2

P> Total Contracts $950,666,000

http://www.csc.com/

Commercial business may be all the rage these days, but don't tell that to Milt Cooper, president of Computer Sciences Corp.'s federal business arm, Systems Group, in Falls Church, Va.

Even in what many call a declining federal market, CSC's federal business climbed to $1.6 billion, up from $1.2 billion in 1994. But Cooper's contribution to the El Segundo, Calif.-based company's overall revenue slipped from 48 percent in 1994 to 39 percent last year.

"The federal division is becoming a smaller part of the overall CSC revenue, but we're still performing with steady dollar growth every year," said Pat Ways, vice president of business development in the Systems Group. Ways predicted that the government will start outsourcing all non-government services, such as the management of defense commissaries.

In fact, CSC teamed with Shaw's Supermarkets Inc., East Bridgewater, Mass., a leading grocery chain with 90 stores in the Northeast, to help the military modernize systems for more than 300 commissaries worldwide. Although the $58 million contract with the Defense Commissary Agency is small when compared to other CSC contracts, it is significant because it places CSC in a brand new market. By providing an automated information management system to help track inventory, labor scheduling and direct delivery, CSC wants to market similar services to prospective clients beyond the government horizon.

CSC also won a $207 million contract from the Federal Aviation Administration to provide expanded software engineering services to support the National Airspace System Enroute programs. The contract vaulted the company over the $1 billion mark in federal business in its first two quarters last year. CSC will support a common data facility, air traffic control, aeronautical data links and traffic management.

But Cooper's biggest victory was a support contract, potentially worth $746 million, with the Air Force Arnold Engineering Development Center. The center operates 50 aerodynamic and propulsion wind tunnels, rocket and turbine engine test cells, space environmental chambers and ballistics ranges.

Despite CSC's federal success, the company's soul rests in the commercial world. In years past, CSC has been touted by industry analysts as the company to beat in the commercial systems integration and IT services markets. Toss in management consulting and business re-engineering, systems consulting, design and integration, as well as systems operations and outsourcing, and you have a tough act to follow.

The company's diversified business mix boosted revenues to a record high. With revenues topping $4.1 billion, compared with $2.6 billion in 1994, CSC is living up to industry analysts' expectations.

International revenues rung up the biggest improvement, from $321 million in 1994 to a booming $1 billion in 1995, with new contracts comprising 25 percent of total revenue. International outsourcing business with United Distillers U.K., Anglian Water, Guinness Brewing, Great Britain and Lucas Industries PLC also buoyed sales.

As with other systems integrators that play in commercial and federal markets, CSC's Commercial Division outpaces the federal division.

Spanning both domestic and international markets, commercial earnings surged to $2.5 billion and accounted for 61 percent of overall business. With 16 percent growth in the last fiscal year, commercial revenue is slowly overshadowing its federal counterpart.

Ways noted that an emerging market in the commercial sector is information security -- an area that has applications in the federal business. "It's not exclusive to the Internet. Classifying information will sweep across the whole government."

Another area with applications in both government and commercial sectors is outsourcing.

CSC provides a full spectrum of IT services. Such crossover among CSC's Index, Consulting Group, Technology Management Group, Systems Group and Integrated Business Services Group has formed what Ways called the "virtual company."

The ability to tap all available resources allows one-stop shopping for many clients, and it's paying off. For example, TMG won a seven-year outsourcing job worth $200 million to $300 million from James River Corp. to develop financial, logistics and supply-chain management systems.

The James River Corp. success prompted CSC to seek markets where similar comprehensive solutions might be needed, and so Integrated Business Services was born.

Tom Madison, president of IBS, said opportunities like these represent a new market for CSC. "This is the first time we've formally structured something to orchestrate the efforts of our many divisions in the global marketplace."

Financial Data

(year ending March 31, 1995)

change from prior year

Revenues$3,372,502,000

Net earnings* $110,739,000

Earnings per share**$2.09

Shareholder's equity$1,148,849,000N/A

Total assets$2,331,364,000N/A

*including gain from accounting change of $4.9 million in fiscal 1994

**includes average effect of recent offering of 4 million shares of common stock

Revenue by Market Sector

($ in millions)

Fiscal 19950f Total

U.S. Federal Government

Department of Defense$84725

NASA$3129

Civil Agencies$33110

Total Gov't$1,49044

Commercial$1,17035

International$71321

Grand Total$3,373100