CSC posts lackluster second quarter results

Company cuts 2012 earnings forecast

Computer Sciences Corp. posted second-quarter fiscal 2012 revenues of $3.97 billion, a 1 percent increase from $3.94 billion in the year-ago quarter, the company announced today.

But shares of the government contractor traded on the New York Stock Exchange took a tumble as CSC lowered its full-year earnings forecast.

For the quarter ended Sept. 30, CSC amassed new business awards of $6.6 billion for a half year increase of 13 percent above last year, the earnings report said.

The North American Public Sector contributed $3.1 billion, Managed Services Sector reported $2.6 billion, and Business Solutions & Services closed $900 million of new business.

On a year-to-date basis, new business awards were approximately $8.9 billion compared to $7.9 billion in the previous year.

The company recorded two significant non-cash charges in the quarter arising from the annual goodwill impairment analysis and a previously disclosed claims settlement.

The goodwill impairment charge arose from the company’s annual test and the charge taken in the quarter was $2.69 billion, equivalent to $18.21 earnings per share (EPS).

On Aug. 24, 2011, CSC announced that it had reached an agreement in principle with the federal government in a dispute of contract claims.

“The settlement was finalized in September resulting in a contract extension of approximately $1 billion and required the company to record a non-cash, pre-tax charge of $269 million which reduced EPS by $1.20,” the statement said.

Operating income margin was -1.89 percent, which included the adverse impact of the government settlement and the recently completed iSOFT acquisition.

On a pro forma basis, operating income margin was 5.56 percent compared to 7.75 percent for the prior year, CSC said.

CSC shares reached their lowest level in almost three months after the company reduced its fiscal 2012 profit forecast amid federal budget uncertainty, Bloomberg News reported.

“North American public sector business continues to be impacted by the federal budget uncertainty,” Chief Executive Officer Michael Laphen said in a Nov. 9 statement  reported by the business news agency.

Shares declined 12 percent to $28.89 at 10:24 a.m. in New York, after dropping 13 percent for the biggest intraday slide since Aug. 10. The government contractor was down 34 percent this year before today, Bloomberg said.

CSC, of Falls Church, Va., ranks No. 11 on Washington Technology’s 2011 Top 100 list of the largest federal government contractors.

About the Author

David Hubler is the former print managing editor for GCN and senior editor for Washington Technology. He is freelance writer living in Annandale, Va.

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