CSC Reports Record Q1 Revenue and Operating Income

Solid Gains Recorded in All Three Lines of Business with Balanced Performance
Across All Verticals and Geographies

FALLS CHURCH, Va., Aug. 5 /PRNewswire-FirstCall/ -- CSC (NYSE: CSC) today
reported revenues of $4.44 billion for the fiscal 2009 first quarter, up 15.6%
year over year, and earnings per share for the quarter of 79 cents (diluted),
an increase of 29.5% year over year.
Summary first quarter results include:
-- Total revenues of $4.44 billion;
-- Operating income of $281.9 million, up 12%;
-- Net income of $120.6 million, or 79 cents per share (diluted);
-- Record total new business awards and orders of $5.4 billion;
-- Double-digit revenue growth in Business Solutions & Services and Global
Outsourcing Services.

Net income for the first quarter was $120.6 million, or 79 cents per share
(diluted), compared to last year's first quarter earnings per share of 61
cents. Last year's earnings per share included special items of approximately
19 cents related to restructuring and an executive retirement agreement. All
revenues, costs and operating income reflect the impact of acquisitions,
currency and the fact that fiscal 2009 is a 53-week year with the extra week
included in the first quarter.
Business Unit Performance
As outlined on June 5, 2008, at CSC's Investor Day presentation, CSC is
now disclosing revenues by the company's three primary lines of business:
Business Solutions and Services (BS&S), Global Outsourcing Services (GOS) and
North American Public Sector (NPS). This change better reflects the company's
organization under CSC's multi-year strategic initiative and provides enhanced
visibility into the company's progress toward achieving its goals of improving
revenue growth, operating margin and ROIC.
CSC's 15.6% (approximately 12% in constant currency) quarterly revenue
gain was led by BS&S, which grew in excess of 39% (31% in constant currency)
and recorded $1.18 billion in revenues compared to $848.1 million in the
year-ago quarter. GOS posted a solid first quarter revenue total of
$1.79 billion, up 12.3% (approximately 8% in constant currency) compared with
$1.59 billion last year.
For the first quarter, NPS revenue increased 5.1% to $1.49 billion from
$1.42 billion for last year's first quarter. Revenue derived from DoD-related
business was $1.02 billion, up 8.1% from last year's $943.4 million. Civil
agency activities generated revenue of $426.0 million, down from $440.5
million last year. NPS other segment revenue was $46.4 million, compared to
$36.1 million in last year's first quarter. The pipeline of qualified
projects continues to grow and now stands at $43 billion, of which nearly
$20 billion is scheduled for award during the remainder of fiscal 2009.
The company's revenue by industry group also demonstrated solid growth
performance. Five of the six vertical industries reported double-digit
revenue gains compared with the year-ago quarter, including Financial
Services; Manufacturing; Technology and Consumer; Healthcare; and Chemical,
Energy and Natural Resources. Four of the industry groups delivered quarterly
revenue of over $500 million.
From a geographic perspective, all four primary regions served by CSC
demonstrated double-digit revenue growth. The Americas reported revenue of
$2.72 billion, up 14.1%; EMEA delivered revenue of $1.28 billion, up 16.8%;
Australia's revenue was $273 million, up 23.1%; and Asia reported revenue of
$164 million, up 27.8%.
Announced new business awards and orders for the first quarter were
approximately $5.4 billion. These awards and orders were comprised of
$2.9 billion from GOS, $1.2 billion from NPS and $1.2 billion for BS&S.
"We are very pleased with our new business activity, earnings and revenue
growth for the first quarter," said CSC Chairman, President and Chief
Executive Officer Michael W. Laphen. "Our first quarter performance clearly
demonstrates we are making good progress toward our annual financial goals,
including free cash flow, which is on plan, and we expect to continue to move
forward in achieving our strategic target of diversifying our portfolio. As a
result of our portfolio diversification efforts, we achieved a better business
balance at the end of the first quarter with Business Solutions and Services
up to 27% of our revenue, North American Public Sector at 33% and Global
Outsourcing Services at 40%. Additionally, we anticipate future improvements
in our growth, profitability and cash flow due to this improving mix, enabling
us to continue our expansion of integrated offerings across selected global
markets and industries."
Guidance
For the second quarter, ending Oct. 3, 2008, CSC anticipates revenue to be
in the range of $4.25 billion to $4.35 billion, an increase of 6% to 8% year
over year. Earnings per share for the second quarter are expected to be in the
range of 70 cents to 80 cents.
For the full fiscal year 2009, CSC continues to expect revenue growth,
excluding any fiscal year 2009 acquisitions, to be in the 6% to 8% range and
earnings per share to be in the $4.20 to $4.40 range, an increase of 9% to 15%
year over year. Free cash flow for fiscal year 2009 is expected to be
approximately 80% to 90% of net income.
As announced in the company's press release dated July 14, 2008, a
teleconference will be held today at 5:00 p.m. EDT to discuss first quarter
results. This teleconference can be accessed from the CSC Web site at
http://www.csc.com/investorrelations, in a listen-only mode, and slides will
also be available at this site immediately prior to the call.
About CSC
CSC is a global leader in providing technology-enabled solutions and
services through three primary lines of business. These include Business
Solutions & Services, Global Outsourcing Services and the North American
Public Sector. CSC's advanced capabilities include systems design and
integration, information technology and business process outsourcing,
applications software development, Web and application hosting, mission
support and management consulting. Headquartered in Falls Church, Va., CSC has
approximately 90,000 employees and reported revenue of $17.1 billion for the
12 months ended July 4, 2008. For more information, visit the company's Web
site at http://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" within the meaning of the Private Securities
Litigation Reform Act of 1995. 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 March 28, 2008. 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.
Note to Analysts and Editors: Please see attached tables.

Revenues by Segment
(preliminary and unaudited)

First Quarter Ended
% of Total
(In millions) July 4, June 29, Fiscal Fiscal
2008 2007 2009 2008

BS&S - Consulting $541.9 $404.2 12% 11%
BS&S - Financial Services
& Solutions 262.4 250.8 6 7
BS&S - Other 376.3 193.1 9 4
Business Services & Solutions 1,180.6 848.1 27 22

Global Outsourcing Services 1,790.6 1,594.6 40 42

Department of Defense 1,020.3 943.4 23 25
Civil Agencies 426.0 440.5 10 11
Other (1) 46.4 36.1 1 1
North American Public Sector 1,492.7 1,420.0 34 37

Corporate 4.5 4.6

Subtotal 4,468.4 3,867.3 101 101

Eliminations (31.3) (29.4) (1) (1)

Total Revenue $4,437.1 $3,837.9 100% 100%

(1) Other revenues consist of state, local and foreign government as well
as commercial contracts performed by the North American reporting
segment.

Consolidated Statements of Income
(preliminary and unaudited)

First Quarter Ended
(In millions except per-share amounts) July 4, June 29,
2008 2007
Revenues $4,437.1 $3,837.9

Costs of services (excludes depreciation
and amortization) 3,601.3 3,098.1
Selling, general and administrative 277.5 240.6
Depreciation and amortization 317.2 279.0
Interest expense 63.9 29.2
Interest income (9.5) (9.5)
Special items 49.0
Other expense (income) 13.3 (18.2)

Total costs and expenses 4,263.7 3,668.2

Income before taxes 173.4 169.7
Taxes on income 52.8 61.6

Net income $120.6 $108.1

Basic $0.80 $0.62

Diluted $0.79 $0.61

Average common shares outstanding for:
Basic EPS 151.187 173.876
Diluted EPS 153.223 177.445

Operating income $281.9 $251.4

Selected Balance Sheet Data
(preliminary and unaudited)

(In millions) July 4, 2008 March 28, 2008
Assets
Cash and cash equivalents $615.6 $698.9
Receivables, net of allowance for doubtful
accounts 4,441.2 4,459.8
Prepaid expenses and other current assets 1,953.4 1,764.5
Property and equipment, net 2,759.5 2,764.6
Outsourcing contract costs, net 872.1 925.4
Software, net 524.2 527.4
Goodwill 4,022.5 3,975.2
Other assets 639.7 659.0

Liabilities
Short-term debt and current maturities of
long-term debt $1,142.3 $838.4
Accounts payable 605.1 798.1
Accrued payroll and related costs 935.1 926.6
Other accrued expenses 1,452.9 1,638.7
Deferred revenue 1,031.3 1,078.5
Long-term debt, net 2,665.6 2,635.3
Other long-term liabilities 816.5 851.8
Stockholders' equity 5,603.6 5,461.8

Consolidated Statements of Cash Flows
(preliminary and unaudited)
Three Months Ended
(In millions) July 4, June 29,
2008 2007

Cash flows from operating activities:
Net income $120.6 $108.1
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization and other
non-cash charges 375.3 303.6
Loss/(gain) on dispositions 1.3 (2.5)
Changes in operating assets and liabilities,
net of effects of acquisitions:
Increase in assets (114.5) (308.1)
Decrease in liabilities (438.7) (506.8)

Net cash used in operating activities (56.0) (405.7)

Investing activities:
Purchases of property and equipment (195.0) (190.0)
Acquisitions, net of cash acquired (62.4)
Outsourcing contracts (29.5) (35.8)
Software (42.8) (33.4)
Other investing cash flows 1.2 15.5

Net cash used in investing activities (328.5) (243.7)

Financing activities:
Net borrowing of commercial paper 417.1
Borrowings under lines of credit 237.8 56.2
Repayment of borrowings under lines of credit (52.0) (63.1)
Principal payments on long-term debt (308.2) (11.4)
Proceeds from debt issuance 1,391.3
Proceeds from stock options, and other common
stock transactions 6.0 45.0
Excess tax benefit from stock-based compensation 1.0 5.0
Repurchase of common stock, net of settlement (2.9) (4.4)
Other financing activities, net 0.2

Net cash provided by financing activities 298.8 1,418.8

Effect of exchange rate changes on cash and cash
equivalents 2.4 9.9

Net (decrease) increase in cash and cash
equivalents (83.3) 779.3
Cash and cash equivalents at beginning of year 698.9 1,050.1

Cash and cash equivalents at end of period $615.6 $1,829.4

Non-GAAP Financial Measures

The following tables reconcile operating income and free cash flow to the
most directly comparable financial measure calculated and presented in
accordance with accounting principles generally accepted in the United
States (GAAP). 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 business unit
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 reported earnings.

GAAP Reconciliations
(In millions)

Operating Income (preliminary and unaudited) First Quarter Ended
July 4, 2008 June 29, 2007
Operating income $281.9 $251.4
Minority interest expense (4.6) (3.2)
Equity earnings 5.5 4.5
Corporate G&A (41.7) (32.5)
Interest expense (63.9) (29.2)
Interest income 9.5 9.5
Special items (49.0)
Other (expense) income (13.3) 18.2
Income before taxes 173.4 169.7
Taxes on income 52.8 61.6
Net income $120.6 $108.1

Free Cash Flow (preliminary and unaudited) First Quarter Ended
July 4, 2008 June 29, 2007
Free cash flow $(329.1) $(660.8)
Net cash used in investing activities 328.5 243.7
Acquisitions, net of cash acquired (62.4)
Capital lease payments 7.0 11.4
Net cash provided by operating activities $(56.0) $(405.7)

Note: Capital lease payments and proceeds from the sale of property and
equipment (included in investing activities) are included in the
calculation of free cash flow.

Earnings per Share Reconciliation (preliminary and unaudited)

The following table is presented to illustrate the impact of the special
items on earnings per share. The earnings per share amounts presented
below include non-GAAP measures. This table should be read in conjunction
with the Consolidated Statements of Income within this release on which
the GAAP earnings per share measures are presented. Earnings per share
before special items provides a basis for comparing current operating
performance to past and future 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 earnings
before special items to evaluate business unit financial performance
and it is one of the measures used in assessing management performance.
One of the limitations associated with the use of earnings before special
items (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 earnings before special
items and reported earnings.

First Quarter Ended
July 4, 2008 June 29, 2007
EPS EPS
Amount (diluted) Amount (diluted)
Net income and EPS (diluted), as
reported $120.6 $0.79 $108.1 $0.61

Income from total operations 120.6 0.79 108.1 0.61
Add back: Special items 33.4 0.19
Income from continuing operations
before special items $120.6 $0.79 $141.5 $0.80

Average common shares outstanding
for diluted EPS 153.223 177.445

SOURCE CSC

Bill Lackey, Director, Investor Relations, Corporate, +1-310-615-1700,
blackey3@csc.com, or Mike Dickerson, Director, Media Relations, Corporate,
+1-310-615-1647, mdickers@csc.com, both of CSC