EDS Reports 2007 Third Quarter Results



    
    - Third quarter adjusted EPS of 42 cents, up 75% versus a year ago

    - Third quarter revenue of $5.63 billion, up 6% versus a year ago

    - Third quarter contract signings of $5.7 billion, up 61% versus a year
      ago
    

    PLANO, TX, Nov. 2 /CNW/ -- EDS today reported third quarter 2007 adjusted
net income of $225 million, or 42 cents per diluted share, versus third
quarter 2006 adjusted net income of $128 million, or 24 cents per diluted
share.  See "GAAP Reconciliation" below for reported net income and earnings
per share for third quarter 2007 and 2006.
    Third quarter revenue increased 6 percent to $5.63 billion from
$5.29 billion in the year-ago quarter(1).  Third quarter revenue increased
4 percent on an organic basis, which excludes the impact of currency
fluctuations, acquisitions and divestitures.
    "EDS posted solid results during the quarter and made significant strides
to boost its long-term profitability and competitiveness," said Ron
Rittenmeyer, president and chief executive officer. "Our earnings tracked to
the high end of our guidance, our win rates continued to trend upward, and we
announced a number of initiatives that will expand our presence in the highest
value areas of the applications market."
    Contract signings for the quarter represented the best third quarter
signings performance in five years. EDS signed $5.7 billion in contracts
versus $3.5 billion in the year-ago quarter.  This included eight contracts
with values greater than $100 million with clients in the government,
financial services, manufacturing and transportation industries.
    Third quarter wins included a $630 million renewal with Sabre Holdings to
provide a full range of IT services in support of Sabre's continued business
transformation; a $489 million amendment to the UK Ministry of Defence (MoD)
Defence Information Infrastructure contract to support the deployed military
operations environment by creating a single, modernized MoD information
infrastructure; and a $310 million renewal with the Commonwealth Bank of
Australia.
    Rittenmeyer added that the company's 2008 sales pipeline increased by
more than 20 percent, year-over-year, with particular strength in financial
services and government.
    EDS also continued to expand its presence in applications, while adding
significant capabilities in higher-margin services.
    Applications-related revenue increased 9 percent versus the third quarter
of 2006 and represented 31 percent of EDS' total revenue for the quarter.
Future contract opportunities also increased, as the company's applications
pipeline rose more than 15 percent in the quarter versus the year-ago period.
    To move its applications business further up the value chain, EDS
recently announced the launch of its Global Testing Services offering and an
agreement with long-time alliance partner SAP to develop a high-value,
end-to-end SAP consulting practice. These two initiatives address what the
company estimates to be an approximately $285 billion market opportunity.
    EDS has also seen increasing market interest in its network services
offerings, powered by the company's Global Services Network. The contract
value for network service deals in the sales pipeline is up more than 60
percent since January of this year.
    Third quarter 2007 operating margin was 6.4 percent on an adjusted basis
versus 4.0 percent in the year-ago quarter (See discussion of adjusted
operating margin under "Non-GAAP Financial Measures" below). Free cash flow
was $181 million in the third quarter of 2007 versus $171 million for the
year-ago period (See discussion of free cash flow under "Non- GAAP Financial
Measures" below).
    "While we have made significant progress, work remains for EDS to reach
its long-term goals, and we will not settle for the status quo," said
Rittenmeyer. "Moving forward, our focus will be on improving our mix of
higher-margin work, driving productivity and improving our working capital
management."

    GAAP Reconciliation

    Reported third quarter 2007 net income was $225 million, or 42 cents per
diluted share, in accordance with U.S. Generally Accepted Accounting
Principles (GAAP), versus net income of $125 million, or 24 cents per diluted
share, in the prior year's third quarter. A statement reconciling GAAP and
adjusted results follows this release.

    Third Quarter Results by Segment

    
    (*)  Americas: Third quarter revenue was $2.63 billion, up 2 percent
         compared to the prior-year period. Operating profit was $425
         million, up 8 percent from $393 million in the prior-year period.


    (*)  EMEA: Third quarter revenue was $1.59 billion, up 3 percent compared
         to the prior-year period. Operating profit was $226 million, up 2
         percent from $222 million in the prior-year period.

    (*)  Asia-Pacific: Third quarter revenue was $465 million, up 18 percent
         compared to the prior-year period, primarily due to India revenues.
         Operating profit was $49 million, down 5 percent from $51 million in
         the prior-year period.

    (*)  U.S. Government: Third quarter revenue was $710 million, up 4
         percent compared to the prior-year period. Operating profit was $179
         million, up 14 percent from $157 million in the prior-year period.

    All segment comparisons are at constant currency, exclude corporate
expenses, and include intersegment transactions.

    2007 Guidance

    (*)  Revenue of $22.0 billion to $22.5 billion.


    (*)  Adjusted EPS of $1.55 to $1.60 (see discussion of adjusted EPS under
         Non-GAAP Financial Measures below).


    (*)  Free cash flow of $900 million to $1 billion.


    (*)  Updated total contract value of $21 billion to $23 billion.
    

    Conference Call

    EDS' earnings conference call will be broadcast live on the Internet
today at 8:00 a.m. Central time (9:00 a.m. Eastern).  To access the call and
view related financial information, go to www.eds.com/call.  The call and
financial information will be archived for 30 days at www.eds.com/call.

    (1) Excludes discontinued operations for all periods presented.

    About EDS

    EDS (NYSE:   EDS) is a leading global technology services company
delivering business solutions to its clients. EDS founded the information
technology outsourcing industry 45 years ago. Today, EDS delivers a broad
portfolio of information technology and business process outsourcing services
to clients in the manufacturing, financial services, healthcare,
communications, energy, transportation, and consumer and retail industries and
to governments around the world. Learn more at eds.com.
    The statements in this news release that are not historical statements,
including statements regarding the amount of new contract values, are forward-
looking statements within the meaning of the federal securities laws. These
statements are subject to numerous risks and uncertainties, many of which are
beyond EDS' control, which could cause actual results to differ materially
from such statements. For information concerning these risks and
uncertainties, see EDS' most recent Form 10-K. EDS disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.

    Non-GAAP Financial Measures

    In addition to GAAP results, EDS discloses the non-GAAP measures of
adjusted operating margin, net income, and earnings per share (EPS), and free
cash flow.
    Adjusted operating margin, net income and EPS exclude the impact of
certain amounts, specifically earnings/losses from discontinued operations net
of taxes, gains and losses from divestitures, reversals of previously
recognized restructuring expense, charges to earnings attributable to early
retirement offers, and other identified items that management believes are not
reflective of EDS' core operating business.  Such amounts may have a material
impact on EDS' operating margin, net income and EPS. Refer to the
Reconciliation of GAAP Results to Adjusted Results below for a reconciliation
of GAAP results to adjusted results for the three and nine months ended
September 30, 2007 and 2006.
    EDS defines free cash flow as net cash provided by operating activities,
less capital expenditures. Capital expenditures is the sum of (i) net cash
used in investing activities, excluding proceeds from sales of marketable
securities, proceeds related to divested assets and non-marketable equity
investments, payments for acquisitions, net of cash acquired, and non-
marketable equity investments, and payments for purchases of marketable
securities, and (ii) payments on capital leases. Free cash flow excludes items
that are actual expenses that impact cash available to EDS for other uses and
should not be considered a measure of liquidity or an alternative to the cash
flow measurements required by GAAP, such as net cash provided by operating
activities or net increase/decrease in cash and cash equivalents.  Refer to
the Reconciliation of Free Cash Flow to Net Change in Cash and Cash
Equivalents below for a reconciliation of free cash flow to the net decrease
in cash and cash equivalents for the nine months ended September 30, 2007 and
2006.
    EDS may not define adjusted operating margin, net income, EPS or free
cash flow in the same manner as other companies and, accordingly, the amounts
reported by EDS for such measures may not be comparable to similarly titled
measures reported by other companies.
    Non-GAAP measures are a supplement to, and not a replacement for, GAAP
financial measures. To gain a complete picture of EDS' performance, management
does (and investors should) rely on EDS' GAAP financial statements.

    
    CONTACT:
    Travis Jacobsen - Media Relations   Roxane Barry - Investor Relations
    972.797.8751                        972.605.6420
    travis.jacobsen@eds.com             roxane.barry@eds.com



    ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES


    UNAUDITED SUMMARY OF RESULTS OF OPERATIONS
    (in millions, except per share amounts)
                          Three Months Ended       Nine Months Ended
                                 September 30,            September 30,
                              2007         2006        2007         2006
    Revenues(1)(2)          $5,629       $5,292      $16,302      $15,564

    Costs and expenses
      Cost of revenues       4,791        4,625       14,044       13,743
      Selling, general and
       administrative          476          453        1,398        1,379
      Other operating
      (income) expense           -           (1)          (1)          (6)
        Total costs
         and expenses, net   5,267        5,077       15,441       15,116


        Operating income       362          215          861          448


    Interest expense           (56)         (58)        (169)        (181)
    Interest income and
     other, net                 52           59          126          134
        Other income
         (expense), net         (4)           1          (43)         (47)

        Income from continuing
         operations before
         income taxes          358          216          818          401

    Provision for income taxes 133           86          284          129
        Income from continuing
         operations            225          130          534          272
    Loss from discontinued
      operations, net of
      income taxes(3)            -           (5)          (7)         (19)
        Net income(4)         $225         $125         $527         $253

    Basic earnings per share
        Income from continuing
         operations          $0.44        $0.25        $1.04        $0.53
        Loss from
         discontinued
         operations              -        (0.01)       (0.01)       (0.04)
        Net income           $0.44        $0.24        $1.03        $0.49

    Diluted earnings
     per share
        Income from continuing
         operations          $0.42        $0.25        $1.01        $0.52
        Loss from
         discontinued
         operations              -        (0.01)       (0.01)       (0.04)
        Net income(4)        $0.42        $0.24        $1.00        $0.48

    Weighted-average shares
     outstanding
        Basic earnings per
         share                 511          517          512          519
        Diluted earnings per
         share                 541          546          543          529


    Cash dividends per share $0.05        $0.05        $0.15        $0.15

    Refer to the following page for accompanying notes to the unaudited
    summary of results of operations.



    ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES

    NOTES TO UNAUDITED SUMMARY OF RESULTS OF OPERATIONS


    (1)  Revenues for the three and nine months ended September 30, 2007
         includes $125 million and $225 million, respectively, related to the
         termination of the Company's IT services contract with Verizon.

    (2)  Revenues for the nine months ended September 30, 2006 includes
         product revenue for dedicated equipment of approximately
         $116 million related to a modification of the Company's contract
         with the Department of Navy, which includes the U.S. Navy and Marine
         Corps.

    (3)  Discontinued operations is comprised primarily of the net results of
         A.T. Kearney which was sold in January 2006 and the maintenance,
         repair and operations (MRO) management services business which was
         sold in March 2007.

    (4)  Adjusted net income was $225 million, or $0.42 per diluted share,
         for the three months ended September 30, 2007, compared with $128
         million, or $0.24 per share, for the three months ended
         September 30, 2006.  Refer to "Non-GAAP Financial Measures" for a
         definition of adjusted net income and adjusted earnings per share,
         and "Reconciliation of GAAP Earnings to Adjusted Earnings" for a
         reconciliation of net income and diluted earnings per share to
         adjusted net income and diluted earnings per share.




    ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES


    UNAUDITED RECONCILIATION OF GAAP EARNINGS TO ADJUSTED EARNINGS
    (in millions)

                               Three Months Ended       Nine Months Ended
                                 September 30,            September 30,
                              2007         2006         2007         2006
    Net income                $225         $125         $527         $253
    Adjusting items, pre-tax:
      Restructuring reversal     -           (1)          (1)          (5)
      Net gain on divestitures   -            -            -           (1)
    Tax effect of adjusting
     items                       -            -            -            2
    Adjusting items, net of
     income taxes                -           (1)          (1)          (4)
    Loss from discontinued
     operations                  -            5            7           19
    Other, rounding              -           (1)           -            -
    Adjusted net income       $225         $128         $533         $268

    Diluted earnings per share
      Net income             $0.42        $0.24        $1.00        $0.48
      Adjusting items            -            -            -       (0.01)
      Loss from discontinued
       operations                -         0.01         0.01         0.04
      Other, rounding            -        (0.01)           -            -
      Adjusted net income    $0.42        $0.24        $1.01        $0.51




    ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES


    UNAUDITED SUMMARY OF CONSOLIDATED BALANCE SHEETS
    (in millions)

                                                     September      December
                                                        30,            31,
                                                       2007           2006
    ASSETS
    Current Assets
      Cash and cash equivalents                       $3,062         $2,972
      Marketable securities                               46             45
      Accounts receivable, net                         3,912          3,647
      Prepaids and other                                 880            866
      Deferred income taxes                              627            727
        Total current assets                           8,527          8,257

    Property and equipment, net                        2,435          2,179
    Deferred contract costs, net                         985            807
    Investments and other assets                         665            636
    Goodwill                                           4,659          4,365
    Other intangible assets, net                         829            749
    Deferred income taxes                                826            961
        Total assets                                 $18,926        $17,954

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities
      Accounts payable                                  $689           $677
      Accrued liabilities                              2,627          2,689
      Deferred revenue                                 1,535          1,669
      Income taxes                                       148             72
      Current portion of long-term debt                  155            127
        Total current liabilities                      5,154          5,234

    Pension benefit liability                          1,598          1,404
    Long-term debt, less current portion               3,170          2,965
    Minority interests and other long-term liabilities   427            455
    Shareholders' equity                               8,577          7,896
        Total liabilities and shareholders' equity   $18,926        $17,954




    ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES

    UNAUDITED SUMMARY OF CONSOLIDATED CASH FLOWS
    (in millions)

                                                         Nine Months Ended
                                                           September 30,
                                                        2007           2006
    Net cash provided by operating activities(1)      $1,183         $1,196

    Cash Flows from Investing Activities
      Proceeds from sales of marketable securities         -          1,985
      Proceeds from investments and other assets          63            216
      Net proceeds (payments) from divested assets and
        non-marketable equity securities                  53            (11)
      Net proceeds from real estate sales                 28             49
      Payments for purchases of property and equipment  (531)          (510)
      Payments for investments and other assets            -            (37)
      Payments for acquisitions, net of cash
        acquired, and non-marketable equity securities   (40)          (352)
      Payments for purchases of
       software and other intangibles                   (313)          (338)
      Payments for purchases of marketable securities     (3)        (1,483)
      Other                                               24             28
    Net cash used in investing activities               (719)          (453)

    Cash Flows from Financing Activities
      Proceeds from long-term debt                         5              -
      Payments on long-term debt                         (10)          (209)
      Capital lease payments                            (125)          (109)
      Purchase of treasury stock                        (334)          (502)
      Employee stock transactions                        142            203
      Dividends paid                                     (77)           (78)
      Other                                               13             14
    Net cash used in financing activities               (386)          (681)
    Effect of exchange rate changes on cash and
     cash equivalents                                     12             (1)
    Net increase (decrease) in cash and cash
     equivalents                                          90             61
    Cash and cash equivalents at beginning of period   2,972          1,899
    Cash and cash equivalents at end of period        $3,062         $1,960



    (1)  Depreciation and amortization and deferred cost charges were $1,058
         million and $973 million for the nine months ended September 30,
         2007 and 2006, respectively.




    ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES


    UNAUDITED RECONCILIATION OF FREE CASH FLOW TO NET CHANGE IN CASH AND CASH
    EQUIVALENTS    (in millions)


                                                         Nine Months Ended
                                                           September 30,
                                                        2007           2006
    Net cash provided by operating activities         $1,183         $1,196

    Capital expenditures:
      Proceeds from investments and other assets          63            216
      Net proceeds from real estate sales                 28             49
      Payments for purchases of property and equipment  (531)          (510)
      Payments for investments and other assets            -            (37)
      Payments for purchases of software and other
       intangibles                                      (313)          (338)
      Other investing activities                          24             28
      Capital lease payments                            (125)          (109)
        Total net capital expenditures                  (854)          (701)
        Free cash flow                                   329            495

    Other investing and financing activities:
      Proceeds from sales of marketable securities         -          1,985
      Net proceeds (payments) from divested assets
       and non-marketable equity securities               53            (11)
      Payments for acquisitions, net of cash
       acquired, and non-marketable equity securities    (40)          (352)
      Payments for purchases of marketable securities     (3)        (1,483)
      Proceeds from long-term debt                         5              -
      Payments on long-term debt                         (10)          (209)
      Purchase of treasury stock                        (334)          (502)
      Employee stock transactions                        142            203
      Dividends paid                                     (77)           (78)
      Other financing activities                          13             14
    Effect of exchange rate changes on cash and
     cash equivalents                                     12             (1)
        Net increase in cash and cash equivalents        $90            $61
    




For further information:

For further information: Travis Jacobsen - Media Relations, 
+1-972-797-8751, travis.jacobsen@eds.com, or Roxane Barry - Investor 
Relations, +1-972-605-6420, roxane.barry@eds.com, both of EDS Web Site:
http://www.eds.com/

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