EDS Reports Fourth Quarter and Full-Year 2007 Results



    
    - Fourth quarter adjusted EPS of 55 cents, up 17% versus a year ago;
      fourth quarter 2007 GAAP EPS of 36 cents

    - Full-year 2007 adjusted EPS of $1.56, up 58% versus 2006; 2007 GAAP EPS
      of $1.35

    - Fourth quarter revenues of $5.83 billion, up 2% versus a year ago

    - Full-year 2007 revenue of $22.1 billion versus $21.3 billion for 2006

    - Fourth quarter free cash flow of $563 million, up 44 percent versus a
      year ago
    

    PLANO, Texas, Feb. 6 /CNW/ -- EDS today reported fourth quarter 2007
adjusted net income of $295 million, or 55 cents per share, versus fourth
quarter 2006 adjusted net income of $254 million, or 47 cents per share.
Fourth quarter 2007 net income, in accordance with U.S. GAAP, was $189
million, or 36 cents per share, versus $217 million, or 40 cents per share, in
the prior year's fourth quarter (A statement reconciling GAAP and adjusted
results is included in this release).
    Fourth quarter revenue increased 2 percent to $5.83 billion from $5.70
billion in the year-ago quarter(1). Fourth quarter revenue decreased 3 percent
on an organic basis, which excludes the impact of currency fluctuations,
acquisitions and divestitures.
    "EDS posted a solid fourth quarter to end a year of operational progress
in 2007," said Ron Rittenmeyer, EDS chairman, president and CEO. "We continued
to improve our competitiveness and made progress toward our financial goals."
    EDS signed $6.1 billion in contracts in the fourth quarter 2007, versus
$7.6 billion in the year-ago quarter. Fourth quarter 2007 signings included
seven contracts with values greater than $100 million.
    Second-half 2007 total contract value was $11.8 billion, representing
EDS' best second-half signings' performance since 2001, and the overall 2008
sales pipeline is up 10 percent versus the year-ago period, showing strength
in both IT outsourcing and applications.
    "We are pleased with recent booking trends," Rittenmeyer said. He noted
that a number of large contracts for which EDS was down-selected to one moved
from the fourth quarter of 2007 into 2008.
    Significant fourth quarter signings included a new contract to deliver
infrastructure services to Bristol-Myers Squibb; a Medicaid contract extension
with the State of Indiana leveraging EDS' leading-edge interChange Health
System; and an IT services contract with Continental Airlines.
    EDS continued its focus on the sale of applications services in the
fourth quarter, signing $1.8 billion in contracts representing 30 percent of
total contract value for the quarter. For the full year, applications services
represented 32 percent of total contracts sold.
    The company continued to build its presence in applications services with
the fourth quarter launch of EDS' Global SAP Consulting Practice and the
launch of a Global Testing Practice. In addition, EDS enhanced its
applications business with the acquisition of a majority interest in Saber
Solutions, a leading provider of software and solutions to U.S. state and
local governments.
    Fourth quarter 2007 operating margin was 7.3 percent on an adjusted basis
versus 6.8 percent in the year-ago quarter (See discussion of adjusted
operating margin under "Non-GAAP Financial Measures" below).
    Free cash flow was $563 million in the fourth quarter of 2007, up 44
percent from the year-ago period (See discussion of free cash flow under
"Non-GAAP Financial Measures" below).

    Fourth Quarter Results by Segment

    
    -- Americas: Fourth quarter revenue was $2.59 billion, down 8 percent
       compared to the prior-year period. Operating profit was $394 million,
       down 28 percent from $547 million in the prior-year period, driven
       primarily by the previously disclosed Verizon contract termination.
    -- EMEA: Fourth quarter revenue was $1.77 billion, up 3 percent compared
       to the prior-year period. Operating profit was $352 million, up
       15 percent from $307 million in the prior-year period.
    -- Asia Pacific: Fourth quarter revenue was $478 million, up 16 percent
       compared to the prior-year period. Operating profit was $71 million,
       up 41 percent from $50 million in the prior-year period, driven
       primarily by MphasiS and improved contract performance in the region.
    -- U.S. Government: Fourth quarter revenue was $624 million, flat
       compared to the prior-year period. Operating profit was $92 million,
       down 34 percent from $139 million in the prior-year period, due
       primarily to contractual price reductions.
    
    All segment comparisons are at constant currency, exclude corporate
expenses and include intersegment transactions.

    Full-Year 2007 Results

    EDS' 2007 adjusted net income was $828 million, or $1.56 per share,
compared to adjusted net income of $522 million, or $0.99 per share in 2006.
Full-year 2007 net income, in accordance with U.S. GAAP, was $716 million, or
$1.35 per share, versus net income of $470 million, or $0.89 per share, in
2006.
    Full-year 2007 adjusted net income and EPS exclude costs related to the
company's fourth quarter 2007 early retirement offer of $154 million, or $0.18
per share, net after-tax losses associated with discontinued operations of $13
million and pre-tax items as follows: a write-off of acquired in-process
research and development of $6 million and a reversal of previously recognized
restructuring expenses of $4 million. Full-year 2006 adjusted net income
excluded net after-tax losses associated with discontinued operations of $29
million, a pre-tax loss on divestitures of $22 million, and a reversal of
previously recognized restructuring expenses of $7 million.
    Full-year 2007 total revenue increased 4 percent to $22.1 billion from
total revenue of $21.3 billion in 2006.
    Full-year 2007 total contract value was $19.5 billion, down 26 percent
from $26.5 billion the prior year. Excluding the multibillion dollar contract
renewals with General Motors and the U.S. Navy in 2006, total contract value
increased 2 percent year-over-year. In 2007, EDS signed 28 mega-deals with
total contract values greater than $100 million versus 26 mega-deals in 2006.
New logos accounted for $3.5 billion of total contract value in 2007.
    Full-year 2007 free cash flow increased to $892 million, from $887
million for full-year 2006.
    "EDS enters 2008 a stronger and more competitive company," said
Rittenmeyer. "Our financial priorities include driving sustainable operating
margin and free cash flow improvement, building on our strong presence in ITO,
continuing to enhance our capabilities in higher-margin applications services,
and expanding and improving our Best Shore(R) global delivery. At the same
time, we will always maintain our relentless focus on operational excellence,
quality and our 'zero outage' goal for clients."

    2008 Guidance

    
    -- Revenue growth of approximately 2 percent.
    -- Adjusted EPS of approximately $1.35 (See discussion of adjusted EPS
       under "Non-GAAP Financial Measures" below).
    -- Free cash flow of approximately $900 million.
    -- Total contract value in excess of $20 billion.
    

    Additional details regarding 2008 guidance will be provided at EDS'
Securities Analyst Conference on February 19.

    Conference Call

    EDS' earnings conference call will be broadcast live on the Internet
today at 4:00 p.m. Central time (5:00 p.m. Eastern).  To access the call and
view related financial information, go to http://www.eds.com/call.  The call
and financial information will be archived for 30 days at
http://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 financial guidance, 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' 2006 Form 10-K filed March 1, 2007.  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, earnings per share (EPS), and free cash
flow.
    Adjusted operating margin, net income and EPS exclude the impact of
certain amounts, specifically asset write-offs and other uncapitalized costs
associated with acquisitions, 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 twelve months ended
December 31, 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 change in
cash and cash equivalents for the twelve months ended December 31, 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.



    ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES

    
    SUMMARY OF RESULTS OF OPERATIONS
    (unaudited, in millions, except per share amounts)

                                 Three Months Ended          Years Ended
                                    December 31,             December 31,
                                 2007         2006        2007        2006
    Revenues(1)(2)              $5,832       $5,704     $22,134     $21,268

    Costs and expenses
      Cost of revenues           4,892        4,836      18,936      18,579
      Selling, general and
       administrative              512          479       1,910       1,858
      Other operating expense(3)   157           21         156          15
         Total costs and
          expenses, net          5,561        5,336      21,002      20,452

         Operating income          271          368       1,132         816

    Interest expense               (56)         (58)       (225)       (239)
    Interest income and
     other, net                     56           45         182         179
         Other income
          (expense), net             -          (13)        (43)        (60)

         Income from continuing
          operations before
          income taxes             271          355       1,089         756

    Provision for income taxes      76          128         360         257
         Income from continuing
          operations               195          227         729         499
    Loss from discontinued
     operations, net of
     income taxes(4)                (6)         (10)        (13)        (29)
         Net income               $189         $217        $716        $470

    Basic earnings per share
         Income from continuing
          operations             $0.38        $0.44       $1.42       $0.96
         Loss from discontinued
          operations             (0.01)       (0.02)      (0.02)      (0.05)
         Net income              $0.37        $0.42       $1.40       $0.91

    Diluted earnings per share
         Income from continuing
          operations             $0.37        $0.42       $1.37       $0.94
         Loss from discontinued
          operations             (0.01)       (0.02)      (0.02)      (0.05)
         Net income              $0.36        $0.40       $1.35       $0.89

    Weighted-average shares
     outstanding
         Basic earnings
          per share                512          517         512         519
         Diluted earnings
          per share                542          549         542         529

    Cash dividends per share     $0.05        $0.05       $0.20       $0.20


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


    ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES

    NOTES TO THE SUMMARY OF RESULTS OF OPERATIONS

    (1) Revenues for the year ended December 31, 2007 includes $225 million
        related to the termination of the Company's IT services contract with
        Verizon.

    (2) Revenues for the year ended December 31, 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) Other operating expense for the three months and year ended
        December 31, 2007 includes approximately $154 million related to an
        early retirement offer. Approximately 2,400 employees accepted the
        offer which provided enhanced retirement benefits payable through
        normal payment options under the EDS Retirement Plan.

    (4) 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.


    ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES

    RECONCILIATION OF GAAP EARNINGS TO ADJUSTED EARNINGS
    (unaudited, in millions, except per share amounts)

                                    Three Months Ended       Years Ended
                                        December 31,         December 31,
                                     2007         2006      2007      2006
    Net income                       $189         $217      $716      $470
    Adjusting items, pre-tax:
      Early retirement offer          154            -       154         -
      Acquired in-process R&D           6            -         6         -
      Restructuring reversal           (3)          (2)       (4)       (7)
      Net loss on divestitures          -           23         -        22
    Tax effect of adjusting items     (58)           6       (58)        8
    Adjusting items, net of
     income taxes                      99           27        98        23
    Loss from discontinued
     operations                         6           10        13        29
    Other, rounding                     1            -         1         -
    Adjusted net income              $295         $254      $828      $522

    Diluted earnings per share
      Net income                    $0.36        $0.40     $1.35     $0.89
      Adjusting items                0.19         0.05      0.19      0.04
      Loss from discontinued
       operations                    0.01         0.02      0.02      0.05
      Other, rounding               (0.01)           -         -      0.01
      Adjusted net income           $0.55        $0.47     $1.56     $0.99



    ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES

    SUMMARY OF CONSOLIDATED BALANCE SHEETS
    (unaudited, in millions)
                                                  December 31,   December 31,
                                                       2007           2006
    ASSETS
    Current Assets
      Cash and cash equivalents                       $3,139         $2,972
      Marketable securities                               55             45
      Accounts receivable, net                         3,603          3,647
      Prepaids and other                                 958            866
      Deferred income taxes                              690            727
         Total current assets                          8,445          8,257

    Property and equipment, net                        2,489          2,179
    Deferred contract costs, net                         984            807
    Investments and other assets                       1,099            636
    Goodwill                                           5,092          4,365
    Other intangible assets, net                         929            749
    Deferred income taxes                                186            961
         Total assets                                $19,224        $17,954

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities
      Accounts payable                                  $605           $677
      Accrued liabilities                              2,616          2,689
      Deferred revenue                                 1,473          1,669
      Income taxes                                        54             72
      Current portion of long-term debt                  168            127
         Total current liabilities                     4,916          5,234

    Pension benefit liability                            989          1,404
    Long-term debt, less current portion               3,209          2,965
    Minority interests and other long-term
     liabilities                                         419            455
    Shareholders' equity                               9,691          7,896
         Total liabilities and shareholders' equity  $19,224        $17,954



    ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES

    SUMMARY OF CONSOLIDATED CASH FLOWS
    (unaudited, in millions)
                                                           Years Ended
                                                           December 31,
                                                       2007           2006
    Net cash provided by operating activities(1)      $2,041         $1,933

    Cash Flows from Investing Activities
      Proceeds from sales of marketable securities         -          2,793
      Proceeds from investments and other assets          67            264
      Net proceeds (payments) from divested assets
       and non-marketable equity securities               53            (49)
      Net proceeds from real estate sales                 28             49
      Payments for purchases of property and
       equipment                                        (725)          (729)
      Payments for investments and other assets            -            (94)
      Payments for acquisitions, net of cash
       acquired, and non-marketable equity securities   (461)          (361)
      Payments for purchases of software and other
       intangibles                                      (378)          (427)
      Payments for purchases of marketable securities     (4)        (1,514)
      Other                                               34             35
    Net cash used in investing activities             (1,386)           (33)

    Cash Flows from Financing Activities
      Proceeds from long-term debt                        13              -
      Payments on long-term debt                         (17)          (213)
      Capital lease payments                            (175)          (144)
      Purchase of treasury stock                        (391)          (667)
      Employee stock transactions                        155            285
      Dividends paid                                    (102)          (104)
      Other                                               13              9
    Net cash used in financing activities               (504)          (834)
    Effect of exchange rate changes on cash and
     cash equivalents                                     16              7
    Net increase in cash and cash equivalents            167          1,073
    Cash and cash equivalents at beginning of period   2,972          1,899
    Cash and cash equivalents at end of period        $3,139         $2,972

    (1) Depreciation and amortization and deferred cost charges were
        $1,441 million and $1,337 million for the years ended December 31,
        2007 and 2006, respectively.



    ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES

    RECONCILIATION OF FREE CASH FLOW TO NET CHANGE IN CASH AND CASH
    EQUIVALENTS
    (unaudited, in millions)
                                                           Years Ended
                                                           December 31,
                                                       2007           2006
    Net cash provided by operating activities         $2,041         $1,933

    Capital expenditures:
      Proceeds from investments and other assets          67            264
      Net proceeds from real estate sales                 28             49
      Payments for purchases of property and
       equipment                                        (725)          (729)
      Payments for investments and other assets            -            (94)
      Payments for purchases of software and other
       intangibles                                      (378)          (427)
      Other investing activities                          34             35
      Capital lease payments                            (175)          (144)
         Total net capital expenditures               (1,149)        (1,046)
         Free cash flow                                  892            887

    Other investing and financing activities:
      Proceeds from sales of marketable securities         -          2,793
      Net proceeds (payments) from divested assets
       and non-marketable equity securities               53            (49)
      Payments for acquisitions, net of cash
       acquired, and non-marketable equity securities   (461)          (361)
      Payments for purchases of marketable securities     (4)        (1,514)
      Proceeds from long-term debt                        13              -
      Payments on long-term debt                         (17)          (213)
      Purchase of treasury stock                        (391)          (667)
      Employee stock transactions                        155            285
      Dividends paid                                    (102)          (104)
      Other financing activities                          13              9
    Effect of exchange rate changes on cash and
     cash equivalents                                     16              7
         Net increase in cash and cash equivalents      $167         $1,073


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




For further information:

For further information: media relations, Travis Jacobsen, 
+1-972-797-8751, travis.jacobsen@eds.com, or investor relations, Roxane 
Barry, +1-972-605-6420, roxane.barry@eds.com, both of Electronic Data Systems 
Corporation Web Site: http://www.eds.com

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