EDS Reports Second Quarter 2008 Results



    
    - Second quarter adjusted EPS of 33 cents, up 22% versus a year ago ...
    second quarter GAAP EPS of 31 cents, up 19% versus a year ago

    - Second quarter contract signings of $5.4 billion, up 27% versus a year
    ago

    
    PLANO, Texas, July 28 /CNW/ -- EDS (NYSE:   EDS) today reported second
quarter 2008 adjusted net income of $173 million, or 33 cents per share (1),
versus second quarter 2007 adjusted net income of $143 million, or 27 cents
per share (2). Second quarter 2008 net income, in accordance with U.S. GAAP,
was $160 million, or 31 cents per share, versus $138 million, or 26 cents per
share, in the prior year's second quarter (a statement reconciling GAAP and
adjusted results is included in this release).
    The adjusted EPS of 33 cents exceeded the high end of the
company-provided guidance of 24 to 27 cents due, in part, to lower than
expected workforce-related costs. Absent that, adjusted EPS would have been at
the high end of EDS' guidance.
    Second quarter 2008 revenue was $5.62 billion, up from $5.45 billion in
the year-ago quarter. Second quarter 2008 revenue increased 3 percent on a
reported basis, down 2 percent on an organic basis, which excludes the impact
of currency fluctuations, acquisitions and divestitures.
    "EDS had very solid performance during the second quarter," said Ron
Rittenmeyer, EDS chairman, president and CEO. "During the quarter, our team
across the globe continued to provide our clients with excellent service, not
allowing the merger planning activities to distract them. I'm proud of our
employees and the earnings performance, robust contract signings, and
increased free cash flow that they delivered."
    EDS signed $5.4 billion in contracts in the second quarter of 2008, up 27
percent from $4.3 billion in the year-ago quarter. Signings were particularly
strong in the EMEA region (up 57 percent year over year) and in the Government
(up 155 percent year over year) and Financial Services (up 111 percent year
over year) sectors.
    Significant contracts signed during the quarter included a contract
extension for data services with the Department for Work and Pensions in the
UK, EDS subsidiary NHIC's win with the Centers for Medicare and Medicaid
Services, and a contract renewal with Kellwood, a leading marketer of apparel
and consumer soft goods.
    Free cash flow was $306 million in the second quarter of 2008, up $150
million from the year-ago period, driven principally by improved earnings and
working capital management along with lower net capital expenditures. (See
discussion of free cash flow under "Non-GAAP Financial Measures" below.)
    
    Second Quarter Results by Segment
    
    -- Americas: Second quarter revenue was $2.49 billion, down 6 percent
compared to the prior-year period. Operating profit was $337 million, down
from $382 million in the prior-year period. Growth on recent signings and
productivity were offset primarily by contract renegotiations, including the
impact of moving work to Best Shore locations, contract run-off and
terminations.
    -- EMEA: Second quarter revenue was $1.89 billion, up 3 percent compared
to the prior-year period. Operating profit was $293 million, up from $272
million in the prior-year period. Performance was driven by growth and
productivity.
    -- Asia Pacific: Second quarter revenue was $588 million, up 11 percent
compared to the prior-year period. Operating profit was $65 million, up from
$30 million in the prior-year period. Results were driven by increased MphasiS
revenues and overall contract performance, primarily in Australia and New
Zealand.
    -- U.S. Government: Second quarter revenue was $657 million, up 6 percent
compared to the prior-year period. Operating profit was $136 million, up from
$131 million in the prior-year period. Results were driven by contract
performance and growth, including revenue from the acquisition of Saber
Government Solutions.
    All segment comparisons are at constant currency(3), exclude corporate
expenses and include intersegment transactions.
    On May 13, 2008, EDS and Hewlett-Packard (HP) executed an Agreement and
Plan of Merger pursuant to which EDS would be acquired by HP. The agreement
was unanimously approved by the EDS Board of Directors and is subject to
certain closing conditions. Those conditions include the expiration of the
waiting period under the Hart Scott Rodino Antitrust Act, which period expired
on June 27; approval from the European Commission, which was granted on July
25; approval of EDS stockholders and approvals from certain other
jurisdictions. A special meeting of EDS stockholders to approve the proposed
merger is scheduled for July 31.
    The company also announced on July 25 that EDS, HP and the plaintiffs in
the five stockholder lawsuits that were commenced following the execution of
the definitive acquisition agreement have agreed to settle and dismiss all
pending lawsuits concerning the proposed merger, subject to court approval.
    In light of EDS' proposed merger with HP, EDS will not be updating prior
financial guidance or providing financial guidance for the third quarter or
full year 2008 and will not be hosting an earnings conference call.

    
    (1) 2Q08 EPS excludes $16 million of pre-tax costs related to the proposed
        HP transaction and $1 million after-tax income from discontinued
        operations.
    

    
    (2) 2Q07 excludes reversal of prior year restructuring and discontinued
        operations.
    

    
    (3) 2007 segment results have been restated to reflect updated foreign
        exchange rates.
    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 more than 46 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 http://www.eds.com.

    
     EDS CONTACTS:
     Bob Brand -- Media Relations        Deanna Rogers -- Investor Relations
     972.605.1290                        972.605.8933
     bob.brand@eds.com                   deanna.rogers@eds.com
    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 as the $16 million of pre-tax
costs related to the proposed HP transaction in the second quarter of 2008).
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 earnings to adjusted earnings for the three and
six months ended June 30, 2008 and 2007.
    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 six months ended June 30, 2008 and 2007.
    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          Six Months Ended
                                  June 30,                   June 30,
                             2008         2007         2008          2007
    

    
    Revenues(1)             $5,623       $5,449      $10,988      $10,673
    

    
    Costs and expenses
      Cost of revenues       4,840        4,732        9,652        9,257
      Selling, general and
       administrative          508          484          964          918
      Other operating
       expense                  (6)          (1)          (6)          (1)
        Total costs and
         expenses, net       5,342        5,215       10,610       10,174
    

    
        Operating income       281          234          378          499
    

    
    Interest expense           (49)         (56)         (90)        (113)
    Interest income and
     other, net                 34           24           81           74
        Other income
         (expense), net        (15)         (32)          (9)         (39)
    

    
        Income from
         continuing
         operations
         before income
         taxes                 266          202          369          460
    

    
    Provision for income
     taxes(2)                  107           58          147          151
        Income from
         continuing
         operations            159          144          222          309
    Income (loss) from
     discontinued
     operations, net of
     income taxes                1           (6)           -           (7)
        Net income            $160         $138         $222         $302
    

    
    Basic earnings per
     share
        Income from
         continuing
         operations          $0.32        $0.28        $0.44        $0.60
        Income (loss)
         from
         discontinued
         operations              -        (0.01)           -        (0.01)
        Net income           $0.32        $0.27        $0.44        $0.59
    

    
    Diluted earnings
     per share
        Income from
         continuing
         operations          $0.31        $0.27        $0.43        $0.58
        Income (loss)
         from
         discontinued
         operations              -        (0.01)           -        (0.01)
        Net income           $0.31        $0.26        $0.43        $0.57
    

    
    Weighted-average
     shares outstanding
        Basic earnings
         per share             503          510          505          512
        Diluted earnings
         per share             532          541          512          543
    

    
    Cash dividends per
     share                   $0.05        $0.05        $0.10        $0.10
    
    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 six months ended June 30, 2007 includes approximately
        $100 million of a $225 million payment received from Verizon in the
        first quarter of 2007 related to the termination of the Company's IT
        services contract with Verizon.
    

    
    (2) The Company's effective income tax rates on income from continuing
        operations were 40% and 29% for the three months ended June 30, 2008
        and 2007, respectively. The Company's effective income tax rates on
        income from continuing operations were 40% and 33% for the six months
        ended June 30, 2008 and 2007, respectively. The effective tax rates in
        2008 were impacted by the expiration of the U.S. research and
        development credit which had a negative impact on earnings of
        approximately $0.01 per share for the three months ended June 30, 2008
        and $0.02 per share for the six months ended June 30, 2008. The
        effective tax rates in 2007 were impacted by Texas tax legislation
        which will permit the recovery of $13 million of deferred tax assets
        that were written off in a prior year.
    



    
    ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
    

    
    RECONCILIATION OF GAAP EARNINGS TO ADJUSTED EARNINGS
    (unaudited, in millions)
    

    
                              Three Months Ended          Six Months Ended
                                   June 30,                   June 30,
                              2008         2007         2008         2007
    

    
    Net income                $160         $138         $222         $302
    Adjusting items,
     pre-tax:
      HP transaction costs      16            -           16            -
      Restructuring reversal     -           (1)           -           (1)
    Tax effect of adjusting
     items                      (2)           -           (2)           -
    Adjusting items, net of
     income taxes               14           (1)          14           (1)
    (Income) loss from
     discontinued operations    (1)           6            -            7
    Adjusted net income       $173         $143         $236         $308
    

    
    Diluted earnings per
     share
      Net income             $0.31        $0.26        $0.43        $0.57
      Adjusting items         0.02            -         0.03            -
      (Income) loss from
       discontinued
       operations                -         0.01            -         0.01
      Adjusted net income    $0.33        $0.27        $0.46        $0.58
    




    
    ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
    

    
    SUMMARY OF CONSOLIDATED BALANCE SHEETS
    (unaudited, in millions)
    

    
                                                       June          December
                                                        30,             31,
                                                       2008            2007
    ASSETS
    Current Assets
      Cash and cash equivalents                       $3,102         $3,139
      Marketable securities                               13             55
      Accounts receivable, net                         3,883          3,603
      Prepaids and other                                 966            958
      Deferred income taxes                              683            690
        Total current assets                           8,647          8,445
    

    
    Property and equipment, net                        2,437          2,489
    Deferred contract costs, net                       1,114            984
    Investments and other assets                         942          1,099
    Goodwill                                           5,158          5,092
    Other intangible assets, net                         932            929
    Deferred income taxes                                187            186
        Total assets                                 $19,417        $19,224
    

    
    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities
      Accounts payable                                  $737           $605
      Accrued liabilities                              2,493          2,616
      Deferred revenue                                 1,561          1,473
      Income taxes                                        91             54
      Current portion of long-term debt                  160            168
        Total current liabilities                      5,042          4,916
    

    
    Pension benefit liability                          1,032            989
    Long-term debt, less current portion               3,069          3,209
    Minority interests and other long-term
     liabilities                                         449            419
    Shareholders' equity                               9,825          9,691
        Total liabilities and shareholders'
         equity                                      $19,417        $19,224
    



    
    ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
    

    
    SUMMARY OF CONSOLIDATED CASH FLOWS
    (unaudited, in millions)
    

    
                                                          Six Months Ended
                                                              June 30,
                                                        2008           2007
    

    
    Net cash provided by operating
     activities(1)                                      $866           $753
    

    
    Cash Flows from Investing Activities
      Proceeds from sales of marketable securities        43              -
      Proceeds from investments and other assets          31             61
      Net proceeds from divested assets and
       non-marketable equity securities                    9             53
      Payments for purchases of property and
       equipment                                        (455)          (367)
      Payments for acquisitions, net of cash
       acquired, and non-marketable equity securities    (29)           (43)
      Payments for purchases of software and
       other intangibles                                (168)          (230)
      Payments for purchases of marketable securities      -             (2)
      Other                                                9              8
    Net cash used in investing activities               (560)          (520)
    

    
    Cash Flows from Financing Activities
      Proceeds from long-term debt                         1              5
      Payments on long-term debt                          (2)           (10)
      Capital lease payments                            (103)           (77)
      Purchase of treasury stock                        (213)          (334)
      Employee stock transactions                         21            129
      Dividends paid                                     (50)           (51)
      Other                                                7              7
    Net cash used in financing activities               (339)          (331)
    Effect of exchange rate changes on cash and
     cash equivalents                                     (4)             7
    Net decrease in cash and cash equivalents            (37)           (91)
    Cash and cash equivalents at beginning of period   3,139          2,972
    Cash and cash equivalents at end of period        $3,102         $2,881
    

    
    (1) Depreciation and amortization and deferred cost charges were $764
        million and $685 million for the six months ended June 30, 2008 and
        2007, respectively.
    



    
    ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
    

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

    
                                                         Six Months Ended
                                                             June 30,
                                                        2008           2007
    Net cash provided by operating activities           $866           $753
    

    
    Capital expenditures:
      Proceeds from investments and other assets          31             61
      Payments for purchases of property and
       equipment                                        (455)          (367)
      Payments for purchases of software and other
       intangibles                                      (168)          (230)
      Other investing activities                           9              8
      Capital lease payments                            (103)           (77)
        Total net capital expenditures                  (686)          (605)
        Free cash flow                                   180            148
    

    
    Other investing and financing activities:
      Proceeds from sales of marketable securities        43              -
      Net proceeds from divested assets and
       non-marketable equity securities                    9             53
      Payments for acquisitions, net of cash
       acquired, and non-marketable equity securities    (29)           (43)
      Payments for purchases of marketable securities      -             (2)
      Proceeds from long-term debt                         1              5
      Payments on long-term debt                          (2)           (10)
      Purchase of treasury stock                        (213)          (334)
      Employee stock transactions                         21            129
      Dividends paid                                     (50)           (51)
      Other financing activities                           7              7
    Effect of exchange rate changes on cash and cash
     equivalents                                          (4)             7
        Net decrease in cash and cash equivalents       $(37)          $(91)

    




For further information:

For further information: Bob Brand, Media Relations, +1-972-605-1290,
bob.brand@eds.com, or Deanna Rogers, Investor Relations, +1-972-605-8933,
deanna.rogers@eds.com, both of Electronic Data Systems Corporation Web Site:
http://www.eds.com

Organization Profile

EDS

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890