EX-99.1 2 cscseparation8-kex991.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1




COMPUTER SCIENCES CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


On November 27, 2015, Computer Sciences Corporation (CSC or the Company) completed the previously announced separation of its wholly owned subsidiary, Computer Sciences Government Holdings, Inc. (renamed CSRA, or “CSRA”) through a one-for-one pro rata distribution of all CSRA common stock to CSC stockholders of record at the close of business on November 18, 2015, the record date of the distribution (“the Distribution”). CSRA is now an independent public company trading under the symbol “CSRA” on the New York Stock Exchange.

The unaudited pro forma condensed consolidated statements of operations of CSC for the six months ended October 2, 2015 and October 3, 2014 and for each of the fiscal years ended April 3, 2015, March 28, 2014, and March 29, 2013 assume the Distribution had occurred on March 31, 2012. The unaudited pro forma Condensed Consolidated Balance Sheet of CSC as of October 2, 2015 assumes the Distribution had occurred on October 2, 2015. Beginning in the third quarter of fiscal 2016, CSRA’s historical financial results for periods prior to the Distribution will be reflected in CSC’s consolidated condensed financial statements as discontinued operations.

The unaudited pro forma condensed consolidated financial statements and the accompanying notes should be read in conjunction with:
I.
The audited consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” include in CSC’s Form 10-K for the fiscal year ended April 3, 2015 and
II.
The unaudited consolidated condensed financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in CSC’s Form 10-Q for the six months ended October 2, 2015.

The Historical columns in the unaudited pro forma consolidated condensed financial statements reflect CSC’s historical financial statements for the periods presented and do not reflect any adjustments related to the Distribution and related events.

The CSRA Separation columns in the unaudited pro forma consolidated condensed financial statements were derived from the historical combined financial statements and the combined financial statements included in the CSRA Form 10 filed with the SEC on November 6, 2015.

The pro forma adjustments columns reflects the exclusion of previously allocated corporate overhead costs as well as the inclusion of certain multi-employer pension and postretirement costs and actuarial gains / losses that were not reflected in the CSRA combined financial statements in the CSRA Form 10.

The pro forma adjustments represent the Company's current best estimates and may differ from those that will be calculated to report CSRA as discontinued operations in CSC’s future filings. The unaudited pro forma condensed consolidated financial statements are provided for illustrative and informational purposes only and are not intended to represent or be indicative of what CSC’s results of operations or financial position would have been had the separation occurred on the dates indicated. The unaudited pro forma condensed consolidated financial statements also should not be considered representative of CSC’s future results of operations or financial position.

See combined notes to the unaudited pro forma condensed consolidated financial statements for a more detailed discussion of these transactions.

Page 1




COMPUTER SCIENCES CORPORATION
PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (unaudited)


 
 
Six Months Ended October 2, 2015
(Amounts in millions, except per-share amounts)
 
Historical CSC
 
CSRA Separation
 
Pro Forma Adjustments
 
Notes
 
Pro Forma* CSC Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
5,473

 
$
(1,928
)
 
$
4

 
(A)
 
$
3,549

 
 
 
 
 
 
 
 
 
 
 
Costs of services (excludes depreciation and amortization and restructuring costs)
 
3,996

 
(1,532
)
 
45

 
(A)(B)(C)
 
2,509

Selling, general and administrative (excludes restructuring costs)
 
570

 
(85
)
 
47

 
(B)
 
532

Depreciation and amortization
 
410

 
(68
)
 
—

 
 
 
342

Restructuring costs
 
6

 
—

 
(1
)
 
(C)
 
5

Separation and merger costs
 
64

 
(56
)
 
—

 
 
 
8

Interest expense
 
70

 
(11
)
 
—

 
 
 
59

Interest income
 
(18
)
 
—

 
—

 
 
 
(18
)
Other (income) expense, net
 
(29
)
 
21

 
1

 
(A)(K)
 
(7
)
Total costs and expenses
 
5,069

 
(1,731
)
 
92

 
 
 
3,430

 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations, before taxes
 
404

 
(197
)
 
(88
)
 
 
 
119

Income tax expense (benefit)
 
67

 
(77
)
 
(22
)
 
(D)
 
(32
)
Income from continuing operations
 
337

 
(120
)
 
(66
)
 
 
 
151

Less: net income attributable to noncontrolling interest, net of tax
 
10

 
(10
)
 
—

 
 
 
—

Net income attributable to CSC common stockholders from continuing operations
 
$
327

 
$
(110
)
 
$
(66
)
 
 
 
$
151

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share from continuing operations
 
$
2.37

 
 
 
 
 
 
 
$
1.09

Diluted earnings per share from continuing operations
 
$
2.32

 
 
 
 
 
 
 
$
1.07

 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding for:
 
 
 
 
 
 
 
 
 
 
   Basic EPS
 
138.106

 
 
 
 
 
 
 
138.106

   Diluted EPS
 
140.699

 
 
 
 
 
 
 
140.699


*Pro forma as defined under Article 11 of SEC Regulation S-X

See accompanying notes.

Page 2




COMPUTER SCIENCES CORPORATION
PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (unaudited)


 
 
Six Months Ended October 3, 2014
(Amounts in millions, except per-share amounts)
 
Historical CSC
 
CSRA Separation
 
Pro Forma Adjustments
 
Notes
 
Pro Forma* CSC Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
6,317

 
$
(2,064
)
 
$
5

 
(A)
 
$
4,258

 
 
 
 
 
 
 
 
 
 
 
Costs of services (excludes depreciation and amortization and restructuring costs)
 
4,571

 
(1,644
)
 
42

 
(A)(B)
 
2,969

Selling, general and administrative (excludes restructuring costs)
 
690

 
(92
)
 
34

 
(B)
 
632

Depreciation and amortization
 
524

 
(71
)
 
—

 
 
 
453

Restructuring costs
 
3

 
—

 
—

 
 
 
3

Interest expense
 
75

 
(11
)
 
—

 
 
 
64

Interest income
 
(10
)
 
—

 
—

 
 
 
(10
)
Other expense (income), net
 
5

 
(2
)
 
1

 
(A)
 
4

Total costs and expenses
 
5,858

 
(1,820
)
 
77

 
 
 
4,115

 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations, before taxes
 
459

 
(244
)
 
(72
)
 
 
 
143

Income tax (benefit) expense
 
123

 
(88
)
 
—

 
 
 
35

Income from continuing operations
 
336

 
(156
)
 
(72
)
 
 
 
108

Less: net income attributable to noncontrolling interest, net of tax
 
10

 
(10
)
 
—

 
 
 
—

Net income attributable to CSC common stockholders from continuing operations
 
$
326

 
$
(146
)
 
$
(72
)
 
 
 
$
108

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share from continuing operations
 
$
2.26

 
 
 
 
 
 
 
$
0.75

Diluted earnings per share from continuing operations
 
$
2.22

 
 
 
 
 
 
 
$
0.73

 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding for:
 
 
 
 
 
 
 
 
 
 
   Basic EPS
 
144.346

 
 
 
 
 
 
 
144.346

   Diluted EPS
 
147.155

 
 
 
 
 
 
 
147.155


*Pro forma as defined under Article 11 of SEC Regulation S-X

See accompanying notes.


Page 3





COMPUTER SCIENCES CORPORATION
PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (unaudited)


 
 
Twelve Months Ended April 3, 2015
(Amounts in millions, except per-share amounts)
 
Historical CSC
 
CSRA Separation
 
Pro Forma Adjustments
 
Notes
 
Pro Forma* CSC Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
12,173

 
$
(4,065
)
 
$
9

 
(A)
 
$
8,117

 
 
 
 
 
 
 
 
 
 
 
Costs of services (excludes depreciation and amortization and restructuring costs)
 
9,534

 
(3,272
)
 
(103
)
 
(A)(B)(C)
 
6,159

Selling, general and administrative (excludes SEC settlement related charges and restructuring costs)
 
1,340

 
(194
)
 
74

 
(B)
 
1,220

Selling, general and administrative - SEC settlement related charges
 
197

 
—

 
—

 
 
 
197

Depreciation and amortization
 
977

 
(137
)
 
—

 
 
 
840

Restructuring costs
 
261

 
—

 
(5
)
 
(C)
 
256

Interest expense
 
148

 
(22
)
 
—

 
 
 
126

Interest income
 
(20
)
 
—

 
—

 
 
 
(20
)
Other expense (income), net
 
12

 
(6
)
 
4

 
(A)
 
10

Total costs and expenses
 
12,449

 
(3,631
)
 
(30
)
 
 
 
8,788

 
 
 
 
 
 
 
 
 
 
 
(Loss) income from continuing operations, before taxes
 
(276
)
 
(434
)
 
39

 
 
 
(671
)
Income tax (benefit) expense
 
(312
)
 
(161
)
 
19

 
(D)
 
(454
)
Income (loss) from continuing operations
 
36

 
(273
)
 
20

 
 
 
(217
)
Less: net income attributable to noncontrolling interest, net of tax
 
15

 
(15
)
 
—

 
 
 
—

Net income attributable to CSC common stockholders from continuing operations
 
$
21

 
$
(258
)
 
$
20

 
 
 
$
(217
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share from continuing operations
 
$
0.15

 
 
 
 
 
 
 
$
(1.52
)
Diluted earnings per share from continuing operations
 
$
0.15

 
 
 
 
 
 
 
$
(1.52
)
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding for:
 
 
 
 
 
 
 
 
 
 
   Basic EPS
 
142.557

 
 
 
 
 
 
 
142.557

   Diluted EPS
 
145.780

 
 
 
 
 
 
 
142.557


*Pro forma as defined under Article 11 of SEC Regulation S-X

See accompanying notes.

Page 4




COMPUTER SCIENCES CORPORATION
PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (unaudited)


 
 
Twelve Months Ended March 28, 2014
(Amounts in millions, except per-share amounts)
 
Historical CSC
 
CSRA Separation
 
Pro Forma Adjustments
 
Notes
 
Pro Forma* CSC Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
12,998

 
$
(4,108
)
 
$
9

 
(A)
 
$
8,899

 
 
 
 
 
 
 
 
 
 
 
Costs of services (excludes depreciation and amortization and restructuring costs)
 
9,272

 
(3,355
)
 
115

 
(A)(B)(C)
 
6,032

Selling, general and administrative (excludes restructuring costs)
 
1,220

 
(188
)
 
67

 
(B)
 
1,099

Depreciation and amortization
 
1,018

 
(148
)
 
—

 
 
 
870

Restructuring costs
 
76

 
—

 
(2
)
 
(C)
 
74

Interest expense
 
147

 
(20
)
 
1

 
(A)
 
128

Interest income
 
(16
)
 
—

 
—

 
 
 
(16
)
Other expense (income), net
 
18

 
(2
)
 
2

 
(A)
 
18

Total costs and expenses
 
11,735

 
(3,713
)
 
183

 
 
 
8,205

 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations, before taxes
 
1,263

 
(395
)
 
(174
)
 
 
 
694

Income tax expense (benefit)
 
383

 
(147
)
 
(62
)
 
(D)
 
174

Income from continuing operations
 
880

 
(248
)
 
(112
)
 
 
 
520

Less: net income attributable to noncontrolling interest, net of tax
 
21

 
(21
)
 
—

 
 
 
—

Net income attributable to CSC common stockholders from continuing operations
 
$
859

 
$
(227
)
 
$
(112
)
 
 
 
$
520

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share from continuing operations
 
$
5.81

 
 
 
 
 
 
 
$
3.52

Diluted earnings per share from continuing operations
 
$
5.70

 
 
 
 
 
 
 
$
3.45

 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding for:
 
 
 
 
 
 
 
 
 
 
   Basic EPS
 
147.647

 
 
 
 
 
 
 
147.647

   Diluted EPS
 
150.761

 
 
 
 
 
 
 
150.761


*Pro forma as defined under Article 11 of SEC Regulation S-X

See accompanying notes.


Page 5




COMPUTER SCIENCES CORPORATION
PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (unaudited)


 
 
Twelve Months Ended March 29, 2013
(Amounts in millions, except per-share amounts)
 
Historical CSC
 
CSRA Separation
 
Pro Forma Adjustments
 
Notes
 
Pro Forma* CSC Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
14,195

 
$
(4,677
)
 
$
15

 
(A)
 
$
9,533

 
 
 
 
 
 
 
 
 
 
 
Costs of services (excludes depreciation and amortization and restructuring costs)
 
11,293

 
(3,873
)
 
35

 
(A)(B)(C)
 
7,455

Selling, general and administrative (excludes restructuring costs)
 
1,197

 
(201
)
 
49

 
(B)
 
1,045

Depreciation and amortization
 
1,070

 
(158
)
 
—

 
 
 
912

Restructuring costs
 
264

 
—

 
(13
)
 
(C)
 
251

Interest expense
 
183

 
(18
)
 
—

 
 
 
165

Interest income
 
(22
)
 
—

 
—

 
 
 
(22
)
Other (income) expense, net
 
(25
)
 
(1
)
 
2

 
(A)
 
(24
)
Total costs and expenses
 
13,960

 
(4,251
)
 
73

 
 
 
9,782

 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations, before taxes
 
235

 
(426
)
 
(58
)
 
 
 
(249
)
Income tax (benefit) expense
 
(62
)
 
(162
)
 
(24
)
 
(D)
 
(248
)
Income (loss) from continuing operations
 
297

 
(264
)
 
(34
)
 
 
 
(1
)
Less: net income attributable to noncontrolling interest, net of tax
 
19

 
(19
)
 
—

 
 
 
—

Net income (loss) attributable to CSC common stockholders from continuing operations
 
$
278

 
$
(245
)
 
$
(34
)
 
 
 
$
(1
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share from continuing operations
 
$
1.80

 
 
 
 
 
 
 
$
(0.01
)
Diluted earnings per share from continuing operations
 
$
1.79

 
 
 
 
 
 
 
$
(0.01
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding for:
 
 
 
 
 
 
 
 
 
 
   Basic EPS
 
154.590

 
 
 
 
 
 
 
154.590

   Diluted EPS
 
155.557

 
 
 
 
 
 
 
154.590


*Pro forma as defined under Article 11 of SEC Regulation S-X

See accompanying notes.


Page 6




COMPUTER SCIENCES CORPORATION
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEETS (unaudited)


 
 
As of October 2, 2015
(Amounts in millions)
 
Historical CSC
 
CSRA Separation
 
Pro Forma Adjustments
 
Notes
 
Pro Forma* CSC Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
1,818

 
$
(10
)
 
$
(253
)
 
(E)
 
$
1,555

Receivables, net
 
2,127

 
(472
)
 
—

 
 
 
1,655

Prepaid expenses and other current assets
 
500

 
(77
)
 
34

 
(F)
 
457

Total current assets
 
4,445

 
(559
)
 
(219
)
 
 
 
3,667

 
 
 
 
 
 
 
 
 
 
 
Property and equipment, net
 
1,519

 
(438
)
 
(37
)
 
(G)(H)(I)
 
1,044

Software, net
 
774

 
(41
)
 
2

 
(J)
 
735

Outsourcing contract costs, net
 
338

 
—

 
—

 
 
 
338

Goodwill
 
1,842

 
(792
)
 
(34
)
 
(K)
 
1,016

Other assets
 
1,095

 
(84
)
 
(25
)
 
(N)
 
986

Total Assets
 
$
10,013

 
$
(1,914
)
 
$
(313
)
 
 
 
$
7,786

 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
Short-term debt and current maturities of long-term debt
 
$
894

 
$
(19
)
 
$
—

 
 
 
$
875

Accounts payable
 
436

 
(140
)
 
4

 
(I)
 
300

Accrued payroll and related costs
 
377

 
(71
)
 
—

 
 
 
306

Accrued expenses and other current liabilities
 
1,028

 
(268
)
 
(14
)
 
(L)
 
746

Deferred revenue and advance contract payments
 
587

 
(148
)
 
—

 
 
 
439

Income taxes payable and deferred income taxes
 
55

 
(61
)
 
48

 
(M)
 
42

Total current liabilities
 
3,377

 
(707
)
 
38

 
 
 
2,708

 
 
 
 
 
 
 
 
 
 
 
Long-term debt, net of current maturities
 
1,716

 
(118
)
 
—

 
 
 
1,598

Income tax liabilities and deferred income taxes
 
451

 
(92
)
 
172

 
(M)
 
531

Other long-term liabilities
 
1,423

 
(94
)
 
(491
)
 
(N)
 
838

 
 
 
 
 
 
 
 
 
 
 
CSC stockholders' equity
 
 
 
 
 
 
 
 
 
 
Common stock, par value $1 per share; authorized 750,000,000; issued 148,484,053
 
148

 
—

 
—

 
 
 
148

Additional paid-in-capital
 
2,312

 
—

 
—

 
 
 
2,312

Earnings retained for use in business/Net Parent Investment
 
1,091

 
(877
)
 
(1
)
 
(O)
 
213

Accumulated other comprehensive (loss) income
 
(61
)
 
2

 
(31
)
 
(N)
 
(90
)
Less common stock in treasury, at cost, 10,011,393
 
(473
)
 
—

 
—

 
 
 
(473
)
Total CSC stockholders' equity
 
3,017

 
(875
)
 
(32
)
 
 
 
2,110

Noncontrolling interest in subsidiaries
 
29

 
(28
)
 
—

 
 
 
1

Total Equity
 
3,046

 
(903
)
 
(32
)
 
 
 
2,111

 
 
 
 
 
 
 
 
 
 
 
Total Liabilities and Equity
 
$
10,013

 
$
(1,914
)
 
$
(313
)
 
 
 
$
7,786


*Pro forma as defined under Article 11 of SEC Regulation S-X

See accompanying notes.


Page 7




COMPUTER SCIENCES CORPORATION
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The unaudited pro forma consolidated condensed statements of earnings for the six months ended October 2, 2015 and October 3, 2014 and for the fiscal years ended ended April 3, 2015, March 28, 2014, and March 29, 2013 and the unaudited pro forma consolidated condensed balance sheet as of October 2, 2015 include the following pro forma adjustments:

(A)
Reflects the removal of related party revenue and costs.

(B)
Reflects adjustments to the CSRA Separation amounts to exclude certain general corporate overhead costs which were historically allocated to CSRA which were not directly attributable to CSRA, stock compensation expense of CSC Board of Directors and corporate executives, and adjustments to include actuarial gains and losses, settlement charges, and net periodic benefit costs related to multi-employer pension plans. See the table below for a detail of these amounts.
Increase (decrease) in millions
 
Six Months Ended
 
Twelve Months Ended
 
 
October 2, 2015
 
October 3, 2014
 
April 3, 2015
 
March 28, 2014
 
March 29, 2013
Cost of Services
 
 
 
 
 
 
 
 
 
 
Pension related adjustments
 
$
21

 
$
19

 
$
(148
)
 
$
68

 
$
(34
)
Corporate overhead and stock compensation adjustments
 
19

 
18

 
31

 
36

 
41

Net adjustments described in footnotes (A) and (C)
 
5

 
5

 
14

 
11

 
28

Total
 
$
45

 
$
42

 
$
(103
)
 
$
115

 
$
35

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative
 
 
 
 
 
 
 
 
 
 
Pension related adjustments
 
$
—

 
$
—

 
$
(2
)
 
$
1

 
$
(1
)
Corporate overhead and stock compensation adjustments
 
47

 
34

 
76

 
66

 
50

Total
 
$
47

 
$
34

 
$
74

 
$
67

 
$
49


(C)
Reflects the reclassification of restructuring costs from cost of services to restructuring costs to conform to CSC's historical financial statement presentation.
 
(D)
Reflects the pro forma tax adjustments related to the Separation.

(E)
Reflects a $290 million adjustment to increase the CSRA reference level cash balance to $300 million as defined in the Master Separation and Distribution Agreement, net of a partially offsetting $37 million adjustment to increase CSC cash for the difference between the repayment of the CSRA note payable to CSC and the amount of the special dividend paid by CSC in connection with the Distribution.

(F)
Reflects restricted cash related to the sale of receivables attributable to CSRA.

(G)
Reflects additional buildings and related accumulated depreciation transferring to CSRA at Separation.

(H)
Reflects additional building improvements attributable to CSRA.

(I)
Reflects program assets and liabilities that will remain with CSC.

(J)
Reflects the adjustment for software transferring to CSC per the IP Matters Agreement.

(K)
Reflects the reversal of the goodwill adjustment recorded in the financial statements of CSRA on a carve-out basis attributable to the sales of ATG and Welkin.

(L)
Reflects the adjustment for the transfer of certain employee-related liabilities.

(M)
Reflects the pro forma tax adjustments related to the Separation.


Page 8



(N)
Reflects transfer of liabilities and accumulated other comprehensive income related to certain pension, post-retirement and other benefit plans to CSRA.

(O)
Earnings retained for use in business/Net Parent Investment was adjusted as a result of pro forma adjustments.


Page 9