Back to GetFilings.com

SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS

(Mark One)

Commission File No.: 1-4850

COMPUTER SCIENCES CORPORATION

Registrant’s telephone number, including area code: (310) 615-0311

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

      Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.     Yes x          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     x

      As of May 23, 2003 the aggregate market value of stock held by non-affiliates of the Registrant was approximately $6,951,000,000. A total of 186,935,500 shares of common stock was outstanding as of such date.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the Registrant’s definitive Proxy Statement for its 2003 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after March 28, 2003, are incorporated by reference into Part III hereof.

TABLE OF CONTENTS

i

PART I

Item 1.     Business

INTRODUCTION AND HISTORY

General

      Computer Sciences Corporation (CSC or the Company) is one of the world leaders in the information technology (I/T) and professional services industry. Since it was founded in 1959, the Company has helped clients use I/T more efficiently in order to improve their operations and profitability, achieve business results and focus on core competencies.

      CSC offers a broad array of services to clients in the global commercial and government markets and specializes in the application of complex I/T to achieve its customers’ strategic objectives. Its service offerings include information technology and business process outsourcing and I/T and professional services.

      Outsourcing involves operating all or a portion of a customer’s technology infrastructure, including systems analysis, applications development, network operations, desktop computing and data center management. CSC also provides business process outsourcing, managing key functions for clients, such as claims processing, credit checking, logistics and customer call centers.

      I/T and professional services includes systems integration, consulting and professional services. Systems integration encompasses designing, developing, implementing and integrating complete information systems. Consulting and professional services includes advising clients on the strategic acquisition and utilization of I/T and on business strategy, security, modeling, simulation, engineering, operations, change management and business process reengineering. Also included are a variety of specialized technical functions such as aviation services and base and range operations. During fiscal 2003, approximately 50% of CSC’s activities in I/T and professional services were delivered by its U.S. Federal sector.

      CSC also licenses sophisticated software systems for the healthcare and financial services markets and provides a broad array of end-to-end e-business solutions that meet the needs of large commercial and government clients. The Company focuses on delivering results by linking business innovation skills with seasoned delivery expertise to provide flexible and scalable solutions. To do so, CSC draws on its vast experience in designing, building and maintaining large, complex, mission-critical systems and applies this knowledge to today’s business challenges.

      In addition, CSC does not have exclusive agreements with hardware or software providers and believes that this “vendor neutrality” enables it to better identify and manage solutions specifically tailored to each client’s needs.

Major Markets

      CSC provides its services to clients in global commercial industries and to the U.S. federal government. Segment and geographic information is included in Note 12 to the Company’s consolidated financial statements for the fiscal year ended March 28, 2003.

      CSC has provided I/T services to the U.S. federal government since 1961. In fiscal 1986, when U.S. federal contracts represented 70% of the Company’s revenues, CSC decided to devote substantial resources to further develop global commercial business in order to accelerate its growth and take advantage of the competencies gained as a leader in the federal sector. As a result of this strategy, CSC has increased its penetration of the global commercial market and has diversified its business.

      In the global commercial market sector, CSC’s service offerings are marketed to clients in a wide array of industries including aerospace/defense; automotive; chemical and energy; consumer goods; financial services; healthcare; manufacturing; media; retail/distribution; telecommunications; traffic and transportation; travel and hospitality; and utilities.

      Geographically, CSC has major operations throughout North America, Europe and Asia-Pacific.

1

      During the last three fiscal years, the Company’s revenue mix by major markets was as follows:

Fiscal Year 2003 Overview

      During fiscal 2003, CSC announced awards valued at approximately $7.7 billion, including $5 billion of Global Commercial awards and $2.7 billion with the U.S. federal government. These multi-year awards represent the estimated value at contract signing. They cannot be considered firm orders, however, due to their variable attributes, including demand-driven usage, modifications in scope of work due to changing customer requirements, and the annual funding constraints and indefinite delivery/indefinite quantity characteristics of major portions of the Company’s U.S. federal activities.

      Continuing with its strategy of balanced growth through organic sources (new contracts and contract expansion) and acquisition, CSC acquired U.S. federal government I/T and professional services provider DynCorp during March 2003. This transaction enhances CSC’s access to the growing federal I/T and professional services markets and expands the Company’s already broad variety of services provided to various levels of the U.S. government. The combined operations rank CSC as a Top 3 U.S. federal I/T contractor providing comprehensive end-to-end services and solutions throughout our clients’ business processes.

Global Commercial Market Highlights

      Within the global commercial market, there were several significant awards to CSC during fiscal 2003:

      CSC’s largest commercial award during fiscal 2003 was the 10 year, $1.6 billion global I/T outsourcing agreement with Motorola. This award calls for the Company to manage Motorola’s worldwide midrange, desktop and distributed computing and network infrastructure, along with help desk functions.

      Bombardier Transportation, an operating group of Bombardier Inc. and a leader in rail equipment manufacturing and servicing, entered into a $700 million, 7 year I/T outsourcing agreement with CSC. The Company will provide desktop, help desk, data center, network and application management services.

      D&B, formerly known as Dun & Bradstreet, and CSC signed a 10 year, $560 million I/T outsourcing agreement which calls for CSC to manage help desk, network and desktop and laptop support functions. D&B will also transition data center operations as well as print and mail facilities services to the Company.

      CSC will continue to provide distributed computing data processing services to J.P.Morgan Chase & Co. under a new 7 year, $500 million subcontract, replacing the Company’s initial agreement with J.P.Morgan Chase & Co. entered into during 1996.

      The Company continued to strengthen and expand its relationship with Raytheon Company through three outsourcing arrangements totaling $492 million over 8 years. A new agreement with Raytheon Aircraft Company calls for CSC to manage a full range of I/T infrastructure. The duration of two of the Company’s existing agreements with Raytheon Company are also extended by 8 years under the terms of these agreements.

      CSC signed an 8 year, $320 million agreement to provide a broad range of I/T infrastructure outsourcing services to Basell, the world’s largest producer of polypropylene. Under the terms of the agreement, the Company will assume responsibility for Basell’s global I/T infrastructure, including data center, help desk and network operations and desktop computers.

2

      Adding to the Company’s relationship with United Technologies Corporation (UTC), CSC was awarded a $143 million agreement expanding its I/T outsourcing to include similar services for UTC operations in Asia Pacific. This expansion brings total UTC awards of $4 billion to CSC through 2014.

U.S. Federal Government Market Highlights

      CSC provides a broad array of services to the U.S. federal government, ranging from traditional systems integration and outsourcing to complex project management and technical services. The Company has extensive experience in the development of software for mission-critical systems for defense and civil agency applications, and also provides systems engineering and specialized support in network management, satellite communications, intelligence, aerospace, logistics and related high-technology fields. As a result of the DynCorp acquisition, CSC also provides a variety of technical functions such as aircraft maintenance and marine services.

      There were several significant awards to CSC during fiscal 2003 from the U.S. federal government:

      CSC is 1 of 8 teams awarded the U.S. Army’s Rapid Response Program Government-wide Acquisition contract. The contract to provide a variety of rapid support services is available to all government agencies. The Company’s portion of the $3 billion contract is estimated to be $700 million over 8 years. CSC will provide a broad range of services, including communications, I/T services, aircraft refurbishment and airstrip construction.

      The National Security Agency has selected CSC as 1 of 4 companies to provide systems and security engineering, hardware and software installation, help desk support and systems administration. The Company’s estimated share of the blanket purchase order is $300 million over 5 years (if all options are exercised).

      CSC was awarded a 7 year, $285 million (if all options are exercised) task order from the Environmental Protection Agency to implement, operate and maintain an e-government central data exchange. This portal will integrate environmental information and provide a single point of entry for environmental reporting from federal, state and local government agencies and private industry.

      The Missile Defense Agency awarded CSC a 3 year, $270 million (if all options are exercised) follow-on contract to continue providing scientific, engineering and technical assistance including acquisition and business management, systems engineering, testing and evaluation, and web engineering support services to the Ballistic Missile Defense System.

COMPETITION

      The I/T and professional services markets in which CSC competes are not dominated by a single company or a small number of companies. A substantial number of companies offer services that overlap and are competitive with those offered by the Company. Some of these are large industrial firms, including computer manufacturers and major aerospace firms that may have greater financial resources than CSC and, in some cases, may have greater capacity to perform services similar to those provided by the Company.

      CSC’s ability to obtain business is dependent upon its ability to offer better strategic concepts and technical solutions, better value, a quicker response or a combination of these factors. In the opinion of the Company’s management, CSC is positioned to compete effectively in the global commercial and U.S. federal government markets based on its technology and systems expertise and large project management skills. It is also management’s opinion that CSC’s competitive position is enhanced by the full spectrum of I/T and professional services that it provides, from consulting to software and systems design, implementation and integration, to information technology and business process outsourcing to technical services.

3

EMPLOYEES

      The Company has offices worldwide, and as of March 28, 2003 employed approximately 90,000 persons. The services provided by CSC require proficiency in many fields, such as computer sciences, programming, mathematics, physics, engineering, astronomy, geology, operations, research, economics, statistics and business administration.

U.S. SECURITIES AND EXCHANGE COMMISSION REPORTS

      All of the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and all amendments to those reports, filed with or furnished to the U.S. Securities and Exchange Commission on or after November 15, 2002 are available free of charge through the Company’s internet website, www.csc.com, as soon as reasonably practical after the Company has electronically filed such material with, or furnished it to, the SEC.

4

      Upon expiration of its leases, the Company does not anticipate any difficulty in obtaining renewals or alternative space. Lease expiration dates range from fiscal 2004 through fiscal 2018.

5

      The Company is currently party to a number of disputes which involve or may involve litigation. After consultation with counsel, it is the opinion of Company management that the ultimate liability, if any, with respect to these disputes will not be material to the Company’s results of operations or financial position.

      None.

Executive Officers of the Registrant

	*	Director of the Company

**	Retired effective June 1, 2003

6

Business Experience of Officers

      Van B. Honeycutt joined the Company in 1975. He was elected Chief Executive Officer in April 1995, and Chairman of the Board of Directors in March 1997. He has been a director of the Company since 1993. Previous positions within the Company include President and Chief Operating Officer (1993-1995), President of the Industry Services Group (1988-1993), and President of CSC Credit Services, Inc. (1983-1988).

      Michael W. Laphen joined the Company in 1977 and was elected President and Chief Operating Officer in April 2003 and Vice President in August 2001. He was President of the European Group from August 2000 to March 31, 2003. Previous positions within the Company include President of the Federal sector-Civil Group (1998-2000), and President of Systems Group - Integrated Systems Division (1992-1998).

      Edward P. Boykin has retired effective June 1, 2003. He joined the Company in 1966 and was elected President and Chief Operating Officer in July 2001, serving in that role through March 31, 2003. Previous positions within the Company include President of the Financial Services Group (1999-2001), CSC Vice President with responsibility for leveraging the capabilities that exist within the J.P. Morgan and DuPont accounts (1998-1999), President of The Pinnacle Alliance, a CSC-managed organization providing information technology outsourcing and other services to J.P. Morgan (1996-1998), and President of the Technology Management Group (1993-1996).

      Leon J. Level joined the Company in 1989 as Vice President and Chief Financial Officer and as a member of CSC’s Board of Directors. Former positions include Vice President and Treasurer of Unisys Corporation and Chairman of Unisys Finance Corporation; Assistant Corporate Controller and Executive Director of The Bendix Corporation; and Principal with the public accounting firm of Deloitte & Touche LLP.

      Harvey N. Bernstein joined the Company as Assistant General Counsel in 1983. He became Deputy General Counsel and was elected a Vice President in 1988. Prior to joining the Company, he specialized in government procurement law at the firm of Fried, Frank, Harris, Shriver & Jacobson in Washington, D.C.

      Paul M. Cofoni joined the Company in 1991 and was elected Vice President in August 2001. He has been President of the Federal sector since June 2001. Previous positions within the Company include President of the Technology Management Group (1998-2001) and Vice President of the Technology Management Group’s Eastern Region (1991-1998). Prior to joining the Company, he had a 17 year career with General Dynamics Corporation, where he held various executive-level positions.

      Donald G. DeBuck joined the Company in 1979 and was elected Vice President and Controller in August 2001. Previous positions within the Company include Assistant Controller (1998-2001) and Vice President of Finance and Administration, Communications Industry Services (1996-1998).

      Hayward D. Fisk joined the Company in 1989 as Vice President, General Counsel and Secretary. Prior to joining the Company, he was associated for 21 years with Sprint Corporation (formerly United Telecommunications, Inc.), in various legal and executive officer positions, most recently as Vice President and Associate General Counsel.

      Paul T. Tucker joined the Company in 1996 as a Corporate Development executive, and in August, 1997 was elected Vice President of Corporate Development. From 1990 to 1995 he was President and Chief Executive Officer of Knight-Ridder Financial, an electronic real-time financial market information company. Previously, he founded and served as President and Chief Technologist of HAL Communications Corp., a communications hardware and software company and was an Associate Professor and Senior Research Engineer at the University of Illinois.

7

PART II

      Common stock of Computer Sciences Corporation is listed and traded on the New York Stock Exchange under the ticker symbol “CSC.”

      As of June 5, 2003 the number of registered shareholders of Computer Sciences Corporation’s common stock was 10,734. The table shows the high and low intra-day prices of the Company’s common stock as reported on the composite tape of the New York Stock Exchange for each quarter during the last two calendar years and through June 5, 2003.

* Through June 5, 2003

COMPUTER SCIENCES CORPORATION

8