SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
Commission File No. 01-11779
ELECTRONIC DATA SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 75-2548221 | |
| (State of incorporation) | (I.R.S. Employer Identification No.) | |
| 5400 Legacy Drive, Plano, Texas | 75024-3199 | |
| (Address of principal executive offices) | (ZIP code) | |
(972) 604-6000
(Registrant’s telephone number)
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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨.
Indicate by check mark whether the registrant is an accelerated filer. Yes x No ¨.
As of October 31, 2004, there were 513,852,211 outstanding shares of the registrant’s Common Stock, $.01 par value per share.
| Page No. | ||||
| Item 1. |
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| 3 | ||||
| 4 | ||||
| 5 | ||||
| Notes to Unaudited Condensed Consolidated Financial Statements |
6 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 | ||
| Item 4. |
33 | |||
| Item 1. |
34 | |||
| Item 2. |
34 | |||
| Item 6. |
34 | |||
| 35 | ||||
2
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2004 |
2003 (restated) |
2004 |
2003 (restated) |
|||||||||||||
| Revenues |
$ | 4,945 | $ | 4,993 | $ | 15,381 | $ | 15,071 | ||||||||
| Costs and expenses |
||||||||||||||||
| Cost of revenues |
4,745 | 4,564 | 14,382 | 13,540 | ||||||||||||
| Selling, general and administrative |
406 | 387 | 1,225 | 1,194 | ||||||||||||
| Restructuring and other |
(4 | ) | 15 | 25 | 106 | |||||||||||
| Total costs and expenses |
5,147 | 4,966 | 15,632 | 14,840 | ||||||||||||
| Operating income (loss) |
(202 | ) | 27 | (251 | ) | 231 | ||||||||||
| Other income (expense) |
(43 | ) | (57 | ) | (229 | ) | (187 | ) | ||||||||
| Income (loss) from continuing operations before income taxes |
(245 | ) | (30 | ) | (480 | ) | 44 | |||||||||
| Provision (benefit) for income taxes |
(76 | ) | 5 | (141 | ) | 31 | ||||||||||
| Income (loss) from continuing operations |
(169 | ) | (35 | ) | (339 | ) | 13 | |||||||||
| Income from discontinued operations, net of income taxes (including net gain on sale of $424 in 2004, net of income taxes) |
16 | 19 | 444 | 58 | ||||||||||||
| Income (loss) before cumulative effect of changes in accounting principles |
(153 | ) | (16 | ) | 105 | 71 | ||||||||||
| Cumulative effect on prior years of changes in accounting principles, net of income taxes |
— | — | — | (1,432 | ) | |||||||||||
| Net income (loss) |
$ | (153 | ) | $ | (16 | ) | $ | 105 | $ | (1,361 | ) | |||||
| Basic earnings per share of common stock |
||||||||||||||||
| Income (loss) from continuing operations |
$ | (0.33 | ) | $ | (0.07 | ) | $ | 0.68 | $ | 0.03 | ||||||
| Income from discontinued operations |
0.03 | 0.04 | 0.89 | 0.12 | ||||||||||||
| Cumulative effect on prior years of changes in accounting principles |
— | — | — | (3.00 | ) | |||||||||||
| Net income (loss) |
$ | (0.30 | ) | $ | (0.03 | ) | $ | 0.21 | $ | (2.85 | ) | |||||
| Diluted earnings per share of common stock |
||||||||||||||||
| Income (loss) from continuing operations |
$ | (0.33 | ) | $ | (0.07 | ) | $ | 0.68 | $ | 0.03 | ||||||
| Income from discontinued operations |
0.03 | 0.04 | 0.89 | 0.12 | ||||||||||||
| Cumulative effect on prior years of changes in accounting principles |
— | — | — | (2.94 | ) | |||||||||||
| Net income (loss) |
$ | (0.30 | ) | $ | (0.03 | ) | $ | 0.21 | $ | (2.79 | ) | |||||
| Cash dividends per share |
$ | 0.05 | $ | 0.15 | $ | 0.35 | $ | 0.45 | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
3
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share amounts)
| September 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 3,062 | $ | 2,197 | ||||
| Marketable securities |
1,477 | 116 | ||||||
| Accounts receivable, net |
2,994 | 3,101 | ||||||
| Prepaids and other |
880 | 1,055 | ||||||
| Deferred income taxes |
389 | 108 | ||||||
| Assets held for sale |
— | 1,539 | ||||||
| Total current assets |
8,802 | 8,116 | ||||||
| Property and equipment, net |
2,162 | 2,818 | ||||||
| Deferred contract costs, net |
779 | 870 | ||||||
| Investments and other assets |
936 | 1,051 | ||||||
| Goodwill |
3,497 | 3,472 | ||||||
| Other intangible assets, net |
996 | 1,231 | ||||||
| Deferred income taxes |
729 | 722 | ||||||
| Total assets |
$ | 17,901 | $ | 18,280 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current liabilities |
||||||||
| Accounts payable |
$ | 529 | $ | 572 | ||||
| Accrued liabilities |
2,880 | 3,244 | ||||||
| Deferred revenue |
982 | 1,079 | ||||||
| Income taxes |
413 | 50 | ||||||
| Current portion of long-term debt and secured A/R facility |
947 | 2,275 | ||||||
| Liabilities held for sale |
— | 262 | ||||||
| Total current liabilities |
5,751 | 7,482 | ||||||
| Pension benefit liability |
1,081 | 1,116 | ||||||
| Long-term debt, less current portion |
3,410 | 3,488 | ||||||
| Minority interests and other long-term liabilities |
381 | 480 | ||||||
| Commitments and contingencies |
||||||||
| Shareholders’ equity |
||||||||
| Preferred stock, $.01 par value; authorized 200,000,000 shares; none issued |
— | — | ||||||
| Common stock, $.01 par value; authorized 2,000,000,000 shares; 522,748,596 shares issued at September 30, 2004 and 495,604,217 shares issued at December 31, 2003 |
5 | 5 | ||||||
| Additional paid-in capital |
2,422 | 917 | ||||||
| Retained earnings |
5,564 | 5,812 | ||||||
| Accumulated other comprehensive loss |
(147 | ) | (131 | ) | ||||
| Treasury stock, at cost, 9,589,348 shares at September 30, 2004 and 14,999,431 shares at December 31, 2003 |
(566 | ) | (889 | ) | ||||
| Total shareholders’ equity |
7,278 | 5,714 | ||||||
| Total liabilities and shareholders’ equity |
$ | 17,901 | $ | 18,280 | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
4
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
| Nine Months Ended September 30, |
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| 2004 |
2003 (restated) |
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| Cash Flows from Operating Activities |
||||||||
| Net income (loss) |
$ | 105 | $ | (1,361 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Depreciation and amortization and deferred cost charges |
1,496 | 1,415 | ||||||
| Deferred compensation |
31 | 50 | ||||||
| Cumulative effect on prior years of changes in accounting principles |
— | 1,432 | ||||||
| Intangible and fixed asset write-downs |
484 | 36 | ||||||
| Other (including pre-tax gains on sales of businesses of $829 in 2004) |
(818 | ) | (143 | ) | ||||
| Changes in operating assets and liabilities, net of effects of acquired companies: |
||||||||
| Accounts receivable |
129 | 409 | ||||||
| Prepaids and other |
203 | (96 | ) | |||||
| Deferred contract costs |
(101 | ) | (386 | ) | ||||
| Accounts payable and accrued liabilities |
(501 | ) | (139 | ) | ||||
| Deferred revenue |
(67 | ) | (99 | ) | ||||
| Income taxes |
74 | (252 | ) | |||||
| Total adjustments |
930 | 2,227 | ||||||
| Net cash provided by operating activities |
1,035 | 866 | ||||||
| Cash Flows from Investing Activities |
||||||||
| Proceeds from sales of marketable securities |
649 | 148 | ||||||
| Proceeds from investments and other assets |
113 | 478 | ||||||
| Proceeds from divested assets |
2,121 | 224 | ||||||
| Payments for purchases of property and equipment |
(498 | ) | (571 | ) | ||||
| Payments for investments and other assets |
(187 | ) | (438 | ) | ||||
| Payments related to acquisitions, net of cash acquired |
(50 | ) | < | |||||