Plano, Texas (ots/PRNewswire) - Perot Systems Corporation (NYSE:
PER) today announced financial results for the second quarter of
2004. For the quarter:
-- Revenue was USD$434 million, an increase of 20% year-to-year.
-- Earnings per share (diluted) was USD$.18.
-- Operating margin was 7.9%.
-- Trailing twelve month new contract signings totaled USD$771
-- Trailing twelve month operating cash flow was USD$113 million
with capital expenditures of USD$24 million for the same time
-- Cash totaled USD$167 million as of June 30, 2004.
For the third quarter of 2004, Perot Systems expects:
-- Revenue to range from USD$430 million to USD$445 million.
-- Earnings per share (diluted) to range from USD$.17 to USD$.18.
"The Perot Systems team produced strong results and good business
momentum this quarter," said Ross Perot Jr., president and CEO of
Perot Systems. "After several years of careful investment and
positioning, our team is beginning to realize the benefits of its
hard work and dedication to building our company for long-term
success. We have strong growth engines that are leading us into the
future. We are winning new business that strengthens our growth
position. We have a strong financial position that provides us the
flexibility to continue investing in our future."
@@start.t1@@ Perot Systems Corporation
Revenue by Line of Business
(Millions of USD)
2Q 2004 Year-to-Year Acquisition-
Line of Business Revenue Growth Related Growth A)
IT Solutions B) $323.6 12% $1.8
Government Services 68.4 17% ---
Consulting, net B) 41.8 263% 29.0
Total $433.8 20% $30.8@@end@@
A. Represents revenue growth contributed from companies acquired
since the second quarter of 2003 and includes Vision Healthsource
($1.8 million) within the IT Solutions line of business, and TSI
($28.8 million) and Delphi Group ($0.2 million) within the
Consulting line of business. For IT Solutions, Consulting, and
Perot Systems consolidated results, acquisitions contributed one,
252, and nine percentage points of year-to-year growth,
B. Revenue from UBS was $64.9 million for the second quarter of
2004, or 15% of revenue. Revenue from UBS reported within the IT
Solutions line of business was $57.5 million for the second quarter
of 2004, a decrease of 4% year-to-year. Revenue from UBS reported
within the Consulting line of business was $7.4 million for the
second quarter of 2004, all of which came from TSI, which was
acquired during December 2003.
The information contained within the following sections,the
projections provided on the first page of this press release with
respect to the third quarter of 2004, and the accompanying footnotes
to the financial statements are important to understanding current
and future performance. Some of the statements included in this
press release involve projections of Perot Systems' future financial
performance and are based on current expectations. These statements
are forward-looking, and actual results may differ materially. In
formulating these projections, we have considered recent and
potential sales, acquisitions, current market conditions and
long-term opportunities and risks, with these factors being subject
to risks and uncertainties, including those described within this
For the third quarter of 2004:
-- Revenue is expected to range from USD$430 million to USD$445
million, representing year-to-year growth of between 16% and 20%.
Acquisitions completed since the third quarter of 2003 will
contribute approximately USD$30 million, equal to eight percentage
points of year-to-year revenue growth. The remainder of the
year-to-year revenue growth will come primarily from new sales and
expansion of existing customer contracts. Perot Systems expects its
IT Solutions, Government Services, and Consulting lines of business
to grow year-to-year by approximately 8%, 20% and 260%,
respectively. Prior to the effect of the acquisition of TSI, which
will add substantial revenue to Perot Systems' Consulting line of
business, Perot Systems' Consulting line of business should grow
year-to-year by approximately 15% to 20%.
-- Earnings per share (diluted) is expected to range from USD$.17
to USD$.18. Perot Systems expects that the commercial outsourcing
contracts it signs during the third quarter will not produce
significant earnings during their initial months, consistent with
the economic model for many outsourcing contracts. Perot Systems
also expects that its commercial accounts will remain stable with
second quarter levels.
Information about Perot Systems' Largest Customer and Planned
With recent changes to our business, improvements to market
conditions, and the opportunities and risks that are present during
the next few years, we are providing the following information:
-- Our outsourcing contract with UBS expires on January 1, 2007,
and as a result, we expect to lose a substantial majority of our
revenue and profit from UBS. The impact of the expiration of the
outsourcing agreement on our profits will be based in part on our
ability to reduce our costs. We expect that the expiration of the
outsourcing agreement likely will have a disproportionately large
effect on our profitability compared to the effect on our revenues.
The amount of gross profit that we have earned from UBS has ranged
from USD$44 million to USD$50 million per year during the past three
calendar years. We expect the services we provide to UBS post 2006
will include offshore services, which are provided outside the scope
of the outsourcing contract and currently represent approximately
USD$30 million of annual revenue outside the outsourcing contract.
-- We expect to realize between USD$50 million and USD$60
million of operating efficiencies by the end of 2007, including
efficiencies we expect on existing fixed and unit priced contracts
of USD$30 million by the end of 2007, reducing existing SG&A by
USD$10 million by the end of 2006 with approximately USD$5 million
of this reduction coming from existing amortization expense during
2005, and between USD$10 million and USD$20 million of expense
reductions to be realized during 2007.
We believe our ability to increase revenues will depend primarily
on the success of our units focused on selling services to
Healthcare, Federal Government and Offshore Services markets. These
three areas currently comprise 78% of our revenue, excluding UBS
outsourcing revenue. For the second quarter of 2004, revenue from the
Healthcare and Government markets grew by 27% and 17% year-to-year,
respectively. Pro forma year-to-year revenue growth for TSI, our
offshore application management unit, was 34% for the second quarter
of 2004. Pro forma growth looks at the underlying growth of TSI,
which we acquired and consolidated beginning on December 31, 2003.
While we may not continue to grow these areas at these rates, we
believe that we will continue to experience strong growth in these
areas. In addition to this growth, we plan to continue adding to our
capabilities through acquisitions.
In expanding our business, we plan to add future SG&A at
approximately 5% of new revenue long-term, excluding the effect of
Perot Systems will hold a conference call to review second quarter
2004 results of operations on August 3, 2004 at 10:15 a.m. EDT.
Parties interested in participating may join the conference call via
the Internet at http://www.perotsystems.com . Additionally, Perot
Systems has published a downloadable summary of its second quarter
results at http://www.perotsystems.com .
@@start.t2@@ Perot Systems Corporation
Condensed Consolidated Statements of Operations
For the Three Months Ended June 30, 2003 and 2004
(Millions of USD, except per share amounts)
Three Months Ended June 30
2003 2004 % Change
Revenue $360.0 $433.8 20%
Direct Cost of Services 307.2 345.2 12%
Gross Profit A) 52.8 88.6 68%
Selling, General & Admin. B) 47.0 54.5 16%
Operating Income 5.8 34.1 488%
Other Income/(Expense), net C) 1.7 0.7 (59%)
Interest Income/(Expense), net 0.6 (0.2) (133%)
Pretax Income 8.1 34.6 327%
Income Tax Expense 3.2 12.7 297%
Net Income $4.9 $21.9 347%
Earnings Per Share (Diluted) $.04 $.18 350%
Shares Outstanding (Diluted) D) 114.7 119.6 4%
Perot Systems Corporation
For the Three Months Ended June 30, 2004
(Millions of USD)
Revenue % Pts. of
2Q 2003 $360.0
New Contracts 17.2 4.8 pts.
Commercial Accounts 12.1 3.3 pts.
Industry-based Consulting 2.4 0.7 pts.
Acquisition 1.8 0.5 pts.
IT Solutions 33.5 9.3 pts.
Government Services 10.0 2.8 pts.
Acquisitions 29.0 8.1 pts.
Other Consulting 1.3 0.3 pts.
Consulting 30.3 8.4 pts.
2Q 2004 $433.8 20.5 pts.
Revenue Year-to-Year Growth % of Total
Healthcare $197.0 27% 45%
Financial Services 58.9 (16%) 14%
Commercial Group & Other 67.7 4% 16%
IT Solutions 323.6 12% 75%
Government Services 68.4 17% 16%
TSI, gross 35.2 n/m 8%
Intersegment Eliminations (6.4) n/m (1%)
TSI, net 28.8 n/m 7%
Solutions Consulting 12.6 13% 2%
Other Consulting 0.4 33% 0%
Consulting, net 41.8 263% 9%
Total Company $433.8 20% 100%
Perot Systems Corporation
Condensed Consolidated Balance Sheets
As of December 31, 2003 and June 30, 2004
(Millions of USD)
As of As of
12/31/2003 6/30/2004 % Change
Cash and cash equivalents $123.8 $166.9 35%
Short-term investments 37.6 --- (100%)
Accounts receivable, net 208.2 240.1 15%
Prepaid expenses and other 52.4 73.2 40%
Total current assets 422.0 480.2 14%
Property, equip. & software,
net 142.8 138.3 (3%)
Goodwill 347.6 358.0 3%
Other non-current assets 98.2 121.3 24%
Total assets $1,010.6 $1,097.8 9%
Current liabilities E) $207.0 $295.9 43%
Long-term liabilities E) 90.8 19.4 (79%)
Stockholders' equity 712.8 782.5 10%
Total liabilities &
stockholders' equity $1,010.6 $1,097.8 9%
Perot Systems Corporation
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended June 30, 2003 and 2004
(Millions of USD)
Three Months Ended
Net income $4.9 $21.9
Depreciation and amortization 9.5 13.6
Changes in assets and liabilities (net of
effects from acquisitions
of businesses) and other non-cash items (14.4) (19.1)
Net cash provided by operating activities --- 16.4
Purchases of property, equipment & software (5.3) (4.0)
Acquisitions of businesses, net of cash acquired (2.8) (0.5)
Other investing activities F) --- 32.3
Net cash provided by (used in) investing
activities (8.1) 27.8
Proceeds from issuance of common stock 2.9 4.3
Other financing activities (0.4) ---
Net cash provided by financing activities 2.5 4.3
Effect of exchange rate changes on cash 2.1 (0.3)
Net cash flow ($3.5) $48.2@@end@@
Financial Statement Notes
A) Gross margin, which is calculated as gross profit divided by
revenue, for the second quarter of 2004 was 20.4% of total revenue,
which is higher than the gross margin for the second quarter of 2003
of 14.7% of total revenue. This year-to-year increase in gross
margin is primarily due to the following:
-- In the second quarter of 2003, we recorded $17.7 million of
expense in direct costs of services associated with the exiting of an
-- The acquisitions of TSI and Vision Healthsource increased
gross margin by 1.8 percentage points. TSI and Vision were acquired
during the twelve-month period following the second quarter of 2003
and typically realize higher gross margins than what we normally
realize on traditional IT outsourcing contracts because of the
nature of the services they provide, which are offshore business
process outsourcing and application management services.
This year-to-year increase is also due to a slight increase in
overall profitability for commercial customer contracts, particularly
our fixed-price contracts for which the profitability tends to
improve with the maturity of the contract as we develop operating
efficiencies. Partially offsetting these increases were three major
customer contract changes, which reduced our gross margin by 0.9
percentage points, and an increase in expense of $6.6 million for
year-end bonuses for the majority of the associates in our IT
Solutions segment and associates in our corporate SG&A areas.
B) Selling, general and administrative expenses for the second
quarter of 2004 increased 16.0% to $54.5 million from $47.0 million
for the second quarter of 2003. This increase is primarily
attributable to the acquisition of TSI and additional costs
associated with corporate compliance and business insurance,
partially offset by reduced SG&A expenses primarily resulting from
cost reductions made in 2003. During the second quarter of 2003, we
recorded $3.3 million of expense in SG&A related to severance and
other costs to eliminate approximately 150 positions in various
business functions and geographic areas. In addition, we recorded a
reduction of expense in the second quarter of 2003 of $5.4 million
resulting from revising our estimate of liabilities associated with
actions in previous years to streamline our operations, which
included a favorable resolution of an employment dispute.
C) Other income, net, for the second quarter of 2004 decreased
to $0.7 million from $1.7 million for the second quarter of 2003.
During the second quarter of 2003, we recorded $1.5 million of
income from our previous 50% equity in the earnings of TSI, which we
consolidated on December 31, 2003, following the acquisition of HCL
Technologies' shares in TSI. The remainder of the change is
primarily due to gains recorded from the sale of securities held by
D) Perot Systems accounts for its employee and non-employee
director stock option activity under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations. Had the company elected to adopt FAS 123,
"Accounting for Stock Based Compensation," the pro forma diluted
earnings per common share for the second quarter of 2003 and 2004
would be $.01 and $.14, respectively.
E) Perot Systems' operating lease with a variable interest
entity for the use of land and office buildings in Plano, Texas was
recorded as long-term debt of $75.5 million as of December 31, 2003.
The agreement matures in June 2005, and Perot Systems is currently
pursuing plans to restructure the agreement. Consequently, Perot
Systems has reclassified $75.5 million from long-term debt to the
current portion of long-term debt as of June 30, 2004.
F) Other investing activities for the second quarter of 2004
include proceeds of $32.3 million associated with the sale of
About Perot Systems
Perot Systems is a worldwide provider of information technology
services and business solutions. Through its flexible and
collaborative approach, Perot Systems integrates expertise from
across the company to deliver custom solutions that enable clients to
accelerate growth, streamline operations and create new levels of
customer value. Headquartered in Plano, Texas, Perot Systems reported
2003 revenue of USD$1.5 billion. The company has more than 14,000
associates located in North America, Europe, and Asia. Additional
information on Perot Systems is available at
This press release contains forward-looking statements that are
subject to known and unknown risks and uncertainties that could cause
actual results to differ materially from those expressed or implied
by such statements. Among many factors that could affect our business
and cause actual results to differ materially are the following:
-- Our outsourcing agreement with UBS, the largest of our UBS
agreements, ends in January 2007, which we expect to result in the
loss of a substantial majority of revenue and profits from our UBS
-- Revenue and profits from our contract with UBS may
substantially vary between periods because it depends on the amount
and quality of the services we provide.
-- We may bear the risk of cost overruns under custom software
development contracts, and, as a result, cost overruns could
adversely affect our profitability.
-- Our five largest customers account for a substantial portion
of our revenue and profits and loss of any of these customers could
result in decreased revenues and profits.
-- If entities we acquire fail to perform in accordance with our
expectations or if their liabilities exceed our expectations, our
profits per share could be diminished and our financial results could
be adversely affected.
-- Our software development products may cost more than we
initially project, encounter delays, or fail to perform well in the
market, which could decrease our profits.
-- Our financial results are materially affected by a number of
factors, including broad economic conditions, the amount and type of
technology spending that our customers undertake, and the business
strategies and financial condition of our customers and the
industries we serve, which could result in increases or decreases in
the amount of services that we provide to our customers and the
pricing of such services. Important to our future financial and
growth position is our ability to identify and effectively respond
to these factors.
-- The success of the implementation of planned operating
efficiencies and cost cutting initiatives, and the timing and amount
of any resulting benefits.
-- If we are unable to successfully integrate acquired entities,
our profits may be less and our operations more costly or less
-- Our contracts generally contain provisions that could allow
customers to terminate the contracts and sometimes contain provisions
that enable the customer to require changes in pricing, decreasing
our revenue and profits and potentially damaging our business
-- Some contracts contain fixed-price provisions or penalties
that could result in decreased profits.
-- Fluctuations in currency exchange rates may adversely affect
the profitability of our foreign operations.
-- Our international operations expose our assets to increased
risks and could result in business loss or in more expensive or less
-- We have a significant business presence in India, and risks
associated with doing business there could decrease our revenue and
-- Governments could enact legislation that restricts the
provision of services from offshore locations.
-- Our government contracts contain early termination and
reimbursement provisions that may adversely affect our revenue and
-- If customers reduce spending that is currently above
contractual minimums, our revenues and profits could diminish.
-- If we fail to compete successfully in the highly competitive
markets in which we operate, our business, financial condition, and
results of operations will be materially and adversely affected.
-- Increasingly complex regulatory environments may increase our
-- Our quarterly operating results may vary.
-- Loss of key personnel could adversely affect our ability to
attract and retain business.
-- Changes in technology could adversely affect our
competitiveness, revenue, and profit.
-- Ross Perot has substantial control over any major corporate
-- We could lose rights to our company name, which may adversely
affect our ability to market our services.
-- Failure to recruit, train, and retain technically skilled
personnel could increase costs or limit growth.
-- Alleged or actual infringement of intellectual property
rights could result in substantial additional costs.
-- Provisions of our certificate of incorporation, bylaws,
stockholders' rights plan and Delaware law could deter takeover
Please refer to our Annual Report on Form 10-K/A for the fiscal
year ended December 31, 2003, as filed with the U.S. Securities and
Exchange Commission and available at http://www.sec.gov , for
additional information regarding risk factors. We disclaim any
intention or obligation to revise any forward-looking statements
whether as a result of new information, future developments, or
Web site: http://www.perotsystems.com
ots Originaltext: Perot Systems Corporation
Im Internet recherchierbar: http://www.newsaktuell.ch
investors, John Lyon, +1-972-577-6132, or fax, +1-972-577-6790, or
John.Lyon@ps.net , or media, Joe McNamara, +1-972-577-6165, or fax,
+1-972-577-4484, or Joe.McNamara@ps.net , both of Perot Systems
Corporation. Company News On-Call: