Shares of Computer Sciences (CSC) Trade Down as Management Withdraws FY12 Outlook
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Price: $69.01 --0%
Financial Fact:
Discontinued operations: 0
Today's EPS Names:
BTTX, VAXX, ELYS, More
Financial Fact:
Discontinued operations: 0
Today's EPS Names:
BTTX, VAXX, ELYS, More
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Following the announcement that Computer Sciences Corporation (NYSE: CSC) has withdrawn its 2012 guidance, shares are trading down roughly 6 percent.
The reason management canceled its 2012 outlook is because the company will be required to recognize a material impairment of its net investment in the contract with the U.K. National Health Service, under which CSC is developing and deploying an integrated electronic patient records system as part of the U.K. government’s NHS IT program, in the third quarter of fiscal year 2012.
Until CSC and NHS conclude their on-going discussions concerning a possible contract amendment, including any scope modifications and contract value reductions that might be part of any such amendment, the Company is unable to estimate the amount of such impairment.
However, depending on the terms of such an amendment or if no amendment is concluded, such impairment could be equal to the Company’s net investment in the contract, which, as of November 30, 2011, was approximately £943 million ($1.5 billion). Additional costs could be incurred by CSC depending on the nature of such an amendment, or if no amendment is concluded. The Company is unable to estimate the amount of such additional costs; however, such costs could be material. At such time as the Company is able to determine the amount of the impairment and any additional costs, it will publicly announce the same.
There can be no assurance that CSC and NHS will enter into a contract amendment or, if a contract amendment is negotiated and entered into, that the contract amendment as finally negotiated will be on terms favorable to CSC.
The failure of the parties to enter into a contract amendment, a significant delay in entering into a contract amendment or the execution of a contract amendment on terms unfavorable to CSC would result in a material impairment of CSC’s net investment in the contract and could have a material adverse effect on CSC’s consolidated financial position, results of operations and cash flows.
The reason management canceled its 2012 outlook is because the company will be required to recognize a material impairment of its net investment in the contract with the U.K. National Health Service, under which CSC is developing and deploying an integrated electronic patient records system as part of the U.K. government’s NHS IT program, in the third quarter of fiscal year 2012.
Until CSC and NHS conclude their on-going discussions concerning a possible contract amendment, including any scope modifications and contract value reductions that might be part of any such amendment, the Company is unable to estimate the amount of such impairment.
However, depending on the terms of such an amendment or if no amendment is concluded, such impairment could be equal to the Company’s net investment in the contract, which, as of November 30, 2011, was approximately £943 million ($1.5 billion). Additional costs could be incurred by CSC depending on the nature of such an amendment, or if no amendment is concluded. The Company is unable to estimate the amount of such additional costs; however, such costs could be material. At such time as the Company is able to determine the amount of the impairment and any additional costs, it will publicly announce the same.
There can be no assurance that CSC and NHS will enter into a contract amendment or, if a contract amendment is negotiated and entered into, that the contract amendment as finally negotiated will be on terms favorable to CSC.
The failure of the parties to enter into a contract amendment, a significant delay in entering into a contract amendment or the execution of a contract amendment on terms unfavorable to CSC would result in a material impairment of CSC’s net investment in the contract and could have a material adverse effect on CSC’s consolidated financial position, results of operations and cash flows.
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