Perot Systems Corp. Reports Operating Results (10-Q)
Perot Systems Corp. is a worldwide provider of information technology services and e-business solutions to a broad range of clients. The company serves clients by delivering services and solutions focused on each client's specific needs. It emphasizes developing and integrating information systems operating and improving technology and business processes and helping clients transform their businesses. The company helps companies take full advantage of e-business by leveraging their traditional strengths and technologies into digital marketplaces. Perot Systems Corp. has a market cap of $1.73 billion; its shares were traded at around $14.5 with a P/E ratio of 15.1 and P/S ratio of 0.6. Perot Systems Corp. had an annual average earning growth of 13.6% over the past 5 years. Highlight of Business Operations:We measure earnings growth using diluted earnings per share, which is a measure of our effectiveness in delivering profitable growth. Diluted earnings per share increased to $0.24 per share from $0.23 per share for the first quarter of 2008. This increase came primarily from a decrease in our effective tax rate for the first quarter of 2009 to 30.0%, as compared to the effective rate of 37.8% for the first quarter of 2008. Income tax expense for the first quarter of 2009 was lower primarily due to a $3 million tax benefit attributable to the resolution of certain tax issues with the Internal Revenue Service related to our consolidated federal income tax returns for the tax years 2003 and 2004. The change in our tax rate resulted in a benefit of approximately $0.03 per diluted share.
Government Services revenue decreased $6 million, or 3.7% for the first quarter of 2009 as compared to the first quarter of 2008. The decrease was primarily attributable to $23 million of lower revenue resulting from the ending of task orders in the normal course of business and reductions of pass-through revenue. These decreases were partially offset by a $17 million, net increase in revenue from contracts that were ramping up in the first quarter of 2008 and net increased level of volumes and scope of services we provide. Our business with the federal government will fluctuate due to annual federal funding limits and the specific needs of the federal agencies we serve.
At March 31, 2009, we have cash and cash equivalents of $266 million, of which $112 million was held by our foreign subsidiaries. We also had short-term investments of $7 million at March 31, 2009, which were held in the U.S. While we are aware of no restrictions on access to our cash balances in any foreign jurisdiction, it is our intent to permanently reinvest our foreign earnings or to remit such earnings to the U.S. in a tax-free manner, and we do not provide for U.S. income tax on the undistributed earnings of our foreign subsidiaries.
In addition, we currently have a credit facility that allows us to borrow up to $275 million. As of March 31, 2009, we have borrowings of $177 million under the credit facility and $98 million available. The credit facility requires certain financial covenants of which we are in compliance as of March 31, 2009.
Net cash provided by investing activities was $15 million for the three months ended March 31, 2009, as compared to net cash provided by investing activities of $11 million for the same period in 2008. During the three months ended March 31, 2009, we liquidated short-term investments of $29 million, net as compared to $23 million, net during the three months ended March 31, 2008.
Net cash provided by financing activities was $3 million for the three months ended March 31, 2009, as compared to net cash used in financing activities of $21 million for the three months ended March 31, 2008. During the first quarter of 2008, we purchased $24 million of treasury stock.
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