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Perot Systems Corp. Reports Operating Results (10-Q)

November 06, 2009 | About:
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10qk

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Perot Systems Corp. (PER) filed Quarterly Report for the period ended 2009-09-30.

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 $3.64 billion; its shares were traded at around $0 with a P/E ratio of 30.7 and P/S ratio of 1.3. 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 $0.27 per share for the third quarter of 2009 from $0.25 per share for the third quarter of 2008. The improvement in earnings relates primarily to reduced income tax expense, which was lower primarily due to a $4 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 2005 through 2007, and a $2 million tax benefit related to the closing of tax years in certain foreign jurisdictions. Earnings also increased due to improved profitability on existing accounts, primarily resulting from the effects of cost reduction activities and increased utilization. These improvements to earnings were partially offset by reductions in discretionary short-term project work and by an increase in selling, general and administrative costs.

Our effective tax rate for the third quarter of 2009 was 23.3% as compared to 37.5% for the third quarter of 2008. Income tax expense for the third quarter of 2009 was lower primarily due to a $4 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 2005 through 2007, and a $2 million tax benefit related to the closing of tax years in certain foreign jurisdictions. In connection with the settlement with the Internal Revenue Service, we expect to owe additional taxes of approximately $1 million, plus interest.

At September 30, 2009, we have cash and cash equivalents of $380 million, of which $131 million was held by our foreign subsidiaries. We also had short-term investments of $53 million at September 30, 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, as of September 30, 2009, we had a credit facility that allowed us to borrow up to $275 million. As of September 30, 2009, we had borrowings of $177 million under the credit facility and $98 million available. The credit facility required certain financial covenants of which we were in compliance as of September 30, 2009. On November 3, 2009, we paid off, in cash, our outstanding borrowings under our credit facility, upon which the credit facility was terminated.

Net cash used in investing activities was $73 million for the nine months ended September 30, 2009, as compared to net cash used in investing activities of $32 million for the same period in 2008. During the nine months ended September 30, 2009, we purchased $53 million of property, equipment and software, as compared to $38 million for the nine months ended September 30, 2008. During the nine months ended September 30, 2009, we made net purchases of short-term investments of $17 million. During the nine months ended September 30, 2008, we liquidated short-term investments of $23 million, net, and used $18 million in the acquisitions of businesses.

Net cash provided by financing activities was $56 million for the nine months ended September 30, 2009, as compared to net cash used in financing activities of $34 million for the nine months ended September 30, 2008. This increase is primarily attributable to $54 million of proceeds from the issuance of treasury stock for the nine months ending September 30, 2009, as compared to $16 million for the same period in 2008. Also, in 2008 we made a $34 million payment against our credit facility and a $24 million purchase of treasury stock.

Read the The complete Report

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