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COVANSYS REPORTS SELECTED FIRST QUARTER OPERATING RESULTS
POSTPONES FILING 10-Q FOR PERIOD ENDING MARCH 31,
2004 PENDING
COMPLETION OF REVIEW AND ANALYSIS OF CERTAIN PROPERTY AND EQUIPMENT
FARMINGTON HILLS,
MI, May 17, 2004 – Covansys Corporation (NASDAQ: CVNS), a worldwide
provider of information technology services, today announced that
the filing of its report on Form 10-Q for the quarter ended March
31, 2004 will be delayed pending completion of the proper accounting
for physical losses and obsolescence for certain of the Company’s
property and equipment, mainly computers and related peripherals,
as a result of a recently completed physical inventory. The physical
losses and obsolescence identified in the first quarter of 2004
had a current net book value of approximately $2.5 million (an
original cost of $15.7 million). The Company has been unable to
identify the periods to which the physical losses and obsolescence
occurred and the related impact on the previously reported financial
information. The physical losses and obsolescence represent less
than 1% of total assets. The Company’s Form 10-Q for the
quarter ended March 31, 2004 will be filed with the Securities
and Exchange Commission as soon as possible after the completion
of this analysis.
While Covansys awaits resolution of the aforementioned item, the
Company is reporting revenues of $93.4 million compared with $96.6
million in the first quarter of 2003 and $91.5 million in the fourth
quarter of 2003.
Highlights of Covansys’ first quarter 2004 included:
- A directive from People Soft, Inc. to expand the company’s
India Development Center;
- An agreement with BearingPoint to assist with the opening
and operation of BearingPoint’s first Global Development
Center in India;
- A $3.4 million contract with the Idaho Secretary of State's
Office to implement a new voter registration system;
- Continued strong revenue growth in India, accounting
for 26% of Covansys’ total first quarter revenue compared
with 15% for the first quarter of 2003 and 25% in the fourth
quarter of 2003;
- An increase of 7% in hours billed in India and a 4% improvement
in its India billing rates;
- A rise in billable headcount to nearly
5000 employees with 245 added in India during the period.
“We are pleased with our success in building out our India
platform while continuing to improve the quality and productivity
of our operations there,” said Martin Clague, President and
Chief Executive Officer of Covansys. “The strength of our
capabilities in India is reflected in the increasing percentage
of total revenues generated in the region, and further enhancing
the scale and scope of our presence in India will remain an important
strategic goal for us in the quarters ahead.”
Of the Company’s reported revenue in the period, 71% was
generated in the commercial sector and 29% in the public sector.
Domestic utilization was 84% in the first quarter 2004, up from
80% for the fourth quarter 2003 and up from 83% for the first quarter
2003. Utilization in India was 71% for the first quarter compared
with 73% for the first quarter 2003 and 76% in the fourth quarter
of 2003. Utilization in India was negatively impacted as Covansys
began to aggressively hire to meet an anticipated increase in demand.
The Company expects to moderately improve its Indian utilization
rates during the second half of the year.
“Looking ahead, we are confident that the new commercial
and public sector projects we were awarded, together with the five-year
Master Service Agreement we announced last month with Fidelity
National Financial (“FNF”), will help us generate strong
revenue growth and continue to enhance our reputation as a leading
provider of innovative IT solutions. We are excited about the opportunity
to work with FNF, BearingPoint and our other valued partners to
help their clients reap the same competitive advantages of offshore
outsourcing that Covansys clients have been enjoying for more than
a decade – rapid deployment, world-class quality and reduced
costs,” concluded Mr. Clague.
Covansys will host a conference call to discuss select first quarter
2004 financials on Tuesday, May 18, 2004 at 1:00 p.m. Eastern Time.
Interested parties may access the call by dialing 877-407-8033
(or 201-689-8033 from outside North America). The call may also
be accessed via the Internet at the company's website, www.covansys.com.
Please note that the call will not include a question and answer
session.
A replay of the call will be available beginning at approximately
1:00 p.m. on May 19th through midnight on May 26th by dialing 877-660-6853
or 201-612-7415 and referencing account number 1628 and conference
ID 104256. The replay will also be available on the Company's website,
www.covansys.com, for 90 days.
About Covansys
Covansys Corporation, (NASDAQ: CVNS), is a global consulting and
technology services company specializing in industry-specific solutions,
strategic outsourcing and integration services through a unique
onsite, off-site, offshore delivery model that helps clients achieve
rapid deployment, world-class quality and reduced costs. Founded
in 1985, Covansys has successfully delivered an array of innovative
and cost-effective business and technical solutions to leaders
in the private and public sectors. With one of the largest offshore
capabilities of any technology services provider based in the United
States, Covansys has achieved the SEI’s CMM Level 5 quality
ratings at two of its offshore development centers in India.
Safe Harbor Statement
With the exception of statements regarding historical matters
and statements concerning our current status, certain matters discussed
herein are forward-looking statements that involve substantial
risks and uncertainties. Such forward-looking statements may be
identified by the words "anticipate," "believe," "estimate," "expect" or "intend" and
similar expressions. Our actual results, performance or achievements
could differ materially from these forward-looking statements.
Factors that could cause or contribute to such material differences
include general economic conditions and conditions in the IT industry
such as the demand for IT services, public sector government budgetary
constraints, potential cost overruns on fixed-price projects, effective
application of the percentage of completion method of accounting
for fixed priced contracts, risks related to merger, acquisition
and strategic investment strategy, variability of operating results,
government regulation of immigration, exposure to regulatory, political
and economic conditions in India and Asia, competition in the IT
services industry, the short-term nature and termination provisions
of contracts, economic conditions unique to clients in specific
industries and limited protection of intellectual property rights.
These and other factors are described in the Company’s filings
with the U.S. Securities and Exchange Commission.
AT THE COMPANY:
David Roady
(248) 848-2221
droady@covansys.com
AT JOELE FRANK, WILKINSON BRIMMER KATCHER:
Eden Abrahams / Andrew Siegel
(212) 355-4449
ea@joelefrank.com / abs@joelefrank.com
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