##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2009
 or
 o
    
    Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from            to
 Commission File Number 1-14773
 PEROT SYSTEMS CORPORATION
  DELAWARE
    
    75-2230700(State or other jurisdiction of incorporation or organization)
    
    (IRS Employer Identification No.)
 
 
 þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




---



##### 



PagePART I: FINANCIAL INFORMATIONItem 1: Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008
    
    
    1Condensed Consolidated Income Statements for the three months ended March 31, 2009 and 2008
    
    
    2Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2009 and 2008
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3: Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4: Controls and Procedures
    
    
    19PART II: OTHER INFORMATIONItem 1: Legal Proceedings
    
    
    19Item 1A: Risk Factors
    
    
    20Item 6: Exhibits
    
    
    20SIGNATURES
    
    
    21EX-31.1EX-31.2EX-32.1EX-32.2




---



##### Table of Contents



PART I: FINANCIAL INFORMATION 
 Item 1: Financial Statements (Unaudited)
  
    March 31, 2009
    
    
    December 31, 2008(Dollars in millions)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    266
    
    
    $
    234Short-term investments
    
    
    7
    
    
    
    36Accounts receivable, net
    
    
    408
    
    
    
    443Prepaid expenses and other
    
    
    113
    
    
    
    93Total current assets
    
    
    794
    
    
    
    806Property, equipment and purchased software, net
    
    
    218
    
    
    
    221Goodwill
    
    
    729
    
    
    
    730Deferred contract costs, net
    
    
    116
    
    
    
    112Identifiable intangible assets, net
    
    
    50
    
    
    
    54Other non-current assets
    
    
    49
    
    
    
    55Total assets
    
    $
    1,956
    
    
    $
    1,978LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    51
    
    
    $
    54Deferred revenue
    
    
    65
    
    
    
    60Accrued compensation
    
    
    52
    
    
    
    98Income taxes payable
    
    
    25
    
    
    
    11Accrued and other current liabilities
    
    
    135
    
    
    
    138Total current liabilities
    
    
    328
    
    
    
    361Long-term debt
    
    
    180
    
    
    
    181Non-current deferred revenue
    
    
    72
    
    
    
    80Other non-current liabilities
    
    
    42
    
    
    
    51Total liabilities
    
    
    622
    
    
    
    673Commitments and contingenciesStockholders equity:Common stock
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    589
    
    
    
    587Retained earnings
    
    
    843
    
    
    
    815Treasury stock
    
    
    (68
    )
    
    
    (73
    )Accumulated other comprehensive income (loss)
    
    
    (31
    )
    
    
    (25
    )Total stockholders equity
    
    
    1,334
    
    
    
    1,305Total liabilities and stockholders equity
    
    $
    1,956
    
    
    $
    1,978
  1




---



##### Table of Contents



Three Months Ended March 31,2009
    
    
    2008(Dollars in millions,except per share data)Revenue
    
    $
    621
    
    
    $
    680Direct cost of services
    
    
    503
    
    
    
    562Gross profit
    
    
    118
    
    
    
    118Selling, general and administrative expenses
    
    
    79
    
    
    
    74Operating income
    
    
    39
    
    
    
    44Interest income
    
    
    1
    
    
    
    2Interest expense
    
    
    (2
    )
    
    
    (3
    )Other income, net
    
    
    2
    
    
    
    2Income before taxes
    
    
    40
    
    
    
    45Provision for income taxes
    
    
    12
    
    
    
    17Net income
    
    $
    28
    
    
    $
    28Earnings per share of common stock:Basic
    
    $
    0.24
    
    
    $
    0.24Diluted
    
    $
    0.24
    
    
    $
    0.23Weighted average number of common shares outstanding (in thousands):Basic
    
    
    119,453
    
    
    
    119,754Diluted
    
    
    120,433
    
    
    
    121,076
  2




---



##### Table of Contents



Three Months Ended March 31,2009
    
    
    2008(Dollars in millions)Cash flows from operating activities:Net income
    
    $
    28
    
    
    $
    28Adjustments to reconcile net income to net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    29
    
    
    
    28Stock-based compensation
    
    
    4
    
    
    
    4Change in deferred taxes
    
    
    (6
    )
    
    
    (5
    )Other non-cash items
    
    
    1
    
    
    
    Changes in assets and liabilities (net of effects from acquisitions of businesses):Accounts receivable, net
    
    
    31
    
    
    
    (16
    )Prepaid expenses
    
    
    (16
    )
    
    
    (19
    )Deferred contract costs, net
    
    
    (12
    )
    
    
    (13
    )Accounts payable and accrued liabilities
    
    
    (4
    )
    
    
    (7
    )Accrued compensation
    
    
    (47
    )
    
    
    2Deferred revenue
    
    
    (1
    )
    
    
    5Income taxes
    
    
    14
    
    
    
    11Other current and non-current assets
    
    
    4
    
    
    
    2Other current and non-current liabilities
    
    
    (4
    )
    
    
    Net cash provided by operating activities
    
    
    21
    
    
    
    20Cash flows from investing activities:Purchases of property, equipment and software
    
    
    (15
    )
    
    
    (14
    )Acquisitions of businesses, net
    
    
    
    
    
    
    1Purchases of short-term investments
    
    
    (16
    )
    
    
    (40
    )Proceeds from sale of short-term investments
    
    
    45
    
    
    
    63Other
    
    
    1
    
    
    
    1Net cash provided by investing activities
    
    
    15
    
    
    
    11Cash flows from financing activities:Repayment of long-term debt
    
    
    (1
    )
    
    
    (1
    )Proceeds from issuance of common and treasury stock
    
    
    3
    
    
    
    4Purchases of treasury stock
    
    
    
    
    
    
    (24
    )Other
    
    
    1
    
    
    
    Net cash provided by (used in) financing activities
    
    
    3
    
    
    
    (21
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (7
    )
    
    
    4Net increase in cash and cash equivalents
    
    
    32
    
    
    
    14Cash and cash equivalents at beginning of period
    
    
    234
    
    
    
    187Cash and cash equivalents at end of period
    
    $
    266
    
    
    $
    201
  3




---



##### Table of Contents



1. General
  Significant accounting standards to be adopted
 FSP No. FAS 157-4, FSP No. FAS 107-1 and APB 28-1, and FSP No. FAS 115-2 and FAS 124-2
  2. Fair Value Measurements
   
    
    Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for
identical assets or liabilities.
    
    Level 2: Inputs other than quoted prices that are observable for the asset or liability,
either directly or indirectly. These include quoted prices for similar assets or liabilities
in active markets and quoted prices for identical or similar assets or liabilities in
markets that are not active.
    
    Level 3: Unobservable inputs that reflect the reporting entitys own assumptions.
 4




---



##### Table of Contents



Basis of Fair Value MeasurementsQuoted PricesIn Active
    
    SignificantMarkets for
    
    Other
    
    SignificantBalance at
    
    Identical
    
    Observable
    
    UnobservableMarch 31,
    
    Items
    
    Inputs
    
    Inputs2009
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)(in millions)Cash equivalents  money market funds
    
    $
    144
    
    
    $
    144
    
    
    $
    
    
    
    $
    Short-term investments
    
    $
    7
    
    
    $
    7
    
    
    $
    
    
    
    $
    Interest rate swaps
    
    $
    (3
    )
    
    $
    
    
    
    $
    (3
    )
    
    $
    Foreign currency derivative financial instruments:Forward contracts
    
    $
    (15
    )
    
    $
    
    
    
    $
    (15
    )
    
    $
    Options
    
    $
    (7
    )
    
    $
    
    
    
    $
    (7
    )
    
    $
    
 3. Derivative Financial Instruments
     5




---



##### Table of Contents



As of March 31,2009
    
    
    2008(in millions)Derivative financial instruments designated as hedging
instruments under FAS 133Interest rate swaps:Accrued and other current liabilities
    
    $
    (3
    )
    
    $
    Other non-current liabilities
    
    
    
    
    
    
    (5
    )Forward contracts:Accounts receivable, net
    
    
    1
    
    
    
    Accrued and other current liabilities
    
    
    (6
    )
    
    
    Other non-current liabilities
    
    
    (9
    )
    
    
    (1
    )Option contracts:Accounts receivable, net
    
    
    
    
    
    
    1Accrued and other current liabilities
    
    
    (7
    )
    
    
    Total derivative financial instruments designated as hedging
instruments under FAS 133
    
    $
    (24
    )
    
    $
    (5
    )Derivative financial instruments not designated as hedging
instruments under FAS 133Forward contracts:Accrued and other current liabilities
    
    $
    (1
    )
    
    $
    Total derivative financial instruments not designated as hedging
instruments under FAS 133
    
    $
    (1
    )
    
    $
    Total derivative financial instruments
    
    $
    (25
    )
    
    $
    (5
    )
 6




---



##### Table of Contents



Three months ended March 31,2009
    
    
    2008(in millions)Interest rate swaps
    
    $
    
    
    
    $
    3Forward contracts
    
    
    4
    
    
    
    Option contracts
    
    
    
    
    
    
    1Total loss in accumulated other comprehensive income
    
    $
    4
    
    
    $
    4
  Three months ended March 31,Income Statement Location
    
    
    2009
    
    
    2008(in millions)Interest rate swaps
    
    Interest expense
    
    $
    1
    
    
    $
    Forward contracts
    
    Revenue
    
    
    1
    
    
    
    Option contracts
    
    Revenue
    
    
    1
    
    
    
    Total loss reclassified to earnings
    
    
    
    
    
    $
    3
    
    
    $
    
   4. Goodwill
  Industry
    
    
    GovernmentSolutions
    
    
    Services
    
    
    Total(in millions)Balance as of December 31, 2008
    
    $
    431
    
    
    $
    299
    
    
    $
    730Reduction of goodwill resulting from Tellurian acquisition
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Balance as of March 31, 2009
    
    $
    430
    
    
    $
    299
    
    
    $
    729
  7




---



##### Table of Contents



5. Identifiable Intangible Assets
  As of March 31, 2009Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    BookValue
    
    
    Amortization
    
    
    Value(in millions)Service marks
    
    $
    4
    
    
    $
    (3
    )
    
    $
    1Customer-based assets
    
    
    83
    
    
    
    (35
    )
    
    
    48Other intangible assets
    
    
    3
    
    
    
    (2
    )
    
    
    1Total
    
    $
    90
    
    
    $
    (40
    )
    
    $
    50
  6. Comprehensive Income
  Three MonthsEnded March 31,2009
    
    
    2008(in millions)Net income
    
    $
    28
    
    
    $
    28Foreign currency translation adjustments
    
    
    (5
    )
    
    
    1Change in fair value of derivative financial instruments
    
    
    (4
    )
    
    
    (4
    )Reclassification of derivative financial instruments into earnings
    
    
    3
    
    
    
    Total comprehensive income
    
    $
    22
    
    
    $
    25
 7. Stockholders Equity
  8. Stock Options and Stock-Based Compensation
 Stock-based compensation
   8




---



##### Table of Contents



Three months endedMarch 31,2009
    
    
    2008(in millions)Direct cost of services
    
    $
    1
    
    
    $
    1Selling, general and administrative expenses
    
    
    3
    
    
    
    3Stock based compensation expense
    
    
    4
    
    
    
    4Total stock based compensation expense, net of tax
    
    
    3
    
    
    
    3
   Three months endedMarch 31,2009
    
    2008Weighted average risk free interest rates
    
    
    1.86
    %
    
    
    2.78
    %Weighted average life (in years)
    
    
    4.4
    
    
    
    4.7Volatility
    
    
    34
    %
    
    
    27
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %Weighted average grant-date fair value per share of awards granted
    
    $
    3.63
    
    
    $
    4.06
 Activity in our stock-based compensation plans
  Three months ended March 31,2009
    
    
    2008Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageOptions/
    
    
    Exercise
    
    
    
    
    
    
    ExerciseSSARs
    
    
    Price
    
    
    Options
    
    
    PriceOutstanding at January 1
    
    
    15,420
    
    
    
    15.25
    
    
    
    16,240
    
    
    
    15.00Granted (1)
    
    
    935
    
    
    
    11.77
    
    
    
    1,627
    
    
    
    14.24Exercised
    
    
    (48
    )
    
    
    9.34
    
    
    
    (181
    )
    
    
    9.96Forfeited
    
    
    (246
    )
    
    
    17.10
    
    
    
    (604
    )
    
    
    15.37Outstanding at March 31
    
    
    16,061
    
    
    
    15.03
    
    
    
    17,082
    
    
    
    14.96Exercisable at March 31
    
    
    10,221
    
    
    
    15.57
    
    
    
    9,882
    
    
    
    15.40
 
 (1)
    
    All awards granted for the three months ended March 31, 2009, were SSARs.  9




---



##### Table of Contents



Three months ended March 31,2009
    
    
    2008Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageGrant-Date
    
    
    
    
    
    
    Grant-DateAwards
    
    
    Fair Value
    
    
    Awards
    
    
    Fair ValueOutstanding at January 1
    
    
    1,030
    
    
    
    14.68
    
    
    
    1,010
    
    
    
    14.90Granted
    
    
    1,083
    
    
    
    11.78
    
    
    
    434
    
    
    
    14.26Vested
    
    
    (84
    )
    
    
    11.85
    
    
    
    
    
    
    
    Forfeited
    
    
    (9
    )
    
    
    14.62
    
    
    
    (56
    )
    
    
    14.82Outstanding at March 31
    
    
    2,020
    
    
    
    13.14
    
    
    
    1,388
    
    
    
    14.70
 9. Income Taxes
    10




---



##### Table of Contents



10. Segment Data
  Industry
    
    GovernmentSolutions
    
    Services
    
    Other(1)
    
    Total(in millions)For the three months ended March 31, 2009:Revenue
    
    $
    467
    
    
    $
    155
    
    
    $
    (1
    )
    
    $
    621Income before taxes
    
    
    37
    
    
    
    8
    
    
    
    (5
    )
    
    
    40For the three months ended March 31, 2008:Revenue
    
    $
    519
    
    
    $
    161
    
    
    $
    
    
    
    $
    680Income before taxes
    
    
    40
    
    
    
    5
    
    
    
    
    
    
    
    45
 
 (1)
    
    Other includes our remaining operating areas and corporate activities, income and expenses
that are not related to the operations of the other reportable segments, and the elimination
of intersegment revenue and direct costs of services of approximately $1 million for the three
months ended March 31, 2009 related to the provision of services by the Industry Solutions
segment to the Government Services segment. During the three months ended March 31, 2009, we
recorded $6 million for cost reduction activities in this segment. 11. Earnings Per Common Share
  For the Three Months EndedMarch 31,2009
    
    
    2008(in thousands, except per share data)Basic Earnings per Common ShareNet income
    
    $
    28,379
    
    
    $
    28,433Weighted average common shares outstanding
    
    
    119,453
    
    
    
    119,754Basic earnings per common share
    
    $
    0.24
    
    
    $
    0.24Diluted Earnings per Common ShareNet income
    
    $
    28,379
    
    
    $
    28,433Weighted average common shares outstanding
    
    
    119,453
    
    
    
    119,754Incremental shares assuming dilution
    
    
    980
    
    
    
    1,322Weighted average diluted common shares outstanding
    
    
    120,433
    
    
    
    121,076Diluted earnings per common share
    
    $
    0.24
    
    
    $
    0.23
 11




---



##### Table of Contents



For the Three MonthsEnded March 31,2009
    
    
    2008(in thousands)Common stock options/SSARs
    
    
    11,716
    
    
    
    10,636Restricted stock units
    
    
    179
    
    
    
    212
  12. Commitments and Contingencies
 Litigation
   IPO Allocation Securities Litigation
  Other
  12




---



##### Table of Contents



This quarterly report contains forward-looking statements. These statements relate to future events
or our future financial performance. In some cases, you can identify forward-looking statements by
terminology such as may, will, should, could, forecasts, expects, plans,
anticipates, believes, estimates, predicts, potential, see, target, projects,
position, or continue or the negative of such terms and other comparable terminology. These
statements reflect our current expectations, estimates, and projections. These statements are not
guarantees of future performance and involve risks, uncertainties, and assumptions that are
difficult to predict. Actual events or results may differ materially from what is expressed or
forecasted in these forward-looking statements. In evaluating these statements, you should
specifically consider various factors, including the risks described in our Annual Report on Form
10-K for the year ended December 31, 2008, which have not materially changed. These risk factors
describe reasons why our actual results may differ materially from any forward-looking statement.
We disclaim any intention or obligation to update any forward-looking statement.
 
 Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
 RESULTS OF OPERATIONS
  Lines of Business
  Overview of Our Financial Results for the First Quarter of 2009
   13




---



##### Table of Contents



Revenue Growth
  
    
    A reduction in project work associated with project cancellations related to software
implementation and product engineering services, projects that did not reach target operating
levels in the quarter, and reduced staffing levels on existing projects.
    
    A reduction of pass-through revenue as a result of transitioning the contract management
function back to a client.
    
    An unfavorable impact from currency on existing accounts.
  
    
    Revenue from new contracts signed during the twelve-month period following the first quarter
of 2008.
    
    Revenue from companies acquired in the second and fourth quarters of 2008.
 Earnings Growth
   14




---



##### Table of Contents



Free Cash Flow
  Three MonthsEndedMarch 31,2009
    
    
    2008Net cash provided by operating activities
    
    $
    21
    
    
    $
    20Purchases of property, equipment and purchased software
    
    
    (15
    )
    
    
    (14
    )Free cash flow
    
    $
    6
    
    
    $
    6
  TCV of Contracts Signed
   Additional Measurements
  15




---



##### Table of Contents



Comparison of the Three Months Ended March 31, 2009 and 2008
 Revenue
  Three Months Ended March 312009
    
    
    2008
    
    
    $ Change
    
    
    % ChangeIndustry Solutions
    
    $
    467
    
    
    $
    519
    
    
    $
    (52
    )
    
    
    (10.0
    )%Government Services
    
    
    155
    
    
    
    161
    
    
    
    (6
    )
    
    
    (3.7
    )%Elimination of intersegment revenue
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    Total
    
    $
    621
    
    
    $
    680
    
    
    $
    (59
    )
    
    
    (8.7
    )%
 Industry Solutions
  
    
    $62 million net decrease from existing accounts largely resulting from completing task orders
in the normal course of business, a reduction of discretionary project services, and a
renegotiated contract with less pass-through revenue as a result of transitioning a contract
management function back to the client. The discretionary services that we provide, which
include short-term project work, can vary from period-to-period depending on many factors,
including specific customer and industry needs and economic conditions. These decreases were
partially offset by expansion of our services among other customers.
 
  
    
    $11 million increase from new contracts signed during the twelve-month period following the
first quarter of 2008. This increase was composed of $7 million and $4 million in revenue from
new contracts signed in the Healthcare and Commercial groups, respectively. The services that
we are providing to these new customers are primarily the same services that we provide to the
majority of our other long-term outsourcing customers.
 
    
    $11 million increase from revenue related to acquisitions within our Commercial group during
the second quarter of 2008 and an acquisition within our Healthcare group during the fourth
quarter of 2008.
 Government Services
  16




---



##### Table of Contents



Gross Margin
  
    
    Increased gross margin in Industry Solutions due to a reduction of pass-through revenue and
expenses, as a result of transitioning a contract management function back to a customer.
 
    
    Increased contract profitability on existing accounts in Industry Solutions caused by
contract efficiencies on fixed-priced contracts and volume increases on unit-priced contracts.
 
    
    Increased gross profit for Government Services related to a contract that was in transition
during the first quarter of 2008.
    
    Increased profitability due to cost containment activities.
  Selling, General and Administrative Expenses
  Other Income Statement Items
  Liquidity and Capital Resources
    17




---



##### Table of Contents



Operating Activities
  
    
    Cash provided by changes in accounts receivable was $31 million for the three months ended
March 31, 2009, as compared to $16 million cash used in accounts receivable for the same
period of the prior year. We typically collect our accounts receivable within 60-65 days, and
therefore our accounts receivable balance at the end of each period can change based on the
amount of revenue for that period and the timing of collection from our customers, which may
vary significantly from period to period.
 
    
    During the three months ended March 31, 2009, we made net cash payments for income taxes of
$3 million as compared to $10 million in the three months ended March 31, 2008.
 
    
    Cash used due to changes in accrued compensation was $47 million in the first quarter of
2009, as compared to $2 million cash provided by changes in accrued compensation in the first
quarter of 2008. The first quarter 2009 changes in accrued compensation are driven by the
compensation accrued as of December 31, 2008 that was paid during the first quarter of 2009.
Bonuses paid to associates under our bonus plans in the first quarters of 2009 and 2008
(including payments of annual bonuses relating to the previous years bonus plan) were $54
million and $15 million, respectively.
 Investing Activities
  Financing Activities
   Significant Accounting Standards to be Adopted
 .
 18




---



##### Table of Contents



Item 3: Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4: Controls and Procedures
   
 PART II: OTHER INFORMATION
 
 Item 1. Legal Proceedings
   IPO Allocation Securities Litigation
  Other
  19




---



##### Table of Contents



Item 1A: Risk Factors
  
 Item 6. Exhibits
  EXHIBITNUMBER
    
    DESCRIPTION OF EXHIBIT3.1
    
    Third Amended and Restated Certificate of Incorporation of Perot
Systems Corporation (the Company) (Incorporated by reference to
Exhibit 3.1 of the Companys Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2002.)3.2
    
    Fifth Amended and Restated Bylaws. (Incorporated by reference to
Exhibit 3.2 of the Companys Current Report on Form 8-K filed
December 17, 2008).4.1
    
    Specimen of Class A Common Stock Certificate (Incorporated by
reference to Exhibit 4.1 of the Companys Registration Statement
on Form S-1, Registration No. 333-60755.)31.1*
    
    Rule 13a-14 Certification dated May 5, 2009, by Peter A. Altabef,
President and Chief Executive Officer.31.2*
    
    Rule 13a-14 Certification dated May 5, 2009, by John E. Harper,
Vice President and Chief Financial Officer.32.1**
    
    Section 1350 Certification dated May 5, 2009, by Peter A. Altabef,
President and Chief Executive Officer.32.2**
    
    Section 1350 Certification dated May 5, 2009, by John E. Harper,
Vice President and Chief Financial Officer.
 
 *
    
    Filed herewith.**
    
    Furnished herewith. 20




---



##### Table of Contents



SIGNATURES
  PEROT SYSTEMS CORPORATION
(Registrant)Date: May 5, 2009
    By
    /s/ ROBERT J. KELLYRobert J. KellyCorporate Controller and Principal Accounting Officer 21