Unisys Corporation (UIS) reported revenues of $928 million in the first quarter of 2012, up 2% from a year ago but down 6% sequentially. Foreign currency fluctuations did not have much of an impact on revenue in the quarter.
Services revenues increased 3% year over year due to growth in systems integration revenue. However, revenues from the U.S. federal business continue to decline posting a 20% decline in the quarter.
Excluding the U.S. Federal business, services revenue grew 7% from the year-ago quarter, driven by continued growth in IT outsourcing and systems integration revenue.
Services orders showed double-digit growth in the quarter, reflecting substantial order gains for outsourcing and infrastructure services. As of March 31, 2012, services backlog was $5.4 billion, down 6% from a year ago and down 1% sequentially.
Technology revenue declined 5% in the quarter driven by lower sales of third-party equipment.
Gross margin came in at 24.3%, down from 28.4% in the previous quarter, but up from 22.8% in the year-ago quarter. Operating margin came in at 6.9%, down from 12.3% in the previous quarter but up from 4.6% in the year-ago quarter.
Net income came in at $13.4 million or $0.30 per diluted share in the first quarter of 2012 compared to a net loss of $40.8 million or $0.95 per diluted share in the year-ago quarter.
The results include a charge of $7.2 million related to debt reduction and $24.6 million of pension expense. Excluding these expenses, net income came in at $0.97 per diluted share.
Balance Sheet
Unisys generated $33 million of cash from operations in the first quarter of 2012, down from $28 million in the year-ago quarter. Capital expenditures in the first quarter of 2012 declined to $30 million compared with $43 million in the year-ago quarter.
The company ended the quarter with cash and equivalents of $654.7 million, down from $714.9 million at the end of the previous quarter. As part of its debt reduction program, Unisys completed its previously announced redemption of $66 million of outstanding senior notes. Unisys ended the quarter with a long-term debt of $295.5 million, down from $359.7 million at the end of the previous quarter.
Since September 2010, Unisys has reduced its debt nearly 2/3 or more than $540 million. The company is now 87% of the way towards its 2013 debt reduction goal. These actions, in turn, have reduced the company’s annual interest expense by $69 million.
The macro-economic conditions continue to be challenging. Hence, we continue to have a Zacks #4 Rank on the stock which translates into a short-term rating of Sell. Nevertheless, in the long run, we have a Neutral recommendation on the stock.
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