Information technology service provider Unisys Corporation’s (UIS) second quarter 2013 earnings more than halved to $20.4 million or 46 cents per share from $46.6 million or 99 cents per share reported in the year-earlier quarter. The lackluster performance was primarily attributable to a year-over-year decline in revenues in both of its operating segments.
Excluding one-time items such as pension expense and debt charges, non-GAAP earnings in the reported quarter were 91 cents per share compared with $1.41 in the year-ago quarter. Although adjusted earnings declined year over year, it well exceeded the Zacks Consensus Estimate of 56 cents.
Total revenue for second quarter 2013 decreased 6.8% year over year to $858.6 million and missed the Zacks Consensus Estimate of $838 million. While revenue from the U.S. dipped about 6%, international revenues declined 7% year over year.
In the Services segment, revenues plummeted 9.3% year over year to $739.7 million with a decline in demand for outsourcing and systems integration services. Order signings increased marginally as growth in systems integration orders more than offset order declines in other services areas and total services backlog at quarter-end was $4.8 billion. Gross profit margin for the reported quarter declined to 18.2% from 21.0% in the prior-year period, while operating profit margin declined to 4.0% from 8.0%.
Technology segment revenues increased 12.6% year over year to $118.9 million as ClearPath software and servers registered strong sales in the reported quarter. Gross profit margin fell to 59.4% from 63.4% in the year-ago quarter. Operating profit margin declined to 23.9% from 28.6%.
Balance Sheet/Cash Flow
Cash generated by operating activities totaled $16.1 million in the second quarter of 2013 compared with $57.1 million in the prior-year quarter. The company incurred capital expenditures of $38.2 million in the reported quarter versus $34.8 million in the year-earlier quarter. Free cash flow before pension contributions aggregated $12.6 million in the reported quarter compared with $72.9 million in the year-ago quarter.
In Dec 2012, Unisys had authorized a share repurchase program worth $50 million, effective through Dec 2014. The company repurchased approximately 612,000 shares for $11.5 million in the reported quarter and currently has $38.5 million remaining under the board authorization. At quarter-end, Unisys had a long-term debt burden of $210 million, with cash and cash equivalents of $575.6 million.
Management expects to face continuing challenges in the coming quarters as it grapples with the softness in the Services segment and adjusts its cost structure in line with its depleting revenues. At the same time, Unisys remains focused on its Technology segment and expects to reverse the decline in systems integration.
Unisys presently has a Zacks Rank #3 (Hold). Other companies in the industry that are worth mentioning include Hewlett-Packard Company (HPQ), Navarre Corp. (NAVR) and Ingram Micro Inc. (IM), each carrying a Zacks Rank #2 (Buy).
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