Buyout Scuttled, Affiliated Computer Profits Rise

Affiliated Computer Services Inc., a major provider of back office operations including accounts receivable management and IT services, announced yesterday its second quarter diluted earnings rose nearly 13 percent to 81 cents a share for the quarter ended Dec. 31. Analysts were expecting earnings of 83 cents per share. The company earned 72 cents during the year ago period.

The company said revenue rose 6 percent to $1.5 billion on the strength of new commercial contracts, compared to $1.4 billion a year ago.

The Dallas-based company said it signed approximately $205 million in new recurring contracts, with $153 from the commercial segment – nearly three times more than a year ago. Government contracts rose 5 percent. “Signings are the early indicator of internal revenue growth and these results send a strong statement that internal revenue growth should trend positively as these contracts ramp up over the next twelve months,” Lynn Blodgett, ACS president and CEO, said in a statement.

ACS also said it spent $200 million during the quarter towards a $1 billion share repurchase effort. Last year the company was the target of an unsuccessful $6.1 billion buyout attempt by its chairman, Darwin Deason, and Cerberus Capital Management. They withdrew their bid in October citing poor debt market conditions.

“With the uncertainty of ownership behind us we were able to focus on selling more business, collecting our cash and growing earnings per share," Blodgett said.

ACS said 85 percent of its revenue is recurring under long-term multi-year contracts, enabling it to better predict business expectations. Going forward, ACS said its acquisition of Syan Holdings Limited, a United Kingdom based provider of a broad range of IT outsourcing services, will help it grow its overseas market.

“Syan’s local offices in two data centers will allow ACS to offer IT services and procurement capabilities to existing and perspective global ACS clients with UK operations,” said Tom Burlin, ACS’s chief operating officer.