Tuesday February 2, 10:01 am Eastern Time
Company Press Release
SOURCE: Duff & Phelps Credit Rating Co.
DCR Raises Unisys Corporation's Ratings
CHICAGO, Feb. 2 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has raised its ratings of Unisys Corporation to recognize the company's improved financial condition and strong operating performance in 1998 and expectations for additional improvement in 1999. DCR raised Unisys' senior debt to 'BB+' (Double-B-Plus) from 'BB' (Double-B), the convertible subordinated notes to 'BB' (Double-B) from 'BB-' (Double-B-Minus), and the convertible preferred stock to 'B+' (Single-B- Plus) from 'B' (Single-B). With these rating actions, DCR has also removed Unisys from Rating Watch Up. The last $27 million of convertible subordinated notes will be redeemed on March 15, 1999, at which time that rating will be dropped.
Unisys made further strides in reducing its financial and business risk in 1998. Debt declined an additional $532 million during the year. Cash remained at a high level, $604 million, even after the elimination of a $120 million receivable factoring program. Cash flow from operations was $650 million in 1998. Operating trends were favorable with 1998 net income increasing 94 percent, excluding charges taken in 1997, on a 9 percent revenue gain. While all three business segments performed well, of particular note, the information services business returned to full year profitability on a 15 percent revenue gain. Relatively higher growth in information services and global customer services versus computer systems has increased the proportion of total service revenues to 67 percent. The growing proportion of Unisys' service business reduces its exposure to capital spending and product cycles.
Additional rating action by DCR will focus on management's continued progress in achieving profitable revenue and cash flow growth in a competitive business environment as well as its efforts to reduce the level of convertible preferred stock. Unisys retired approximately 2.2 million preferred shares in January 1999, following a call for redemption. The company then called an additional 6 million shares for redemption as of March 4, 1999. As long as Unisys' common stock price remains greater than $30.25, preferred holders will benefit from conversion. Elimination of the preferred remains a management priority and would remove a significant annual fixed payment of $106 million.
With 1998 revenue of $7.2 billion, Unisys is one of the top 10 U.S.-based providers of information hardware, services and software. End-market focus is in financial services, public sector and government, transportation, communications and health information management. Unisys had approximately $1.2 billion of debt outstanding at December 31, 1998, and approximately $1.3 billion of convertible preferred stock pro forma for the January 1999 conversions.
SOURCE: Duff & Phelps Credit Rating Co. |
