(RTTNews) - Business process outsourcing firm Affiliated Computer Services Inc. (ACS: News ) Thursday said its first quarter profit declined from last year, hurt mainly by transaction cost related to the proposed merger by Xerox.

The Dallas, Texas-based company posted net income of $68.8 million or $0.70 per share for the first quarter, down from $83.6 million or $0.85 per share in the prior year quarter. Result for the quarter mainly included $15.4 million or $0.16 per share cost related to Xerox transaction, and legal settlement of $5 million or $0.05 per share.

Excluding items, adjusted net income rose to $93.0 million or $0.95 per share from $87.6 million or $0.89 per share in the previous year quarter. On average, 12 analysts polled by Thomson Reuters expected the company to report earnings of $0.94 per share for the first quarter. Analysts' estimates typically exclude special items.

First quarter revenues increased 5% to $1.68 billion from $1.60 billion in the same quarter last year. Internal revenue growth was 2%. Twelve analysts had a consensus revenue estimate of $1.69 billion for the first quarter.

The Commercial segment contributed 61% of revenues, while the Government segment contributed 39% of revenues.

Total operating expenses for the first quarter rose to $1.55 billion from $1.43 billion in the year-ago quarter.
Last month, Norwalk, Connecticut-based Xerox Corp. (XRX) agreed to acquire ACS in a cash and stock deal valued at $63.11 per share or $6.4 billion. The acquisition would create a $22 billion global enterprise for document technology and business process management.

Under the deal terms, the shareholders of ACS will receive a total of $18.60 per share in cash plus 4.935 Xerox shares for each ACS share they own, and the total consideration is based on Xerox's closing price on September 25 of $9.02. In addition, Xerox will assume ACS's debt of $2 billion and issue $300 million of convertible preferred stock to ACS's Class B shareholder.

On an adjusted earnings basis, the transaction is expected to be accretive in the first year.

Owing to the proposed merger deal with Xerox, ACS said it will not be updating prior financial guidance or provide financial guidance for the second quarter or fiscal year 2010.

ACS closed Thursday's regular trading session at $54.41, up $2.60 or 5.02% on a volume of 4.15 million shares.

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by RTT Staff Writer

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