1st Quarter Results
Unisys Announces First-Quarter 2013 Financial Results
BLUE BELL, Pa., April 23, 2013 --
-- Revenue declines 13 percent on lower systems integration, technology
revenue; IT outsourcing revenue grows
-- Diluted loss per share of 77 cents vs. diluted EPS of 30 cents in 1Q 2012
-- Cash from operations of $14 million vs. $33 million in 1Q 2012
Unisys Corporation (NYSE: UIS) today reported a first-quarter 2013 net loss of
$33.9 million, or a loss of 77 cents per diluted share, which included $22.3
million of pension expense and a $6.5 million loss associated with the recent
Venezuelan currency devaluation. In the first quarter of 2012, the company
reported net income of $13.4 million, or 30 cents per diluted share, which
included $24.6 million of pension expense and a $7.2 million debt reduction
charge. Excluding pension expense and debt reduction charges, the non-GAAP
diluted loss per share(1) in the first quarter of 2013 was 26 cents compared
with non-GAAP diluted EPS of 97 cents in the first quarter of 2012.
First-quarter 2013 revenue declined 13 percent to $810 million from $928
million in the year-ago quarter. Foreign currency fluctuations had a one
percentage point negative impact on revenue in the first quarter.
"This was a difficult quarter for us as lower revenue impacted our bottom-line
results," said Unisys Chairman and CEO Ed Coleman. "We saw lower revenue in our
technology business following a strong fourth quarter in 2012 where we
benefited from some earlier-than-expected ClearPath revenue. In services,
while we were pleased to see growth in our strategic IT outsourcing business in
the quarter, we were disappointed in the decline in our project-based systems
integration business, where the market for discretionary projects remains soft
and where we need to improve our execution.
"We expect continuing challenges as we work through softness in our services
business and recognize the need to maintain a competitive cost structure in
line with our revenue performance," Coleman said. "We are focused on reversing
the decline in systems integration. In technology, given the variability of
our sales from quarter to quarter, we measure this business on an annual basis
and continue to focus on maintaining flat revenue for the full year."
First-Quarter Company and Business Segment Highlights
U.S. revenue declined 15 percent in the quarter while international revenue
declined 11 percent. On a constant currency basis(2), international revenue
declined 9 percent with declines in all regions except for Latin America.
The company reported an overall first-quarter 2013 gross profit margin of 19.9
percent, down from 24.3 percent in the year-ago quarter. Operating expenses (SG
&A and R&D expenses) decreased 1 percent from the year-ago period. The company
reported a first-quarter 2013 operating profit of $1.6 million compared with an
operating profit of $64.4 million in the first quarter of 2012.
First-quarter 2013 services revenue declined 12 percent from the prior-year
quarter as declines in systems integration, infrastructure services, and core
maintenance offset revenue growth in IT outsourcing. Reflecting the lower
services revenue, first-quarter 2013 services gross profit margin declined to
17.4 percent from 18.9 percent a year ago while services operating profit
margin declined to 3.1 percent from 5.0 percent a year ago.
First-quarter 2013 services order signings showed a slight decrease from
year-ago levels as strong growth in IT outsourcing orders were offset by order
declines in other areas. Services backlog at March 31, 2013 was $5.1 billion,
flat from December 31, 2012 levels.
First-quarter 2013 technology revenue declined 18 percent from the prior-year
quarter driven by lower sales of ClearPath enterprise software and servers.
Reflecting the lower ClearPath sales, first-quarter 2013 technology gross
profit margin declined to 45.8 percent from 62.2 percent in the year-ago
quarter and technology operating profit margin declined to 0.2 percent from
25.6 percent in the year-ago quarter.
Cash Flow and Balance Sheet Highlights
Unisys generated $14 million of cash from operations in the first quarter of
2013, including $27 million of pension contributions. In the first quarter of
2012, the company generated $33 million of cash from operations, which included
$68 million of pension contributions. Capital expenditures in the first quarter
of 2013 were $26 million compared with $30 million in the year-ago quarter.
After capital expenditures, the company used $12 million of free cash(3) in the
first quarter of 2013 compared with free cash flow of $3 million in the first
quarter of 2012. Free cash flow before pension contributions was $15 million in
the first quarter of 2013 compared with $71 million in the year-ago quarter.
At March 31, 2013, the company reported a cash balance of $629 million and
total debt of $211 million.
Non-GAAP Information
Unisys reports its results in accordance with Generally Accepted Accounting
Principles (GAAP) in the United States. However, in an effort to provide
investors with additional perspective regarding the company's results as
determined by GAAP, the company also discusses, in its earnings press release
and/or earnings presentation materials, non-GAAP information which management
believes provides useful information to investors. Our management uses
supplemental non-GAAP financial measures internally to understand, manage and
evaluate our business and assess operational alternatives. These non-GAAP
measures may include non-GAAP diluted earnings per share, free cash flow, free
cash flow before pension contributions, and constant currency.
Our non-GAAP measures are not intended to be considered in isolation or as
substitutes for results determined in accordance with GAAP and should be read
only in conjunction with our consolidated financial statements prepared in
accordance with GAAP. (See GAAP to non-GAAP reconciliations attached.)
(1) Non-GAAP diluted earnings/loss per share - As a result of debt reduction
actions, Unisys recorded a charge of $7.2 million during the first quarter of
2012. The company also recorded pension expense of $22.3 million and $24.6
million during the first quarters of 2013 and 2012, respectively. In an effort
to provide investors with a perspective on the company's earnings without these
charges, they are excluded from the non-GAAP diluted earnings/loss per share
calculations.
(2) Constant currency - The company refers to growth rates at constant currency
or adjusting for currency so that the business results can be viewed without
the impact of fluctuations in foreign currency exchange rates to facilitate
comparisons of the company's business performance from one period to another.
Constant currency for revenue is calculated by retranslating current and prior
period results at a consistent rate. This approach is based on the pricing
currency for each country which is typically the functional currency.
Generally, when the dollar either strengthens or weakens against other
currencies, the growth at constant currency rates will be higher or lower,
respectively, than growth reported at actual exchange rates.
(3) Free cash flow - To better understand the trends in our business, we
believe that it is helpful to present free cash flow, which we define as cash
flow from operations less capital expenditures. Management believes this
measure gives investors an additional perspective on cash flow from operating
activities in excess of amounts required for reinvestment. Because of the
significance of the company's pension funding obligations, free cash flow
before pension funding is also provided.
Conference Call
Unisys will hold a conference call today at 5:30 p.m. Eastern Time to discuss
its results. The listen-only Webcast, as well as the accompanying presentation
materials, can be accessed on the Unisys Investor Web site at www.unisys.com/
investor. Following the call, an audio replay of the Webcast, and accompanying
presentation materials, can be accessed through the same link.
About Unisys
Unisys is a worldwide information technology company. We provide a portfolio of
IT services, software, and technology that solves critical problems for
clients. We specialize in helping clients secure their operations, increase the
efficiency and utilization of their data centers, enhance support to their end
users and constituents, and modernize their enterprise applications. To provide
these services and solutions, we bring together offerings and capabilities in
outsourcing services, systems integration and consulting services,
infrastructure services, maintenance services, and high-end server technology.
With approximately 23,000 employees, Unisys serves commercial organizations and
government agencies throughout the world. For more information, visit
www.unisys.com.
Forward-Looking Statements
Any statements contained in this release that are not historical facts are
forward-looking statements as defined in the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include, but are not limited to,
any projections of earnings, revenues, or other financial items; any statements
of the company's plans, strategies or objectives for future operations;
statements regarding future economic conditions or performance; and any
statements of belief or expectation. All forward-looking statements rely on
assumptions and are subject to various risks and uncertainties that could cause
actual results to differ materially from expectations. Risks and uncertainties
that could affect the company's future results include the company's ability to
drive profitable growth in consulting and systems integration; the company's
ability to take on, successfully implement and grow outsourcing operations;
market demand for the company's high-end enterprise servers and maintenance on
those servers; the potential adverse effects of aggressive competition in the
information services and technology marketplace; the company's ability to
retain significant clients; the company's ability to effectively anticipate and
respond to volatility and rapid technological change in its industry; the
adverse effects of global economic conditions; the company's significant
pension obligations and potential requirements to make significant cash
contributions to its defined benefit pension plans; the success of the
company's program to reduce costs, focus its global resources and simplify its
business structure; the risks that the company's contracts may not be as
profitable as expected or provide the expected level of revenues and that
contracts with U.S. governmental agencies may subject it to audits, criminal
penalties, sanctions and other expenses and fines; the risk that the company
may face damage to its reputation or legal liability if its clients are not
satisfied with its services or products; the risk that breaches of data
security could expose the company to legal liability and could harm its
business and reputation; the performance and capabilities of third parties with
whom the company has commercial relationships; the risks of doing business
internationally when more than half of the company's revenue is derived from
international operations; the company's ability to access capital and credit
markets to address its liquidity needs; the potential for intellectual property
infringement claims to be asserted against the company or its clients; the
possibility that pending litigation could affect the company's results of
operations or cash flow; the business and financial risk in implementing future
dispositions or acquisitions; and the company's consideration of all available
information following the end of the quarter and before the filing of the Form
10-Q and the possible impact of this subsequent event information on its
financial statements for the reporting period. Additional discussion of factors
that could affect the company's future results is contained in its periodic
filings with the Securities and Exchange Commission. The company assumes no
obligation to update any forward-looking statements.
RELEASE NO.: 0423/9163
Unisys is a registered trademark of Unisys Corporation. All other brands and
products referenced herein are acknowledged to be trademarks or registered
trademarks of their respective holders.
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Millions, except per share data)
Three Months
Ended March 31
2013 2012
Revenue
Services $723.0 $823.0
Technology 86.9 105.4
809.9 928.4
Costs and expenses
Cost of revenue:
Services 602.8 668.6
Technology 46.3 34.0
649.1 702.6
Selling, general and administrative 142.2 141.4
Research and development 17.0 20.0
808.3 864.0
Operating profit 1.6 64.4
Interest expense 2.7 9.3
Other income (expense), net (4.9) (13.2)
Income (loss) before income taxes (6.0) 41.9
Provision for income taxes 21.4 22.0
Consolidated net income (loss) (27.4) 19.9
Net income attributable to
noncontrolling interests 2.5 2.5
Net income (loss) attributable to Unisys
Corporation (29.9) 17.4
Preferred stock dividend 4.0 4.0
Net income (loss) attributable to Unisys
Corporation common shareholders ($33.9) $13.4
Earnings (loss) per common share
attributable to Unisys Corporation
Basic ($ .77) $ .31
Diluted ($ .77) $ .30
Shares used in the per share computations (thousands):
Basic 44,054 43,611
Diluted 44,054 44,063
UNISYS CORPORATION
SEGMENT RESULTS
(Unaudited)
(Millions)
Total Eliminations Services Technology
Three Months Ended
March 31, 2013
Customer revenue $809.9 $723.0 $86.9
Intersegment ($17.3) 0.5 16.8
Total revenue $809.9 ($17.3) $723.5 $103.7
Gross profit percent 19.9% 17.4% 45.8%
Operating profit percent 0.2% 3.1% 0.2%
Three Months Ended
March 31, 2012
Customer revenue $928.4 $823.0 $105.4
Intersegment ($32.0) 0.8 31.2
Total revenue $928.4 ($32.0) $823.8 $136.6
Gross profit percent 24.3% 18.9% 62.2%
Operating profit percent 6.9% 5.0% 25.6%
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions)
March 31, December 31,
2013 2012
Assets
Current assets
Cash and cash equivalents $628.6 $655.6
Accounts and notes receivable, net 581.5 670.2
Inventories
Parts and finished equipment 28.9 29.3
Work in process and materials 21.5 20.7
Deferred income taxes 17.8 21.6
Prepaid expense and other current assets 123.6 115.0
Total 1,401.9 1,512.4
Properties 1,246.6 1,262.2
Less accumulated depreciation and amortization 1,081.2 1,085.8
Properties, net 165.4 176.4
Outsourcing assets, net 120.1 126.3
Marketable software, net 123.5 124.2
Prepaid postretirement assets 11.3 3.3
Deferred income taxes 155.9 162.7
Goodwill 192.1 192.3
Other long-term assets 153.0 122.8
Total $2,323.2 $2,420.4
Liabilities and deficit
Current liabilities
Notes payable $0.4 $0.0
Current maturities of long-term debt .3 .3
Accounts payable 218.5 228.6
Deferred revenue 379.9 389.5
Other accrued liabilities 349.7 411.9
Total 948.8 1,030.3
Long-term debt 210.0 210.0
Long-term postretirement liabilities 2,481.6 2,553.5
Long-term deferred revenue 118.8 123.1
Other long-term liabilities 109.4 92.2
Commitments and contingencies
Total deficit (1,545.4) (1,588.7)
Total $2,323.2 $2,420.4
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions)
Three Months Ended
March 31
2013 2012 *
Cash flows from operating
activities
Consolidated net income (loss) ($27.4) $19.9
Add (deduct) items to reconcile
consolidated net
income (loss) to net cash
provided by operating activities:
Foreign currency transaction loss 6.5 -
Loss on debt extinguishment - 7.2
Employee stock compensation 5.9 6.1
Company stock issued for U.S. 401 - 4.3
(k) plan
Depreciation and amortization of 11.9 14.4
properties
Depreciation and amortization of 12.8 13.4
outsourcing assets
Amortization of marketable software 15.5 14.0
Disposals of capital assets 0.1 0.3
Gain on sale of business - (11.3)
Pension plans contributions (26.6) (68.2)
Decrease in deferred income taxes, 11.7 3.8
net
Decrease in receivables, net 69.5 69.5
(Increase) decrease in inventories (0.8) 3.5
Decrease in accounts payable and (76.9) (73.6)
other accrued liabilities
Increase in other liabilities 18.6 24.9
(Increase) decrease in other assets (6.6) 4.5
Other (0.1) 0.7
Net cash provided by operating 14.1 33.4
activities
Cash flows from investing
activities
Proceeds from investments 1,224.8 711.0
Purchases of investments (1,223.7) (711.0)
Restricted deposits 0.2 1.3
Investment in marketable
software (14.8) (13.9)
Capital additions of properties (3.6) (7.9)
Capital additions of
outsourcing assets (7.5) (8.6)
Net proceeds from sale of
business - 2.8
Net cash used for investing (24.6) (26.3)
activities
Cash flows from financing
activities
Payments of long-term debt - (71.7)
Dividends paid to
noncontrolling interests - (4.5)
Dividends paid on preferred
shares (4.0) (4.0)
Proceeds from exercise of stock
options 0.5 0.1
Net proceeds from short-term
borrowings 0.4 -
Net cash used for financing
activities (3.1) (80.1)
Effect of exchange rate changes on
cash and cash equivalents (13.4) 12.8
Decrease in cash and cash
equivalents (27.0) (60.2)
Cash and cash equivalents,
beginning of period 655.6 714.9
Cash and cash equivalents, end of
period $628.6 $654.7
* Certain components of net cash provided by operating activities were changed
to present pension contributions separately, consistent with the 2013
presentation.
( 1 )
UNISYS CORPORATION
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(Unaudited)
(Millions, except per share data)
Three Months
Ended March 31
2013 2012
GAAP net income (loss)
attributable to Unisys Corporation
common shareholders ($33.9) $13.4
Debt reduction charges, net of tax 0.0 7.2
FAS87 pension charges, net of tax 22.3 24.6
Non-GAAP net income (loss)
attributable to Unisys Corporation
common shareholders (11.6) 45.2
Add preferred stock dividend 0.0 4.0
Non-GAAP net income (loss)
attributable to Unisys Corporation
for diluted earnings per share ($11.6) $49.2
Weighted average shares (thousands) 44,054 43,611
Plus incremental shares from assumed conversion:
Employee stock plans 0 452
Preferred stock 0 6,913
GAAP Adjusted weighted average shares 44,054 50,976
Diluted earnings (loss) per share
GAAP basis
GAAP net income (loss)
attributable to Unisys Corporation
for diluted earnings per share ($33.9) $13.4
Divided by adjusted weighted average shares 44,054 44,063
GAAP net income (loss) per diluted share ($ .77) $ .30
Non-GAAP basis
Non-GAAP net income (loss)
attributable to Unisys Corporation
for diluted earnings per share ($11.6) $49.2
Divided by Non-GAAP adjusted weighted average shares 44,054 50,976
Non-GAAP net income (loss) per diluted share ($ .26) $ .97
( 2 )
UNISYS CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
(Unaudited)
(Millions)
FREE CASH FLOW
Three Months
Ended March 31
2013 2012
Cash provided by operations $14.1 $33.4
Additions to marketable software (14.8) (13.9)
Additions to properties (3.6) (7.9)
Additions to outsourcing assets (7.5) (8.6)
Free cash flow (11.8) 3.0
Pension funding 26.6 68.2
Free cash flow before pension funding $14.8 $71.2
CONTACT: Investor Contact, Niels Christensen, 215-986-6651,
Niels.Christensen@unisys.com or Media Contact, Jim Kerr, 215-986-5795,
Jim.Kerr@unisys.com
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