Unisys Announces Third-Quarter 2012 Financial R...
Unisys Announces Third-Quarter 2012 Financial Results
BLUE BELL, Pennsylvania, Oct. 24, 2012 --
- Net loss of $12.4 million includes $23.1 million of debt
reduction charges and $28.9 million of pension expense; compares
with net income of $78.6 million in 3Q 2011, which included $6.9
million of pension expense
- Non-GAAP net income(1) of $43.6 million vs. $89.7 million in 3Q
2011
- Year-to-date net income of $47.6 million vs. $26.2 for first nine
months of 2011
- Year-to-date non-GAAP net income of $165.3 million vs. $143.5
million for first nine months of 2011
- Company completes its $1 billion multi-year debt reduction
program
Unisys Corporation (NYSE: UIS) today reported a third-quarter 2012 net loss of $12.4
million, or a loss of 28 cents per diluted share, which included $23.1 million of debt
reduction charges and $28.9 million of pension expense. In the third quarter of 2011, the
company reported net income of $78.6 million, or $1.63 per diluted share, which included
$6.9 million of pension expense. Excluding debt reduction charges and pension expense,
non-GAAP diluted earnings per share(1) in the third quarter of 2012 was 85 cents
compared with $1.77 in the third quarter of 2011. On lower pre-tax income, the company
reported a third-quarter 2012 income tax provision of $32.7 million compared with $33.4
million in the third quarter of 2011. The third-quarter 2012 tax provision included a
charge of $9.2 million related to a change in applicable corporate tax rates in the U.K.
Revenue in the third quarter of 2012 declined 14 percent to $877 million compared
with $1.02 billion in the year-ago quarter. Foreign currency fluctuations had a 4
percentage point negative impact on revenue comparisons in the current quarter.
Through the first nine months of 2012, Unisys reported net income of $47.6 million,
which included $30.6 million of debt reduction charges and $75.0 million of pension
expense. This compared to net income of $26.2 million for the first nine months of 2011,
which included $77.6 million of debt reduction charges, $21.3 million of pension expense,
and an $8.9 million charge related to the settlement of a non-income tax matter.
Excluding these items, non-GAAP net income for the first nine months of 2012 was $165.3
million compared with $143.5 million for the comparable period of 2011. Revenue for the
first nine months of 2012 declined 5 percent - 2 percent on a constant currency basis(2)
- over the first nine months of 2011.
"After a strong first half of 2012, we saw softer services demand, particularly for
short-term project work, in the third quarter," said Unisys Chairman and CEO Ed Coleman.
"The lower services revenue, along with higher pension expense and debt reduction
charges, impacted our results. However, we were pleased with margin improvement in our
technology business, ongoing cost discipline across our company, continued improvements
in service quality, and the early achievement of our 2013 debt reduction goal.
"Year to date, we have improved our profitability from 2011 levels. We are encouraged
by reaction to recent product announcements, a growing reputation for service excellence,
and a strong pipeline of opportunities," Coleman said.
Third-Quarter Company and Business Segment Highlights
U.S. revenue declined 24 percent in the quarter. About half of the revenue decline
was in the company's U.S. Federal government business. International revenue declined 6
percent in the quarter. On a constant currency basis, international revenue grew 3
percent as increases in Latin America and Japan offset declines in Europe.
The company reported an overall third-quarter 2012 gross profit margin of 24.9
percent, down from 27.9 percent in the year-ago quarter. Operating expenses (R&D and SG&A
expenses) declined 8 percent from the year-ago period. Third-quarter 2012 operating
profit declined to 7.0 percent of revenue from 11.1 percent of revenue in the third
quarter of 2011. The company reported a third-quarter 2012 operating profit of $61.2
million, including $29.9 of pension expense, compared with a third-quarter 2011 operating
profit of $113.0 million, which included $8.5 million of pension expense.
Third-quarter 2012 services revenue declined 15 percent from the prior-year quarter.
On a constant currency basis, services revenue decreased 10 percent primarily driven by
lower project revenue and lower sales of industry solutions within the company's systems
integration business. The lower revenue level as well as a different mix of services
revenue impacted services margins in the quarter. Third-quarter 2012 services gross
profit margin declined to 19.9 percent from 21.6 percent a year ago while services
operating profit margin decreased to 6.0 percent from 8.7 percent a year ago.
Third-quarter services order signings were down but flat on a constant currency
basis. Services backlog at September 30, 2012 was $5.1 billion, an 8 percent decrease
From services backlog at December 31, 2011.
Third-quarter 2012 technology revenue decreased 10 percent from the prior-year
quarter as growth in enterprise servers was offset by lower sales of other technology.
Reflecting a higher percentage of enterprise-class software and server sales in the
quarter, technology gross profit margin improved to 59.9 percent from 57.4 percent in the
year-ago quarter and technology operating profit margin increased to 29.1 percent from
25.8 percent in the year-ago quarter.
Cash Flow and Balance Sheet Highlights
Unisys generated $17 million of cash from operations in the third quarter of 2012,
which included pension contributions of $56 million. In the year-ago quarter, the company
generated $94 million of cash from operations, which included $21 million of pension
contributions. Capital expenditures in the third quarter of 2012 increased to $32 million
compared with $29 million in the year-ago quarter. The company used $15 million of free
cash in the third quarter of 2012 compared with free cash flow(3) of $65 million in the
third quarter of 2011. Free cash flow before pension contributions was $42 million in the
current quarter compared with $86 million in the year-ago quarter. Before pension
contributions, the company generated free cash flow of $186 million in the first nine
months of 2012 compared with $120 million in the first nine months of 2011.
During the quarter Unisys completed previously announced actions to eliminate
remaining high-interest debt as part of its debt reduction program. Through a combination
of debt extinguishment and refinancing actions, the company retired $293.7 million
aggregate principal amount of 12.5% and 12.75% senior notes while successfully issuing
$210 million of 6.25% senior notes due 2017.
At September 30, 2012, the company reported a cash balance of $542 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 net income and diluted earnings per share, constant
currency, and free cash flow.
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 net income and diluted earnings per share - As a result of debt
reduction actions, Unisys recorded charges of $23.1 million and $0.1 million during the
third quarters of 2012 and 2011, respectively. The company also recorded pension expense
of $28.9 million and $6.9 million during the third quarters of 2012 and 2011,
respectively. For the first nine months of 2012 and 2011, Unisys recorded debt reduction
charges of $30.6 million and $77.6 million, respectively. The company also recorded
pension expense of $75.0 million and $21.3 million during the first nine months of 2012
and 2011, respectively. In the first nine months of 2011, the company incurred a charge
of $8.9 million related to a Brazil non-income tax case. In an effort to provide
investors with a perspective on the company's earnings without these charges, they are
excluded from the non-GAAP net income and diluted earnings 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 in 2012, 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 via a link on the Unisys Investor Web site at
http://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 22,500 employees, Unisys serves commercial
organizations and government agencies throughout the world. For more information, visit
http://www.unisys.com/index.htm.
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; the company's ability to use its U.S. Federal net operating
loss carryforwards and other tax attributes; 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.: 1023/9138
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 Nine Months
Ended September 30 Ended September 30
2012 2011 2012 2011
Revenue
Services $748.0 $876.3 $2,386.7 $2,519.3
Technology 129.4 143.8 340.4 349.2
877.4 1,020.1 2,727.1 2,868.5
Costs and expenses
Cost of revenue:
Services 612.5 680.0 1,927.0 2,010.6
Technology 46.3 55.3 112.5 151.2
658.8 735.3 2,039.5 2,161.8
Selling, general and
administrative 138.6 153.3 422.0 446.5
Research and
development 18.8 18.5 61.0 57.2
816.2 907.1 2,522.5 2,665.5
Operating profit 61.2 113.0 204.6 203.0
Interest expense 7.8 12.5 25.0 51.7
Other income
(expense), net (25.8) 16.6 (34.9) (56.6)
Income before income
taxes 27.6 117.1 144.7 94.7
Provision for income
taxes 32.7 33.4 76.8 52.4
Consolidated net
income (loss) (5.1) 83.7 67.9 42.3
Net income
attributable to
noncontrolling
interests 3.3 1.0 8.2 6.6
Net income (loss)
attributable to Unisys
Corporation (8.4) 82.7 59.7 35.7
Preferred stock
dividends 4.0 4.1 12.1 9.5
Net income (loss)
attributable to Unisys
Corporation
common
shareholders ($12.4) $78.6 $47.6 $26.2
Earnings (loss) per
common share
attributable to
Unisys
Corporation
Basic ($ .28) $ 1.82 $ 1.09 $ .61
Diluted ($ .28) $ 1.63 $ 1.08 $ .60
Shares used in the per share
computations (thousands):
Basic 43,966 43,246 43,827 43,063
Diluted 43,966 50,623 44,273 43,635
UNISYS CORPORATION
SEGMENT RESULTS
(Unaudited)
(Millions)
Total Eliminations Services Technology
Three Months Ended
September 30, 2012
Customer revenue $877.4 $748.0 $129.4
Intersegment ($16.2) 0.6 15.6
Total revenue $877.4 ($16.2) $748.6 $145.0
Gross profit percent 24.9% 19.9% 59.9%
Operating profit
percent 7.0% 6.0% 29.1%
Three Months Ended
September 30, 2011
Customer revenue $1,020.1 $876.3 $143.8
Intersegment ($26.4) 0.9 25.5
Total revenue $1,020.1 ($26.4) $877.2 $169.3
Gross profit percent 27.9% 21.6% 57.4%
Operating profit
percent 11.1% 8.7% 25.8%
Nine Months Ended
September 30, 2012
Customer revenue $2,727.1 $2,386.7 $340.4
Intersegment ($85.8) 2.0 83.8
Total revenue $2,727.1 ($85.8) $2,388.7 $424.2
Gross profit percent 25.2% 19.9% 61.8%
Operating profit
percent 7.5% 6.3% 27.8%
Nine Months Ended
September 30, 2011
Customer revenue $2,868.5 $2,519.3 $349.2
Intersegment ($70.2) 2.7 67.5
Total revenue $2,868.5 ($70.2) $2,522.0 $416.7
Gross profit percent 24.6% 19.9% 53.1%
Operating profit
percent 7.1% 6.7% 14.6%
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions)
September 30, December 31,
2012 2011
Assets
Current assets
Cash and cash equivalents $541.6 $714.9
Accounts and notes receivable, net 602.2 673.0
Inventories
Parts and finished equipment 32.7 38.1
Work in process and materials 26.3 26.7
Deferred income taxes 23.7 27.1
Prepaid expense and other current assets 98.2 123.6
Total 1,324.7 1,603.4
Properties 1,264.0 1,257.2
Less accumulated depreciation and
amortization 1,088.5 1,065.9
Properties, net 175.5 191.3
Outsourcing assets, net 119.3 137.9
Marketable software, net 130.2 129.8
Prepaid postretirement assets 22.0 43.9
Deferred income taxes 176.5 181.5
Goodwill 192.2 192.5
Other long-term assets 114.1 131.9
Total $2,254.5 $2,612.2
Liabilities and deficit
Current liabilities
Notes payable $0.2 $ -
Current maturities of long-term debt 0.5 0.9
Accounts payable 221.1 241.6
Deferred revenue 362.8 448.1
Other accrued liabilities 368.8 425.5
Total 953.4 1,116.1
Long-term debt 210.1 358.8
Long-term postretirement liabilities 2,032.1 2,224.0
Long-term deferred revenue 116.4 120.3
Other long-term liabilities 95.1 104.0
Commitments and contingencies
Total deficit (1,152.6) (1,311.0)
Total $2,254.5 $2,612.2
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions)
Nine Months Ended
September 30
2012 2011
Cash flows from operating activities
Consolidated net income $67.9 $42.3
Add (deduct) items to reconcile consolidated net
income to net cash provided by operating activities:
Loss on debt extinguishment 30.6 77.6
Employee stock compensation 11.8 12.8
Company stock issued for U.S. 401(k) plan 6.2 9.6
Depreciation and amortization of properties 41.8 50.8
Depreciation and amortization of outsourcing assets 44.1 48.2
Amortization of marketable software 42.5 50.9
Disposals of capital assets 6.2 1.0
(Gain) loss on sale of businesses and assets (11.7) 0.3
Decrease in deferred income taxes, net 31.0 33.4
Decrease in receivables, net 58.0 89.5
Decrease in inventories 5.1 21.3
Decrease in accounts payable and other accrued
liabilities (151.8) (254.6)
Decrease in other liabilities (183.6) (43.2)
Decrease in other assets 112.0 17.6
Other (2.7) 0.2
Net cash provided by operating activities 107.4 157.7
Cash flows from investing activities
Proceeds from investments 2,786.6 396.9
Purchases of investments (2,784.2) (394.5)
Restricted deposits (1.1) 30.1
Investment in marketable
software (42.9) (36.9)
Capital additions of properties (26.0) (32.9)
Capital additions of outsourcing
assets (27.8) (31.3)
Net proceeds from sale of
businesses and assets 5.2 (15.0)
Net cash used for investing activities (90.2) (83.6)
Cash flows from financing activities
Proceeds from issuance of
preferred stock, net of issuance
costs - 249.7
Payments of long-term debt (388.9) (462.5)
Dividends paid to noncontrolling
interests (4.5) (0.4)
Dividends paid on preferred
shares (12.1) (8.1)
Proceeds from exercise of stock
options 0.4 1.4
Proceeds from issuance of
long-term debt 204.8 -
Net proceeds from short-term
borrowings 0.2 -
Financing fees - (2.2)
Net cash used for financing activities (200.1) (222.1)
Effect of exchange rate changes on cash and cash
equivalents 9.6 (13.0)
Decrease in cash and cash equivalents (173.3) (161.0)
Cash and cash equivalents, beginning of period 714.9 828.3
Cash and cash equivalents, end of period $541.6 $667.3
( 1 )
UNISYS CORPORATION
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(Unaudited)
(Millions, except per share data)
Three Months Nine Months
Ended September Ended September
30 30
2012 2011 2012 2011
GAAP net income (loss)
attributable to Unisys
Corporation
common shareholders ($12.4) $78.6 $47.6 $26.2
Debt reduction charges,
net of tax 23.1 0.1 30.6 77.6
Brazil non-income tax
case, net of tax 8.9
FAS87 pension charges,
net of tax 28.9 6.9 75.0 21.3
Non-GAAP net income
attributable to Unisys
Corporation
common shareholders 39.6 85.6 153.2 134.0
Add preferred stock
dividends 4.0 4.1 12.1 9.5
Non-GAAP net income
attributable to Unisys
Corporation
for diluted earnings per
share $43.6 $89.7 $165.3 $143.5
Weighted average shares
(thousands) 43,966 43,246 43,827 43,063
Plus incremental shares from
assumed conversion:
Employee stock
plans 458 464 445 572
Preferred stock 6,913 6,913 6,913 5,402
GAAP Adjusted weighted
average shares 51,337 50,623 51,185 49,037
Diluted earnings (loss)
per share
GAAP basis
GAAP net income (loss)
attributable to Unisys
Corporation
for diluted earnings per
share ($12.4) $82.7 $47.6 $26.2
Divided by adjusted weighted
average shares 43,966 50,623 44,273 43,635
GAAP net income (loss) per
diluted share ($ .28) $ 1.63 $ 1.08 $ .60
Non-GAAP basis
Non-GAAP net income
attributable to Unisys
Corporation
for diluted earnings per
share $43.6 $89.7 $165.3 $143.5
Divided by Non-GAAP adjusted
weighted average shares 51,337 50,623 51,185 49,037
Non-GAAP net income per
diluted share $ .85 $ 1.77 $ 3.23 $ 2.93
( 2 )
UNISYS CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
(Unaudited)
(Millions)
FREE CASH FLOW
Three Months Nine Months
Ended September Ended September
30 30
2012 2011 2012 2011
Cash provided by
operations $16.9 $93.8 $107.4 $157.7
Additions to marketable
software (14.3) (13.6) (42.9) (36.9)
Additions to properties (8.1) (8.9) (26.0) (32.9)
Additions to outsourcing
assets (9.1) (6.3) (27.8) (31.3)
Free cash flow (14.6) 65.0 10.7 56.6
Pension funding 56.3 20.8 175.1 63.6
Free cash flow before pension
funding $41.7 $85.8 $185.8 $120.2
SOURCE Unisys Corporation
CONTACT: Investors: Niels Christensen, +1-215-986-6651, Niels.Christensen@unisys.com,
or Media: Jim Kerr, +1-215-986-5795, Jim.Kerr@unisys.com
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