Final Results

Unisys Corp 18 January 2001 Media Contact: Jay Grossman, Unisys, (215) 986-6948 jay.grossman@unisys.com Investor Contact: Jim Kerr, Unisys, (215) 986-5795 jim.kerr@unisys.com Unisys Reports Fourth-Quarter 2000 Earnings in Line with Expectations BLUE BELL, PA, JANUARY 18, 2001 -- Unisys Corporation (NYSE: UIS) today reported fourth-quarter 2000 net income of $128.6 million, or 41 cents per diluted common share, before a one-time charge, compared to net income of $144.4 million, or 46 cents per diluted share, in the fourth quarter of 1999. The company's fourth-quarter 2000 revenue of $1.93 billion declined 1.6% from year-ago levels. Without the negative impact of foreign currency translation, revenue in the quarter increased 4% from a year ago. As previously announced, the company took a one-time, pre-tax charge of $127.6 million ($89.5 million after tax) against fourth-quarter 2000 net income for actions taken to focus on higher-growth, higher-margin, value-added business and reduce its cost structure in line with its more focused business model. Including this charge, the company reported fourth-quarter 2000 net income of $39.1 million, or 12 cents per share. For the full year of 2000, Unisys reported net income of $334.3 million, or $1.06 per diluted common share, on revenue of $6.89 billion. This compared to net income of $500.8 million, or $1.56 per share after payment of preferred dividends, on revenue of $7.54 billion in 1999. These amounts do not include special items in both 2000 and 1999. On a full-year basis including such special items, Unisys reported net income of $225.0 million, or $.71 per common share, in 2000 compared to net income of $510.7 million, or $1.59 per common share, in 1999. Comments from Chairman and CEO Larry Weinbach 'We closed a challenging year with a solid fourth-quarter performance,' said Unisys Chairman and CEO Lawrence A. Weinbach. 'In the midst of a major repositioning of our business model, we met our fourth-quarter revenue and earnings targets, driven by a strong performance in our technology business. We also achieved good operating cash flow that enabled us to pay down a substantial portion of our short-term debt. 'Our technology business delivered double-digit customer revenue growth in the quarter driven by stronger ClearPath mainframe sales and a continued ramp-up in sales of our new ES7000 Intel-based enterprise servers, based on the Unisys Cellular Multi-Processing (CMP) architecture. While our services revenue was down as expected in the quarter, we achieved continued sequential margin improvement in this business. 'As evidence of an economic slowdown became apparent late in the quarter, we saw an impact on our orders as customers became more cautious in their IT spending plans,' Weinbach said. 'Nonetheless, we were pleased to close two of the largest outsourcing contracts in Unisys history -- a 10-year payment processing arrangement in the U.K. with Lloyds TSB and Barclays Bank estimated at more than $700 million, and a 10-year contract estimated at $300 million to handle insurance processing for Abbey Life in the U.K. (www.unisys.com/news/releases/2001/jan/01187045.asp) Gains in outsourcing orders allowed us to close the year with a record $5.8 billion of services backlog, up 25% from year-end 1999 backlog levels.' Weinbach said Unisys made significant progress during the quarter in implementing its previously announced strategic actions to focus on higher-growth, higher-margin business opportunities and de-emphasize commodity-based business. Unisys said it has finalized its previously announced strategic relationship with Ingram Micro under which Ingram will deliver, through an e-business model, a full range of multivendor products to Unisys customers in the United States. Unisys and Ingram expect to extend this arrangement to other geographies. (www.unisys.com/news/releases/2001/jan/01187046.asp) Unisys also said it is in the process of finalizing its previously announced agreement with Dell Computer under which Dell will OEM Unisys CMP-based servers, and Unisys will OEM Dell mid-range servers and will provide an expanded set of support and technical services to Dell clients worldwide. This agreement is expected to be concluded shortly. Unisys also announced that it has completed an OEM agreement with Hitachi, Ltd. under which Hitachi will sell Unisys CMP-based servers in Japan. This arrangement further expands the company's OEM channel for its CMP-based servers. Hitachi joins Compaq, ICL, Hewlett-Packard, and Dell as Unisys OEM partners, and establishes Unisys CMP technology as the de facto standard for high-end, enterprise-class, Intel-based servers. (www.unisys.com/news/releases/2001/jan/01187043.asp) Weinbach said the company continues to make progress in realigning its cost base with its more focused business model. During the fourth quarter the company offered an early retirement program in the United States that was accepted by approximately 750 employees. In addition, Unisys conducted an involuntary workforce reduction of approximately 1,250 positions. The majority of these actions were completed by year-end. 'We expect these actions to improve our operating profit margins,' Weinbach said. 'While we have more work to do to complete the actions, we enter the new year with a highly focused, competitive portfolio of services, solutions, and technology needed to meet customer requirements in an e-business environment.' Overall Company Highlights Unisys reported that U.S. revenue showed modest declines in the fourth quarter compared to the year-ago period. Revenue in international markets was up slightly in the quarter as gains in Japan and Pacific/Asia were offset by declines in Latin America. On a constant currency basis, international revenue showed double-digit growth over the prior-year quarter. Total worldwide orders, driven by the large outsourcing contracts in the U.K., posted substantial gains in the quarter over year-ago levels. International orders showed very substantial gains while U.S. orders were weak. On a business segment basis, technology orders were up slightly while services orders showed very substantial growth. Unisys said that its margins for the fourth quarter showed sequential improvement, reflecting the strong profit performance in the technology business and continued margin improvement in services. The company reported an overall fourth-quarter 2000 gross profit margin of 33.7%, up from 28.1% in the third quarter, and an operating profit margin of 11.4%, up from 4.6% in the third quarter. Business Segment Highlights Customer revenue in the company's technology business increased 12% in the fourth quarter driven by stronger sales of ClearPath servers and a continued ramp-up in shipments of the company's new CMP-based servers. (www.unisys.com/news/releases/2001/jan/01187042.asp) Gross margins in the technology business increased 4.5 percentage points over the year-ago period to 48.3% and technology operating margins increased 7.7 percentage points over the year-ago period to 23.5%, reflecting a richer mix of higher-margin server sales. Customer revenue in the services business declined 7% in the fourth quarter over the year-ago period as very strong growth in network services was more than offset by double-digit declines in systems integration and in proprietary maintenance. Reflecting the declines in these higher-margin areas, gross profit margins in the services business declined 4 percentage points from year-ago levels to 22.9% while operating margins declined 6 percentage points from year-ago levels to 3.4%. On a sequential basis, gross margins in the services business improved 1.3 percentage points and operating margins increased 1.9 percentage points from third-quarter 2000 levels, reflecting improved utilization of resources and cost reduction actions. Cash Flow and Balance Sheet Highlights Unisys cited strong improvement in cash flow in the fourth quarter driven by reductions in accounts receivable. The company generated $493 million of operating cash in the fourth quarter compared to $198 million in the year-ago period. Unisys said that the improvement in accounts receivable reflected the sale of approximately $230 million of receivables through a new U.S. securitization facility as well as a 5-day improvement in days of sales outstanding from the third quarter of 2000. The new securitization facility, renewable annually for up to three years, allows for the sale of up to $275 million of U.S. trade receivables. Unisys said it reduced its total debt by approximately $264 million during the fourth quarter. At December 31, 2000, the company's total debt was $763 million compared to $1.0 billion at year-end 1999. Unisys ended 2000 with $378 million of cash on hand. Business Outlook 'Based on the current economic environment, we are taking a cautious view of the first half of 2001,' Weinbach said. 'We look for our results to build over the course of the year as our new outsourcing contracts roll out, shipments of our CMP-based servers ramp up, and IT spending levels pick up. The actions we've taken to focus on value-added, mission-critical services and systems and to reduce our cost structure provide a solid foundation during this period. Given current economic conditions, we look for our revenue to be approximately flat year-over-year in the first quarter on a pro forma basis excluding de-emphasized business. We expect this to put us at the low end of our previously expected 8-12% range of pro forma revenue growth for the full year of 2001. We look for earnings per share in the 20-25 cents range for the first quarter. For the full year, we estimate an earnings-per-share range of $1.25 to $1.35, which would represent strong double-digit earnings growth from 2000 levels.' About Unisys Unisys is an e-business solutions company whose 36,000 employees help customers in 100 countries apply information technology to seize opportunities and overcome challenges of the Internet economy. Unisys people integrate and deliver the solutions, services, platforms and network infrastructure required by business and government to transform their organizations for success in this new era. The company offers a rich portfolio of Unisys c-@ction Solutions for e-business based on its expertise in vertical industry solutions, network services, outsourcing, systems integration and multivendor support, coupled with enterprise-class server and related technologies. The primary vertical markets Unisys serves worldwide include financial services, transportation, communications, publishing and commercial sectors, as well as the public sector, including federal government customers. Unisys is headquartered in Blue Bell, Pennsylvania, in the Greater Philadelphia area. For more information on the company, access the Unisys home page on the World Wide Web at www.unisys.com. Investor information can be found at www.unisys.com/investor. 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. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect the company's future financial results are discussed more fully in the company's latest Form 10-Q as filed with the Securities and Exchange Commission. (See accompanying financial information below). http://www.unisys.com/news/releases/2001/jan/011870454.asp) Unisys is a registered trademark and e-@ction is a 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 STATEMENT OF INCOME (Millions, except per share data) Three Months Year Ended December 31 Ended December 31 ------------------ ------------------ 2000 1999 2000 1999 -------- -------- -------- -------- Revenue $1,928.3 $1,959.9 $6,885.0 $7,544.6 -------- -------- -------- -------- Costs and expenses Cost of revenue 1,334.0 1,278.1 4,795.9 4,859.9 Selling, general and administrative 404.6 349.7 1,328.7 1,384.6 Research and development 95.8 88.0 333.6 339.4 -------- -------- -------- -------- 1,834.4 1,715.8 6,458.2 6,583.9 -------- -------- -------- -------- Operating income 93.9 244.1 426.8 960.7 Interest expense 22.1 24.8 79.8 127.8 Other income (expense), net (4.5) 2.7 32.0 (62.6) -------- -------- -------- -------- Income before income taxes 67.3 222.0 379.0 770.3 Estimated income taxes 28.2 77.6 134.2 247.5 -------- -------- -------- -------- Income before extraordinary items 39.1 144.4 244.8 522.8 Extraordinary items (19.8) (12.1) -------- -------- -------- -------- Net income 39.1 144.4 225.0 510.7 Dividends on preferred shares 36.7 -------- -------- -------- -------- Earnings on common shares $39.1 $144.4 $225.0 $474.0 ======== ======== ======== ======== Earnings per common share Basic Before extraordinary items $ .12 $ .47 $ .78 $ 1.69 Extraordinary items (.06) (.04) -------- -------- -------- -------- Total $ .12 $ .47 $ .72 $ 1.65 ======== ======== ======== ======== Diluted Before extraordinary items $ .12 $ .46 $ .77 $ 1.63 Extraordinary items (.06) (.04) -------- -------- -------- -------- Total $ .12 $ .46 $ .71 $ 1.59 ======== ======== ======== ======== Shares used in the per share computations (thousands): Basic 315,040 310,127 313,115 287,290 ======== ======== ======== ======== Diluted 316,986 317,080 316,651 298,820 ======== ======== ======== ======== -------------------------------------------------------------------------------- UNISYS CORPORATION CONSOLIDATED STATEMENT OF INCOME EXCLUDING ONE-TIME CHARGES AND EXTRAORDINARY ITEMS (Millions, except per share data) Three Months Year Ended December 31 Ended December 31 ------------------ ------------------ 2000 1999 2000 1999 -------- -------- -------- -------- Revenue $1,928.3 $1,959.9 $6,885.0 $7,544.6 -------- -------- -------- -------- Costs and expenses Cost of revenue 1,277.9 1,278.1 4,739.8 4,859.9 Selling, general and administrative 352.7 349.7 1,276.8 1,384.6 Research and development 77.6 88.0 315.4 339.4 -------- -------- -------- -------- 1,708.2 1,715.8 6,332.0 6,583.9 -------- -------- -------- -------- Operating income 220.1 244.1 553.0 960.7 Interest expense 22.1 24.8 79.8 127.8 Other income (expense), net (3.1) 2.7 33.4 (62.6) -------- -------- -------- -------- Income before income taxes 194.9 222.0 506.6 770.3 Estimated income taxes 66.3 77.6 172.3 269.5 -------- -------- -------- -------- Net income 128.6 144.4 334.3 500.8 Dividends on preferred shares 36.7 -------- -------- -------- -------- Earnings on common shares $128.6 $144.4 $334.3 $464.1 ======== ======== ======== ======== Diluted earnings per common share $ .41 $ .46 $ 1.06 $ 1.56 ======== ======== ======== ======== -------------------------------------------------------------------------------- UNISYS CORPORATION SUPPLEMENTAL SUMMARY (Millions) Elimi- Total nations Services Technology -------- -------- -------- ---------- Three Months Ended December 31, 2000 ------------------ Customer revenue $1,928.3 $1,287.5 $640.8 Intersegment ($110.5) 11.4 99.1 -------- -------- -------- -------- Total revenue $1,928.3 ($110.5) $1,298.9 $739.9 ======== ======== ======== ======== Gross profit percent 33.7% 22.9% 48.3% ======== ======== ======== Operating income percent 11.4% 3.4% 23.5% ======== ======== ======== Three Months Ended December 31, 1999 ------------------ Customer revenue $1,959.9 $1,385.7 $574.2 Intersegment ($161.9) 16.6 145.3 -------- -------- -------- -------- Total revenue $1,959.9 ($161.9) $1,402.3 $719.5 ======== ======== ======== ======== Gross profit percent 34.8% 26.9% 43.8% ======== ======== ======== Operating income percent 12.5% 9.4% 15.8% ======== ======== ======== Year Ended December 31, 2000 ------------------ Customer revenue $6,885.0 $4,741.6 $2,143.4 Intersegment ($437.2) 46.6 390.6 -------- -------- -------- -------- Total revenue $6,885.0 ($437.2) $4,788.2 $2,534.0 ======== ======== ======== ======== Gross profit percent 31.2% 21.6% 44.7% ======== ======== ======== Operating income percent 8.0% 1.7% 17.7% ======== ======== ======== Year Ended December 31, 1999 ------------------ Customer revenue $7,544.6 $5,287.0 $2,257.6 Intersegment ($577.5) 65.6 511.9 -------- -------- -------- -------- Total revenue $7,544.6 ($577.5) $5,352.6 $2,769.5 ======== ======== ======== ======== Gross profit percent 35.6% 25.6% 48.1% ======== ======== ======== Operating income percent 12.7% 7.9% 20.3% ======== ======== ======== -------------------------------------------------------------------------------- UNISYS CORPORATION CONSOLIDATED BALANCE SHEET (Millions) December 31, December 31, 2000 1999 ---------- ---------- Assets Current assets Cash and cash equivalents $378.0 $464.0 Accounts and notes receivable, net 1,247.4 1,430.5 Inventories Parts and finished equipment 249.4 236.8 Work in process and materials 176.1 136.1 Deferred income taxes 460.6 472.7 Other current assets 75.5 105.6 ---------- ---------- Total 2,587.0 2,845.7 ---------- ---------- Properties 1,584.1 1,723.0 Less accumulated depreciation 963.9 1,102.2 ---------- ---------- Properties, net 620.2 620.8 ---------- ---------- Investments at equity 225.8 225.5 Software, net of accumulated amortization 296.7 259.8 Prepaid pension cost 1,063.0 975.9 Deferred income taxes 583.6 655.6 Other assets 341.4 306.4 ---------- ---------- Total $5,717.7 $5,889.7 ========== ========== Liabilities and stockholders' equity Current liabilities Notes payable $209.5 $26.9 Current maturities of long-term debt 16.8 22.9 Accounts payable 847.7 833.2 Other accrued liabilities 1,323.5 1,386.6 Estimated income taxes 288.3 348.9 ---------- ---------- Total 2,685.8 2,618.5 ---------- ---------- Long-term debt 536.3 950.2 Other liabilities 309.5 367.7 Stockholders' equity Common stock 3.2 3.1 Accumulated deficit (829.4) (1,054.4) Other capital 3,656.0 3,575.0 Accumulated other comprehensive loss (643.7) (570.4) ---------- ---------- Stockholders' equity 2,186.1 1,953.3 ---------- ---------- Total $5,717.7 $5,889.7 ========== ========== -------------------------------------------------------------------------------- UNISYS CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Millions) Year Ended December 31 ------------------ 2000 1999 ------- ------- Cash flows from operating activities Income before extraordinary items $244.8 $522.8 Add (deduct) items to reconcile income before extraordinary items to net cash provided by operating activities: Extraordinary items (19.8) (12.1) Depreciation 143.0 141.8 Amortization: Marketable software 115.5 110.9 Goodwill 12.5 12.5 Decrease (increase) in deferred income taxes, net 85.6 (9.9) Decrease (increase) in receivables, net 158.2 (244.5) (Increase) decrease in inventories (52.5) 98.0 (Decrease) in accounts payable and other accrued liabilities (136.1) (81.8) (Decrease) increase in estimated income taxes (62.8) 78.2 (Decrease) in other liabilities (6.4) (2.2) (Increase) in other assets (69.2) (159.2) Other 7.1 63.1 ------- ------- Net cash provided by operating activities 419.9 517.6 ------- ------- Cash flows from investing activities Proceeds from investments 790.4 1,033.8 Purchases of investments (716.7) (1,013.8) Proceeds from sales of properties 20.0 47.9 Investment in marketable software (152.4) (122.8) Capital additions of properties (198.3) (219.6) Purchases of businesses (13.9) (53.9) ------- ------- Net cash used for investing activities (270.9) (328.4) ------- ------- Cash flows from financing activities Redemption of preferred stock (197.0) Proceeds from issuance of long-term debt 30.3 Payments of long-term debt (448.0) (164.4) Net proceeds from (reduction in) short-term borrowings 179.6 (25.6) Dividends paid on preferred shares (59.4) Proceeds from employee stock plans 51.1 87.7 ------- ------- Net cash used for financing activities (217.3) (328.4) ------- ------- Effect of exchange rate changes on cash and cash equivalents (17.7) (13.2) ------- ------- Decrease in cash and cash equivalents (86.0) (152.4) Cash and cash equivalents, beginning of period 464.0 616.4 ------- ------- Cash and cash equivalents, end of period $378.0 $464.0 ======= =======

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