Final Results
Unisys Corp
17 January 2002
Media Contact: Jay Grossman, Unisys, 215-986-6948
jay.grossman@unisys.com
Maureen O'Brien, Unisys, 215-986-3978
maureen.obrien@unisys.com
Investor Contact: Jim Kerr, Unisys, 215-986-5795
jim.kerr@unisys.com
Unisys Fourth-Quarter 2001 Results Meet Expectations
BLUE BELL, Pa, January 17, 2002 - Unisys Corporation (NYSE: UIS) today
reported fourth-quarter 2001 net income of $34.4 million, or 11 cents per
diluted share, before a charge for cost reduction, actions. This compares to
pro forma, net income of $129.2 million, or 41 cents per diluted share,
before a charge for cost reduction actions in the fourth quarter of 2000.
Revenue in the fourth quarter of 2001 declined 7% to $1.56 billion compared
to pro forma revenue of $1.68 billion in the year-ago period. On a constant
currency basis, revenue declined 4% in the quarter.
As previously announced, Unisys took a charge in the fourth quarter of 2001
principally to eliminate about 3,750 positions worldwide, including 750
through a U.S. early retirement program, as well as other related actions.
This resulted in a pre-tax charge of $276.3 million in the quarter, In the
fourth quarter of 2000, the company took a pre-tax charge of $127.6 million
for similar actions. Including these charges, the company reported a
fourth-quarter 2001 net loss of $169,4 million, or 53 cents per share,
compared to fourth-quarter 2000 net income of $39.1 million, or 12 cents per
share.
Comparisons in this release exclude the charges discussed above and are based
on year 2000 pro forma results, which exclude de-emphasized commodity
hardware business.
Comments from Chairman and CEO Larry Weinbach
'The people of Unisys delivered a solid fourth-quarter performance to close
out a very challenging year,' said Unisys Chairman and CEO Lawrence A,
Weinbach, 'We met the revenue and earnings targets that we announced in
October 2001, and achieved $267 million in cash flow from operations. Equally
important, we saw encouraging signs of stabilization in our U.S. business
where orders showed good gains in the quarter.
'Our ability to deliver operating profits every quarter in 2001, in the midst
of the worst downturn in technology spending in two decades, shows the value
of the services-led, technology-based model that we have been implementing at
Unisys. In 2001, 74% of our revenue came from our services business. In
particular, we are seeing tangible results from our focus on growing our
long-term outsourcing revenue, which provides a recurring annuity base. Our
outsourcing revenue grew 10% in 2001, and we closed the year by booking more
than $600 million in orders for long-term business process outsourcing
contracts in the fourth quarter. In addition, while the systems integration
and consulting market remains weak industry wide, we are encouraged by very
strong growth in systems integration orders in the fourth quarter over
year-ago levels.
'The focus we've applied to our technology business is also providing
benefits,' Weinbach said. 'In 2001 we continued to extend our industry
leadership in high-end Intel-based servers that utilize our groundbreaking
Cellular Multi-Processing (CMP) architecture. During the year we released a
number of industry benchmarks that demonstrate the price-performance benefits
of our ES7000 servers over proprietary Unix-based systems. Sales of the
ES7000 are growing and we are seeing increasing numbers of multi-unit orders
and repeat orders. We're also encouraged by the reception we've received for
our new clearPath Plus servers based on the CMP architecture. Sales
of ClearPath systems strengthened sequentially in the fourth quarter,'
Unisys also cited continued progress in reducing costs. The company reduced
selling, general and administrative expenses by 16% in the quarter over
year-ago levels and by 14% overall in 2001.
Overall Company Highlights
Unisys reported that U.S. revenue declined 7% in the fourth quarter compared
to the year-ago period. Revenue in international markets also decreased 7%
driven by double-digit declines in Japan and Latin America. On a constant
currency basis, international revenue was down slightly in the quarter.
Total worldwide orders showed double-digit declines in the fourth quarter.
U.S. orders showed good gains. International orders declined from year-ago
levels, which included approximately $1 billion in outsourcing orders in the
United Kingdom. On a segment basis, services and technology orders both
declined in the quarter.
Unisys said its margins in the quarter were impacted by continued industry
weakness in high-end servers and in systems integration and consulting. The
company reported an overall fourth quarter 2001 gross profit margin of 28.4%,
down from 38.1% in year-ago period, and operating margins of 4.8%, down from
13.2% a year ago.
Business Segment Highlights
Customer revenue in the company's services business was flat in the fourth
quarter compared to the year-ago period as double-digit growth in outsourcing
was offset by revenue declines in systems integration and proprietary
maintenance. Gross profit margins in the services business declined 4
percentage points from year-ago levels to 20.8% while services operating
margins declined slightly to 3.0%. The company noted that services operating
margins have improved sequentially since the second quarter of 2001.
Customer revenue in the company's technology business declined 23% from
prior-year levels, primarily driven by lower shipments of ClearPath systems
compared to a year ago. On a sequential basis, sales of ClearPath and ES7000
servers showed strong growth from the third quarter of 2001. Reflecting the
lower mix of ClearPath sales compared to year-ago levels, gross margins in the
technology business decreased 13 percentage points to 43.1%, while technology
operating margins decreased 17 percentage points to 10.3%.
Cash Flow and Balance Sheet Highlights
Unisys achieved $267 million of cash from operations in the fourth quarter.
Higher levels of customer prepayments and improved working capital management
contributed to operational cash flow in the quarter.
During the quarter Unisys reduced its total debt by approximately $70 million
to $826 million. The company reduced short-term borrowings by $200 million,
more than offsetting the issuance of $150 million of 7 1/4% senior notes.
Unisys ended the fourth quarter with $326 million of cash on hand.
Full-Year Results
On a full-year basis excluding special items in both years (see accompanying
financial information), Unisys reported net income of $153.9 million, or 48
cents per share, on revenue of $6.02 billion in 2001, compared to net income
of $340.2 million, or $1.07 per share, on revenue of $6.09 billion in 2000.
Including special items in both years, the company reported a net loss of
$67.1 million, or 21 cents per share in 2001, compared to net income of
$225.0 million, or 71 cents per share, on revenue of $6.89 billion in 2000.
Business Outlook
'Moving into 2002, we are focused on five strategic priorities as we continue
our multi-year transition into a services-led, technology-based provider,'
Weinbach said. 'First, we are continuing to grow our annuity base of long-term
outsourcing revenue. Second, we are committed to driving profitable growth in
systems integration. Third, we are expanding our security solutions program
by developing integrated services and solutions that meet clients' needs in
this critical and emerging market. Fourth, we are focused on accelerating
marketing and sales of our CMP-based servers. Finally, we will continue to
exercise tight controls over discretionary expenses.
'We believe that business conditions have begun to stabilize in the United
States,' Weinbach said. 'As a result, we continue to look for a gradual
recovery in 2002, with the second half stronger than the first. We remain
comfortable with our previously stated earnings expectations for the first
quarter and full year of 2002. In the first quarter, we look for earnings per
share in the 5-10 cents range as our business is impacted by weakness in our
Japanese business. As economic conditions recover and we execute against our
five strategic priorities, we look for our earnings to build over the course
of the year, with full-year 2002 earnings per share growth of about 50% over
year 2001 levels before special items.'
Conference Call
Unisys will hold a conference call to discuss the results today from 8:15-9:15
a.m. EST. The listen-only audiocast can be accessed via a link on the Unisys
Investor Web site at www.unisys.com/investor. An audio replay of the Webcast
will be available for about 10 days following the call.
About Unisys
Unisys is a worldwide information technology services and solutions company
whose 39,000 people help clients in more than 100 countries utilize
technology to seize opportunities, overcome challenges and succeed in the
global economy. The company offers a rich portfolio of business solutions led
by its expertise in consulting and systems integration, outsourcing, network
services and security, coupled with leading enterprise-class server and
related technologies. Primary vertical markets for Unisys worldwide are the
financial services, transportation, communications, media, commercial and
public sectors, including U.S. 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 rely on assumptions and
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.
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
EXCLUDING SPECIAL ITEMS*
(Millions, except per share data)
Three Months Year
Ended December 31 Ended December 31
2001 2000 2001 2000
Revenue $1,556.9 $1,677.8 $6,018.1 $6,092.0
Costs and expenses
Cost of revenue 1,114.7 1,038.4 4,371.0 3,980.7
Selling, general and
administrative 288.7 342.5 1,073.1 1,243.0
Research and development 79.3 75.7 303.9 306.6
1,482.7 1,456.6 5,748.0 5,530.3
Operating income 74.2 221.2 270.1 561.7
Interest expense 20.0 22.1 70.0 79.8
Other income
(expense), net (2.9) (3.1) 29.7 33.4
Income before income taxes 51.3 196.0 229.8 515.3
Provision for income taxes 16.9 66.8 75.9 175.1
Net income $34.4 $129.2 $153.9 $340.2
Diluted earnings
per share $ .11 $ .41 $ .48 $ 1.07
* Special Items:
These results exclude charges for cost reductions and related actions as
well as extraordinary items in both 2001 and 2000. In addition, 2000 results
exclude low-margin commodity business that the company has de-emphasised.
UNISYS CORPORATION
SUPPLEMENTAL SUMMARY
EXCLUDING SPECIAL ITEMS
(Millions)
Elimi-
Total nations Services Technology
Three Months Ended
December 31, 2001
Customer revenue $1,556.9 $1,132.9 $424.0
Intersegment ($96.4) 22.0 74.4
Total revenue $1,556.9 ($96.4) $1,154.9 $498.4
Gross profit percent 28.4% 20.8% 43.1%
Operating profit
percent 4.8% 3.0% 10.3%
Three Months Ended
December 31, 2000
Customer revenue $1,677.8 $1,128.7 $549.1
Intersegment ($104.9) 17.6 87.3
Total revenue $1,677.8 ($104.9) $1,146.3 $636.4
Gross profit percent 38.1% 24.8% 56.4%
Operating profit
percent 13.2% 3.4% 27.7%
Year Ended
December 31, 2001
Customer revenue $6,018.1 $4,444.6 $1,573.5
Intersegment ($363.4) 73.8 289.6
Total revenue $6,018.1 ($363.4) $4,518.4 $1,863.1
Gross profit percent 27.4% 19.7% 43.0%
Operating profit
percent 4.5% 2.1% 11.6%
Year Ended
December 31, 2000
Customer revenue $6,092.0 $4,226.3 $1,865.7
Intersegment ($424.5) 72.8 351.7
Total revenue $6,092.0 (424.5) $4,299.1 $2,217.4
Gross profit percent 34.7% 23.3% 51.1%
Operating profit
percent 9.2% 1.8% 20.7%
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Millions, except per share data)
Three Months Year
Ended December 31 Ended December 31
2001 2000 2001 2000
Revenue $1,556.9 $1,928.3 $6,018.1 $6,885.0
Costs and expenses
Cost of revenue 1,278.5 1,334.0 4,534.8 4,795.9
Selling, general and
administrative 371.9 404.6 1,156.3 1,328.7
Research and development 106.9 95.8 331.5 333.6
1,757.3 1,834.4 6,022.6 6,458.2
Operating income (loss) (200.4) 93.9 (4.5) 426.8
Interest expense 20.0 22.1 70.0 79.8
Other income
(expense), net (4.6) (4.5) 28.0 32.0
Income (loss) before
income taxes (225.0) 67.3 (46.5) 379.0
Provision for income taxes (55.6) 28.2 3.4 134.2
Income (loss) before
extraordinary items (169.4) 39.1 (49.9) 244.8
Extraordinary items (17.2) (19.8)
Net income (loss) ($169.4) $39.1 ($67.1) $225.0
======== ========
Earnings (loss) per share
Basic
Before extraordinary
Items ($ .53) $ .12 $.16) $ .78
Extraordinary items (.05) (.06)
Total ($ .53) $ .12 ($ .21) $ .72
Diluted
Before extraordinary
items ($ .53) $ .12 ($ .16) $ .77
Extraordinary items (.05) (.06)
Total ($ .53) $ .12 ($ .21) $ .71
Shares used in the per share
computations (thousands):
Basic 320,100 315,040 318,207 313,115
Diluted 320,100 316,986 318,207 316,651
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEET
(Millions)
December 31, December 31,
2001 2000
Assets
Current assets
Cash and cash equivalents $ 325.9 $ 378.0
Accounts and notes receivable, net 1,093.7 1,247.4
Inventories
Parts and finished equipment 201.6 249.4
Work in process and materials 144.2 176.1
Deferred income taxes 342.6 460.6
Other current assets 96.1 75.5
Total 2,204.1 2,587.0
Properties 1,445.0 1,400.6
Less accumulated depreciation 910.8 890.7
Properties, net 534.2 509.9
Investments at equity 212.3 225.8
Software, net of accumulated amortization 287.9 296.7
Prepaid pension cost 1,221.0 1,063.0
Deferred income taxes 747.8 583.6
Goodwill 159.0 186.3
Other assets 402.8 261.0
Total $ 5,769.1 $5,713.3
Liabilities and stockholders' equity
Current liabilities
Notes payable $ 78.9 $ 209.5
Current maturities of long-term debt 2.2 16.8
Accounts payable 694.9 847.7
Other accrued liabilities 1,312.5 1,278.8
Income taxes payable 234.6 288.3
Total 2,323.1 2,641.1
Long-term debt 745.0 536.3
Other liabilities 588.3 349.8
Stockholders' equity
Common stock 3.2 3.2
Accumulated deficit (896.5) (829.4)
Other capital 3,712.8 3,656.0
Accumulated other comprehensive loss (706.8) (643.7)
Stockholders' equity 2,112.7 2,186.1
Total $5,769.1 $5,713.3
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions)
Year ended
December 31
2001 2000
Cash flows from operating activities
Income (loss) before extraordinary items ($49.9) $244.8
Add (deduct) items to reconcile
income (loss) before extraordinary
items to net cash provided by
operating activities:
Extraordinary items (17.2) (19.8)
Depreciation 140.2 135.6
Amortization:
Marketable software 145.5 115.5
Goodwill 16.5 21.8
(Increase) decrease in deferred income
taxes, net (44.4) 85.6
Decrease in receivables, net 72.3 158.2
Decrease (increase) in inventories 79.7 (52.5)
(Decrease) in accounts payable
and other accrued liabilities (143.6) (140.0)
(Decrease) in income taxes payable (58.0) (62.8)
Increase (decrease) in other liabilities 245.6 (2.5)
(Increase) in other assets (238.4) (69.2)
Other 54.1 5.2
Net cash provided by operating activities 202.4 419.9
Cash flows from investing activities
Proceeds from investments 3,028.7 790.4
Purchases of investments (3,009.0) (716.7)
Investment in marketable software (136.8) (152.4)
Capital additions of properties (199.4) (198.3)
Purchases of businesses (9.1) (13.9)
Proceeds from sales of properties 20.0
Net cash used for investing activities (325.6) (270.9)
Cash flows from financing activities
Proceeds from issuance of long-term debt 536.5
Payments of long-term debt (370.8) (448.0)
Net (reduction in) proceeds from
short-term borrowings (127.7) 179.6
Proceeds from employee stock plans 33.6 51.1
Net cash provided by (used for)
financing activities 71.6 (217.3)
Effect of exchange rate changes in cash
and cash equivalents (.5) (17.7)
Decrease in cash and cash equivalents (52.1) (86.0)
Cash and cash equivalents, beginning of
period 378.0 464.0
Cash and cash equivalents, end of period $325.9 $378.0
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