Unisys Announces Second-Quarter 2008 Financial ...
Unisys Corp
Company reports $22.6 million operating profit, services orders growth; cash
flow from operations more than doubles from year ago
Unisys Corporation (NYSE: UIS) today reported that its second-quarter 2008
operating profit increased to $22.6 million compared with an operating profit of
$2.5 million in the year-ago period. Revenue for the second quarter of 2008
declined 3 percent to $1.34 billion from $1.38 billion in the year-ago quarter.
Foreign currency exchange rates had an approximately 4 percentage-point positive
impact on revenue in the quarter.
'We continued to make important progress in the second quarter despite a
difficult economic environment,' said Unisys President and CEO Joseph W.
McGrath. 'Our cash flow from operations more than doubled from the year-ago
quarter. Services orders continued to grow, although at a slower rate than in
recent quarters. While our revenue was down in the quarter, primarily due to
weakness in the financial services industry, we continued to grow and expand our
strategic services programs, such as outsourcing, enterprise security, and open
source services.
'Given the weak economic environment and the declining revenue in our
non-strategic businesses, we will be placing additional focus on reducing costs
in order to enhance our margins,' McGrath said. 'We also continue to explore
portfolio rationalization and other actions to unlock value in the business and
drive shareholder value.'
Unisys reported a pretax loss of $10.4 million in the second quarter of 2008
compared with a pretax loss of $24.9 million in the second quarter of 2007.
After taxes, the company reported a second-quarter 2008 net loss of $14.0
million, or diluted loss per share of 4 cents, compared with a net loss of $65.5
million, or a loss of 19 cents per share, in the year-ago period. The company's
year-ago results included a net $24 million pre-tax cost reduction charge. The
current year includes $8 million in pre-tax cost reduction-related charges.
Pretax retirement-related expense in the second quarter of 2008 was $5.8 million
compared with $24.5 million in the year-ago period.
Second-Quarter Company Results
Services orders showed single-digit gains in the second quarter, driven by order
gains for outsourcing. Services order backlog at June 30, 2008 was $7.17
billion, up 3 percent from $6.97 billion at March 31, 2008.
Revenue in the United States declined 3 percent in the quarter to $572 million.
Revenue in international markets declined 2 percent to $768 million. The revenue
declines in both regions primarily reflected sales declines in financial
services. On a constant currency basis, international revenue declined 10
percent in the quarter.
The company's gross profit margin and operating profit margin in the second
quarter of 2008 increased to 22.7 percent and 1.7 percent, respectively. These
compared with gross and operating profit margins of 21.8 percent and 0.2
percent, respectively, in the second quarter of 2007.
Second-Quarter Business Segment Results
Unisys has a long-standing policy to evaluate business segment performance on
operating income exclusive of restructuring charges and unusual and
non-recurring items. Therefore, the comparisons below exclude these items.
Customer revenue in the company's services segment declined 1 percent in the
second quarter of 2008 compared with the year-ago period. The company reported
revenue growth in outsourcing and in systems integration and consulting. Growth
in these areas was offset by revenue declines in infrastructure services and
core maintenance. Gross profit margin in the services business improved to 19.2
percent compared with 17.3 percent a year ago. Services operating margin
improved to 3.3 percent compared with 2.5 percent a year ago.
Unisys said its technology revenue and margins in the quarter were negatively
impacted, as expected, by the ending of $18.8 million of quarterly royalty
revenue from a 2005 intellectual property agreement with Nihon Unisys Limited
(NUL) that ended on March 31. Customer revenue in the company's technology
segment declined 14 percent from the second quarter of 2007. Excluding the NUL
royalty revenue in the year-ago period, technology revenue declined about 3
percent in the quarter. Gross profit margin in the technology business declined
to 39.2 percent compared with 43.3 percent a year ago, while technology
operating margin declined to (3.7) percent compared with (0.6) percent in the
second quarter of 2007.
Cash Flow and Balance Sheet Highlights
Unisys generated $52 million of cash from operations in the second quarter of
2008. In the year-ago quarter, the company generated $23 million of cash from
operations, which included a tax refund of approximately $58 million. The
company used approximately $22 million of cash in the second quarter of 2008 for
restructuring payments compared to approximately $37 million in the year-ago
period.
Capital expenditures in the second quarter of 2008 were $71 million compared to
$84 million in the year-ago quarter. After deducting for capital expenditures,
Unisys used $19 million of free cash in the quarter compared with free cash
usage of $61 million in the second quarter of 2007.
Conference Call
Unisys will hold a conference call today at 8:15 a.m. EDT 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
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 services and solutions company. We
provide consulting, systems integration, outsourcing and infrastructure
services, combined with powerful enterprise server technology. We specialise in
helping clients use information to create efficient, secure business operations
that allow them to achieve their business goals. Our consultants and industry
experts work with clients to understand their business challenges and create
greater visibility into critical linkages throughout their operations. 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 general economic and
business conditions; the effects of aggressive competition in the information
services and technology markets on the company's revenues, pricing and margins
and on the competitiveness of its product and services offerings; the level of
demand for the company's products and services and the company's ability to
anticipate and respond to changes in technology and customer preferences; the
company's ability to successfully implement its repositioning strategy; the
company's ability to retain significant clients; the company's ability to grow
outsourcing and its ability to effectively and timely complete the related
solutions implementations, client transitions to the new environment and work
force and facilities rationalizations; the company's ability to continue to
effectively address its challenging outsourcing operations through negotiations
or operationally and to fully recover the associated outsourcing assets; the
company's ability to drive profitable growth in consulting and systems
integration; the level of demand for the company's high-end enterprise servers
and maintenance on those servers; the risk 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 be subject 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 performance and capabilities of
third parties with whom the company has commercial relationships; the risks of
doing business internationally; the potential business and financial risk in
implementing future acquisitions or dispositions; the potential for infringement
claims to be asserted against the company or its clients and the possibility
that pending litigation could affect the company's results of operations or cash
flow. Additional discussion of these and other factors that could affect Unisys
future results is contained in its periodic filings with the Securities and
Exchange Commission. Unisys assumes no obligation to update any forward-looking
statements.
RELEASE NO.: 0723/8899
http://www.unisys.com/about__unisys/news_a_events/07238899.htm
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.
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UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Millions, except per share data)
Three Months Six Months
Ended June 30 Ended June 30
------------------- -------------------
2008 2007 2008 2007
Revenue
Services $1,197.0 $1,208.6 $2,334.1 $2,361.5
Technology 143.0 167.1 307.2 362.2
------- ------- ------- -------
1,340.0 1,375.7 2,641.3 2,723.7
Costs and expenses
Cost of revenue:
Services 954.4 992.2 1,876.6 1,986.1
Technology 81.8 84.1 167.7 180.8
------- ------- ------- -------
1,036.2 1,076.3 2,044.3 2,166.9
Selling, general and
administrative 251.0 247.4 483.5 492.0
Research and development 30.2 49.5 62.9 91.9
------- ------- ------- -------
1,317.4 1,373.2 2,590.7 2,750.8
------- ------- ------- -------
Operating profit (loss) 22.6 2.5 50.6 (27.1)
Interest expense 21.2 18.7 42.8 37.6
Other income
(expense), net (11.8) (8.7) (17.8) 16.8
------- ------- ------- -------
Loss before income taxes (10.4) (24.9) (10.0) (47.9)
Provision for income taxes 3.6 40.6 27.4 14.0
------- ------- ------- -------
Net Loss ($14.0) ($65.5) ($37.4) ($61.9)
======= ======= ======= =======
Loss per share
Basic ($ .04) ($ .19) ($ .10) ($ .18)
======= ======= ======= =======
Diluted ($ .04) ($ .19) ($ .10) ($ .18)
======= ======= ======= =======
Shares used in the per share
computations (thousands):
Basic 358,167 348,958 356,482 347,690
======= ======= ======= =======
Diluted 358,167 348,958 356,482 347,690
======= ======= ======= =======
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UNISYS CORPORATION
SEGMENT RESULTS
(Unaudited)
(Millions)
Elimi-
Total nations Services* Technology*
---------- ------- --------- -----------
Three Months Ended
June 30, 2008
-----------------------------
Customer revenue $1,340.0 $1,197.0 $143.0
Intersegment ($51.0) 2.7 48.3
---------- ------ ------- -----
Total revenue $1,340.0 ($51.0) $1,199.7 $191.3
======== ====== ======== =========
Gross profit percent 22.7% 19.2% 39.2%
========= ======== =======
Operating profit
(loss) percent 1.7% 3.3% (3.7%)
========= ======== =======
Three Months Ended
June 30, 2007
-----------------------------
Customer revenue $1,375.7 $1,208.6 $167.1
Intersegment ($47.4) 3.6 43.8
---------- ------ ------- -----
Total revenue $1,375.7 ($47.4) $1,212.2 $210.9
======== ====== ======== =========
Gross profit percent 21.8% 17.3% 43.3%
========= ======== =======
Operating profit
(loss) percent 0.2% 2.5% (0.6%)
========= ======== =======
Six Months Ended
June 30, 2008
-----------------------------
Customer revenue $2,641.3 $2,334.1 $307.2
Intersegment ($94.7) 5.4 89.3
---------- ------ ------- -----
Total revenue $2,641.3 ($94.7) $2,339.5 $396.5
======== ====== ======== =========
Gross profit percent 22.6% 18.8% 41.1%
========= ======== =======
Operating profit
(loss) percent 1.9% 2.8% (1.4%)
========= ======== =======
Six Months Ended
June 30, 2007
-----------------------------
Customer revenue $2,723.7 $2,361.5 $362.2
Intersegment ($87.5) 7.5 80.0
---------- ------ ------- -----
Total revenue $2,723.7 ($87.5) $2,369.0 $442.2
======== ====== ======== =========
Gross profit percent 20.4% 16.2% 43.3%
========= ======== =======
Operating profit
(loss) percent (1.0%) 0.8% 1.5%
========= ======== =======
* Results exclude cost reduction actions
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UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Millions)
June 30, 2008 December 31,
(Unaudited) 2007
--------------- ------------
Assets
Current assets
Cash and cash equivalents $ 471.4 $ 830.2
Accounts and notes receivable, net 991.1 1,059.2
Inventories
Parts and finished equipment 90.6 91.9
Work in process and materials 73.5 79.2
Deferred income taxes 18.0 18.0
Prepaid expense and other
current assets 155.9 133.7
------------- ----------
Total 1,800.5 2,212.2
------------- ----------
Properties 1,374.8 1,336.9
Less accumulated depreciation
and amortization 1,057.9 1,004.7
------------- ----------
Properties, net 316.9 332.2
------------- ----------
Outsourcing assets, net 380.2 409.4
Marketable software, net 254.0 268.8
Prepaid postretirement assets 570.5 497.0
Deferred income taxes 93.8 93.8
Goodwill 203.7 200.6
Other long-term assets 134.4 123.1
------------- ----------
Total $ 3,754.0 $ 4,137.1
============== ===========
Liabilities and stockholders' equity
Current liabilities
Notes payable $ 0.1 $ 0.1
Current maturities of long-term debt 3.2 204.3
Accounts payable 373.3 419.6
Other accrued liabilities 1,162.2 1,272.0
------------- ----------
Total 1,538.8 1,896.0
------------- ----------
Long-term debt 1,060.3 1,058.3
Long-term postretirement liabilities 406.1 420.7
Other long-term liabilities 358.4 395.5
Stockholders' equity
Common stock 3.6 3.6
Accumulated deficit (2,503.3) (2,465.9)
Other capital 4,047.7 4,011.8
Accumulated other comprehensive loss (1,157.6) (1,182.9)
------------- ----------
Stockholders' equity 390.4 366.6
------------- ----------
Total $ 3,754.0 $ 4,137.1
============== ===========
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UNISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Millions)
Six Months Ended
June 30
---------------------
2008 2007
---------- ----------
Cash flows from operating activities
Net loss ($37.4) ($61.9)
Add (deduct) items to reconcile
net loss to net cash provided by
(used for) operating activities:
Employee stock compensation expense 11.9 5.5
Company stock issued for U.S. 401(k) plan 23.9 23.0
Depreciation and amortization
of properties 53.7 56.9
Depreciation and amortization of
outsourcing assets 83.9 70.6
Amortization of marketable software 60.9 62.1
Disposals of capital assets 5.6 .3
Gain on sale of assets (23.1)
Decrease in receivables, net 89.4 136.0
Decease (increase) in inventories 9.8 (9.0)
Decrease in accounts payable
and other accrued liabilities (207.2) (250.5)
Decrease in other liabilities (16.6) (50.9)
Increase in other assets (80.8) (39.9)
Other 5.2 (.2)
-------- --------
Net cash provided by (used for)
operating activities 2.3 (81.1)
-------- --------
Cash flows from investing activities
Proceeds from investments 3,276.9 3,942.4
Purchases of investments (3,306.5) (3,941.0)
Investment in marketable software (45.4) (48.9)
Capital additions of properties (32.1) (39.8)
Capital additions of outsourcing assets (58.6) (78.5)
Purchases of businesses (1.8) (1.6)
Proceeds from sale of assets 27.7
---------- --------
Net cash used for investing activities (167.5) (139.7)
-------- --------
Cash flows from financing activities
Net reduction in short-term borrowings (.6)
Proceeds from exercise of stock options 11.3
Payments of long-term debt (200.0)
Financing fees (.8)
-------- ----------
Net cash (used for) provided by financing
activities (200.8) 10.7
-------- --------
Effect of exchange rate changes on cash
and cash equivalents 7.2 11.5
-------- --------
Decrease in cash and cash
equivalents (358.8) (198.6)
Cash and cash equivalents, beginning of
period 830.2 719.3
-------- --------
Cash and cash equivalents, end of period $ 471.4 $ 520.7
========= =========
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CONTACT: Unisys Corporation
Investor:
Jack McHale, 215-986-6050
Jack.McHale@unisys.com
or
Media:
Jim Kerr, 215-986-5795
Jim.Kerr@unisys.com
or
Gail Ferrari Marold, 919-302-1620
Gail.Ferrari@unisys.com
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