1st Quarter Results
Unisys Announces First-Quarter 2014 Financial Results
- Revenue declines 6 percent; 4 percent on a constant currency(1) basis
- Diluted loss per share of $1.15 vs. a loss of 77 cents in 1Q 2013
- Cash from operations of $20 million vs. $14 million in 1Q 2013
BLUE BELL, Pa., April 22, 2014 -- Unisys Corporation (NYSE: UIS) today reported
a first-quarter 2014 net loss of $53.5 million, or a loss of $1.15 per diluted
share, which included $19.3 million of pension expense. In the first quarter
of 2013 the company reported a net loss of $33.9 million, or a loss of 77
cents per diluted share, which included $22.3 million of pension expense.
Excluding pension expense in both periods, the non-GAAP diluted loss per
share(2) in the first quarter of 2014 was 74 cents compared with a non-GAAP
diluted loss per share of 26 cents in the first quarter of 2013.
First-quarter 2014 revenue declined 6 percent to $762 million from $810 million
in the year-ago quarter. On a constant currency basis, first-quarter 2014
revenue declined 4 percent.
"Following a strong fourth quarter of 2013, our first-quarter 2014 revenue and
margins were impacted by lower sales of technology and IT services projects,
while cash from operations improved over the year ago quarter," said Unisys
Chairman and CEO Ed Coleman. "We look for improved results through the course
of the year, driven in part by anticipated full-year growth in our technology
business. We are confident in our strategy and are optimistic about the
investments we are making in new products such as our Stealth cybersecurity
software, our Forward! by Unisys fabric-based server platform, and our
cloud-based offerings."
First-Quarter Company and Business Segment Highlights
U.S. revenue declined 5 percent in the quarter. U.S. Federal government revenue
grew 2 percent. International revenue declined 7 percent. On a constant
currency basis, international revenue declined 4 percent.
First-quarter 2014 services revenue declined 4 percent from the prior-year
quarter driven by lower outsourcing and infrastructure services revenue.
Reflecting the lower services revenue, first-quarter 2014 services gross profit
margin declined to 15.8 percent from 17.4 percent a year ago while services
operating profit margin declined to 1.9 percent from 3.1 percent a year ago.
First-quarter 2014 services orders decreased from year-ago levels primarily
driven by lower outsourcing orders. Services backlog at March 31, 2014 was $4.5
billion compared to $4.8 billion at December 31, 2013.
First-quarter 2014 technology revenue declined 19 percent from the prior-year
quarter driven by lower sales of ClearPath enterprise software and servers.
Reflecting the lower ClearPath sales, first-quarter 2014 technology gross
profit margin declined to 42.5 percent from 45.8 percent in the year-ago
quarter and technology operating profit (loss) margin declined to (21.2)
percent from 0.2 percent in the year-ago quarter.
The company reported an overall first-quarter 2014 gross profit margin of 17.5
percent compared with 19.9 percent in the year-ago quarter. Operating expenses
(SG&A and R&D expenses) declined 4 percent from the year-ago period. The
company reported a first-quarter 2014 operating loss of $19.9 million compared
with an operating profit of $1.6 million in the first quarter of 2013.
Cash Flow and Balance Sheet Highlights
Unisys generated $20 million of cash from operations in the first quarter of
2014 compared to $14 million in the first quarter of 2013. Cash from operations
included pension contributions of $56 million in the first quarter of 2014, an
increase from $27 million in the first quarter of 2013. Capital expenditures in
the first quarter of 2014 were $45 million compared with $26 million in the
year-ago quarter. After capital expenditures, the company used $25 million of
free cash(3) in the first quarter of 2014 compared with free cash usage of $12
million in the first quarter of 2013. Free cash flow before pension
contributions increased to $31 million in the first quarter of 2014 from $15
million in the year-ago quarter.
At March 31, 2014, the company reported a cash balance of $614 million and
total debt of $210 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) 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.
(2) Non-GAAP diluted earnings/loss per share - Unisys recorded pension expense
of $19.3 million and $22.3 million during the first quarters of 2014 and 2013,
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.
(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
effectively anticipate and respond to volatility and rapid technological change
in its industry; the company's ability to drive profitable growth in consulting
and systems integration; the company's ability to profitably grow its
outsourcing business; the company's ability to maintain and grow its technology
business; the potential adverse effects of aggressive competition in the
information services and technology marketplace; the company's ability to
retain significant clients; 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 performance and capabilities of
third parties with whom the company has commercial relationships; the company's
ability to attract, motivate and retain experienced and knowledgeable personnel
in key positions; the company's significant pension obligations and potential
requirements to make significant cash contributions to its defined benefit
pension plans; the company's ability to continue to simplify its operations and
provide services more cost efficiently; the adverse effects of global economic
conditions; the risk that breaches of data security could expose the company to
legal liability and could harm its business and reputation; 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.: 0422/9244
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
---------------
2014 2013
---- ----
Revenue
Services $690.9 $723.0
Technology 70.8 86.9
---- ----
761.7 809.9
Costs and expenses
Cost of revenue:
Services 592.2 602.8
Technology 36.5 46.3
---- ----
628.7 649.1
Selling, general and administrative 138.5 142.2
Research and development 14.4 17.0
---- ----
781.6 808.3
----- -----
Operating profit (loss) (19.9) 1.6
Interest expense 2.0 2.7
Other income (expense), net (9.8) (4.9)
---- ----
Loss before income taxes (31.7) (6.0)
Provision for income taxes 16.0 21.4
---- ----
Consolidated net loss (47.7) (27.4)
Net income attributable to
noncontrolling interests 3.1 2.5
---- ---
Net loss attributable to Unisys
Corporation (50.8) (29.9)
Preferred stock dividend 2.7 4.0
--- ---
Net loss attributable to Unisys
Corporation common shareholders ($53.5) ($33.9)
------- -------
Loss per common share
attributable to Unisys Corporation
Basic ($ 1.15) ($ .77)
-------- -------
Diluted ($ 1.15) ($ .77)
---------- --------
Shares used in the per share computations (thousands):
Basic 46,343 44,054
Diluted 46,343 44,054
UNISYS CORPORATION
SEGMENT RESULTS
(Unaudited)
(Millions)
Total Eliminations Services Technology
Three Months Ended ---- ------------ -------- ----------
March 31, 2014
--------------
Customer revenue $761.7 $690.9 $70.8
Intersegment ($9.6) 0.2 9.4
------ ----- --- ---
Total revenue $761.7 ($9.6) $691.1 $80.2
------ ----- ------ -----
Gross profit percent 17.5% 15.8% 42.5%
----- ----- ----
Operating profit (loss) percent (2.6%) 1.9% (21.2%)
------ ---- -----
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%
---- ---- ----
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions)
March 31, December 31,
2014 2013
---- ----
Assets
Current assets
Cash and cash equivalents $613.8 $639.8
Accounts and notes receivable, net 564.9 683.1
Inventories
Parts and finished equipment 29.2 32.8
Work in process and materials 23.0 22.3
Deferred income taxes 19.1 24.1
Prepaid expense and other current assets 139.4 138.7
----- -----
Total 1,389.4 1,540.8
------- -------
Properties 1,117.3 1,095.5
Less accumulated depreciation and amortization 939.6 920.8
----- -----
Properties, net 177.7 174.7
----- -----
Outsourcing assets, net 110.8 115.5
Marketable software, net 135.1 129.1
Prepaid postretirement assets 106.5 83.7
Deferred income taxes 125.7 112.3
Goodwill 189.7 188.7
Other long-term assets 164.3 165.2
----- -----
Total $2,399.2 $2,510.0
-------- --------
Liabilities and deficit
Current liabilities
Accounts payable $221.4 $246.7
Deferred revenue 407.2 402.4
Other accrued liabilities 339.4 375.7
----- -----
Total 968.0 1,024.8
----- -------
Long-term debt 210.0 210.0
Long-term postretirement liabilities 1,648.1 1,697.2
Long-term deferred revenue 119.7 122.7
Other long-term liabilities 113.0 119.2
Commitments and contingencies
Total deficit (659.6) (663.9)
----- -----
Total $2,399.2 $2,510.0
-------- --------
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions)
Three Months Ended
March 31
--------
2014 2013 *
---- ----
Cash flows from operating activities
Consolidated net loss ($47.7) ($27.4)
Add (deduct) items to reconcile consolidated net
loss to net cash provided by operating activities:
Foreign currency transaction loss 5.8 6.5
Employee stock compensation 7.2 5.9
Depreciation and amortization of properties 12.0 11.9
Depreciation and amortization of outsourcing assets 13.3 12.8
Amortization of marketable software 14.7 15.5
Disposals of capital assets 0.3 0.1
Gain on sale of business (0.7) -
Pension contributions (55.5) (26.6)
Pension expense 19.5 23.2
Decrease in deferred income taxes, net 2.8 11.7
Decrease in receivables, net 121.2 69.5
Decrease (increase) in inventories 3.0 (0.8)
Decrease in accounts payable and other accrued (66.0) (76.9)
liabilities
Decrease in other liabilities (9.6) (4.6)
Increase in other assets (0.1) (6.6)
Other (0.1) (0.1)
----- -----
Net cash provided by operating activities 20.1 14.1
----- -----
Cash flows from investing activities
Proceeds from investments 1,431.6 1,224.8
Purchases of investments (1,429.0) (1,223.7)
Investment in marketable software (20.7) (14.8)
Capital additions of properties (15.2) (3.6)
Capital additions of outsourcing assets (8.7) (7.5)
Other 0.9 0.2
--- ---
Net cash used for investing activities (41.1) (24.6)
---- ----
Cash flows from financing activities
Purchases of common stock (0.9) -
Dividends paid on preferred shares (4.0) (4.0)
Proceeds from exercise of stock options 2.6 0.5
Net proceeds from short-term borrowings - 0.4
----- -----
Net cash used for financing activities (2.3) (3.1)
----- -----
Effect of exchange rate changes on cash and cash (2.7) (13.4)
equivalents ----- ------
Decrease in cash and cash equivalents (26.0) (27.0)
Cash and cash equivalents, beginning of period 639.8 655.6
----- -----
Cash and cash equivalents, end of period $613.8 $628.6
----- -----
* Certain components of net cash provided by operating activities were
changed to present pension expense separately, consistent with the 2014
presentation.
( 1 )
UNISYS CORPORATION
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(Unaudited)
(Millions, except per share data)
Three Months
Ended March 31
--------------
2014 2013
---- ----
GAAP net loss
attributable to Unisys Corporation
common shareholders ($53.5) ($33.9)
FAS87 pension charges, net of tax 19.3 22.3
---- ----
Non-GAAP net loss
attributable to Unisys Corporation
common shareholders (34.2) (11.6)
Add preferred stock dividend 0.0 0.0
--- ---
Non-GAAP net loss
attributable to Unisys Corporation
for diluted earnings per share ($34.2) ($11.6)
----- ----
Weighted average shares (thousands) 46,343 44,054
Plus incremental shares from assumed conversion:
Employee stock plans 0 0
Preferred stock 0 0
-- --
GAAP Adjusted weighted average shares 46,343 44,054
------ ------
Diluted earnings (loss) per share
GAAP basis
----------
GAAP net loss
attributable to Unisys Corporation
for diluted earnings per share ($53.5) ($33.9)
Divided by adjusted weighted average shares 46,343 44,054
GAAP net loss per diluted share ($ 1.15) ($ .77)
-------- -------
Non-GAAP basis
--------------
Non-GAAP net loss
attributable to Unisys Corporation
for diluted earnings per share ($34.2) ($11.6)
Divided by Non-GAAP adjusted weighted
average shares 46,343 44,054
Non-GAAP net loss per diluted share ($ .74) ($ .26)
-------- -------
( 2 )
UNISYS CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
(Unaudited)
(Millions)
FREE CASH FLOW
--------------
Three Months
Ended March 31
--------------
2014 2013
---- ----
Cash provided by operations $20.1 $14.1
Additions to marketable software (20.7) (14.8)
Additions to properties (15.2) (3.6)
Additions to outsourcing assets (8.7) (7.5)
----- -----
Free cash flow (24.5) (11.8)
Pension funding 55.5 26.6
---- ----
Free cash flow before pension funding $31.0 $14.8
----- -----
SOURCE Unisys Corporation
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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