2nd Quarter Results
Unisys Announces Second-Quarter 2013 Financial Results
- Revenue declines 7 percent on lower services revenue while technology revenue
grows on strong ClearPath sales
- Diluted earnings per share of 46 cents vs. diluted EPS of 99 cents in 2Q 2012
- Non-GAAP EPS(1) of 91 cents vs. $1.41 in 2Q 2012
BLUE BELL, Pennsylvania, July 24, 2013 -- Unisys Corporation (NYSE: UIS) today
reported second-quarter 2013 net income of $20.4 million, or 46 cents per diluted
share, which included $21.9 million of pension expense. In the second quarter of
2012, the company reported net income of $46.6 million, or 99 cents per diluted
share, which included $21.5 million of pension expense and a $0.3 million debt
reduction charge. Excluding pension expense in both periods and the debt reduction
charge in the year-ago period, non-GAAP diluted earnings per share in the second
quarter of 2013 was 91 cents compared with $1.41 in the second quarter of 2012.
Second-quarter 2013 revenue declined 7 percent to $859 million from $921 million in
the year-ago quarter. On a constant currency basis(2), revenue declined 6 percent in
the quarter. Services revenue declined 9 percent from the year-ago quarter while
technology revenue grew 13 percent. Sequentially, revenue grew 6 percent from the
first quarter of 2013.
"We were pleased to see the sequential improvement in our results," said Unisys
Chairman and CEO Ed Coleman. "Our technology business delivered a strong revenue
performance, led by higher sales of our ClearPath family of enterprise software and
servers. In our services business, revenue and margins declined year over year as
demand remained soft in a challenging IT spending environment. However, we made
progress in further strengthening our industry solutions and in building our
application managed services capabilities. We are also making additional
investments for growth in mission-critical computing, cybersecurity, cloud
computing, IT outsourcing, and building our reseller channel."
Second-Quarter Company and Business Segment Highlights
U.S. revenue declined 6 percent in the quarter while international revenue declined
7 percent. On a constant currency basis, international revenue declined 6 percent
as revenue declines in Europe and Asia Pacific more than offset growth in Latin
America.
The company reported an overall second-quarter 2013 gross profit margin of 23.4
percent, down from year-ago gross profit margin of 26.4 percent. Operating expenses
(SG&A and R&D expenses) decreased 1 percent from the year-ago period. The company
reported a second-quarter 2013 operating profit of $38.0 million, or 4.4 percent of
revenue, compared with an operating profit of $79.0 million, or 8.6 percent of
revenue, in the second quarter of 2012.
Second-quarter 2013 services revenue declined 9 percent from the prior-year quarter
on lower demand for outsourcing and systems integration services. Reflecting the
lower services revenue, second-quarter 2013 services gross profit margin declined
to 18.2 percent from 21.0 percent a year ago and services operating profit margin
declined to 4.0 percent from 8.0 percent a year ago.
Second-quarter 2013 services orders grew slightly from year-ago levels as growth in
systems integration orders more than offset order declines in other services areas.
Services backlog at June 30, 2013 was $4.8 billion, down 6 percent from December
31, 2012 levels.
Second-quarter 2013 technology revenue grew 13 percent from the prior-year quarter
driven by higher sales of ClearPath enterprise software and servers. Second-
quarter 2013 technology gross profit margin was 59.4 percent compared to 63.4
percent in the year-ago quarter and technology operating profit margin was 23.9
percent compared to 28.6 percent in the year-ago quarter.
Cash Flow and Balance Sheet Highlights
Unisys generated $16 million of cash from operations in the second quarter of 2013,
including $35 million of pension contributions. In the second quarter of 2012, the
company generated $57 million of cash from operations, which included $51 million
of pension contributions. Capital expenditures in the second quarter of 2013 were
$38 million compared with $35 million in the year-ago quarter. After capital
expenditures, the company used $22 million of free cash(3) in the second quarter of
2013 compared with free cash flow of $22 million in the second quarter of 2012.
Free cash flow before pension contributions was $13 million in the second quarter
of 2013 compared with $73 million in the year-ago quarter.
At June 30, 2013, the company reported a cash balance of $576 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) Non-GAAP diluted earnings per share - The company recorded pension expense of
$21.9 million and $21.5 million during the second quarters of 2013 and 2012,
respectively. In addition, as a result of debt reductions, Unisys recorded a charge
of $0.3 million during the second quarter of 2012. 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 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, 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 22,500
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 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; 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.: 0723/9184
Unisys is a registered trademark of Unisys Corporation. Any other brand or product
referenced herein is acknowledged to be a trademark or registered trademark of its
respective holders.
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Millions, except per share data)
Three
Months Six Months
Ended June 30 Ended June 30
----------- -------------
2013 2012 2013 2012
---- ---- ---- ----
Revenue
Services $739.7 $815.7 $1,462.7 $1,638.7
Technology 118.9 105.6 205.8 211.0
----- ----- ----- -----
858.6 921.3 1,668.5 1,849.7
Costs and expenses
Cost of revenue:
Services 614.0 645.9 1,216.8 1,314.5
Technology 43.9 32.2 90.2 66.2
---- ---- ---- ----
657.9 678.1 1,307.0 1,380.7
Selling, general
and administrative 144.9 142.0 287.1 283.4
Research and
development 17.8 22.2 34.8 42.2
820.6 842.3 1,628.9 1,706.3
----- ----- ------- -------
Operating profit 38.0 79.0 39.6 143.4
Interest expense 2.6 7.9 5.3 17.2
Other
income (expense),
net 14.1 4.1 9.2 (9.1)
---- --- --- ----
Income before
income taxes 49.5 75.2 43.5 117.1
Provision for
income taxes 22.7 22.1 44.1 44.1
---- ---- ---- ----
Consolidated
net income
(loss) 26.8 53.1 (0.6) 73.0
Net income
attributable to
noncontrolling
interests 2.3 2.4 4.8 4.9
--- --- --- ---
Net income (loss)
attributable to
Unisys
Corporation 24.5 50.7 (5.4) 68.1
Preferred
stock
dividend 4.1 4.1 8.1 8.1
--- --- --- ---
Net income (loss)
attributable to
Unisys
Corporation
common
shareholders $20.4 $46.6 ($13.5) $60.0
===== ===== ====== =====
Earnings (loss)
per common
share
attributable to
Unisys Corporation
Basic $.47 $1.06 ($.31) $1.37
==== ===== ===== =====
Diluted $.46 $.99 ($.31) $1.33
==== ==== ===== =====
Shares used in the
per share
computations
(thousands):
Basic 43,780 43,905 43,918 43,758
Diluted 44,195 51,244 43,918 51,110
UNISYS CORPORATION
SEGMENT RESULTS
(Unaudited)
(Millions)
Total Eliminations Services Technology
----- ------------ -------- ----------
Three Months Ended
June 30, 2013
-------------
Customer
revenue $858.6 $739.7 $118.9
Intersegment ($16.9) 0.4 16.5
------ ------ ------ ------
Total
revenue $858.6 ($16.9) $740.1 $135.4
====== ====== ====== ======
Gross profit
percent 23.4% 18.2% 59.4%
==== ==== ====
Operating
profit
percent 4.4% 4.0% 23.9%
=== === ====
Three Months Ended
June 30, 2012
-------------
Customer
revenue $921.3 $815.7 $105.6
Intersegment ($37.6) 0.6 37.0
------ ------ ------ ------
Total
revenue $921.3 ($37.6) $816.3 $142.6
====== ====== ====== ======
Gross profit
percent 26.4% 21.0% 63.4%
==== ==== ====
Operating
profit
percent 8.6% 8.0% 28.6%
=== === ====
Six Months Ended
June 30, 2013
-------------
Customer
revenue $1,668.5 $1,462.7 $205.8
Intersegment ($34.2) 0.9 33.3
------ ------ ------ ------
Total
revenue $1,668.5 ($34.2) $1,463.6 $239.1
======== ====== ======== ======
Gross profit
percent 21.7% 17.8% 53.5%
==== ==== ====
Operating
profit
percent 2.4% 3.5% 13.6%
=== === ====
Six Months Ended
June 30, 2012
-------------
Customer
revenue $1,849.7 $1,638.7 $211.0
Intersegment ($69.6) 1.4 68.2
Total
revenue $1,849.7 ($69.6) $1,640.1 $279.2
======== ====== ======== ======
Gross profit
percent 25.4% 19.9% 62.8%
==== ==== ====
Operating
profit
percent 7.8% 6.5% 27.1%
=== === ====
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions)
June 30, December 31,
2013 2012
---- ----
Assets
Current assets
Cash and cash equivalents $575.6 $655.6
Accounts and notes receivable,
net 600.0 670.2
Inventories
Parts and
finished
equipment 29.1 29.3
Work in
process
and
materials 18.8 20.7
Deferred income taxes 16.8 21.6
Prepaid expense and other
current assets 121.4 115.0
------ ------
Total 1,361.7 1,512.4
------- -------
Properties 1,235.5 1,262.2
Less accumulated depreciation
and amortization 1,070.4 1,085.8
Properties, net 165.1 176.4
----- -----
Outsourcing assets, net 120.3 126.3
Marketable software, net 122.9 124.2
Prepaid postretirement assets 19.3 3.3
Deferred income taxes 150.8 162.7
Goodwill 189.0 192.3
Other long-term assets 146.7 122.8
----- -----
Total $2,275.8 $2,420.4
======== ========
Liabilities and deficit
Current liabilities
Notes payable $0.2 $0.0
Current maturities of long-
term debt 0.2 0.3
Accounts payable 229.2 228.6
Deferred revenue 357.4 389.5
Other accrued liabilities 362.5 411.9
----- -----
Total 949.5 1,030.3
----- -------
Long-term debt 210.0 210.0
Long-term postretirement
liabilities 2,429.2 2,553.5
Long-term deferred revenue 113.9 123.1
Other long-term liabilities 109.2 92.2
Commitments and contingencies
Total deficit (1,536.0) (1,588.7)
-------- --------
Total $2,275.8 $2,420.4
======== ========
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions)
Six Months
Ended
June 30
-------
2013 2012 *
---- -----
Cash flows from operating activities
Consolidated net income (loss) ($0.6) $73.0
Add (deduct) items to reconcile
consolidated net
income (loss) to net cash provided
by operating activities:
Foreign currency transaction loss 6.5 -
Loss on debt extinguishment - 7.5
Employee stock compensation 8.9 8.9
Company stock issued for U.S. 401(k)
plan - 6.2
Depreciation and amortization of
properties 23.7 28.7
Depreciation and amortization of
outsourcing assets 25.5 30.7
Amortization of marketable software 31.0 28.9
Disposals of capital assets 0.2 3.1
Gain on sale of business - (10.6)
Pension plans contributions (61.3) (118.8)
Decrease in deferred income taxes,
net 18.7 7.5
Decrease in receivables, net 33.3 43.1
Decrease in inventories 1.0 4.8
Decrease in accounts payable and
other accrued liabilities (83.5) (76.3)
Increase in other liabilities 41.1 31.4
(Increase) decrease in other assets (14.8) 23.9
Other 0.5 (1.5)
---- ----
Net cash provided by operating
activities 30.2 90.5
---- ----
Cash flows from investing activities
Proceeds from
investments 2,450.2 1,631.8
Purchases of
investments (2,452.9) (1,630.5)
Restricted
deposits (0.6) 1.6
Investment in
marketable
software (29.6) (28.6)
Capital
additions of
properties (16.2) (17.9)
Capital
additions of
outsourcing
assets (18.3) (18.7)
Net proceeds
from sale of
business - 2.7
----- -----
Net cash used for investing
activities (67.4) (59.6)
----- -----
Cash flows from financing activities
Purchases of
common stock (11.5) -
Payments of
long-term
debt - (75.0)
Dividends
paid to
noncontrolling
interests - (4.5)
Dividends
paid on
preferred
shares (8.1) (8.1)
Proceeds from
exercise of
stock options 1.2 0.3
Net proceeds
from short-
term borrowings 0.2 -
----- -----
Net cash used for financing
activities (18.2) (87.3)
----- -----
Effect of exchange rate changes on
cash and cash equivalents (24.6) 1.2
----- ---
Decrease in cash and cash
equivalents (80.0) (55.2)
Cash and cash equivalents, beginning
of period 655.6 714.9
----- -----
Cash and cash equivalents, end of
period $575.6 $659.7
====== ======
* Certain components of net cash provided by operating activities were changed to
present pension contributions separately, consistent with the 2013 presentation.
( 1 )
UNISYS CORPORATION
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(Unaudited)
(Millions, except per share data)
Three Months Six Months
Ended June 30 Ended June 30
----------- -------------
2013 2012 2013 2012
---- ---- ---- ----
GAAP net
income (loss)
attributable to
Unisys Corporation
common
shareholders $20.4 $46.6 ($13.5) $60.0
Debt reduction
charges, net
of tax 0.0 0.3 0.0 7.5
FAS87 pension
charges, net
of tax 21.9 21.5 44.2 46.1
---- ---- ---- ----
Non-GAAP
net income
attributable to
Unisys Corporation
common
shareholders 42.3 68.4 30.7 113.6
Add preferred
stock dividend 4.1 4.1 8.1 8.1
--- --- --- ---
Non-GAAP
net income
attributable to
Unisys Corporation
for diluted
earnings per
share $46.4 $72.5 $38.8 $121.7
===== ===== ===== ======
Weighted
average shares
(thousands) 43,780 43,905 43,918 43,758
Plus incremental
shares from assumed
conversion:
Employee
stock
plans 415 426 449 439
Preferred
stock 6,913 6,913 0 6,913
----- ----- --- -----
GAAP Adjusted
weighted average
shares 51,108 51,244 44,367 51,110
====== ====== ====== ======
Diluted earnings (loss)
per share
GAAP basis
----------
GAAP net income
(loss)
attributable to
Unisys Corporation
for diluted earnings
per share $20.4 $50.7 ($13.5) $68.1
Divided by
adjusted weighted
average shares 44,195 51,244 43,918 51,110
GAAP net
income (loss)
per diluted
share $.46 $.99 ($.31) $1.33
==== ==== ===== =====
Non-GAAP basis
--------------
Non-GAAP net
income
attributable to
Unisys Corporation
for diluted
earnings per
share $46.4 $72.5 $30.7 $121.7
Divided by
Non-GAAP adjusted
weighted average
shares 51,108 51,244 44,367 51,110
Non-GAAP
net income
per diluted
share $.91 $1.41 $.69 $2.38
==== ===== ==== =====
( 2 )
UNISYS CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
(Unaudited)
(Millions)
FREE CASH FLOW
--------------
Three Months Six Months
Ended June 30 Ended June 30
---------- -----------
2013 2012 2013 2012
---- ---- ---- ----
Cash provided
by operations $16.1 $57.1 $30.2 $90.5
Additions to
marketable
software (14.8) (14.7) (29.6) (28.6)
Additions to
properties (12.6) (10.0) (16.2) (17.9)
Additions to
outsourcing
assets (10.8) (10.1) (18.3) (18.7)
----- ----- ----- -----
Free cash flow (22.1) 22.3 (33.9) 25.3
Pension funding 34.7 50.6 61.3 118.8
---- ----- ----- -----
Free cash flow
before pension
funding $12.6 $72.9 $27.4 $144.1
===== ===== ===== ======
SOURCE Unisys Corporation
CONTACT: Investor Contact: Niels Christensen, +1-215-986-6651, Niels.Christensen@unisys.com, Media Contact:
Jim Kerr, +1-215-986-5795, Jim.Kerr@unisys.com
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