3rd Quarter Results
Unisys Announces Third-Quarter 2013 Financial Results
BLUE BELL, Pa., Oct. 23, 2013 -- Unisys Corporation (NYSE: UIS) today
reported a third-quarter 2013 net loss of $11.6 million, or a loss of 26
cents per diluted share, which included $22.6 million of pension expense. In
the third quarter of 2012, the company reported a net loss of $12.4 million,
or a loss of 28 cents per diluted share, which included $28.9 million of
pension expense and $23.1 million of debt reduction charges. Excluding
pension expense in both periods and the debt reduction charge in the year-
ago period, non-GAAP diluted earnings per share(1) in the third quarter of
2013 was 25 cents compared with 85 cents in the third quarter of 2012. Pre-
tax income in the third quarter of 2013 was $23.5 million compared to $27.6
million in the third quarter of 2012.
The company reported a third-quarter 2013 income tax provision of $27.0
million compared with $32.7 million in the third quarter of 2012. The third-
quarter 2013 and third-quarter 2012 tax provisions included charges of $11.4
million and $9.2 million, respectively, related to a change in applicable
corporate tax rates in the U.K.
Third-quarter 2013 revenue declined 10 percent to $792 million from $877
million in the year-ago quarter primarily driven by a $57 million decline in
technology revenue. Foreign currency translations had a one percentage-point
negative impact on revenue comparisons in the quarter.
"While we were encouraged by improved operating profit margins in our
services business, both sequentially and compared to the year-ago quarter,
our third-quarter results were impacted by lower technology revenue, which
can vary significantly from quarter to quarter," said Unisys Chairman and
CEO Ed Coleman. "We are focused on our goal of maintaining flat technology
revenue for the full year and look to close out the year with a strong
fourth quarter. Longer term, we are excited about the growth prospects of
our newer technology offerings, such as our Unisys Stealth suite of
cybersecurity products and our recently announced Forward! by Unisys
computing platform."
Third-Quarter Company and Business Segment Highlights
U.S. revenue declined 2 percent in the quarter while international revenue
declined 15 percent. On a constant currency basis (2), international revenue
declined 13 percent, primarily due to lower technology revenue.
Reflecting the lower technology revenue, the company reported an overall
third-quarter 2013 gross profit margin of 21.7 percent, down from 24.9
percent a year ago. Operating expenses (SG&A and R&D expenses) declined 6
percent from the year-ago period. The company reported a third-quarter 2013
operating profit of $24.0 million, or 3.0 percent of revenue, compared with
an operating profit of $61.2 million, or 7.0 percent of revenue, in the
third quarter of 2012.
Third-quarter 2013 services revenue declined 4 percent (2 percent on a
constant currency basis) from the prior-year quarter, primarily driven by
lower IT outsourcing revenue. Third-quarter 2013 services gross profit
margin improved to 21.1 percent from 19.9 percent a year ago and services
operating profit margin improved to 7.7 percent from 6.0 percent a year ago.
Third-quarter 2013 services orders grew slightly from year-ago levels as
order growth for IT outsourcing and systems integration offset order
declines in other areas. Services backlog at September 30, 2013 was $4.8
billion, consistent with June 30, 2013 levels and down 5 percent from
December 31, 2012.
Third-quarter 2013 technology revenue, which represented 9 percent of
overall company revenue in the quarter, declined 44 percent from the prior-
year quarter due to lower sales of ClearPath enterprise software and servers.
Reflecting the lower ClearPath sales, third-quarter 2013 technology gross
profit margin declined to 35.3 percent compared to 59.9 percent in the year-
ago quarter and technology operating profit (loss) margin was (11.0) percent
compared to 29.1 percent in the year-ago quarter.
Cash Flow and Balance Sheet Highlights
Unisys generated $16 million of cash from operations in the third quarter of
2013, including $40 million of pension contributions. In the third quarter
of 2012, the company generated $17 million of cash from operations, which
included $56 million of pension contributions. Capital expenditures in the
third quarter of 2013 were $39 million compared with $32 million in the
year-ago quarter. After capital expenditures, the company used $23 million
of free cash(3) in the third quarter of 2013 compared with free cash usage
of $15 million in the third quarter of 2012. Free cash flow before pension
contributions was $17 million in the third quarter of 2013 compared with $42
million in the year-ago quarter.
At September 30, 2013, the company reported a cash balance of $556 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, and free cash flow before pension contributions.
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 $22.6 million and $28.9 million during the third quarters of 2013
and 2012, respectively. In addition, as a result of debt reductions, Unisys
recorded a charge of $23.1 million during the third 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.: 1022/9201
Unisys, ClearPath, Unisys Stealth and Forward! by Unisys are registered
trademarks or trademarks 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 Nine Months
Ended Ended
September 30 September 30
------------- -------------
2013 2012 2013 2012
---- ---- ---- ----
Revenue
Services $720.0 $748.0 $2,182.7 $2,386.7
Technology 72.1 129.4 277.9 340.4
---- ----- ----- -----
792.1 877.4 2,460.6 2,727.1
Costs and expenses
Cost of revenue:
Services 580.3 612.5 1,797.1 1,927.0
Technology 40.3 46.3 130.5 112.5
---- ---- ----- -----
620.6 658.8 1,927.6 2,039.5
Selling, general and
administrative 131.7 138.6 418.8 422.0
Research and development 15.8 18.8 50.6 61.0
----- ----- ------- -------
768.1 816.2 2,397.0 2,522.5
----- ----- ------- -------
Operating profit 24.0 61.2 63.6 204.6
Interest expense 2.4 7.8 7.7 25.0
Other income (expense), net 1.9 (25.8) 11.1 (34.9)
--- ----- ---- -----
Income before income taxes 23.5 27.6 67.0 144.7
Provision for income taxes 27.0 32.7 71.1 76.8
---- ---- ---- ----
Consolidated net income (loss) (3.5) (5.1) (4.1) 67.9
Net income attributable to
noncontrolling interests 4.1 3.3 8.9 8.2
--- --- --- ---
Net income (loss)
attributable to Unisys
Corporation (7.6) (8.4) (13.0) 59.7
Preferred stock dividend 4.0 4.0 12.1 12.1
--- --- ---- ----
Net income (loss)
attributable to Unisys
Corporation common shareholders ($11.6) ($12.4) ($25.1) $47.6
====== ====== ====== =====
Earnings (loss) per common
share attributable to
Unisys Corporation
Basic ($.26) ($.28) ($.57) $1.09
===== ===== ===== =====
Diluted ($.26) ($.28) ($.57) $1.08
===== ===== ===== =====
Shares used in the per share
computations (thousands):
Basic 43,811 43,966 43,883 43,827
Diluted 43,811 43,966 43,883 44,273
UNISYS CORPORATION
SEGMENT RESULTS
(Unaudited)
(Millions)
Total Eliminations Services Technology
----- ------------ -------- ----------
Three Months Ended
September 30, 2013
------------------
Customer revenue $792.1 $720.0 $72.1
Intersegment ($22.3) 0.4 21.9
Total revenue $792.1 ($22.3) $720.4 $94.0
====== ====== ====== =====
Gross profit percent 21.7% 21.1% 35.3%
==== ==== ====
Operating profit
(loss) percent 3.0% 7.7% (11.0%)
=== === ======
Three Months Ended
September 30, 2012
------------------
Customer revenue $877.4 $748.0 $129.4
Intersegment ($16.2) 0.6 15.6
Total revenue $877.4 ($16.2) $748.6 $145.0
====== ====== ====== ======
Gross profit percent 24.9% 19.9% 59.9%
==== ==== ====
Operating profit
percent 7.0% 6.0% 29.1%
=== === ====
Nine Months Ended
September 30, 2013
------------------
Customer revenue $2,460.6 $2,182.7 $277.9
Intersegment ($56.5) 1.3 55.2
Total revenue $2,460.6 ($56.5) $2,184.0 $333.1
======== ====== ======== ======
Gross profit percent 21.7% 18.9% 48.4%
==== ==== ====
Operating profit
percent 2.6% 4.9% 6.7%
=== === ===
Nine Months Ended
September 30, 2012
------------------
Customer revenue $2,727.1 $2,386.7 $340.4
Intersegment ($85.8) 2.0 83.8
Total revenue $2,727.1 ($85.8) $2,388.7 $424.2
======== ====== ======== ======
Gross profit percent 25.2% 19.9% 61.8%
==== ==== ====
Operating profit
percent 7.5% 6.3% 27.8%
=== === ====
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions)
September 30, December 31,
2013 2012
---- ----
Assets
Current assets
Cash and cash equivalents $555.9 $655.6
Accounts and notes receivable, net 572.7 670.2
Inventories
Parts and finished equipment 35.6 29.3
Work in process and materials 19.5 20.7
Deferred income taxes 17.0 21.6
Prepaid expense and other
current assets 126.6 115.0
Total 1,327.3 1,512.4
------- -------
Properties 1,184.0 1,262.2
Less accumulated depreciation
and amortization 1,018.6 1,085.8
Properties, net 165.4 176.4
----- -----
Outsourcing assets, net 119.2 126.3
Marketable software, net 125.1 124.2
Prepaid postretirement assets 27.7 3.3
Deferred income taxes 139.8 162.7
Goodwill 189.7 192.3
Other long-term assets 143.5 122.8
Total $2,237.7 $2,420.4
======== ========
Liabilities and deficit
Current liabilities
Current maturities of long-
term debt $0.1 $0.3
Accounts payable 218.6 228.6
Deferred revenue 343.1 389.5
Other accrued liabilities 353.9 411.9
Total 915.7 1,030.3
----- -------
Long-term debt 210.0 210.0
Long-term postretirement
liabilities 2,404.8 2,553.5
Long-term deferred revenue 109.5 123.1
Other long-term liabilities 107.6 92.2
Commitments and contingencies
Total deficit (1,509.9) (1,588.7)
Total $2,237.7 $2,420.4
======== ========
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions)
Nine Months
Ended
September 30
------------
2013 2012*
---- -----
Cash flows from operating activities
Consolidated net income (loss) ($4.1) $67.9
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 - 30.6
Employee stock compensation 10.8 11.8
Company stock issued for U.S. 401(k) plan - 6.2
Depreciation and amortization of properties 35.1 41.8
Depreciation and amortization of outsourcing assets 39.4 44.1
Amortization of marketable software 46.4 42.5
Disposals of capital assets 1.4 6.2
Gain on sale of business - (11.7)
Pension plans contributions (101.6) (175.1)
Decrease in deferred income taxes, net 29.4 22.3
Decrease in receivables, net 66.3 58.0
(Increase) decrease in inventories (5.6) 5.1
Decrease in accounts payable and other
accrued liabilities (123.3) (137.7)
Increase in other liabilities 59.7 58.9
(Increase) decrease in other assets (14.1) 39.2
Other (0.1) (2.7)
Net cash provided by operating activities 46.2 107.4
---- -----
Cash flows from investing activities
Proceeds from investments 3,850.2 2,786.6
Purchases of investments (3,857.8) (2,784.2)
Restricted deposits 1.1 (1.1)
Investment in marketable software (47.3) (42.9)
Capital additions of properties (26.1) (26.0)
Capital additions of outsourcing assets (29.6) (27.8)
Net proceeds from sale of business - 5.2
Net cash used for investing activities (109.5) (90.2)
------ -----
Cash flows from financing activities
Purchases of common stock (11.5) -
Payments of long-term debt - (388.9)
Dividends paid to noncontrolling interests - (4.5)
Dividends paid on preferred shares (12.1) (12.1)
Proceeds from exercise of stock options 4.5 0.4
Proceeds from issuance of long-term debt - 204.8
Net proceeds from short-term borrowings - 0.2
Net cash used for financing activities (19.1) (200.1)
----- ------
Effect of exchange rate changes
on cash and cash equivalents (17.3) 9.6
----- ---
Decrease in cash and cash equivalents (99.7) (173.3)
Cash and cash equivalents, beginning of period 655.6 714.9
Cash and cash equivalents, end of period $555.9 $541.6
====== ======
* 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 Nine Months
Ended Ended
September 30 September 30
------------ ------------
2013 2012 2013 2012
---- ---- ---- ----
GAAP net income (loss)
attributable to Unisys Corporation
common shareholders ($11.6) ($12.4) ($25.1) $47.6
Debt reduction charges, net of tax 0.0 23.1 0.0 30.6
FAS87 pension charges, net of tax 22.6 28.9 66.8 75.0
---- ---- ---- ----
Non-GAAP net income
attributable to Unisys Corporation
common shareholders 11.0 39.6 41.7 153.2
Add preferred stock dividend 4.0 4.0 12.1 12.1
--- --- ---- ----
Non-GAAP net income
attributable to Unisys Corporation
for diluted earnings per share $15.0 $43.6 $53.8 $165.3
===== ===== ===== ======
Weighted average shares (thousands) 43,811 43,966 43,883 43,827
Plus incremental shares from assumed
conversion:
Employee stock plans 436 458 445 445
Preferred stock 0 6,913 0 6,913
--- ----- --- -----
GAAP Adjusted weighted average shares 44,247 51,337 44,327 51,185
====== ====== ====== ======
Diluted earnings (loss) per share
GAAP basis
----------
GAAP net income (loss)
attributable to Unisys Corporation
for diluted earnings per share ($11.6) ($12.4) ($25.1) $47.6
Divided by adjusted weighted average shares 43,811 43,966 43,883 44,273
GAAP net income (loss) per diluted share ($.26) ($.28) ($.57) $1.08
===== ===== ===== =====
Non-GAAP basis
--------------
Non-GAAP net income
attributable to Unisys Corporation
for diluted earnings per share $11.0 $43.6 $41.7 $165.3
Divided by Non-GAAP adjusted weighted
average shares 44,247 51,337 44,327 51,185
Non-GAAP net income per diluted share $.25 $.85 $.94 $3.23
==== ==== ==== =====
(2)
UNISYS CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
(Unaudited)
(Millions)
FREE CASH FLOW
--------------
Three Months Nine Months
Ended Ended
September 30 September 30
------------ ------------
2013 2012 2013 2012
---- ---- ---- ----
Cash provided by operations $16.0 $16.9 $46.2 $107.4
Additions to marketable software (17.7) (14.3) (47.3) (42.9)
Additions to properties (9.9) (8.1) (26.1) (26.0)
Additions to Outsourcing assets (11.3) (9.1) (29.6) (27.8)
----- ---- ----- -----
Free cash flow (22.9) (14.6) (56.8) 10.7
Pension funding 40.3 56.3 101.6 175.1
---- ---- ----- -----
Free cash flow before pension funding $17.4 $41.7 $44.8 $185.8
===== ===== ===== ======
SOURCE Unisys Corporation
CONTACT: Investor Contact: Niels Christensen, 215-986-6651,
Niels.Christensen@unisys.com; Media Contact: Jim Kerr, 215-986-5795,
Jim.Kerr@unisys.com
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