Final Results
Unisys Announces Fourth-Quarter 2013 Financial Results
- Revenue grows 2 percent; technology revenue up 5 percent; services revenue up
1 percent
- Net income of $117.4 million vs. $81.8 million in 4Q 2012
- Diluted EPS of $2.37 vs. $1.67 in 4Q 2012
- Non-GAAP diluted EPS(1) of $2.82 vs. $2.27 in 4Q 2012
- Free cash flow(2) of $93 million; free cash flow of $138 million before
pension contributions
BLUE BELL, Pa., Jan. 30, 2014 -- Unisys Corporation (NYSE: UIS) today reported
fourth-quarter 2013 net income of $117.4 million, or $2.37 per diluted share,
which included $23.2 million of pension expense. In the fourth quarter of 2012,
the company reported net income of $81.8 million, or $1.67 per diluted share,
which included $30.4 million of pension expense. Excluding pension expense,
non-GAAP diluted earnings per share in the fourth quarter of 2013 was $2.82
compared with $2.27 in the fourth quarter of 2012. Fourth-quarter 2013 revenue
grew 2 percent to $996 million from $979 million in the fourth quarter of 2012.
Foreign currency translations had a negligible impact on revenue comparisons
in the fourth quarter.
For the full year of 2013, Unisys reported net income of $92.3 million, or
$2.08 per diluted share, which included $90.0 million of pension expense. For
the full year of 2012, the company reported net income of $129.4 million, or
$2.84 per diluted share, which included $105.4 million of pension expense and
$30.6 million of debt reduction charges. Excluding pension expense in both
years and the debt reduction charges in 2012, non-GAAP earnings per share for
the full year of 2013 was $3.87 compared with $5.50 for the full year of 2012.
Full-year 2013 revenue declined 7 percent to $3.46 billion from full-year 2012
revenue of $3.71 billion. Foreign currency translations had a one
percentage-point negative impact on full-year 2013 revenue comparisons.
"We closed 2013 with a good fourth quarter, reporting significantly increased
profitability on higher revenue," said Unisys Chairman and CEO Ed Coleman. "We
grew both our services and technology businesses while continuing to show good
cost discipline across the business. We were particularly pleased by the higher
operating profit margins in our services business, where we also grew orders
for the third consecutive quarter.
"As we move into 2014, we are excited by the opportunities in front of us,"
Coleman said. "We are seeing growing market interest in our Stealth
cybersecurity software products, our new Forward! by Unisys fabric-based
servers, our cloud-based offerings, and other innovative solution offerings. We
are focused on continuing our fourth-quarter momentum and driving profitable
revenue growth in the year ahead."
Fourth-Quarter Company and Business Segment Highlights
International revenue grew 2 percent (3 percent on a constant currency(3)
basis) in the fourth quarter as growth in Europe and Asia Pacific more than
offset declines in Latin America. U.S. revenue was flat compared to the fourth
quarter of 2012.
The company reported an overall fourth-quarter 2013 gross profit margin of 31.7
percent, up from 29.2 percent in the year-ago quarter. Operating expenses (SG&A
and R&D expenses) decreased 7 percent from the year-ago period, reflecting
effective cost management. The company reported fourth-quarter 2013 operating
profit of $155.9 million, or 15.7 percent of revenue, compared with
fourth-quarter 2012 operating profit of $114.6 million, or 11.7 percent of
revenue.
Fourth-quarter 2013 services revenue increased 1 percent (2 percent on a
constant currency basis) as growth in outsourcing and systems integration
offset declines in core maintenance. Reflecting a richer mix of higher-margin
services and solutions as well as a continued focus on cost control,
fourth-quarter 2013 services gross profit margin improved to 21.9 percent from
20.2 percent a year ago and services operating profit margin improved to 9.8
percent from 6.6 percent a year ago.
Fourth-quarter 2013 services orders grew from the fourth quarter of 2012,
driven by higher orders for outsourcing and systems integration services.
Services backlog at December 31, 2013 was $4.8 billion, down 5 percent from
services backlog at December 31, 2012.
Fourth-quarter 2013 technology revenue grew 5 percent from the prior-year
quarter. Fourth-quarter 2013 technology gross profit margin declined to 61.4
percent from 68.1 percent in the year-ago quarter, resulting from a higher mix
of third-party product sales, and technology operating profit margin declined
to 40.6 percent from 43.9 percent in the year-ago quarter.
Cash Flow and Balance Sheet Highlights
In the fourth quarter of 2013, Unisys generated $141 million of cash from
operations, which included $46 million of pension contributions. In the fourth
quarter of 2012, the company generated $154 million of cash from operations,
which included $26 million of pension contributions. Capital expenditures in
the fourth quarter of 2013 were $48 million compared with $36 million in the
year-ago quarter. The company generated $93 million of free cash flow in the
fourth quarter of 2013 compared with free cash flow of $118 million in the
fourth quarter of 2012. Free cash flow before pension contributions was $138
million in the fourth quarter of 2013 compared with $144 million in the
year-ago quarter.
Unisys made a total of $147 million in pension contributions in 2013 compared
with $202 million of pension contributions in 2012. For the full year of 2013,
the company generated free cash flow of $183 million before pension
contributions compared with $330 million of free cash flow before pension
contributions in 2012.
At December 31, 2013, the company reported a cash balance of $640 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
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 - For the full years of 2013 and 2012,
Unisys recorded pension expense of $90.0 million and $105.4 million,
respectively. In addition, for full year 2012 the company incurred debt
reduction charges of $30.6 million as a result of debt reduction actions. 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) 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.
(3) 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.
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
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 year and before the filing of the Form
10-K 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.: 0130/9222
Unisys is a registered trademark of Unisys Corporation. Any other brand and
products referenced herein is acknowledged to be a trademark or registered
trademark of its respective holder.
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Millions, except per share data)
Three Months Year
Ended December 31 Ended December 31
2013 2012 2013 2012
Revenue
Services $813.4 $805.7 $2,996.1 $3,192.4
Technology 182.5 173.6 460.4 514.0
995.9 979.3 3,456.5 3,706.4
Costs and expenses
Cost of revenue:
Services 608.4 640.7 2,405.5 2,567.7
Technology 72.1 52.7 202.6 165.2
680.5 693.4 2,608.1 2,732.9
Selling, general and administrative 140.6 150.8 559.4 572.8
Research and development 18.9 20.5 69.5 81.5
840.0 864.7 3,237.0 3,387.2
Operating profit 155.9 114.6 219.5 319.2
Interest expense 2.2 2.5 9.9 27.5
Other income (expense), net (1.3) (2.7) 9.8 (37.6)
Income before income taxes 152.4 109.4 219.4 254.1
Provision for income taxes 28.2 20.5 99.3 97.3
Consolidated net income 124.2 88.9 120.1 156.8
Net income attributable to
noncontrolling interests 2.7 3.0 11.6 11.2
Net income attributable to Unisys
Corporation 121.5 85.9 108.5 145.6
Preferred stock dividend 4.1 4.1 16.2 16.2
Net income attributable to Unisys
Corporation common shareholders $117.4 $81.8 $92.3 $129.4
Earnings per common share
attributable to Unisys Corporation
Basic $ 2.67 $ 1.86 $ 2.10 $ 2.95
Diluted $ 2.37 $ 1.67 $ 2.08 $ 2.84
Shares used in the per share computations
(thousands):
Basic 43,947 43,976 43,899 43,864
Diluted 51,319 51,307 44,347 51,216
UNISYS CORPORATION
SEGMENT RESULTS
(Unaudited)
(Millions)
Total Eliminations Services Technology
Three Months Ended
December 31, 2013
Customer revenue $995.9 $813.4 $182.5
Intersegment ($66.0) 0.4 65.6
Total revenue $995.9 ($66.0) $813.8 $248.1
Gross profit percent 31.7% 21.9% 61.4%
Operating profit percent 15.7% 9.8% 40.6%
Three Months Ended
December 31, 2012
Customer revenue $979.3 $805.7 $173.6
Intersegment ($37.3) 1.8 35.5
Total revenue $979.3 ($37.3) $807.5 $209.1
Gross profit percent 29.2% 20.2% 68.1%
Operating profit percent 11.7% 6.6% 43.9%
Year Ended
December 31, 2013
Customer revenue $3,456.5 $2,996.1 $460.4
Intersegment ($122.5) 1.7 120.8
Total revenue $3,456.5 ($122.5) $2,997.8 $581.2
Gross profit percent 24.5% 19.7% 53.9%
Operating profit percent 6.4% 6.2% 21.1%
Year Ended
December 31, 2012
Customer revenue $3,706.4 $3,192.4 $514.0
Intersegment ($123.1) 3.8 119.3
Total revenue $3,706.4 ($123.1) $3,196.2 $633.3
Gross profit
percent 26.3% 20.0% 63.9%
Operating profit
percent 8.6% 6.4% 33.1%
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions)
December 31, December 31,
2013 2012
Assets
Current assets
Cash and cash equivalents $639.8 $655.6
Accounts and notes receivable, net 683.1 670.2
Inventories
Parts and finished equipment 32.8 29.3
Work in process and materials 22.3 20.7
Deferred income taxes 24.1 21.6
Prepaid expense and other current assets 138.7 115.0
Total 1,540.8 1,512.4
Properties 1,095.5 1,262.2
Less accumulated depreciation and amortization 920.8 1,085.8
Properties, net 174.7 176.4
Outsourcing assets, net 115.5 126.3
Marketable software, net 129.1 124.2
Prepaid postretirement assets 83.7 3.3
Deferred income taxes 112.3 162.7
Goodwill 188.7 192.3
Other long-term assets 165.2 122.8
Total $2,510.0 $2,420.4
Liabilities and deficit
Current liabilities
Current maturities of long-term debt $0.0 $0.3
Accounts payable 246.7 228.6
Deferred revenue 402.4 389.5
Other accrued liabilities 375.7 411.9
Total 1,024.8 1,030.3
Long-term debt 210.0 210.0
Long-term postretirement liabilities 1,697.2 2,553.5
Long-term deferred revenue 122.7 123.1
Other long-term liabilities 119.2 92.2
Commitments and contingencies
Total deficit (663.9) (1,588.7)
Total $2,510.0 $2,420.4
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions)
Year Ended
December 31
2013 2012 *
Cash flows from operating activities
Consolidated net income $120.1 $156.8
Add (deduct) items to reconcile consolidated net
income to net cash provided by operating activities:
Foreign currency transaction loss 6.5 -
Loss on debt extinguishment - 30.6
Employee stock compensation 12.5 14.3
Company stock issued for U.S. 401(k) plan - 6.2
Depreciation and amortization of properties 46.7 54.7
Depreciation and amortization of outsourcing assets 53.5 57.9
Amortization of marketable software 59.4 62.0
Disposals of capital assets 2.0 6.3
Loss (gain) on sale of business 1.5 (11.7)
Pension plans contributions (147.2) (201.5)
Decrease in deferred income taxes, net 29.4 26.3
Increase in receivables, net (63.5) (11.2)
(Increase) decrease in inventories (6.5) 14.2
Increase (decrease) in accounts payable and other 1.9 (80.7)
accrued liabilities
Change in other assets, liabilities and other 71.1 137.1
Net cash provided by operating activities 187.4 261.3
Cash flows from investing activities
Proceeds from investments 5,315.9 4,108.5
Purchases of investments (5,325.8) (4,107.2)
Restricted deposits (1.3) (0.6)
Investment in marketable software (64.3) (56.4)
Capital additions of properties (47.2) (40.1)
Capital additions of outsourcing assets (39.9) (36.1)
Net proceeds from sale of business (0.1) 5.2
Net cash used for investing activities (162.7) (126.7)
Cash flows from financing activities
Purchases of common stock (11.7) -
Payments of long-term debt - (388.9)
Dividends paid to noncontrolling interests - (4.5)
Dividends paid on preferred shares (16.2) (16.2)
Proceeds from exercise of stock options 4.9 0.4
Proceeds from issuance of long-term debt - 204.8
Net cash used for financing activities (23.0) (204.4)
Effect of exchange rate changes on cash and cash (17.5) 10.5
equivalents
Decrease in cash and cash equivalents (15.8) (59.3)
Cash and cash equivalents, beginning of period 655.6 714.9
Cash and cash equivalents, end of period $639.8 $655.6
* 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 Year
Ended December Ended December
31 31
2013 2012 2013 2012
GAAP net income
attributable to Unisys Corporation
common shareholders $117.4 $81.8 $92.3 $129.4
Debt reduction charges, net of tax 0.0 0.0 0.0 30.6
FAS87 pension charges, net of tax 23.2 30.4 90.0 105.4
Non-GAAP net income
attributable to Unisys Corporation
common shareholders 140.6 112.2 182.3 265.4
Add preferred stock dividend 4.1 4.1 16.2 16.2
Non-GAAP net income
attributable to Unisys Corporation
for diluted earnings per share $144.7 $116.3 $198.5 $281.6
Weighted average shares (thousands) 43,947 43,976 43,899 43,864
Plus incremental shares from assumed
conversion:
Employee stock plans 460 419 448 439
Preferred stock 6,913 6,913 6,913 6,913
GAAP Adjusted weighted average shares 51,319 51,307 51,260 51,216
Diluted earnings per share
GAAP basis
GAAP net income
attributable to Unisys Corporation
for diluted earnings per share $121.5 $85.9 $92.3 $145.6
Divided by adjusted weighted average 51,319 51,307 44,347 51,216
shares
GAAP net income (loss) per diluted share $ 2.37 $ 1.67 $ 2.08 $ 2.84
Non-GAAP basis
Non-GAAP net income
attributable to Unisys Corporation
for diluted earnings per share $144.7 $116.3 $198.5 $281.6
Divided by Non-GAAP adjusted weighted 51,319 51,307 51,260 51,216
average shares
Non-GAAP net income per diluted share $ 2.82 $ 2.27 $ 3.87 $ 5.50
( 2 )
UNISYS CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
(Unaudited)
(Millions)
FREE CASH FLOW
Three Months Year
Ended December 31 Ended December 31
2013 2012 2013 2012
Cash provided by $141.2 $153.9 $187.4 $261.3
operations
Additions to marketable (17.0) (13.5) (64.3) (56.4)
software
Additions to properties (21.1) (14.1) (47.2) (40.1)
Additions to outsourcing (10.3) (8.3) (39.9) (36.1)
assets
Free cash flow 92.8 118.0 36.0 128.7
Pension funding 45.6 26.4 147.2 201.5
Free cash flow before $138.4 $144.4 $183.2 $330.2
pension funding
SOURCE Unisys Corporation
CONTACT: Investors: Niels Christensen, 215-986-6651,
Niels.Christensen@unisys.com; or Media: Jim Kerr, 215-986-5795,
Jim.Kerr@unisys.com
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