3rd Quarter & 9 Mths Results

Unisys Corp
15 October 2001


Media Contact:     Jay Grossman, Unisys, 215-986-6948
                   [e-mail]

                   Maureen O'Brien, Unisys, 215-986-3978
                   [e-mail]

Investor Contact:  Jim Kerr, Unisys, 215-986-5795
                   [e-mail]                                   

  
Unisys Third-Quarter 2001 Earnings Meet Expectations; Company to 
Take Additional Actions to Reduce Cost Structure


BLUE BELL, Pa, October 15, 2001 -- Unisys Corporation (NYSE: UIS) today reported
third-quarter 2001 net income of $20.9 million, or 7 cents per diluted share, 
compared to pro forma net income of $44.2 million, or 14 cents per diluted 
share, in the year-ago quarter. Third-quarter 2001 revenue was $1.38 billion, a 
decline of 6% compared to pro forma revenue of $1.46 billion in the year-ago 
period. Excluding a negative 5-percentage point impact from foreign currency 
fluctuations, revenue declined 1% from the year-ago period. The pro forma third-
quarter 2000 results exclude low-margin commodity hardware business that the 
company has de-emphasized through its focus on higher value-added business 
areas. Including de-emphasized commodity hardware, the company's reported net 
income in the third quarter of 2000 was $42.9 million on revenue of $1.69 
billion. 

Due to increased economic uncertainties worldwide, Unisys also announced that it
plans to take actions in the fourth quarter of 2001 to further reduce its cost 
structure.

 
Comments from Chairman and CEO Larry Weinbach 

'I was pleased by our profit performance under extraordinarily difficult 
circumstances this quarter,' said Unisys Chairman and CEO Lawrence A. Weinbach. 
'The tragic events of September 11, which took such a terrible toll on countless
people's lives, added greater uncertainty to an already fragile global economic 
climate. In this environment, we saw organizations across our targeted 
industries -- particularly in airlines and travel, financial services, and 
communications -- delay planned I.T. decisions. This resulted late in the 
quarter in a sharp falloff in expected orders for enterprise servers and for 
networking and systems integration projects. 

'Still, we were able to meet our profit targets for the quarter by staying 
focused on closing certain key business deals and by continuing to aggressively 
control expenses. We reduced selling, general, and administrative expenses by 
16% from year-ago levels and have cut SG&A expenses so far in 2001 by 13% over 
the first nine months of 2000. This discipline on controlling expenses, along 
with the progress we've made in strengthening our balance sheet and cutting 
interest expense, have been a key to our continued profitability throughout this
challenging period. I am also encouraged by the improving profit trends in our 
services business, which now accounts for about 75% of our revenue. 

'We also made progress on several other fronts this quarter. In our services 
business, we continued to grow our outsourcing business as part of our strategy 
to increase our annuity-based revenue stream. In systems integration, where 
business conditions remain challenging, we are using this period of industry 
turmoil and consolidation to enhance our skills base by hiring recognized 
industry experts to lead our industry practices. In our technology business, in 
September we began initial shipments, on schedule, of new high-end ClearPath 
Plus systems based on our leading-edge CMP architecture. Customer acceptance of 
the new system has been good, and we look for shipments to increase in the 
fourth quarter, although at a lower rate than previously expected due to 
economic uncertainties. 

'We are committed to continuing to take the necessary actions to weather this 
difficult period and position the company for stronger results when business 
conditions improve,' Weinbach said. As a result, the company will reduce its 
cost structure by taking an estimated pre-tax charge of $200 million in the 
fourth quarter of 2001 to cover a workforce reduction of approximately 3,000 
people and other actions. This program includes an early retirement incentive 
for certain eligible groups of U.S. employees. At the same time, Unisys said it 
plans to continue to invest in enhancing its skills mix in services and funding 
further development and marketing of its high-end, CMP-based servers. 

  
Overall Company Highlights 

Unisys reported that U.S. revenue declined 5% in the third quarter compared to 
the year-ago period. Revenue in international markets decreased 6% in the 
quarter. On a constant currency basis, international revenue was up 2% as gains 
in Japan, Latin America, and Europe more than offset declines in Pacific/Asia. 

Total worldwide orders showed very substantial declines in the quarter, 
reflecting the falloff in expected orders late in the quarter. The order decline
was broad-based across all geographies and businesses, with technology orders 
particularly impacted. 

The company reported an overall third-quarter 2001 gross profit margin of 27.6%,
down from 31.9% in the year-ago period, and an operating profit margin of 3.2% 
in the third quarter, down from 5.4% a year ago. 

  
Business Segment Highlights

Customer revenue in the company's services business was flat in the third 
quarter compared to the year-ago period as continued growth in outsourcing was 
offset by declines in other services businesses. On a constant currency basis, 
revenue grew 4% in the quarter. Gross profit margins in the services business 
declined 3 percentage points from year-ago levels to 20.8% but increased from 
19.2% in the second quarter of 2001. Services operating margins improved to 2.2%
from 1.6% a year ago and from 0.9% in the second quarter of 2001, reflecting 
cost reductions. 

Customer revenue in the company's technology business declined 21% from prior-
year levels, primarily driven by lower shipments of ClearPath systems. 
Reflecting the lower ClearPath sales in the quarter, gross margins in the 
technology business decreased 4 percentage points over the year-ago period to 
42.1% and operating margins decreased 5 percentage points from the year-ago 
period to 7.5%. 
  
Cash Flow and Balance Sheet Highlights

Unisys used $75 million of cash from operations in the third quarter compared to
operational cash flow of $37 million in the year-ago period. The use of cash 
flow in the quarter largely reflected a significant reduction in accounts 
payable. The company ended the third quarter with $220 million of cash on hand.

Unisys also said that it had completed today the redemption of the remaining 
$14.9 million outstanding of its 11 3/4% senior notes due 2004. The notes were 
redeemed at 103.917% of par. 

  
Year-to-Date Results

For the nine months ended September 30, 2001, Unisys reported net income of 
$119.5 million before special items, or 37 cents per diluted common share. This 
compared to pro forma net income of $211.0 million before special items, or 67 
cents per diluted common share, for the nine months of 2000. Revenue through the
first nine months of 2001 was $4.46 billion compared to pro forma revenue of 
$4.41 billion for the same period in 2000. Including discontinued commodity 
hardware, net income in the first nine months of 2000 was $205.7 million, before
special items, on revenue of $4.96 billion. 

  
Business Outlook

'The current business environment remains highly uncertain as organizations 
reduce costs and review their spending priorities,' Weinbach said. 'As a result,
short-term forecasting is more difficult. Our current view is that the fourth 
quarter will be more challenging than we had expected, particularly in our 
technology business. We look for sales of enterprise servers to remain soft, 
despite availability of our new line of high-end ClearPath Plus systems, as some
customers defer purchases until their own business levels recover. However, by 
continuing to improve the profitability of our services business, and by staying
vigilant on costs, we believe we can achieve fourth-quarter earnings of 10-15 
cents per share. These earnings expectations are before the planned fourth-
quarter charge discussed earlier. As we work through this uncertain period, we 
remain focused on our strategy of pursuing targeted business opportunities -- 
such as business process outsourcing, managed network services, security, and 
server consolidation -- that leverage our strengths and provide clear value to 
our clients. This work positions us well to benefit as economic conditions 
improve.' 

  
Conference Call 

Unisys will hold a conference call to discuss the results today from 4:30 - 5:30
EDT. The listen-only audiocast can be accessed via a link on the Unisys Investor
Web site at www.unisys.com/investor. An audio replay of the Webcast will be 
available for about 10 days following the call. 


 
About Unisys

Unisys is an e-business solutions company whose employees help customers in 100 
countries apply information technology to seize opportunities and overcome 
challenges of the Internet economy. Unisys people integrate and deliver the 
solutions, services, platforms and network infrastructure required by business 
and government to transform their organizations for success in this new era. The
company offers a rich portfolio of Unisys e-@ction Solutions for e-business 
based on its expertise in vertical industry solutions, network services, 
outsourcing, systems integration and multivendor support, coupled with 
enterprise-class server and related technologies. The primary vertical markets 
Unisys serves worldwide include financial services, transportation, 
communications, publishing and commercial sectors, as well as the public sector,
including federal government customers. Unisys is headquartered in Blue Bell, 
Pennsylvania, in the Greater Philadelphia area. For more information on the 
company, access the Unisys home page on the World Wide Web at www.unisys.com. 
Investor information can be found at www.unisys.com/investor. 


  
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. 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. The factors that could affect the company's
future financial results are discussed more fully in the company's latest Form 
10-Q as filed with the Securities and Exchange Commission. 



RELEASE NO.: 1001/8063 (See accompanying financial information) 
http://www.unisys.com/news/releases/2001/oct/10158063.asp

Unisys and e-@ction are registered trademarks 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 STATEMENT OF INCOME - PROFORMA
                      EXCLUDING EXTRAORDINARY ITEMS
                    (Millions, except per share data)

                            Three Months         Nine Months
                         Ended September 30   Ended September 30
                         ------------------   ------------------
                           2001      2000       2001      2000
                         --------  --------   --------  --------
Revenue                  $1,376.0  $1,460.6   $4,461.2  $4,414.2
                         --------  --------   --------  --------
Costs and expenses
  Cost of revenue           996.1     994.7    3,256.3   2,942.3
  Selling, general and
    administrative          262.7     311.4      784.4     900.5
  Research and development   73.4      75.4      224.6     230.9
                         --------  --------   --------  --------
                          1,332.2   1,381.5    4,265.3   4,073.7
                         --------  --------   --------  --------
Operating income             43.8      79.1      195.9     340.5

Interest expense             16.5      18.5       50.0      57.7
Other income
 (expense), net               3.9       6.5       32.6      36.5
                         --------  --------   --------  --------
Income before income taxes   31.2      67.1      178.5     319.3
Provision for income taxes   10.3      22.9       59.0     108.3
                         --------  --------   --------  --------
Net income                  $20.9     $44.2     $119.5    $211.0
                         ========  ========   ========  ========
Diluted earnings per share  $ .07     $ .14      $ .37     $ .67
                         ========  ========   ========  ======== 

 
                            UNISYS CORPORATION
                    CONSOLIDATED STATEMENT OF INCOME
                    (Millions, except per share data)

                            Three Months         Nine Months
                         Ended September 30   Ended September 30
                         ------------------   ------------------
                           2001      2000       2001      2000
                         --------  --------   --------  --------
Revenue                  $1,376.0  $1,690.9   $4,461.2  $4,956.7
                         --------  --------   --------  --------
Costs and expenses
  Cost of revenue           996.1   1,216.2    3,256.3   3,461.9
  Selling, general and
    administrative          262.7     320.1      784.4     924.1
  Research and development   73.4      77.5      224.6     237.8
                         --------  --------   --------  --------
                          1,332.2   1,613.8    4,265.3   4,623.8
                         --------  --------   --------  --------
Operating income             43.8      77.1      195.9     332.9

Interest expense             16.5      18.5       50.0      57.7
Other income
 (expense), net               3.9       6.4       32.6      36.5
                         --------  --------   --------  --------
Income before income taxes   31.2      65.0      178.5     311.7
Provision for income taxes   10.3      22.1       59.0     106.0
                         --------  --------   --------  --------
Income before
   extraordinary items       20.9      42.9      119.5     205.7
Extraordinary items                              (17.2)    (19.8)
                         --------  --------   --------  --------
Net income                  $20.9     $42.9     $102.3    $185.9
                         ========  ========   ========  ========
Earnings per share
Basic
 Before extraordinary items $ .07     $ .14      $ .37     $ .66
 Extraordinary items                              (.05)     (.06)
                         --------  --------   --------  --------
  Total                     $ .07     $ .14      $ .32     $ .60
                         ========  ========   ========  ========
Diluted
 Before extraordinary items $ .07     $ .14      $ .37     $ .65
 Extraordinary items                              (.05)     (.06)
                         --------  --------   --------  --------
  Total                     $ .07     $ .14      $ .32     $ .59
                         ========  ========   ========  ========
Shares used in the per share
  computations (thousands):
  Basic                   318,761   313,744    317,576   312,473
                         ========  ========   ========  ========
  Diluted                 320,155   315,516    319,527   316,539
                         ========  ========   ========  ======== 

  
                      
                            UNISYS CORPORATION
                     SUPPLEMENTAL SUMMARY - PROFORMA
                                (Millions)

                                 Elimi-
                       Total     nations    Services  Technology
                      --------   --------   --------  ----------
Three Months Ended
September 30, 2001
------------------
Customer revenue      $1,376.0              $1,051.3      $324.7
Intersegment                      ($102.0)      20.3        81.7
                      --------   --------   --------    --------
Total revenue         $1,376.0    ($102.0)  $1,071.6      $406.4
                      ========   ========   ========    ========

Gross profit percent     27.6%                 20.8%       42.1%
                      ========              ========    ========
Operating income
  percent                 3.2%                  2.2%        7.5%
                      ========              ========    ========
Three Months Ended
September 30, 2000
------------------
Customer revenue      $1,460.6              $1,048.0      $412.6
Intersegment                       ($96.1)      21.7        74.4
                      --------   --------   --------    --------
Total revenue         $1,460.6     ($96.1)  $1,069.7      $487.0
                      ========   ========   ========    ========

Gross profit percent     31.9%                 23.8%       46.0%
                      ========              ========    ========
Operating income
  percent                 5.4%                  1.6%       12.3%
                      ========              ========    ========

Nine Months Ended
September 30, 2001
------------------
Customer revenue      $4,461.2              $3,311.7    $1,149.5
Intersegment                      ($267.0)      51.8       215.2
                      --------   --------   --------    --------
Total revenue         $4,461.2    ($267.0)  $3,363.5    $1,364.7
                      ========   ========   ========    ========

Gross profit percent     27.0%                 19.3%       42.9%
                      ========              ========    ========
Operating income
  percent                 4.4%                  1.8%       12.1%
                      ========              ========    ========
Nine Months Ended
September 30, 2000
------------------
Customer revenue      $4,414.2              $3,097.6    $1,316.6
Intersegment                      ($319.6)      55.2       264.4
                      --------   --------   --------    --------
Total revenue         $4,414.2    ($319.6)  $3,152.8    $1,581.0
                      ========   ========   ========    ========

Gross profit percent     33.3%                 22.8%       49.0%
                      ========              ========    ========
Operating income
  percent                 7.7%                  1.2%       18.0%
                      ========              ========    ======== 

  

                             UNISYS CORPORATION
                           SUPPLEMENTAL SUMMARY
                                (Millions)

                                Elimi-
                      Total     nations    Services  Technology
                     --------   --------   --------  ----------
Three Months Ended
September 30, 2001
------------------
Customer revenue     $1,376.0              $1,051.3      $324.7
Intersegment                     ($102.0)      20.3        81.7
                     --------   --------   --------    --------
Total revenue        $1,376.0    ($102.0)  $1,071.6      $406.4
                     ========   ========   ========    ========

Gross profit percent    27.6%                 20.8%       42.1%
                     ========              ========    ========
Operating income
  percent                3.2%                  2.2%        7.5%
                     ========              ========    ========
Three Months Ended
September 30, 2000
------------------
Customer revenue     $1,690.9              $1,200.2      $490.7
Intersegment                      ($92.8)      10.6        82.2
                     --------   --------   --------    --------
Total revenue        $1,690.9     ($92.8)  $1,210.8      $572.9
                     ========   ========   ========    ========

Gross profit percent    28.1%                 21.6%       38.9%
                     ========              ========    ========
Operating income
  percent                4.6%                  1.5%        9.8%
                     ========              ========    ========

Nine Months Ended
September 30, 2001
------------------
Customer revenue     $4,461.2              $3,311.7    $1,149.5
Intersegment                     ($267.0)      51.8       215.2
                     --------   --------   --------    --------
Total revenue        $4,461.2    ($267.0)  $3,363.5    $1,364.7
                     ========   ========   ========    ========

Gross profit percent    27.0%                 19.3%       42.9%
                     ========              ========    ========
Operating income
  percent                4.4%                  1.8%       12.1%
                     ========              ========    ========
Nine Months Ended
September 30, 2000
------------------
Customer revenue     $4,956.7              $3,454.1    $1,502.6
Intersegment                     ($326.7)      35.2       291.5
                     --------   --------   --------    --------
Total revenue        $4,956.7    ($326.7)  $3,489.3    $1,794.1
                     ========   ========   ========    ========

Gross profit percent    30.2%                 21.1%       43.3%
                     ========              ========    ========
Operating income
  percent                6.7%                  1.1%       15.3%
                     ========              ========    ======== 

 

                            UNISYS CORPORATION
                        CONSOLIDATED BALANCE SHEET
                                (Millions)

                                        September 30,December 31,
                                           2001         2000
                                        ----------   ----------
Assets
Current assets
 Cash and cash equivalents                  $219.7       $378.0
 Accounts and notes receivable, net          989.3      1,247.4
 Inventories
   Parts and finished equipment              247.1        249.4
   Work in process and materials             151.3        176.1
 Deferred income taxes                       464.1        460.6
 Other current assets                        128.2         75.5
                                        ----------   ----------
 Total                                     2,199.7      2,587.0
                                        ----------   ----------
Properties                                 1,429.4      1,400.6
 Less accumulated depreciation               890.2        890.7
                                        ----------   ----------
 Properties, net                             539.2        509.9
                                        ----------   ----------
Investments at equity                        204.7        225.8
Software, net of accumulated amortization    308.3        296.7
Prepaid pension cost                       1,213.9      1,063.0
Deferred income taxes                        583.6        583.6
Goodwill                                     168.6        186.3
Other assets                                 376.0        261.0
                                        ----------   ----------
 Total                                    $5,594.0     $5,713.3
                                        ==========   ==========

Liabilities and stockholders' equity
Current liabilities
 Notes payable                              $278.5       $209.5
 Current maturities of long-term debt          4.2         16.8
 Accounts payable                            558.8        847.7
 Other accrued liabilities                 1,059.3      1,319.1
 Income taxes payable                        267.3        288.3
                                        ----------   ----------
 Total                                     2,168.1      2,681.4
                                        ----------   ----------
Long-term debt                               611.9        536.3
Other liabilities                            547.6        309.5
Stockholders' equity
 Common stock                                  3.2          3.2
 Accumulated deficit                        (727.1)      (829.4)
 Other capital                             3,700.3      3,656.0
 Accumulated other comprehensive loss       (710.0)      (643.7)
                                        ----------   ----------
 Stockholders' equity                      2,266.4      2,186.1
                                        ----------   ----------
 Total                                    $5,594.0     $5,713.3
                                        ==========   ========== 

 

                            UNISYS CORPORATION
                   CONSOLIDATED STATEMENT OF CASH FLOWS
                                (Millions)

                                              Nine Months Ended
                                                September 30
                                              -----------------
                                               2001       2000
                                              ------     ------
Cash flows from operating activities
Income before extraordinary items             $119.5     $205.7
Add (deduct) items to reconcile
 income before extraordinary items
 to net cash provided by (used for)
 operating activities:
Extraordinary items                            (17.2)     (19.8)
Depreciation                                   100.6      103.9
Amortization:
 Marketable software                            88.3       90.2
 Goodwill                                       12.5       14.6
(Increase) in deferred income
  taxes, net                                    (3.5)      (9.6)
Decrease in receivables, net                   161.0        8.4
Decrease (increase) in inventories              27.0      (46.2)
(Decrease) in accounts payable
 and other accrued liabilities                (561.7)    (335.6)
(Decrease) increase in income taxes payable    (21.0)      10.5
Increase (decrease) in other liabilities       241.9       (3.4)
(Increase) in other assets                    (226.8)    (110.6)
Other                                           14.7       19.2
                                             -------    -------
Net cash used for operating activities         (64.7)     (72.7)
                                             -------    -------
Cash flows from investing activities
 Proceeds from investments                   1,976.6      525.1
 Purchases of investments                   (1,967.5)    (454.0)
 Investment in marketable software            (100.0)    (113.6)
 Capital additions of properties              (134.8)    (143.2)
 Purchases of businesses                        (2.2)     (13.9)
 Proceeds from sales of properties                         17.0
                                             -------    -------
Net cash used for investing activities        (227.9)    (182.6)
                                             -------    -------
Cash flows from financing activities
 Proceeds from issuance of long-term debt      389.9
 Payments of long-term debt                   (354.3)    (447.2)
 Net proceeds from short-term borrowings        68.9      442.5
 Proceeds from employee stock plans             26.2       42.5
                                             -------    -------
Net cash provided by financing activities      130.7       37.8
                                             -------    -------
Effect of exchange rate changes on cash
 and cash equivalents                            3.6      (11.6)
                                             -------    -------
Decrease in cash and cash equivalents         (158.3)    (229.1)
Cash and cash equivalents, beginning of
 period                                        378.0      464.0
                                             -------    -------
Cash and cash equivalents, end of period      $219.7     $234.9
                                             -------    -------