NEWS RELEASE
UNISYS
Media Contact:
Elizabeth Douglass, Unisys, 215-986-6583
Elizabeth.douglass@unisys.com
Investor Contact:
Jim Kerr, Unisys, 215-986-5795
jim.kerr@unisys.com
UNISYS REPORTS 20% GROWTH IN FIRST-QUARTER 2003 EARNINGS PER SHARE OVER
YEAR-AGO PERIOD; ORDERS SHOW SUBSTANTIAL GAINS
COMPANY REAFFIRMS OUTLOOK FOR DOUBLE-DIGIT EPS GROWTH FOR FULL-YEAR 2003
BLUE BELL, Pa., April 14, 2003 -- Unisys Corporation (NYSE: UIS) today reported
double-digit earnings per share (EPS) growth for the first quarter of 2003,
achieving its targeted earnings range for the quarter. The company also
reported substantial growth in its first-quarter orders, driven by significant
long-term contract signings in business process outsourcing (BPO) and managed
infrastructure services.
Unisys reported first-quarter 2003 net income of $38.5 million, or 12 cents per
share, compared to first-quarter 2002 net income of $32.7 million, or 10 cents
per share, an EPS increase of 20% over the first quarter of 2002. Revenue for
the first quarter of 2003 was $1.40 billion, up from $1.36 billion of revenue a
year ago. Currency had a 4 percentage-point positive impact on the company's
revenue in the first quarter, as the U.S. dollar weakened against most major
currencies worldwide.
COMMENTS FROM CHAIRMAN AND CEO LARRY WEINBACH
"We demonstrated continued solid execution in the first quarter of 2003," said
Unisys Chairman and CEO Lawrence A. Weinbach. "Despite a highly uncertain
geopolitical environment, we met our earnings and revenue targets for the
quarter and achieved double-digit growth in our earnings per share. We
achieved this earnings growth even though pension income in the first quarter
of 2003 declined to approximately $6 million from $38 million in the year-ago
quarter.
"Growth in our services business this quarter was driven by strong double-digit
growth in outsourcing as we continue to expand our strategic BPO offerings. We
saw continued strong demand for our enterprise security services, building on
our work with large organizations such as the U.S. Transportation Security
Administration and Lloyds TSB in the United Kingdom, to create secure networks.
In addition, our technology business delivered a strong profit performance in
the first quarter, driven by sales of new ClearPath server models. Sales of
our ES7000 family of high-end Intel-based servers showed strong double-digit
growth in the quarter as we benefit from our ongoing efforts to market the
significant capabilities of these systems to both new and existing clients.
"I was particularly pleased by our new orders in the first quarter," Weinbach
said. "We showed substantial double-digit growth in our orders and won a
number of significant BPO and managed infrastructure services contracts.
Overall, we closed more than $800 million of long-term services business in
the first quarter."
Major services contracts signed during the quarter included:
* A 10-year business process outsourcing contract to assume processing and
administration of 2.4 million life and pensions policies for Royal &
SunAlliance in the United Kingdom;
* A seven-year outsourcing contract with the city of Minneapolis to provide a
full range of outsourcing services to manage the city's complete IT
infrastructure, ranging from the data center to desktops and mobile devices;
* A three-year contract extension with the city of Chicago under which Unisys
will continue providing a full range of outsourcing services to manage the
city's distributed IT infrastructure;
* A three-year contract with HBOS plc, a leading financial services firm in
the United Kingdom, to provide infrastructure support services for some
29,000 employees;
* A four-year contract with the West Virginia Department of Health and Human
Services to become the new Medicaid fiscal agent for the state; and
* A five-year contract with the Board of Airline Representatives (BARA) in
Australia to implement and manage a new baggage reconciliation system at
all Australian international airports.
"These client wins, and many others achieved during the quarter, add to our
base of annuity services business," Weinbach said. "Our ability to win such
large, value-added contracts -- particularly in the current business
environment -- speaks to the competitiveness of our offerings and the ability
of Unisys people to deliver on client commitments."
OVERALL COMPANY HIGHLIGHTS
Total worldwide orders showed strong double-digit growth in the first quarter,
driven by substantial order gains in international markets, primarily Europe.
U.S. orders increased slightly in the quarter over the year-ago period. On a
business segment basis, services orders showed substantial double-digit gains
while technology orders declined in the quarter.
The company's U.S. revenue increased 17% in the first quarter to $665 million
compared to $570 million in the year-ago period driven primarily by strength
in the U.S. Federal government business. Revenue in international markets
declined 7% to $734 million from $793 million a year ago despite double-digit
growth in Japan.
First-quarter 2003 gross profit and operating margins reflected lower pension
income in the quarter compared to the first quarter of 2002. The company's
overall first-quarter 2003 gross profit margin declined to 27.7% from 28.6% in
the year-ago period, while operating profit margins declined to 5.5% from 5.8%
in the year-ago quarter. Selling, general, and administrative (SG&A) expenses
were approximately flat with first-quarter 2002 levels. SG&A expenses
represented 17.4% of revenue in the first quarter of 2003 compared to 18.0% of
revenue in the year-ago quarter.
BUSINESS SEGMENT HIGHLIGHTS
Customer revenue in the company's services business increased 6% in the first
quarter over the year-ago period. Double-digit growth in outsourcing revenue
was offset by slight revenue declines in systems integration and consulting
and infrastructure services. Reflecting the lower levels of pension income,
gross profit margins in the services business declined 3 percentage points
from year-ago levels to 18.7%, and services operating margins declined 2
percentage points from a year ago to 3.1%.
Customer revenue in the company's technology business declined 7% in the first
quarter, reflecting lower sales of specialized equipment and enterprise
servers. Within enterprise servers, strong growth in Intel-based ES7000
servers was offset by a single-digit revenue decline in ClearPath systems.
Reflecting a richer mix of higher-margin ClearPath sales in the quarter, gross
margins in the technology business increased 7.5 percentage points from
year-ago levels to 50.0%, and technology operating margins increased 3
percentage points from a year ago to 11.1%.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Unisys used $65 million of cash from operations in the first quarter compared
to operational cash flow of $10 million in the year-ago quarter. The change
in year-over-year cash from operations primarily reflected lower levels of
customer prepayments and payment of 2002 incentive compensation. Cash
expenditures for prior restructuring actions were $30 million in the first
quarter of 2003 compared to $35 million in the first quarter of 2002.
The company spent $89 million in the first quarter on capital expenditures,
including $58 million invested in revenue-generating projects.
During the quarter Unisys issued $300 million of 6 7/8% senior notes due March
15, 2010. The company plans to use the proceeds for general corporate
purposes. Unisys ended the March 31, 2003 quarter with $433 million of cash
on hand.
BUSINESS OUTLOOK
"We're off to a solid start toward achieving our financial goals for 2003,"
Weinbach said. "While the global business environment remains highly
challenging, we are growing our earnings and revenue while continuing to build
our base of multi-year, annuity-based business. For the second quarter of
2003, we look for earnings per share in the 14 - 17 cents range on modest
revenue growth. We remain comfortable with our previous expectation for
double-digit earnings growth for 2003 overall, with full-year earnings per
share in the 77 - 82 cents range."
CONFERENCE CALL
Unisys will hold a conference call today from approximately 9:15 - 10:15 a.m.
Eastern Time to discuss its results. The listen-only Webcast, as well as the
accompanying presentation materials, can be accessed via a link 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 services and solutions company.
Our people combine expertise in systems integration, outsourcing,
infrastructure, server technology and consulting with precision thinking and
relentless execution to help clients, in more than 100 countries, quickly and
efficiently achieve competitive advantage. 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. 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
periodic reports as filed with the Securities and Exchange Commission.
###
RELEASE NO.: 0403/8265 (See accompanying financial information)
<http://www.unisys.com/about__unisys/news_a_events/04148265.htm>
Unisys is a registered trademark of Unisys Corporation. All other brands and
products referenced herein are acknowledged to be trademarks or registered
trademarks of their respective holders.
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Millions, except per share data)
Three Months
Ended March 31
------------------
2003 2002
-------- --------
Revenue
Services $1,107.0 $1,049.2
Technology 291.9 313.3
-------- --------
1,398.9 1,362.5
Costs and expenses
Cost of revenue:
Services 882.5 802.4
Technology 129.3 170.8
-------- --------
1,011.8 973.2
Selling, general and
administrative 243.7 245.4
Research and development 66.8 65.1
-------- --------
1,322.3 1,283.7
-------- --------
Operating income 76.6 78.8
Interest expense 15.7 17.5
Other income
(expense), net (3.4) (12.4)
-------- --------
Income before income taxes 57.5 48.9
Provision for income taxes 19.0 16.2
-------- --------
Net income $38.5 $32.7
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Earnings per share
Basic $ .12 $ .10
======== ========
Diluted $ .12 $ .10
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Shares used in the per share
computations (thousands):
Basic 327,208 321,469
======== ========
Diluted 328,824 323,307
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UNISYS CORPORATION
SEGMENT RESULTS
(Millions)
Elimi-
Total nations Services Technology
-------- -------- -------- ----------
Three Months Ended
March 31, 2003
- ------------------
Customer revenue $1,398.9 $1,107.0 $291.9
Intersegment ($70.0) 5.6 64.4
-------- -------- -------- --------
Total revenue $1,398.9 ($70.0) $1,112.6 $356.3
======== ======== ======== ========
Gross profit percent 27.7% 18.7% 50.0%
======== ======== ========
Operating profit
percent 5.5% 3.1% 11.1%
======== ======== ========
Three Months Ended
March 31, 2002
- ------------------
Customer revenue $1,362.5 $1,049.2 $313.3
Intersegment ($80.7) 11.5 69.2
-------- -------- -------- --------
Total revenue $1,362.5 ($80.7) $1,060.7 $382.5
======== ======== ======== ========
Gross profit percent 28.6% 21.7% 42.5%
======== ======== ========
Operating profit
percent 5.8% 4.9% 7.7%
======== ======== ========
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Millions)
March 31, December 31,
2003 2002
---------- ----------
Assets
Current assets
Cash and cash equivalents $433.1 $301.8
Accounts and notes receivable, net 862.7 955.6
Inventories
Parts and finished equipment 156.9 165.3
Work in process and materials 133.3 127.5
Deferred income taxes 312.3 311.3
Other current assets 97.4 84.5
---------- ----------
Total 1,995.7 1,946.0
---------- ----------
Properties 1,576.0 1,542.7
Less accumulated depreciation
and amortization 958.2 932.9
---------- ----------
Properties, net 617.8 609.8
---------- ----------
Investments at equity 111.8 111.8
Marketable software, net 322.1 311.8
Deferred income taxes 1,476.0 1,476.0
Goodwill 161.7 160.6
Other long-term assets 367.8 365.4
---------- ----------
Total $5,052.9 $4,981.4
========== ==========
Liabilities and stockholders' equity
Current liabilities
Notes payable $78.6 $77.3
Current maturities of long-term debt 2.5 4.4
Accounts payable 434.9 532.5
Other accrued liabilities 1,152.9 1,341.4
Income taxes payable 235.0 228.9
---------- ----------
Total 1,903.9 2,184.5
---------- ----------
Long-term debt 1,046.3 748.0
Accrued pension liabilities 715.1 727.7
Other long-term liabilities 486.0 465.2
Stockholders' equity
Common stock 3.3 3.3
Accumulated deficit (635.0) (673.5)
Other capital 3,775.9 3,763.1
Accumulated other comprehensive loss (2,242.6) (2,236.9)
---------- ----------
Stockholders' equity 901.6 856.0
---------- ----------
Total $5,052.9 $4,981.4
========== ==========
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions)
Three Months Ended
March 31
------------------
2003 2002
------- -------
Cash flows from operating activities
Net income $38.5 $32.7
Add (deduct) items to reconcile
net income to net cash (used for)
provided by operating activities:
Depreciation and amortization
of properties 42.2 36.0
Amortization:
Marketable software 29.7 29.7
Deferred outsourcing contract costs 7.8 3.9
(Increase) in deferred
income taxes, net (1.0) (1.5)
Decrease in receivables, net 91.9 147.6
Decrease in inventories 2.6 32.2
(Decrease) in accounts payable
and other accrued liabilities (267.8) (199.1)
Increase (decrease) in income
taxes payable 6.1 (5.8)
Increase (decrease) in other liabilities 4.5 (19.4)
(Increase) in other assets (20.3) (77.0)
Other .9 30.3
------- -------
Net cash (used for) provided by
operating activities (64.9) 9.6
------- -------
Cash flows from investing activities
Proceeds from investments 1,279.1 701.7
Purchases of investments (1,292.7) (699.1)
Investment in marketable software (40.0) (36.3)
Capital additions of properties (49.4) (39.4)
Purchases of businesses (.8)
------- -------
Net cash used for investing activities (103.8) (73.1)
------- -------
Cash flows from financing activities
Proceeds from issuance of long-term debt 293.3
Net proceeds from short-term borrowings 1.3 15.9
Proceeds from employee stock plans 6.3 7.4
Payments of long-term debt (2.4) (.5)
------- -------
Net cash provided by financing activities 298.5 22.8
------- -------
Effect of exchange rate changes on cash
and cash equivalents 1.5 (1.9)
------- -------
Increase (decrease) in cash
and cash equivalents 131.3 (42.6)
Cash and cash equivalents, beginning of
period 301.8 325.9
------- -------
Cash and cash equivalents, end of period $433.1 $283.3
======= =======