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 23% GROWTH IN EARNINGS PER SHARE AND STRONG CASH
FLOW IN SECOND QUARTER OF 2003
COMPANY MEETS FINANCIAL TARGETS FOR QUARTER AND REAFFIRMS EARNINGS OUTLOOK FOR
FULL-YEAR 2003
BLUE BELL, Pa., July 17, 2003 -- Unisys Corporation (NYSE: UIS) today reported
23% year-over-year growth in its second-quarter 2003 earnings per share,
within its targeted EPS range for the quarter. Unisys also reported second-
quarter 2003 revenue growth and strong cash flow from operations, as the
company continues to benefit from its end-to-end, value-added business strategy.
Unisys reported second-quarter 2003 net income of $52.5 million, or 16 cents
per share, compared to net income of $42.2 million, or 13 cents per share, in
the second quarter of 2002. Revenue for the second quarter of 2003 increased
5% to $1.43 billion from revenue of $1.36 billion in the year-ago quarter.
Currency had a 4 percentage-point positive impact on the company's revenue in
the second quarter, as the U.S. dollar weakened against most major currencies
worldwide.
COMMENTS FROM CHAIRMAN AND CEO LARRY WEINBACH
"We continue to execute in a tough IT spending environment," said Unisys
Chairman and CEO Lawrence A. Weinbach. "By staying focused on our value-added
strategy and being highly selective in the opportunities we pursue, we
continued our consistent financial performance and met our financial targets
for the quarter. We achieved this earnings growth despite significantly lower
pension income, which declined to $8 million in the quarter from $34 million
in the year-ago period.
"I was particularly pleased with the performance of our services business,
where revenue grew 12% in the quarter and where we have made good progress
in our three key priority areas of outsourcing, consulting and systems
integration, and security services. Our outsourcing business showed continued
strong double-digit growth as we benefit from our expanding client base and
the rollout of recent large contract wins, including our work with the U.S.
Transportation Security Administration. We also saw growth in consulting and
systems integration, and enterprise security solutions.
"We also continue to make progress against the key growth objective in our
technology business -- namely, to increase sales and market share in our high-
end, Intel-based ES7000 servers," Weinbach said. "While the technology market
remains weak overall, our ES7000 server revenue grew more than 50% in the
quarter from year-ago levels. This was our fourth consecutive quarter of year-
over-year double-digit sales growth for the ES7000 line, demonstrating our
building momentum in this emerging market. We are steadily building our base
of satisfied ES7000 users around the world, many of whom are purchasing follow-
on systems and placing multi-unit orders."
In the second quarter, Unisys announced a range of new services and products
that expand its offerings in its strategic growth areas. In the services
business, Unisys announced its Business Blueprinting initiative, which is
designed to help clients create digital roadmaps for their organizations in
order to improve their flexibility, reduce system development time, and
eliminate unnecessary costs. Unisys also continued to expand its enterprise
security solutions, including the introduction of a new suite of identity
management solutions for Microsoft Windows-based environments. In its
technology business, the company launched its ES7000/400 line of servers, a
major expansion of the ES7000 family based on Intel's new 64-bit Itanium 2
processors.
OVERALL COMPANY HIGHLIGHTS
Unisys said total worldwide orders showed single-digit gains in the second
quarter. Double-digit gains in services orders offset order declines for
technology products. U.S. orders, led by the U.S. Federal government sector,
showed strong double-digit growth, while international orders experienced
double-digit declines.
U.S. revenue grew 12% in the second quarter to $668 million compared to $595
million in the year-ago period. U.S. revenue growth in the quarter was driven
primarily by growth in the company's U.S. Federal government business.
Revenue in international markets declined 1% to $757 million from $765 million
a year ago. On a constant currency basis, revenue in international markets
declined 9% in the quarter.
Unisys reported an overall second-quarter 2003 gross profit margin of 27.5%
compared to 29.7% in the year-ago period. Operating profit margins declined
to 6.0% from 7.1% in the year-ago quarter. The decline in the company's
profit margins in the quarter primarily reflected significantly lower pension
income compared to the year-ago quarter.
Selling, general, and administrative (SG&A) expenses declined slightly from
second-quarter 2002 levels. SG&A expenses represented 17.0% of revenue in the
second quarter of 2003 compared to 18.1% of revenue in the year-ago quarter.
BUSINESS SEGMENT HIGHLIGHTS
Customer revenue in the company's services business grew 12% in the second
quarter. Unisys reported double-digit growth in outsourcing and in systems
integration and consulting, and a slight decline in infrastructure services.
Primarily reflecting the lower levels of pension income, gross profit margins
in the services business declined 1.9 percentage points from year-ago levels
to 20.0%, and services operating margins declined .3 percentage points from a
year ago to 5.5%.
Customer revenue in the company's technology business declined 18% in the
second quarter, reflecting continued weak conditions in the technology market,
particularly in Europe and Latin America. Within enterprise servers, sales of
Intel-based ES7000 servers showed substantial growth over year-ago levels,
while ClearPath system sales showed double-digit declines. Gross margins in
the technology business declined slightly from year-ago levels to 46.6%.
Technology operating margins decreased 4.4 percentage points from a year ago
to 7.8%, reflecting lower volume and the impact of lower pension income in the
quarter.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Unisys generated $113 million of cash flow from operations in the second
quarter compared to $3 million in the year-ago quarter. The improvement in
cash flow from operations primarily reflected the company's continued focus on
working capital, including higher levels of customer prepayments. Cash
expenditures for prior restructuring actions were $14 million in the second
quarter of 2003 compared to $28 million in the year-ago quarter.
Capital expenditures in the second quarter of 2003 were $100 million,
including $77 million invested in revenue-generating projects. This compared
to capital expenditures of $102 million, including $79 million for revenue-
generating projects, in the year-ago quarter. The company had $382 million of
cash on hand at June 30, 2003.
On July 1, 2003 Unisys finalized a new three-year unsecured credit agreement
that replaced a $450 million three-year facility due to expire in March 2004.
The new facility is supported by 15 U.S. and international banks and provides
an increased commitment to $500 million, with terms similar to the previous
agreement. The new facility will be used to support the company's ongoing
operating and working capital needs.
YEAR-TO-DATE RESULTS
For the six months ended June 30, 2003, Unisys reported net income of $91.0
million, or 28 cents per share, compared to first-half 2002 net income of
$74.9 million, or 23 cents per share. Revenue for the first six months of
2003 was $2.82 billion compared to revenue of $2.72 billion in the first half
of 2002.
BUSINESS OUTLOOK
"With half the year behind us, we are on track to achieve our strategic and
financial objectives for 2003," Weinbach said. "While the global business
environment remains challenging, we are growing our revenue and earnings and
steadily improving the profitability of our underlying operations. As we
enter the third quarter and the vacation season, we expect to see the usual
seasonal weakness in technology sales, particularly in Europe. Still, with
our existing backlog and a significant pipeline of potential services
business, we believe we can achieve earnings per share in the 15 - 20 cents
range on modest revenue growth in the third quarter. We continue to look for
a strong fourth-quarter close, and we remain comfortable with our previous
expectation for full-year 2003 earnings per share in the 77 - 82 cents range."
CONFERENCE CALL
Unisys will hold a conference call today at 8:15 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.: 0703/8319 (See accompanying financial information)
<http://www.unisys.com/about__unisys/news_a_events/07178319.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 Six Months
Ended June 30 Ended June 30
------------------ ------------------
2003 2002 2003 2002
-------- -------- -------- --------
Revenue
Services $1,163.4 $1,039.3 $2,270.4 $2,088.5
Technology 261.6 320.5 553.5 633.8
-------- -------- -------- --------
1,425.0 1,359.8 2,823.9 2,722.3
Costs and expenses
Cost of revenue:
Services 906.8 793.1 1,789.3 1,595.5
Technology 126.1 162.2 255.4 333.0
-------- -------- -------- --------
1,032.9 955.3 2,044.7 1,928.5
Selling, general and
administrative 242.4 245.5 486.1 490.9
Research and development 63.7 62.0 130.5 127.1
-------- -------- -------- --------
1,339.0 1,262.8 2,661.3 2,546.5
-------- -------- -------- --------
Operating income 86.0 97.0 162.6 175.8
Interest expense 18.4 18.1 34.1 35.6
Other income
(expense), net 10.6 (16.0) 7.2 (28.4)
-------- -------- -------- --------
Income before income taxes 78.2 62.9 135.7 111.8
Provision for income taxes 25.7 20.7 44.7 36.9
-------- -------- -------- --------
Net income $52.5 $42.2 $91.0 $74.9
======== ======== ======== ========
Earnings per share
Basic $ .16 $ .13 $ .28 $ .23
======== ======== ======== ========
Diluted $ .16 $ .13 $ .28 $ .23
======== ======== ======== ========
Shares used in the per share
computations (thousands):
Basic 328,783 322,832 327,996 322,150
======== ======== ======== ========
Diluted 331,149 324,262 329,987 323,785
======== ======== ======== ========
UNISYS CORPORATION
SEGMENT RESULTS
(Millions)
Elimi-
Total nations Services Technology
-------- -------- -------- ----------
Three Months Ended
June 30, 2003
- ------------------
Customer revenue $1,425.0 $1,163.4 $261.6
Intersegment ($89.2) 6.3 82.9
-------- -------- -------- --------
Total revenue $1,425.0 ($89.2) $1,169.7 $344.5
======== ======== ======== ========
Gross profit percent 27.5% 20.0% 46.6%
======== ======== ========
Operating profit
percent 6.0% 5.5% 7.8%
======== ======== ========
Three Months Ended
June 30, 2002
- ------------------
Customer revenue $1,359.8 $1,039.3 $320.5
Intersegment ($82.9) 14.2 68.7
-------- -------- -------- --------
Total revenue $1,359.8 ($82.9) $1,053.5 $389.2
======== ======== ======== ========
Gross profit percent 29.7% 21.9% 46.8%
======== ======== ========
Operating profit
percent 7.1% 5.8% 12.2%
======== ======== ========
Six Months Ended
June 30, 2003
- ------------------
Customer revenue $2,823.9 $2,270.4 $553.5
Intersegment ($159.2) 11.9 147.3
-------- -------- -------- --------
Total revenue $2,823.9 ($159.2) $2,282.3 $700.8
======== ======== ======== ========
Gross profit percent 27.6% 19.4% 48.3%
======== ======== ========
Operating profit
percent 5.8% 4.3% 9.5%
======== ======== ========
Six Months Ended
June 30, 2002
- ------------------
Customer revenue $2,722.3 $2,088.5 $633.8
Intersegment ($163.6) 25.7 137.9
-------- -------- -------- --------
Total revenue $2,722.3 ($163.6) $2,114.2 $771.7
======== ======== ======== ========
Gross profit percent 29.2% 21.8% 44.7%
======== ======== ========
Operating profit
percent 6.5% 5.4% 10.0%
======== ======== ========
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Millions)
June 30, December 31,
2003 2002
---------- ----------
Assets
Current assets
Cash and cash equivalents $381.8 $301.8
Accounts and notes receivable, net 957.9 955.6
Inventories
Parts and finished equipment 144.7 165.3
Work in process and materials 128.6 127.5
Deferred income taxes 312.8 311.3
Other current assets 94.6 84.5
---------- ----------
Total 2,020.4 1,946.0
---------- ----------
Properties 1,663.9 1,542.7
Less accumulated depreciation
and amortization 1,004.8 932.9
---------- ----------
Properties, net 659.1 609.8
---------- ----------
Investments at equity 125.6 111.8
Marketable software, net 328.8 311.8
Deferred income taxes 1,476.0 1,476.0
Goodwill 165.1 160.6
Other long-term assets 379.8 365.4
---------- ----------
Total $5,154.8 $4,981.4
========== ==========
Liabilities and stockholders' equity
Current liabilities
Notes payable $17.7 $77.3
Current maturities of long-term debt 2.2 4.4
Accounts payable 472.9 532.5
Other accrued liabilities 1,195.1 1,341.4
Income taxes payable 246.4 228.9
---------- ----------
Total 1,934.3 2,184.5
---------- ----------
Long-term debt 1,046.7 748.0
Accrued pension liabilities 682.3 727.7
Other long-term liabilities 489.4 465.2
Stockholders' equity
Common stock 3.3 3.3
Accumulated deficit (582.6) (673.5)
Other capital 3,788.4 3,763.1
Accumulated other comprehensive loss (2,207.0) (2,236.9)
---------- ----------
Stockholders' equity 1,002.1 856.0
---------- ----------
Total $5,154.8 $4,981.4
========== ==========
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions)
Six Months Ended
June 30
------------------
2003 2002
------- -------
Cash flows from operating activities
Net income $91.0 $74.9
Add (deduct) items to reconcile
net income to net cash provided
by operating activities:
Depreciation and amortization
of properties 88.9 74.6
Amortization:
Marketable software 59.9 61.0
Deferred outsourcing contract costs 16.5 9.0
(Increase) in deferred
income taxes, net (1.5) (2.2)
(Increase) decrease in receivables, net (6.6) 132.6
Decrease in inventories 19.5 72.7
(Decrease) in accounts payable
and other accrued liabilities (169.8) (302.5)
Increase (decrease) in income
taxes payable 17.5 (2.3)
(Decrease) in other liabilities (22.5) (22.0)
(Increase) in other assets (39.1) (131.5)
Other (5.6) 48.3
------- -------
Net cash provided by operating activities 48.2 12.6
------- -------
Cash flows from investing activities
Proceeds from investments 2,387.5 1,476.7
Purchases of investments (2,421.7) (1,490.6)
Investment in marketable software (76.9) (71.2)
Capital additions of properties (112.0) (106.1)
Purchases of businesses (2.0) (3.9)
------- -------
Net cash used for investing activities (225.1) (195.1)
------- -------
Cash flows from financing activities
Proceeds from issuance of long-term debt 293.3
Net (reduction in) proceeds from
short-term borrowings (59.6) 39.0
Proceeds from employee stock plans 13.9 16.1
Payments of long-term debt (3.0) (1.2)
------- -------
Net cash provided by financing activities 244.6 53.9
------- -------
Effect of exchange rate changes on cash
and cash equivalents 12.3 3.8
------- -------
Increase (decrease) in cash
and cash equivalents 80.0 (124.8)
Cash and cash equivalents, beginning of
period 301.8 325.9
------- -------
Cash and cash equivalents, end of period $381.8 $201.1
======= =======