News Release
UNISYS
Media Contacts:
Elizabeth Douglass, 215-986-6583 elizabeth.douglass@unisys.com
Jacqueline Lewis, 215-986-5204 jacqueline.lewis@unisys.com
Investor Contact:
Jim Kerr, 215-986-5795 jim.kerr@unisys.com
UNISYS ANNOUNCES FIRST-QUARTER 2005 FINANCIAL RESULTS
BLUE BELL, Pa., April 14, 2005 - Unisys Corporation (NYSE: UIS) today reported
a first-quarter 2005 net loss of $45.5 million, or a loss of 13 cents per share,
compared with first-quarter 2004 net income of $28.9 million, or 9 cents per
share. The first-quarter 2005 results included pre-tax pension expense of
$46.8 million, or 9 cents per share, compared with pension expense of $22.2
million, or 4 cents per share, in the year-ago quarter. Excluding the impact
of pension expense in both periods, the first-quarter 2005 loss was $13.7
million, or a loss of 4 cents per share, compared with net income of $44.0
million, or 13 cents per share, in the first quarter of 2004. Revenue for the
first quarter of 2005 declined 7% to $1.37 billion from $1.46 billion in the
year-ago quarter. Currency had a 2 percentage-point positive impact on the
company's revenue in the first quarter, reflecting a weak U.S. dollar against
most major currencies worldwide.
COMMENTS FROM PRESIDENT AND CEO JOSEPH W. MCGRATH
"This was a tough quarter for Unisys," said Joseph W. McGrath, Unisys President
and Chief Executive Officer. "Our results in the quarter, as expected, were
impacted by the continuing challenges of several transformational outsourcing
contracts and a substantial increase in pension expense, both of which affected
our services margins. We also saw lower-than-expected revenue in the quarter.
"We did make progress on several important fronts, however. After a slow year
for orders in 2004, we implemented aggressive sales and marketing programs to
drive stronger order and revenue trends going forward. We were pleased by good
services order growth in the quarter, driven by substantial double-digit order
gains for outsourcing services. Overall we signed multi-year annuity contracts
with an estimated total value of more than $400 million in the quarter."
McGrath said that major services contracts signed in the quarter included:
* a contract valued at $143 million ($105 million for the initial five-year
term and $38 million for an optional two-year extension) to provide desktop
support services on an outsourced basis to New York City Transit;
* a 10-year contract valued at $90 million to provide insurance processing
services for a new Resolution Life Group company in the United Kingdom;
* a contract valued at $77 million over five years to provide infrastructure
outsourcing services to a leading U.S. financial institution;
* a contract valued at $22 million over five years to provide infrastructure
outsourcing services to a major U.S. city public entity.
In addition, in early April, Unisys signed a five-year, $68 million contract
with a group of U.S. telecommunications companies for IT infrastructure
outsourcing services.
"We are encouraged by these wins, since they show that our sales and marketing
efforts are starting to pay off," McGrath said. "More importantly, they show
that Unisys is providing the kind of value-added services and solutions that
clients need in the marketplace."
FIRST-QUARTER COMPANY RESULTS
Overall orders were flat in the first quarter. Services orders showed single-
digit gains, while technology orders showed double-digit declines.
On a geographic basis, U.S. revenue declined 9% to $621 million. Revenue in
international markets declined 4% in the quarter to $746 million.
The company's gross profit margin and operating profit margin in the quarter
were 19.0% and (4.8%), respectively, compared with 26.8% and 4.0% in the first
quarter of 2004. The year-over-year margin declines for the company and the
services segment were principally due to the impact of the transformational
outsourcing contracts and higher pension expense.
SG&A expense and R&D expense represented 19.1% and 4.7% of revenue,
respectively, in the first quarter of 2005 compared with 17.9% and 4.9% of
revenue in the year-ago quarter. The principal reasons for the increase in
SG&A expenses as a percent of revenue were the decrease in revenue and the
higher pension expense.
The first-quarter 2005 results include a tax benefit of $7.8 million related
to a favorable decision in foreign tax litigation.
FIRST-QUARTER BUSINESS SEGMENT RESULTS
Customer revenue in the company's services segment declined 5% in the first
quarter of 2005 compared with the year-ago period. All services categories
showed revenue declines in the quarter. On a reported basis, gross profit
margin in the services business declined to 11.0% from 19.1% a year ago, while
the services operating margin was (6.8)% compared with 2.5% a year ago.
Excluding the impact of pension expense in both periods, services gross profit
margin declined to 13.8% from 20.4% a year ago, while services operating margin
declined to (3.2%) compared with 4.1% a year ago.
Customer revenue in the company's technology segment declined 13% in the first
quarter. Sales of specialized equipment declined by double digits, while
enterprise server sales showed slight declines. Within enterprise servers,
sales of ClearPath systems showed mid single-digit declines, while ES7000
revenue showed a high single-digit increase. The technology margins declined
in the quarter, primarily reflecting lower sales of ClearPath and specialized
technology. On a reported basis, technology gross margin declined to 47.7%
from 48.3% a year ago, and technology operating margin declined to 6.1% from
8.6% a year ago. Excluding the impact of pension expense in both periods, the
technology gross margin decreased to 48.0% in the first quarter of 2005 from
48.4% in the year-ago quarter and the technology operating margin declined to
8.5% compared with 9.5% in the year-ago period.
CASH FLOW RESULTS
Unisys generated $27 million of cash from operations in the quarter compared
with operational cash flow of $129 million in the year-ago quarter. The
decline in operational cash flow year-over-year was primarily driven by lower
net income.
Capital expenditures in the first quarter of 2005 were $97 million, including
$76 million invested in revenue-generating projects. On January 17, 2005,
Unisys repaid at maturity all outstanding $150 million of its 7 1/4% senior
notes. The repayment was made from cash on hand. Unisys ended the quarter
with $442 million of cash on hand.
BUSINESS OUTLOOK
"We expect the second quarter to continue to be challenging as we work through
the issues in our transformational outsourcing business and soft demand in our
high-end enterprise server business," McGrath said. "We look for second-
quarter earnings per share, excluding the impact of pension expense, to be
approximately breakeven, with revenue relatively flat compared with the prior-
year quarter."
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 consulting, systems integration, outsourcing,
infrastructure and server technology 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. Forward-looking statements include, but are not limited
to, any projections of earnings, revenues, contract values 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. Statements in this release regarding the company's financial
outlook are based in part on the company's assumptions for the economy. Risks
and uncertainties that could affect the company's future results include
general economic and business conditions; the effects of aggressive competition
in the information services and technology markets on the company's revenues,
pricing and margins and on the competitiveness of its product and services
offerings; the level of demand for the company's products and services and the
company's ability to anticipate and respond to changes in technology and
customer preferences; the company's ability to grow outsourcing and
infrastructure services and its ability to effectively and timely complete the
related solutions implementations, client transitions to the new environment
and work force and facilities rationalizations and to fully recover the
associated outsourcing assets; the company's ability to drive profitable growth
in consulting and systems integration; the degree of market acceptance of the
company's high-end enterprise servers; the company's ability to maintain tight
cost controls; the risks of doing business internationally and the potential
for infringement claims to be asserted against the company or its clients.
Statements in this release regarding contract values are based upon various
assumptions, which are subject to change, including the projected volume of
products and services to be provided by Unisys, the contracts continuing for
their full term, and possible price adjustment or gain-sharing price reduction
provisions. Accordingly, the contract values are not guaranteed. Additional
discussion of these and other factors that could affect Unisys future results
is contained in its periodic filings with the Securities and Exchange
Commission. Unisys assumes no obligation to update any forward-looking
statements.
PRESENTATION OF INFORMATION IN THIS PRESS RELEASE
This release presents information that excludes pension expense. This
financial measure is considered non-GAAP. Generally, a non-GAAP financial
measure is a numerical measure of a company's performance, financial position,
or cash flows where amounts are either excluded or included not in accordance
with generally accepted accounting principles. A reconciliation of this non-
GAAP measure to the most directly comparable GAAP measure, as well as
disclosure of the reasons why the company uses this measure, is included in the
financial information accompanying this release.
..
###
RELEASE NO: xxxx/xxxx (See accompanying financial information)
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
------------------
2005 2004
-------- --------
Revenue
Services $1,107.7 $1,165.0
Technology 258.9 297.9
-------- --------
1,366.6 1,462.9
Costs and expenses
Cost of revenue:
Services 981.4 925.7
Technology 124.9 145.7
-------- --------
1,106.3 1,071.4
Selling, general and
administrative 261.6 261.2
Research and development 64.9 71.5
-------- --------
1,432.8 1,404.1
-------- --------
Operating income (loss) (66.2) 58.8
Interest expense 12.6 17.0
Other income
(expense), net 0.5 0.6
-------- --------
Income (loss) before
income taxes (78.3) 42.4
Provision (benefit) for
income taxes (32.8) 13.5
-------- --------
Net income (loss) ($45.5) $28.9
======== ========
Earnings (loss) per share
Basic ($ .13) $ .09
======== ========
Diluted ($ .13) $ .09
======== ========
Shares used in the per share
computations (thousands):
Basic 338,248 332,722
======== ========
Diluted 338,248 338,048
======== ========
UNISYS CORPORATION
SEGMENT RESULTS
(Millions)
Elimi-
Total nations Services Technology
-------- -------- -------- ----------
Three Months Ended
March 31, 2005
- ------------------
Customer revenue $1,366.6 $1,107.7 $258.9
Intersegment ($59.9) 4.8 55.1
-------- -------- -------- --------
Total revenue $1,366.6 ($59.9) $1,112.5 $314.0
======== ======== ======== ========
Gross profit percent 19.0% 11.0% 47.7%
======== ======== ========
Operating profit
(loss) percent (4.8%) (6.8%) 6.1%
======== ======== ========
Three Months Ended
March 31, 2004
- ------------------
Customer revenue $1,462.9 $1,165.0 $297.9
Intersegment ($45.7) 4.8 40.9
-------- -------- -------- --------
Total revenue $1,462.9 ($45.7) $1,169.8 $338.8
======== ======== ======== ========
Gross profit percent 26.8% 19.1% 48.3%
======== ======== ========
Operating profit
percent 4.0% 2.5% 8.6%
======== ======== ========
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Millions)
March 31, December 31,
2005 2004
---------- ----------
Assets
Current assets
Cash and cash equivalents $441.6 $660.5
Accounts and notes receivable, net 1,050.1 1,136.8
Inventories
Parts and finished equipment 92.2 93.7
Work in process and materials 130.4 122.4
Deferred income taxes 292.1 291.8
Prepaid expense and other
current assets 139.5 112.4
---------- ----------
Total 2,145.9 2,417.6
---------- ----------
Properties 1,271.3 1,305.5
Less accumulated depreciation
and amortization 863.8 881.4
---------- ----------
Properties, net 407.5 424.1
---------- ----------
Outsourcing assets, net 433.3 431.9
Marketable software, net 340.5 336.8
Investments at equity 210.4 197.1
Prepaid pension cost 49.4 52.5
Deferred income taxes 1,394.6 1,394.6
Goodwill 188.4 189.9
Other long-term assets 164.3 176.4
---------- ----------
Total $5,334.3 $5,620.9
========== ==========
Liabilities and stockholders' equity
Current liabilities
Notes payable $2.7 $1.0
Current maturities of long-term debt 1.5 151.7
Accounts payable 365.6 487.4
Other accrued liabilities 1,291.5 1,316.1
Income taxes payable 0.0 66.6
---------- ----------
Total 1,661.3 2,022.8
---------- ----------
Long-term debt 898.6 898.4
Accrued pension liabilities 573.3 537.9
Other long-term liabilities 708.6 655.3
Stockholders' equity
Common stock 3.4 3.4
Accumulated deficit (421.7) (376.2)
Other capital 3,895.8 3,883.8
Accumulated other comprehensive loss (1,985.0) (2,004.5)
---------- ----------
Stockholders' equity 1,492.5 1,506.5
---------- ----------
Total $5,334.3 $5,620.9
========== ==========
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions)
Three Months Ended
March 31
------------------
2005 2004
------- -------
Cash flows from operating activities
Net income (loss) ($45.5) $28.9
Add (deduct) items to reconcile
net income (loss) to net cash
provided by operating activities:
Equity loss (income) 4.3 (5.3)
Depreciation and amortization of properties 30.0 35.8
Depreciation and amortization of
outsourcing assets 34.7 26.6
Amortization of marketable software 28.5 29.3
Increase in deferred income taxes, net (.3) (1.4)
Decrease in receivables, net 90.5 54.2
Increase in inventories (6.5) (19.1)
(Decrease) increase in accounts payable
and other accrued liabilities (158.5) 8.2
Decrease in income taxes payable (66.6) (8.0)
Increase in other liabilities 97.7
Increase in other assets (16.4) (25.4)
Other 34.9 5.4
------- -------
Net cash provided by operating activities 26.8 129.2
------- -------
Cash flows from investing activities
Proceeds from investments 1,779.9 1,408.3
Purchases of investments (1,776.8) (1,413.7)
Investment in marketable software (33.0) (29.0)
Capital additions of properties (22.4) (36.5)
Capital additions of outsourcing assets (41.9) (47.6)
------- -------
Net cash used for investing activities (94.2) (118.5)
------- -------
Cash flows from financing activities
Net proceeds from short-term borrowings 1.7 10.6
Proceeds from employee stock plans 6.6 11.1
Payments of long-term debt (150.3) (1.0)
------- -------
Net cash (used for) provided by
financing activities (142.0) 20.7
------- -------
Effect of exchange rate changes on cash
and cash equivalents (9.5) 4.1
------- -------
(Decrease) increase in cash and cash
equivalents (218.9) 35.5
Cash and cash equivalents, beginning of
period 660.5 635.9
------- -------
Cash and cash equivalents, end of period $441.6 $671.4
======= =======
Reconciliation of GAAP to Non-GAAP
Financial Information
The preceding release presents information with and
without pension expense. Unisys believes that this
information will enhance an overall understanding
of its financial performance due to the significant
change in pension expense from period to period
and the non-operational nature of pension expense.
The presentation of non-GAAP information is not
meant to be considered in isolation or as a substitute
for results prepared in accordance with accounting
principles generally accepted in the United States.
UNISYS CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
CONSOLIDATED STATEMENTS OF INCOME
(Millions, except per share data)
Three Months Ended
March 31, 2005
----------------------------
US GAAP Less Without
as Pension Pension
Reported Expense Expense
-------- -------- --------
Revenue $1,366.6 $1,366.6
Costs and expenses
Cost of revenue 1,106.3 ($32.8) 1,073.5
Selling, general and
administrative 261.6 (9.1) 252.5
Research and development 64.9 (4.9) 60.0
-------- -------- --------
1,432.8 (46.8) 1,386.0
-------- -------- --------
Operating income (loss) (66.2) 46.8 (19.4)
Interest expense 12.6 12.6
Other income
(expense), net 0.5 0.5
-------- -------- --------
Income (loss) before
income taxes (78.3) 46.8 (31.5)
Provision (benefit) for
income taxes (32.8) 15.0 (17.8)
-------- -------- --------
Net income (loss) ($45.5) $31.8 ($13.7)
======== ======== ========
Earnings (loss) per share ($ .13) $ .09 ($ .04)
======== ======== ========
Three Months Ended
March 31, 2004
----------------------------
US GAAP Less Without
as Pension Pension
Reported Expense Expense
-------- -------- --------
Revenue $1,462.9 $1,462.9
Costs and expenses
Cost of revenue 1,071.4 ($15.5) 1,055.9
Selling, general and
administrative 261.2 (4.9) 256.3
Research and development 71.5 (1.8) 69.7
-------- -------- --------
1,404.1 (22.2) 1,381.9
-------- -------- --------
Operating income 58.8 22.2 81.0
Interest expense 17.0 17.0
Other income
(expense), net 0.6 0.6
-------- -------- --------
Income before income taxes 42.4 22.2 64.6
Provision for income taxes 13.5 7.1 20.6
-------- -------- --------
Net income $28.9 $15.1 $44.0
======== ======== ========
Earnings per share $ .09 $ .04 $ .13
======== ======== ========
UNISYS CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
SEGMENT RESULTS OF OPERATIONS
(Millions)
Three Months Ended
March 31, 2005
---------------------------
Less Without
As Pension Pension
Reported Expense Expense
-------- -------- --------
Services Segment
Total revenue $1,112.5 $1,112.5
Gross profit 122.2 ($31.8) 154.0
% of revenue 11.0% 13.8%
Operating income (loss) (75.1) (39.4) (35.7)
% of revenue -6.8% -3.2%
Technology Segment
Total revenue 314.0 314.0
Gross profit 149.7 (1.0) 150.7
% of revenue 47.7% 48.0%
Operating income 19.3 (7.4) 26.7
% of revenue 6.1% 8.5%
Total Company
Total revenue 1,366.6 1,366.6
Gross profit 260.3 (32.8) 293.1
% of revenue 19.0% 21.4%
Operating income (loss) (66.2) (46.8) (19.4)
% of revenue -4.8% -1.4%
Three Months Ended
March 31, 2004
---------------------------
Less Without
As Pension Pension
Reported Expense Expense
-------- -------- --------
Services Segment
Total revenue $1,169.8 $1,169.8
Gross profit 222.9 ($15.2) 238.1
% of revenue 19.1% 20.4%
Operating income 29.2 (19.3) 48.5
% of revenue 2.5% 4.1%
Technology Segment
Total revenue 338.8 338.8
Gross profit 163.8 (0.3) 164.1
% of revenue 48.3% 48.4%
Operating income 29.2 (2.9) 32.1
% of revenue 8.6% 9.5%
Total Company
Total revenue 1,462.9 1,462.9
Gross profit 391.5 (15.5) 407.0
% of revenue 26.8% 27.8%
Operating income 58.8 (22.2) 81.0
% of revenue 4.0% 5.5%
UNISYS CORPORATION
RECONCILATION OF GAAP TO NON-GAAP
FORWARD-LOOKING ESTIMATED EARNINGS (LOSS) PER SHARE
Three
Months
Ending
6/30/2005
----------
Earnings (loss) per share-
on a GAAP basis (.11)-(.07)
Add back estimated pension expense,
net of tax .09
---------
Earnings (loss) per share-
on a NON-GAAP basis
(excluding pension expense) (.02)-.02
=========
NOTE: See section in press release entitled
"Forward-Looking Statements".