News Release
Investor Contact:
Jack McHale, 215-986-6050
Jack.McHale@unisys.com
Media Contacts:
Jim Kerr, 215-986-5795
Jim.Kerr@unisys.com
Gail Ferrari Marold, 919-342-5376
Gail.Ferrari@unisys.com
UNISYS REPORTS FOURTH-QUARTER 2006 FINANCIAL RESULTS
PRE-TAX INCOME INCREASES 81 PERCENT TO $49 MILLION AS COMPANY BENEFITS FROM
ONGOING REPOSITIONING PROGRAM
BLUE BELL, Pa., January 24, 2007 - Unisys Corporation (NYSE: UIS) today
reported fourth-quarter 2006 pre-tax income of $49.3 million as the company
benefits from its ongoing repositioning program. Operating profit margins and
earnings improved significantly in the quarter and service orders showed double-
digit growth for the second consecutive quarter driven by strong demand for
outsourcing.
Fourth-quarter 2006 pre-tax income of $49.3 million increased 81 percent from
pre-tax income of $27.2 million for the fourth quarter of 2005. The company
reported fourth-quarter 2006 net income of $21.3 million, or 6 cents per share.
The results included pre-tax pension expense of $43.7 million. These results
compared with a fourth-quarter 2005 net loss of $31.1 million, or 9 cents per
share, which included pre-tax pension expense of $44.3 million.
Revenue for the fourth quarter of 2006 declined 1 percent to $1.55 billion from
$1.57 billion in the year-ago quarter. Foreign currency exchange rates had an
approximately three-point positive impact on revenue in the quarter.
COMMENTS FROM PRESIDENT AND CEO JOSEPH W. MCGRATH
"We closed a year of tremendous progress in 2006 with a solid, and profitable,
fourth quarter," said Joseph W. McGrath, Unisys president and chief executive
officer. "Our focus in 2006 was to drive our multi-year repositioning program,
which is designed to significantly enhance our market focus, our cost
competitiveness, and our profitability by 2008. We got off to a good start in
this multi-year effort as the people of Unisys showed strong execution in
implementing many different elements of the repositioning program.
"While we have made much progress, we have a great deal more work to do in the
year ahead," McGrath said. "In 2007 we will focus on continuing to execute the
repositioning program by investing to drive growth in our strategic programs,
building out our global delivery model, and further reducing costs. As we do
this, we look to further improve our profitability, particularly in the second
half of 2007, as we advance toward our financial goal of an 8 to 10 percent
operating profit margin excluding retirement-related expenses in 2008."
FOURTH-QUARTER CLIENT WINS
Major wins in the fourth quarter included:
* Unisys received a five-year outsourcing order with an estimated value of
approximately $100 million from the Australian Department of Immigration and
Multicultural Affairs for a range of IT services including desktop services and
e-mail and intranet security;
* The U.S. Department of Justice, Asset Forfeiture Management Staff, awarded
Unisys a blanket purchase agreement under which delivery orders may be issued
for continued support of the department's Consolidated Asset Tracking System,
which tracks and monitors assets that are seized and forfeited in the
prosecution of criminals and criminal enterprises; the agreement could be worth
approximately $112 million if the government orders services at anticipated
levels for the full eight-year term;
* Unisys is part of a team led by IBM to provide outsourcing services under a
seven-year contract with the Texas Department of Information Resources. Unisys
will create a new data center for the project and will also provide transition
and transformation services, day-to-day data center operations, advanced
helpdesk and support services, and state-wide server maintenance;
* Business Objects, a leading provider of business intelligence solutions,
awarded Unisys a significant, five-year contract to provide information
technology outsourcing services including lifecycle desktop services and help
desk;
* BSN Medical GmbH, an international provider of medical products, awarded
Unisys a five-year contract with an estimated value of $35 million for
outsourcing services, including desktop services and user help desk, supporting
BSN Medical's 3,500 staff worldwide;
* The Belgian Federal Public Service (FPS) Finance, which is responsible for
tax collection and processing throughout Belgium, awarded Unisys a six-year,
approximately $34 million contract to create a next-generation tax collection,
processing, and recovery system for use by FPS agencies; Unisys will provide a
range of services including lifecycle application development for the new
system.
COST-REDUCTION PROGRAM
The company gave the following update with regard to ongoing cost-reduction
activities as part of its repositioning program:
* Unisys continues to target total headcount reductions of approximately 5,600
positions through its cost-reduction actions;
* Of the 5,600 total targeted reductions, Unisys completed approximately 4,900
reductions in 2006;
* The company said it expects to complete approximately 450 headcount
reductions in the first quarter of 2007, with the remaining approximately 250
reductions expected to be completed during the second quarter of 2007; and
* Unisys estimates that the cost-reduction actions completed in 2006 will yield
net annualized cost savings of approximately $280 million in 2007. Unisys
expects the cost restructuring program overall to yield on a run-rate basis net
annualized cost savings of more than $340 million by the second half of 2007.
FOURTH-QUARTER COMPANY RESULTS
The company reported a double-digit increase in services orders in the fourth
quarter. Outsourcing orders showed substantial double-digit gains, partially
offset by double-digit order declines in infrastructure services and core
maintenance.
Revenue in the United States declined 5 percent in the quarter to $655 million.
Revenue in international markets increased 2 percent in the quarter to $897
million.
The company's gross profit margin and operating profit margin in the fourth
quarter of 2006 were 24.9 percent and 4.4 percent, respectively. These
compared with gross and operating profit margins of 24.1 percent and 2.3
percent, respectively, in the fourth quarter of 2005.
FOURTH-QUARTER BUSINESS SEGMENT RESULTS
Customer revenue in the company's services segment increased slightly in the
fourth quarter of 2006 compared with the year-ago period. The company reported
high single-digit revenue growth in outsourcing and infrastructure services,
which offset a slight revenue decline in systems integration and consulting and
a high single-digit revenue decline in core maintenance. Gross profit margin
in the services business improved to 16.9 percent from 13.6 percent a year ago,
while the services operating margin improved to 1.2 percent compared with (2.0
percent) a year ago.
Customer revenue in the company's technology segment declined double digits
versus the strong fourth quarter of 2005, but increased substantially from the
third quarter of 2006. Gross profit margin in the technology business declined
to 49.0 percent from 56.2 percent a year ago while operating margins declined
to 13.7 percent from 16.7 percent a year ago.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Unisys generated $167 million of cash from operations in the fourth quarter
compared with $260 million in the fourth quarter of 2005. The company used
approximately $88 million of cash in the fourth quarter of 2006 for
restructuring payments, compared to approximately $9 million of cash for
restructuring payments in the fourth quarter of 2005.
Capital expenditures in the fourth quarter of 2006 were $58 million compared to
$88 million in the year-ago quarter. After deducting for capital expenditures,
Unisys generated $109 million of free cash in the quarter compared with $172
million in the fourth quarter of 2005. The company ended 2006 with $719
million of cash on hand.
On Dec. 31, 2006, the company adopted Statement of Financial Accounting
Standards No. 158 (SFAS No. 158), new accounting guidance related to pension
and other postretirement plans released by the Financial Accounting Standards
Board in September 2006. SFAS No. 158 requires an employer to recognize in its
statement of financial position the funded status of a benefit plan, measured
as the difference between plan assets at fair value and the benefit obligation.
The adoption of SFAS No. 158 reduced the company's assets by $1.1 billion,
increased its liabilities by $0.3 billion and reduced stockholders' equity by
$1.4 billion. The non-cash charge to equity has no effect on the company's net
income, liquidity, cash flows, or financial ratio covenants in the company's
credit agreements and public debt securities.
FULL-YEAR 2006 RESULTS
For the year ended Dec. 31, 2006, Unisys reported revenue of $5.76 billion,
flat from revenue of $5.76 billion in 2005. Currency had an approximately one-
percentage point positive impact on revenue in the year.
For the year ended Dec. 31, 2006, Unisys reported a net loss of $278.7 million,
or 81 cents per share. These results included:
* total pre-tax charges of approximately $330 million for headcount reductions;
* a first-quarter 2006 pre-tax gain of $149.9 million on the sale of the
company's shares in Nihon Unisys Limited;
* worldwide pre-tax pension expense of $135.5 million, net of a first-quarter
2006 pre-tax curtailment gain of $45 million related to changes in the
company's U.S. defined benefit pension plans.
For the year ended Dec. 31, 2005, Unisys reported a net loss of $1.73 billion,
or $5.09 per share. These results included:
* a non-cash charge of $1.57 billion for an increase in the company's deferred
tax asset valuation allowance;
* a pre-tax charge of $10.7 million related to a cash tender for the company's
8 1/8 percent notes due 2006; and
* worldwide pre-tax pension expense of $181.1 million.
CONFERENCE CALL
Unisys will hold a conference call today at 8:15 a.m. EST 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 technology services and solutions company. Our
consultants apply Unisys expertise in consulting, systems integration,
outsourcing, infrastructure, and server technology to help our clients achieve
secure business operations. We build more secure organizations by creating
visibility into clients' business operations. Leveraging the Unisys 3D Visible
Enterprise approach, we make visible the impact of their decisions-ahead of
investments, opportunities and risks. 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 concerning the company's cost
reduction plan are subject to the risk that the company may not implement the
planned headcount reductions as quickly as currently planned, which could
affect the timing of anticipated cost savings. The amount of anticipated cost
savings is also subject to currency exchange rate fluctuations with regard to
actions taken outside the U.S. 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 ability to maintain current prices after completion of benchmarking
studies and the continuation of the contracts for their full term, and, for
contracts with governmental entities, the availability of appropriated funds.
Accordingly, the contract values are not guaranteed. Other 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; the company's ability to effectively
address its challenging outsourcing operations through negotiations or
operationally and to fully recover the associated outsourcing assets; the
company's ability to drive profitable growth in consulting and systems
integration; the level of demand for the company's high-end enterprise servers;
the company's ability to effectively rightsize its cost structure; the risks of
doing business internationally and the potential for infringement claims to be
asserted against the company or its clients. 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.
###
RELEASE NO.: 0124/8749
http://www.unisys.com/about__unisys/news_a_events/01248749.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 Year
Ended December 31 Ended December 31
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
Revenue
Services $1,298.7 $1,270.8 $4,917.2 $4,788.5
Technology 253.3 298.7 840.0 970.2
-------- -------- -------- --------
1,552.0 1,569.5 5,757.2 5,758.7
Costs and expenses
Cost of revenue:
Services 1,045.4 1,081.0 4,317.1 4,161.8
Technology 120.5 110.8 430.5 435.5
-------- -------- -------- --------
1,165.9 1,191.8 4,747.6 4,597.3
Selling, general and
administrative 270.5 269.9 1,104.7 1,059.9
Research and development 47.0 71.2 231.7 263.9
-------- -------- -------- --------
1,483.4 1,532.9 6,084.0 5,921.1
-------- -------- -------- --------
Operating income (loss) 68.6 36.6 (326.8) (162.4)
Interest expense 19.3 19.8 77.2 64.7
Other income
(expense), net - 10.4 153.1 56.2
-------- -------- -------- --------
Income (loss) before
income taxes 49.3 27.2 (250.9) (170.9)
Provision (benefit) for
income taxes 28.0 58.3 27.8 1,561.0
-------- -------- -------- --------
Net income (loss) $21.3 ($31.1) ($278.7)($1,731.9)
======== ======== ======== ========
Earnings (loss) per share
Basic $ .06 ($ .09) ($ .81) ($ 5.09)
======== ======== ======== ========
Diluted $ .06 ($ .09) ($ .81) ($ 5.09)
======== ======== ======== ========
Shares used in the per share
computations (thousands):
Basic 344,935 341,656 343,747 340,216
======== ======== ======== ========
Diluted 345,627 341,656 343,747 340,216
======== ======== ======== ========
UNISYS CORPORATION
SEGMENT RESULTS
(Millions)
Elimi-
Total nations Services* Technology*
-------- -------- -------- ----------
Three Months Ended
December 31, 2006
- ------------------
Customer revenue $1,552.0 $1,298.7 $253.3
Intersegment ($78.0) 4.0 74.0
-------- -------- -------- --------
Total revenue $1,552.0 ($78.0) $1,302.7 $327.3
======== ======== ======== ========
Gross profit percent 24.9% 16.9% 49.0%
======== ======== ========
Operating profit
percent 4.4% 1.2% 13.7%
======== ======== ========
Three Months Ended
December 31, 2005
- ------------------
Customer revenue $1,569.5 $1,270.8 $298.7
Intersegment ($66.9) 4.5 62.4
-------- -------- -------- --------
Total revenue $1,569.5 ($66.9) $1,275.3 $361.1
======== ======== ======== ========
Gross profit percent 24.1% 13.6% 56.2%
======== ======== ========
Operating profit
(loss) percent 2.3% (2.0%) 16.7%
======== ======== ========
Year Ended
December 31, 2006
- ------------------
Customer revenue $5,757.2 $4,917.2 $840.0
Intersegment ($250.3) 14.8 235.5
-------- -------- -------- --------
Total revenue $5,757.2 ($250.3) $4,932.0 $1,075.5
======== ======== ======== ========
Gross profit percent 17.5% 15.1% 44.2%
======== ======== ========
Operating profit
(loss) percent (5.7%) (0.5%) 1.7%
======== ======== ========
Year Ended
December 31, 2005
- ------------------
Customer revenue $5,758.7 $4,788.5 $970.2
Intersegment ($259.6) 18.7 240.9
-------- -------- -------- --------
Total revenue $5,758.7 ($259.6) $4,807.2 $1,211.1
======== ======== ======== ========
Gross profit percent 20.2% 12.1% 48.4%
======== ======== ========
Operating profit
(loss) percent (2.8%) (4.3%) 4.2%
======== ======== ========
* 2006 results exclude cost reductions actions
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Millions)
December 31, December 31,
2006 2005
---------- ----------
Assets
Current assets
Cash and cash equivalents $719.3 $642.5
Accounts and notes receivable, net 1,164.6 1,111.5
Inventories
Parts and finished equipment 95.0 103.4
Work in process and materials 81.2 90.7
Deferred income taxes 36.5 68.2
Prepaid expense and other
current assets 148.3 137.0
---------- ----------
Total 2,244.9 2,153.3
---------- ----------
Properties 1,233.4 1,320.8
Less accumulated depreciation
and amortization 892.1 934.4
---------- ----------
Properties, net 341.3 386.4
---------- ----------
Outsourcing assets, net 401.1 416.0
Marketable software, net 304.3 327.6
Investments at equity .1 207.8
Prepaid postretirement assets 250.1 66.1
Deferred income taxes 211.0 138.4
Goodwill 193.9 192.0
Other long-term assets 117.3 141.3
---------- ----------
Total $4,064.0 $4,028.9
========== ==========
Liabilities and stockholders' equity (deficit)
Current liabilities
Notes payable $1.2 $18.1
Current maturities of long-term debt 0.5 58.8
Accounts payable 460.9 444.6
Other accrued liabilities 1,518.1 1,293.3
---------- ----------
Total 1,980.7 1,814.8
---------- ----------
Long-term debt 1,049.1 1,049.0
Long-term postretirement liabilities 667.7 652.3
Other long-term liabilities 463.1 545.4
Stockholders' equity (deficit)
Common stock 3.5 3.4
Accumulated deficit (2,386.8) (2,108.1)
Other capital 3,945.1 3,917.0
Accumulated other comprehensive loss (1,658.4) (1,844.9)
---------- ----------
Stockholders' deficit (96.6) (32.6)
---------- ----------
Total $4,064.0 $4,028.9
========== ==========
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions)
Year Ended
December 31
-------------------
2006 2005
------- -------
Cash flows from operating activities
Net loss ($278.7) ($1,731.9)
Add (deduct) items to reconcile
net loss to net cash provided
by operating activities:
Equity loss (income) 4.5 (9.2)
Employee stock compensation expense 6.7 .6
Depreciation and amortization
of properties 120.5 120.7
Depreciation and amortization of
outsourcing assets 135.1 128.8
Amortization of marketable software 132.9 124.7
Gain on sale of NUL shares
and other assets (153.2) (15.8)
Loss on the tender of debt 10.7
(Increase) decrease in deferred
income taxes, net (87.0) 1,491.2
Decrease in receivables, net 14.2 34.8
Decrease in inventories 19.4 20.9
Increase (decrease) in accounts payable
and other accrued liabilities 94.7 (61.4)
(Decrease) increase in other liabilities (68.8) 149.4
Decrease (increase) in other assets 52.8 (34.3)
Other 35.6 52.8
------- -------
Net cash provided by operating
activities 28.7 282.0
------- -------
Cash flows from investing activities
Proceeds from investments 7,522.0 7,726.2
Purchases of investments (7,535.9) (7,709.6)
Investment in marketable software (105.4) (125.7)
Capital additions of properties (70.1) (112.0)
Capital additions of outsourcing assets (81.0) (143.8)
Purchases of businesses (1.1) (1.5)
Proceeds from sale of NUL shares
and other assets 380.6 23.4
------- -------
Net cash provided by (used for)
investing activities 109.1 (343.0)
------- -------
Cash flows from financing activities
Net (reduction in) proceeds from
short-term borrowings (17.0) 17.2
Proceeds from employee stock plans 1.6 12.8
Payments of long-term debt (57.9) (509.1)
Proceeds from issuance of long-term debt 541.5
Financing fees (4.6)
------- -------
Net cash (used for) provided by
financing activities (77.9) 62.4
------- -------
Effect of exchange rate changes on cash
and cash equivalents 16.9 (19.4)
------- -------
Increase (decrease) in cash
and cash equivalents 76.8 (18.0)
Cash and cash equivalents, beginning of
period 642.5 660.5
------- -------
Cash and cash equivalents, end of period $719.3 $642.5
======= =======