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, 919-302-1620
Gail.Ferrari@unisys.com
UNISYS ANNOUNCES FIRST-QUARTER 2007 FINANCIAL RESULTS
COMPANY CONTINUES TO MAKE PROGRESS IN REPOSITIONING PROGRAM
BLUE BELL, Pa., April 25, 2007 - Unisys Corporation (NYSE: UIS) today reported
continued progress in its multi-year repositioning program. The company
reported first-quarter 2007 net income of $3.6 million, or 1 cent per share.
The results include:
* a $23.7 million pre-tax gain on the sale of the company's media solutions
business;
* a $39.4 million tax benefit related to an income tax audit settlement in the
Netherlands;
* a $32.7 million pre-tax restructuring charge to cover the reduction of about
950 employees;
* $23.5 million of pre-tax retirement-related expense for the company's defined
benefit pension plans and the U.S. 401(k) plan.
These results compared to a first-quarter 2006 net loss of $27.9 million, or 8
cents per share. The year-ago results included:
* a pre-tax gain of $149.9 million on the sale of the company's equity stake in
Nihon Unisys Limited;
* a $145.9 million pre-tax restructuring charge;
* pre-tax retirement-related expense of $13.5 million, which included a pre-tax
U.S. pension plan curtailment gain of $45.0 million.
Revenue for the first quarter of 2007 decreased 3 percent to $1.35 billion from
$1.39 billion in the year-ago quarter. Foreign currency exchange rates had an
approximately three percentage-point positive impact on revenue in the quarter.
COMMENTS FROM PRESIDENT AND CEO JOSEPH W. MCGRATH
"We continue to make progress in driving our multi-year repositioning program,
which is aimed at significantly enhancing our market competitiveness and
profitability by 2008," said Joseph W. McGrath, Unisys president and chief
executive officer.
"We are driving change at every level of the business - our focus in the
market, our sales and marketing approach, our services delivery model, our use
of offshore sourcing and our cost structure. While the level of change causes
some short-term disruption and impacts revenue levels, we continue to see
initial benefits in our profitability as we implement changes in our business
model.
"As we re-engineer processes and drive productivity enhancements through our
repositioning efforts, we continue to identify ways to streamline our
operations in line with our more focused business model. We are committed to
building a culture that regularly benchmarks its operations and drives
continuous productivity improvement and cost discipline. As we execute against
our repositioning plan, we continue to target an 8-10 percent operating profit
margin, excluding retirement-related expense, in 2008."
COST-REDUCTION PROGRAM
During the first quarter of 2007, as part of its continuous benchmarking and
process improvement program, the company identified opportunities to further
reduce costs in line with its more focused business model. With the proceeds
from the sale of its media solutions business and the income tax audit refund
in the Netherlands, the company plans to take the following actions:
* Reduce its headcount, primarily in the United States and United Kingdom, by
about 950 employees. The company took a $32.7 million pre-tax charge in the
first quarter of 2007 to cover these planned reductions. The majority of these
reductions are related to productivity and process improvements in the
company's services operations as well as the shift of resources to lower-cost
global sourcing locations.
* Take an additional approximately $35 million charge in the second quarter of
2007 related to facility consolidations and additional workforce reductions
principally in continental Europe. This is the first phase of global facility
consolidations to reflect the company's headcount reductions and its continued
move to a mobile services delivery workforce.
With regard to headcount reductions announced in 2006, Unisys said it has
essentially completed these reductions as of the end of the first quarter of
2007.
Unisys said it continues to make investments in 2007 in its strategic growth
programs and in global sourcing. The company expects the 2006 and first-
quarter 2007 restructuring actions to yield, on a run-rate basis, net
annualized cost savings of more than $340 million by the second half of 2007
and more than $360 million by the first half of 2008.
FIRST-QUARTER COMPANY RESULTS
The company reported that its services orders, which can vary significantly
from quarter to quarter due to the size and timing of client signings, showed a
double-digit decrease in the first quarter. The order decrease was driven
primarily by declines in outsourcing and systems integration and consulting
orders. The company's overall services orders have increased in four of six
quarters since Unisys announced its repositioning program.
Revenue in the United States declined 3 percent in the quarter to $604 million.
Revenue in international markets declined 3 percent in the quarter to $744
million.
The company's gross profit margin and operating profit margin in the first
quarter of 2007 were 19.1 percent and (2.2) percent, respectively. These
compared with gross and operating profit margins of 14.5 percent and (12.2)
percent, respectively, in the first quarter of 2006.
FIRST-QUARTER BUSINESS SEGMENT RESULTS
Unisys has a long-standing policy to evaluate business segment performance on
operating income exclusive of restructuring charges and unusual and non-
recurring items. Therefore, the comparisons below exclude the first-quarter
2007 and 2006 cost-reduction charges discussed above.
Customer revenue in the company's services segment decreased 2 percent in the
first quarter of 2007 compared with the year-ago period. The company reported
continued revenue growth in outsourcing and infrastructure services, which were
more than offset by revenue declines in systems integration and consulting and
core maintenance. Gross profit margin in the services business was 15.0
percent compared to 15.2 percent a year ago, while the services operating
margin was (1.0) percent compared with (0.9) percent a year ago.
Customer revenue in the company's technology segment declined 8 percent from
the first quarter of 2006. Gross profit margin in the technology business was
43.3 percent compared to 41.9 percent a year ago while operating margin was 3.5
percent compared to (5.4) percent a year ago.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Unisys used $104 million of cash from operations in the first quarter of 2007.
In the year-ago quarter, the company generated $27 million of cash from
operations. The change in operational cash flow primarily reflected an
approximately $74 million year-over-year reduction in accounts receivable
securitization. In addition, the company used approximately $50 million of
cash in the first quarter of 2007 for restructuring payments, compared to
approximately $6 million of cash for restructuring payments in the first
quarter of 2006.
Capital expenditures in the first quarter of 2007 were $83 million compared to
$73 million in the year-ago quarter. After deducting for capital expenditures,
Unisys used $187 million of free cash in the quarter compared with free cash
usage of $46 million in the first quarter of 2006.
During the first quarter, the company received approximately $28 million in
cash proceeds related to the completed sale of its media solutions business.
The company ended the quarter with $564 million of cash on hand.
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. 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.: 0425/8770
http://www.unisys.com/about__unisys/news_a_events/04258770.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
------------------
2007 2006
-------- --------
Revenue
Services $1,152.9 $1,176.4
Technology 195.1 211.4
-------- --------
1,348.0 1,387.8
Costs and expenses
Cost of revenue:
Services 993.9 1,076.5
Technology 96.7 109.4
-------- --------
1,090.6 1,185.9
Selling, general and
administrative 244.6 295.4
Research and development 42.4 75.3
-------- --------
1,377.6 1,556.6
-------- --------
Operating loss (29.6) (168.8)
Interest expense 18.9 19.8
Other income
(expense), net 25.5 153.4
-------- --------
Loss before income taxes (23.0) (35.2)
Benefit for income taxes (26.6) (7.3)
-------- --------
Net income (loss) $3.6 ($27.9)
======== ========
Earnings (loss) per share
Basic $ .01 ($ .08)
======== ========
Diluted $ .01 ($ .08)
======== ========
Shares used in the per share
computations (thousands):
Basic 346,421 342,458
======== ========
Diluted 348,338 342,458
======== ========
UNISYS CORPORATION
SEGMENT RESULTS
(Millions)
Elimi-
Total nations Services* Technology*
-------- -------- -------- ----------
Three Months Ended
March 31, 2007
- ------------------
Customer revenue $1,348.0 $1,152.9 $195.1
Intersegment ($40.1) 3.9 36.2
-------- -------- -------- --------
Total revenue $1,348.0 ($40.1) $1,156.8 $231.3
======== ======== ======== ========
Gross profit percent 19.1% 15.0% 43.3%
======== ======== ========
Operating profit
(loss) percent (2.2%) (1.0%) 3.5%
======== ======== ========
Three Months Ended
March 31, 2006
- ------------------
Customer revenue $1,387.8 $1,176.4 $211.4
Intersegment ($42.6) 3.4 39.2
-------- -------- -------- --------
Total revenue $1,387.8 ($42.6) $1,179.8 $250.6
======== ======== ======== ========
Gross profit percent 14.5% 15.2% 41.9%
======== ======== ========
Operating loss
percent (12.2%) (0.9%) (5.4%)
======== ======== ========
* Results exclude cost reduction actions
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Millions)
March 31, December 31,
2007 2006
---------- ----------
Assets
Current assets
Cash and cash equivalents $564.2 $719.3
Accounts and notes receivable, net 1,164.3 1,164.6
Inventories
Parts and finished equipment 103.1 95.0
Work in process and materials 85.6 81.2
Deferred income taxes 30.0 30.0
Prepaid expense and other
current assets 155.6 148.4
---------- ----------
Total 2,102.8 2,238.5
---------- ----------
Properties 1,242.8 1,233.4
Less accumulated depreciation
and amortization 910.1 892.1
---------- ----------
Properties, net 332.7 341.3
---------- ----------
Outsourcing assets, net 403.7 401.1
Marketable software, net 290.1 304.3
Prepaid postretirement assets 279.7 250.1
Deferred income taxes 191.3 191.3
Goodwill 194.7 193.9
Other long-term assets 118.3 117.4
---------- ----------
Total $3,913.3 $4,037.9
========== ==========
Liabilities and stockholders' equity (deficit)
Current liabilities
Notes payable $0.1 $1.2
Current maturities of long-term debt 0.4 0.5
Accounts payable 396.9 460.9
Other accrued liabilities 1,388.5 1,469.1
---------- ----------
Total 1,785.9 1,931.7
---------- ----------
Long-term debt 1,049.2 1,049.1
Long-term postretirement liabilities 654.8 667.7
Other long-term liabilities 428.7 453.6
Stockholders' equity (deficit)
Common stock 3.5 3.5
Accumulated deficit (2,383.2) (2,386.8)
Other capital 3,963.2 3,945.1
Accumulated other comprehensive loss (1,588.8) (1,626.0)
---------- ----------
Stockholders' deficit (5.3) (64.2)
---------- ----------
Total $3,913.3 $4,037.9
========== ==========
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions)
Three Months Ended
March 31
-------------------
2007 2006
------- -------
Cash flows from operating activities
Net income (loss) $3.6 ($27.9)
Add (deduct) items to reconcile
net income (loss) to net cash (used for)
provided by operating activities:
Equity loss 4.3
Employee stock compensation expense 2.3 1.7
Company stock issued for U.S. 401(k) plan 9.5 4.4
Depreciation and amortization
of properties 27.4 30.3
Depreciation and amortization of
outsourcing assets 38.0 35.0
Amortization of marketable software 33.4 33.1
Gain on sale of assets (23.7) (153.2)
Increase in deferred
income taxes, net (2.3) (19.8)
(Increase) decrease in receivables, net (5.3) 67.0
(Increase) decrease in inventories (11.9) 4.3
(Decrease) increase in accounts payable
and other accrued liabilities (135.3) 94.5
Decrease in other liabilities (29.2) (14.6)
Increase in other assets (13.1) (30.8)
Other 2.3 (1.4)
------- -------
Net cash (used for) provided by operating
activities (104.3) 26.9
------- -------
Cash flows from investing activities
Proceeds from investments 1,922.4 1,869.3
Purchases of investments (1,925.4) (1,870.6)
Investment in marketable software (24.3) (27.1)
Capital additions of properties (19.3) (21.6)
Capital additions of outsourcing assets (39.3) (24.6)
Purchases of businesses (1.2)
Proceeds from sale of assets 28.3 380.6
------- -------
Net cash (used for) provided by
investing activities (58.8) 306.0
------- -------
Cash flows from financing activities
Net (reduction in) proceeds from
short-term borrowings (1.1) 1.6
Proceeds from exercise of stock options 7.0 .6
------- -------
Net cash provided by financing
activities 5.9 2.2
------- -------
Effect of exchange rate changes on cash
and cash equivalents 2.1 2.6
------- -------
(Decrease) increase in cash
and cash equivalents (155.1) 337.7
Cash and cash equivalents, beginning of
period 719.3 642.5
------- -------
Cash and cash equivalents, end of period $564.2 $980.2
======= =======