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 FOURTH-QUARTER AND FULL-YEAR 2007 FINANCIAL RESULTS
COMPANY REPORTS SIGNIFICANT IMPROVEMENT IN OPERATING PROFIT AND $247 MILLION IN
OPERATING CASH FLOW FOR FOURTH QUARTER OF 2007
BLUE BELL, Pa., January 29, 2008 - Unisys Corporation (NYSE: UIS) today
reported $247 million in fourth-quarter operating cash flow and its highest
full-year operating profit since 2003 as the company closed a year of
significant progress in its multi-year repositioning program.
Unisys reported fourth-quarter 2007 operating income of $69.4 million, which
included $55 million of net cost reduction charges and $11.6 million of
retirement-related expense. These results compared with fourth-quarter 2006
operating income of $68.6 million, which included a $10 million benefit for
changes in estimates for previously recorded cost reduction charges and $47.6
million of retirement-related expense. Fourth-quarter 2007 operating profit
before the impact of these items improved by $30 million, or 29 percent, year
over year.
For the full year of 2007, the company reported operating income of $85.9
million compared with a full-year 2006 operating loss of $326.8 million, a year-
over-year improvement of $413 million. The 2007 results include $105 million
of net cost reduction charges and $82.4 million of retirement-related expense,
and the 2006 results include net cost reduction charges of $316 million and
$153.8 million of retirement-related expense. Before the impact of these items
in both years, full-year 2007 operating income improved by $130 million, or 91
percent, year over year.
Revenue for the fourth quarter of 2007 declined 1 percent to $1.54 billion from
$1.55 billion in the year-ago quarter. Full-year 2007 revenue declined 2
percent to $5.65 billion compared with $5.76 billion in 2006. Foreign currency
exchange rates had an approximately 5 percentage-point positive impact on
revenue in the quarter and an approximately 4 percentage point positive impact
on revenue for the full year.
COMMENTS FROM PRESIDENT AND CEO JOSEPH W. MCGRATH
"In 2007, we rebuilt our profitability to the highest level since 2003," said
Joseph W. McGrath, Unisys president and chief executive officer. "By staying
focused on implementing the many elements of a complex, multi-year
repositioning plan, we closed 2007 with a strong fourth quarter and reported
full-year operating profit of $85.9 million. Excluding cost reduction charges
and retirement expense, our operating profit in 2007 increased 91 percent from
2006 levels. We also generated $247 million in operating cash flow in the
fourth quarter, up 48 percent from year-ago levels. This is strong, tangible
evidence that our repositioning is working and yielding results.
"Our revenue declined in 2007 as we de-emphasized low-margin, non-strategic
areas of the business," McGrath said. "Within our overall revenue base,
however, we are seeing a mix change as our strategic programs grow.
Collectively, these strategic programs - outsourcing, enterprise security, open
source solutions, Microsoft solutions, and real-time infrastructure solutions -
now represent the majority of our overall revenue and grew about 10 percent in
2007. As we continue to build out these programs, while further streamlining
our operations and reducing costs, we expect to continue our profit improvement
in 2008."
FOURTH-QUARTER COMPANY RESULTS
After tax expense, the company reported fourth-quarter 2007 net income of $13.8
million, or diluted earnings per share of 4 cents, compared with net income of
$21.3 million, or 6 cents per share in the year-ago quarter.
Services orders showed mid single-digit declines in the fourth quarter, driven
by order declines for infrastructure services and systems integration and
consulting. Outsourcing orders grew in the quarter. For the full year of
2007, services orders were flat compared with 2006. The company closed 2007
with $6.9 billion of firm services order backlog, up 4 percent from $6.6
billion of firm services backlog at year-end 2006.
Revenue in the United States declined 4 percent in the quarter to $629 million
while revenue in international markets increased 1 percent to $907 million. On
a constant currency basis, international revenue declined 8 percent in the
quarter.
The company's gross profit margin and operating profit margin in the fourth
quarter of 2007 improved to 27.4 percent and 4.5 percent, respectively. These
compared with gross and operating profit margins of 24.9 percent and 4.4
percent, respectively, in the fourth quarter of 2006.
FOURTH-QUARTER BUSINESS SEGMENT RESULTS
Unisys has a long-standing policy of evaluating business segment performance on
operating income exclusive of restructuring charges and unusual and non-
recurring items. Therefore, the comparisons below exclude these items.
Customer revenue in the company's services segment declined 2 percent in the
fourth quarter of 2007 compared with the year-ago period. The company reported
continued revenue growth in outsourcing, which was more than offset by revenue
declines in other services businesses. Gross profit margin in the services
business improved to 19.6 percent compared with 16.9 percent a year ago.
Services operating margin improved to 4.5 percent compared with 1.2 percent a
year ago.
Customer revenue in the company's technology segment increased 6 percent from
the fourth quarter of 2006. Within technology, the company saw strong double-
digit revenue growth for its ClearPath enterprise servers. Gross profit margin
in the technology business increased to 53.9 percent from 49.0 percent a year
ago while operating margin increased to 20.5 percent compared to 13.7 percent
in the fourth quarter of 2006.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Unisys generated $247 million of cash from operations in the fourth quarter of
2007 compared with $167 million in the year-ago quarter. The company used
approximately $28 million of cash in the fourth quarter of 2007 for
restructuring payments compared to approximately $88 million in the year-ago
period.
Capital expenditures in the fourth quarter of 2007 were $71 million compared to
$58 million in the year-ago quarter. The increase was due to investments in
outsourcing assets related to new outsourcing engagements. After deducting for
capital expenditures, Unisys generated $176 million of free cash in the quarter
compared with $109 million in the fourth quarter of 2006.
The company ended 2007 with $830 million of cash, which included the proceeds
of an offering of $210 million of 12.5% senior notes placed in the fourth
quarter. The company offered the new notes to refinance $200 million of its
7 7/8% senior notes due 2008. The 7 7/8% senior notes were redeemed on January
11, 2008.
FULL-YEAR 2007 RESULTS
For the year ended December 31, 2007, Unisys reported revenue of $5.65 billion,
a decline of 2 percent from revenue of $5.76 billion in 2006. Currency had an
approximately 4 percentage point positive impact on full-year 2007 revenue.
For the year ended December 31, 2007, Unisys reported a net loss of $79.1
million, or 23 cents per share. These results included:
* net pre-tax cost reduction charges of approximately $105 million for
workforce reductions and facility consolidations;
* a pre-tax gain of $24.7 million on the sale of the media solutions business;
* a $39.4 million tax benefit related to an income tax settlement; and
* $82.4 million of pre-tax retirement-related expense.
For the year ended December 31, 2006, Unisys reported a net loss of $278.7
million, or 81 cents per share. These results included:
* net pre-tax cost reduction charges of approximately $316 million;
* a pre-tax gain of $149.9 million on the sale of the company's shares in Nihon
Unisys Limited; and
* $153.8 million of pre-tax retirement-related expense.
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 information technology services and solutions company.
We provide consulting, systems integration, outsourcing and infrastructure
services, combined with powerful enterprise server technology. We specialize
in helping clients use information to create efficient, secure business
operations that allow them to achieve their business goals. Our consultants
and industry experts work with clients to understand their business challenges
and create greater visibility into critical linkages throughout their
operations. 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, 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. 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 continue 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.: 0129/8854
http://www.unisys.com/about__unisys/news_a_events/01298854.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
------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
Revenue
Services $1,267.6 $1,298.7 $4,846.7 $4,917.2
Technology 268.1 253.3 805.8 840.0
-------- -------- -------- --------
1,535.7 1,552.0 5,652.5 5,757.2
Costs and expenses
Cost of revenue:
Services 1,008.7 1,045.4 3,989.3 4,317.1
Technology 105.9 120.5 376.2 430.5
-------- -------- -------- --------
1,114.6 1,165.9 4,365.5 4,747.6
Selling, general and
administrative 304.3 270.5 1,022.1 1,104.7
Research and development 47.4 47.0 179.0 231.7
-------- -------- -------- --------
1,466.3 1,483.4 5,566.6 6,084.0
-------- -------- -------- --------
Operating profit (loss) 69.4 68.6 85.9 (326.8)
Interest expense 20.2 19.3 76.3 77.2
Other income
(expense), net (3.6) - (6.1) 153.1
-------- -------- -------- --------
Income (loss) before
income taxes 45.6 49.3 3.5 (250.9)
Provision for income taxes 31.8 28.0 82.6 27.8
-------- -------- -------- --------
Net income (loss) $13.8 $21.3 ($79.1) ($278.7)
======== ======== ======== ========
Earnings (loss) per share
Basic $ .04 $ .06 ($ .23) ($ .81)
======== ======== ======== ========
Diluted $ .04 $ .06 ($ .23) ($ .81)
======== ======== ======== ========
Shares used in the per share
computations (thousands):
Basic 352,502 344,935 349,661 343,747
======== ======== ======== ========
Diluted 352,936 345,627 349,661 343,747
======== ======== ======== ========
UNISYS CORPORATION
SEGMENT RESULTS
(Millions)
Elimi-
Total nations Services* Technology*
-------- -------- -------- ----------
Three Months Ended
December 31, 2007
- ------------------
Customer revenue $1,535.7 $1,267.6 $268.1
Intersegment ($58.0) 3.0 55.0
-------- -------- -------- --------
Total revenue $1,535.7 ($58.0) $1,270.6 $323.1
======== ======== ======== ========
Gross profit percent 27.4% 19.6% 53.9%
======== ======== ========
Operating profit
percent 4.5% 4.5% 20.5%
======== ======== ========
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%
======== ======== ========
Year Ended
December 31, 2007
- ------------------
Customer revenue $5,652.5 $4,846.7 $805.8
Intersegment ($206.7) 13.9 192.8
-------- -------- -------- --------
Total revenue $5,652.5 ($206.7) $4,860.6 $998.6
======== ======== ======== ========
Gross profit percent 22.8% 17.4% 47.0%
======== ======== ========
Operating profit
percent 1.5% 2.5% 8.3%
======== ======== ========
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%
======== ======== ========
* Results exclude cost reduction actions
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Millions)
December 31, December 31,
2007 2006
---------- ----------
Assets
Current assets
Cash and cash equivalents $830.2 $719.3
Accounts and notes receivable, net 1,059.2 1,164.6
Inventories
Parts and finished equipment 91.9 95.0
Work in process and materials 79.2 81.2
Deferred income taxes 15.0 30.0
Prepaid expense and other
current assets 133.7 148.4
---------- ----------
Total 2,209.2 2,238.5
---------- ----------
Properties 1,336.9 1,233.4
Less accumulated depreciation
and amortization 1,004.7 892.1
---------- ----------
Properties, net 332.2 341.3
---------- ----------
Outsourcing assets, net 409.4 401.1
Marketable software, net 268.8 304.3
Prepaid postretirement assets 497.0 250.1
Deferred income taxes 101.2 191.3
Goodwill 200.6 193.9
Other long-term assets 123.1 117.4
---------- ----------
Total $4,141.5 $4,037.9
========== ==========
Liabilities and stockholders' equity (deficit)
Current liabilities
Notes payable $0.1 $1.2
Current maturities of long-term debt 204.3 0.5
Accounts payable 419.6 460.9
Other accrued liabilities 1,253.4 1,469.1
---------- ----------
Total 1,877.4 1,931.7
---------- ----------
Long-term debt 1,058.3 1,049.1
Long-term postretirement liabilities 420.7 667.7
Other long-term liabilities 387.1 453.6
Stockholders' equity (deficit)
Common stock 3.6 3.5
Accumulated deficit (2,465.9) (2,386.8)
Other capital 4,011.9 3,945.1
Accumulated other comprehensive loss (1,151.6) (1,626.0)
---------- ----------
Stockholders' equity (deficit) 398.0 (64.2)
---------- ----------
Total $4,141.5 $4,037.9
========== ==========
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions)
Year Ended
December 31
-------------------
2007 2006
-------- --------
Cash flows from operating activities
Net loss ($79.1) ($278.7)
Add (deduct) items to reconcile
net loss to net cash provided by
operating activities:
Equity loss 4.5
Employee stock compensation expense 7.7 6.7
Company stock issued for U.S. 401(k) plan 47.4 18.3
Depreciation and amortization
of properties 115.1 120.5
Depreciation and amortization of
outsourcing assets 143.8 135.1
Amortization of marketable software 121.6 132.9
Gain on sale of assets (24.7) (153.2)
Decrease (increase) in deferred
income taxes, net 69.9 (66.5)
Decrease in receivables, net 176.2 14.2
Decrease in inventories 10.7 19.4
(Decrease) increase in accounts payable
and other accrued liabilities (286.1) 74.1
Decrease in other liabilities (103.3) (68.8)
(Increase) decrease in other assets (32.2) 52.8
Other 6.1 17.4
------- -------
Net cash provided by operating activities 173.1 28.7
------- -------
Cash flows from investing activities
Proceeds from investments 7,718.5 7,522.0
Purchases of investments (7,728.3) (7,535.9)
Investment in marketable software (94.0) (105.4)
Capital additions of properties (77.5) (70.1)
Capital additions of outsourcing assets (137.5) (81.0)
Purchases of businesses (1.2) (1.1)
Proceeds from sale of assets 29.3 380.6
------- -------
Net cash (used for) provided by
investing activities (290.7) 109.1
------- -------
Cash flows from financing activities
Net reduction in short-term borrowings (1.1) (17.0)
Minority shareholder dividends (5.8)
Proceeds from exercise of stock options 12.3 1.6
Payments of long-term debt (57.9)
Proceeds from issuance of long-term debt 204.2
Cost of credit agreement (4.6)
------- -------
Net cash provided by (used for) financing
activities 209.6 (77.9)
------- -------
Effect of exchange rate changes on cash
and cash equivalents 18.9 16.9
------- -------
Increase in cash and cash equivalents 110.9 76.8
Cash and cash equivalents, beginning of
period 719.3 642.5
------- -------
Cash and cash equivalents, end of period $830.2 $719.3
======= =======