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 Third-Quarter 2008 Financial Results
BLUE BELL, Pa., October 30, 2008 - Unisys Corporation (NYSE: UIS) today
reported a net loss of $34.7 million, or 10 cents a share, on revenue of $1.31
billion for the third quarter of 2008. In the year-ago quarter, the company
reported a net loss of $31.0 million, or 9 cents a share, on revenue of $1.39
billion. The third-quarter 2008 results include $3.7 million of pretax
retirement-related income compared with $22.8 million of pretax retirement-
related expense in the third quarter of 2007. Foreign currency exchange rates
had an approximately 2 percentage-point favorable impact on revenue in the
current quarter.
"We saw an impact on third-quarter demand from economic uncertainties in our
key commercial markets, particularly in financial services," said Unisys Chief
Financial Officer Janet Haugen. "Clients reacted to tight credit conditions by
reducing IT spending. We also saw a slowdown in our federal business due to
slower government spending. However, we saw growth in our non-federal public
sector business and strong sales of our ClearPath family of enterprise servers.
We also generated free cash flow in the quarter - a key focus for the company.
But we expect the environment to remain tough and we will reduce spending as we
work through this challenging economic period."
Unisys said the company continues to evaluate actions to unlock value in the
business and drive shareholder value. Ed Coleman, who joined Unisys as
chairman and CEO on October 7, is in the process of reviewing the company's
strategy, businesses and operations with the goal of building on Unisys
strengths and creating a profitable, growing market leader in targeted areas of
the IT industry.
"Although I've just recently joined Unisys, I believe there is significant
unrealized value in this company," Coleman said. "In speaking with our
employees, I am extremely impressed with their skills, dedication, and
commitment to clients. As I speak with clients and other stakeholders, I'm
convinced that Unisys has tremendous assets to build on, including a great
client base and strong capabilities in key segments of the IT industry. We
need to better concentrate those assets and drive profitable growth by
providing superior client service and solutions. That is my focus and
priority. I look forward to working with the Unisys team to realize the
potential of this company for the benefit of all stakeholders."
Revenue in the United States declined 8 percent in the quarter to $560 million.
Revenue in international markets declined 4 percent to $752 million. On a
constant currency basis, international revenue declined 9 percent in the
quarter.
The company reported an overall gross profit margin of 22.2 percent and
operating profit margin of 2.9 percent in the third quarter of 2008. These
compared to a gross margin of 22.2 percent and operating profit margin of 3.1
percent in the third quarter of 2007.
THIRD-QUARTER BUSINESS SEGMENT RESULTS
Customer revenue in the company's services segment declined 5 percent in the
third quarter of 2008 compared with the year-ago period. Gross profit margin
in the services business was 17.6 percent compared with 17.7 percent a year ago
while services operating margin declined to 3.1 percent compared with 3.6
percent a year ago.
Services orders showed double-digit declines in the third quarter. Services
order backlog at September 30, 2008 was $6.50 billion, down 9 percent from
$7.17 billion at June 30, 2008, primarily reflecting changes in foreign
currency rates.
Customer revenue in the company's technology segment declined 9 percent from
the third quarter of 2007. Excluding $18.8 million of quarterly royalty
revenue in the year-ago period from a recently ended intellectual property
agreement with Nihon Unisys Limited (NUL), technology customer revenue grew
about 2 percent in the quarter. Double-digit growth in ClearPath mainframe
revenue offset revenue declines in specialized technology. Gross profit margin
in the technology business increased to 47.5 percent compared with 44.6 percent
a year ago, while technology operating margin increased to 11.0 percent
compared with 4.0 percent in the third quarter of 2007.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Unisys generated $114 million of cash from operations in the third quarter of
2008 compared with $7 million of cash flow from operations in the year-ago
quarter. The company used approximately $6 million of cash in the third
quarter of 2008 for restructuring payments compared to approximately $37
million in the year-ago period.
Capital expenditures in the third quarter of 2008 were $78 million compared to
$71 million in the year-ago quarter. After deducting for capital expenditures,
Unisys generated $36 million of free cash in the quarter compared with free
cash usage of $64 million in the third quarter of 2007.
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.
We provide consulting, systems integration, outsourcing and infrastructure
services, combined with powerful enterprise server technology. We specialise
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 company's ability to successfully
implement its repositioning strategy; 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 retain significant clients; the
company's ability to grow outsourcing 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 and maintenance on those servers; the risk that the
company's contracts may not be as profitable as expected or provide the
expected level of revenues and that contracts with U.S. governmental agencies
may be subject to audits, criminal penalties, sanctions and other expenses and
fines; the risk that the company may face damage to its reputation or legal
liability if its clients are not satisfied with its services or products; the
performance and capabilities of third parties with whom the company has
commercial relationships; the risks of doing business internationally; the
potential business and financial risk in implementing future acquisitions or
dispositions; the potential for infringement claims to be asserted against the
company or its clients and the possibility that pending litigation could affect
the company's results of operations or cash flow. 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.: 0723/8899
http://www.unisys.com/about__unisys/news_a_events/07238899.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
(Unaudited)
(Millions, except per share data)
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Revenue
Services $1,152.1 $1,217.6 $3,486.2 $3,579.1
Technology 160.3 175.5 467.5 537.7
-------- -------- -------- --------
1,312.4 1,393.1 3,953.7 4,116.8
Costs and expenses
Cost of revenue:
Services 937.6 994.5 2,814.2 2,980.6
Technology 82.8 89.5 250.5 270.3
-------- -------- -------- --------
1,020.4 1,084.0 3,064.7 3,250.9
Selling, general and
administrative 218.4 225.8 701.9 717.8
Research and development 35.7 39.7 98.6 131.6
-------- -------- -------- --------
1,274.5 1,349.5 3,865.2 4,100.3
-------- -------- -------- --------
Operating profit 37.9 43.6 88.5 16.5
Interest expense 21.5 18.5 64.3 56.1
Other income
(expense), net (6.1) (19.3) (23.9) (2.5)
-------- -------- -------- --------
Income (loss) before
income taxes 10.3 5.8 0.3 (42.1)
Provision for income taxes 45.0 36.8 72.4 50.8
-------- -------- -------- --------
Net loss ($34.7) ($31.0) ($72.1) ($92.9)
======== ======== ======== ========
Loss per share
Basic ($ .10) ($ .09) ($ .20) ($ .27)
======== ======== ======== ========
Diluted ($ .10) ($ .09) ($ .20) ($ .27)
======== ======== ======== ========
Shares used in the per share
computations (thousands):
Basic 360,944 350,765 357,969 348,715
======== ======== ======== ========
Diluted 360,944 350,765 357,969 348,715
======== ======== ======== ========
UNISYS CORPORATION
SEGMENT RESULTS
(Unaudited)
(Millions)
Elimi-
Total nations Services* Technology*
-------- -------- -------- ----------
Three Months Ended
September 30, 2008
- ------------------
Customer revenue $1,312.4 $1,152.1 $160.3
Intersegment ($67.5) 4.0 63.5
-------- -------- -------- --------
Total revenue $1,312.4 ($67.5) $1,156.1 $223.8
======== ======== ======== ========
Gross profit percent 22.2% 17.6% 47.5%
======== ======== ========
Operating profit
percent 2.9% 3.1% 11.0%
======== ======== ========
Three Months Ended
September 30, 2007
- ------------------
Customer revenue $1,393.1 $1,217.6 $175.5
Intersegment ($61.2) 3.4 57.8
-------- -------- -------- --------
Total revenue $1,393.1 ($61.2) $1,221.0 $233.3
======== ======== ======== ========
Gross profit percent 22.2% 17.7% 44.6%
======== ======== ========
Operating profit
Percent 3.1% 3.6% 4.0%
======== ======== ========
Nine Months Ended
September 30, 2008
- ------------------
Customer revenue $3,953.7 $3,486.2 $467.5
Intersegment ($162.2) 9.4 152.8
-------- -------- -------- --------
Total revenue $3,953.7 ($162.2) $3,495.6 $620.3
======== ======== ======== ========
Gross profit percent 22.5% 18.4% 43.4%
======== ======== ========
Operating profit
Percent 2.2% 2.9% 3.1%
======== ======== ========
Nine Months Ended
September 30, 2007
- ------------------
Customer revenue $4,116.8 $3,579.1 $537.7
Intersegment ($148.7) 10.9 137.8
-------- -------- -------- --------
Total revenue $4,116.8 ($148.7) $3,590.0 $675.5
======== ======== ======== ========
Gross profit percent 21.0% 16.7% 43.7%
======== ======== ========
Operating profit
Percent 0.4% 1.7% 2.4%
======== ======== ========
* Results exclude cost reduction actions
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Millions)
September 30,
2008 December 31,
(Unaudited) 2007
---------- ----------
Assets
Current assets
Cash and cash equivalents $493.8 $830.2
Accounts and notes receivable, net 853.3 1,059.2
Inventories
Parts and finished equipment 78.5 91.9
Work in process and materials 72.8 79.2
Deferred income taxes 18.0 18.0
Prepaid expense and other
current assets 145.6 133.7
---------- ----------
Total 1,662.0 2,212.2
---------- ----------
Properties 1,307.8 1,336.9
Less accumulated depreciation
and amortization 1,013.2 1,004.7
---------- ----------
Properties, net 294.6 332.2
---------- ----------
Outsourcing assets, net 348.9 409.4
Marketable software, net 244.2 268.8
Prepaid postretirement assets 603.8 497.0
Deferred income taxes 93.8 93.8
Goodwill 195.9 200.6
Other long-term assets 120.2 123.1
---------- ----------
Total $3,563.4 $4,137.1
========== ==========
Liabilities and stockholders' equity
Current liabilities
Notes payable $0.0 $0.1
Current maturities of long-term debt 2.2 204.3
Accounts payable 337.5 419.6
Other accrued liabilities 1,092.1 1,272.0
---------- ----------
Total 1,431.8 1,896.0
---------- ----------
Long-term debt 1,059.7 1,058.3
Long-term postretirement liabilities 370.3 420.7
Other long-term liabilities 321.5 395.5
Stockholders' equity
Common stock 3.6 3.6
Accumulated deficit (2,538.0) (2,465.9)
Other capital 4,045.9 4,011.8
Accumulated other comprehensive loss (1,131.4) (1,182.9)
---------- ----------
Stockholders' equity 380.1 366.6
---------- ----------
Total $3,563.4 $4,137.1
========== ==========
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Millions)
Nine Months Ended
September 30
--------------------
2008 2007
-------- --------
Cash flows from operating activities
Net loss ($72.1) ($92.9)
Add (deduct) items to reconcile
net loss to net cash provided by
(used for) operating activities:
Employee stock compensation expense (.2) 8.6
Company stock issued for U.S. 401(k) plan 34.2 34.3
Depreciation and amortization
of properties 80.4 83.9
Depreciation and amortization of
outsourcing assets 126.0 102.4
Amortization of marketable software 90.0 90.1
Disposals of capital assets 8.6 3.8
Gain on sale of assets (23.4)
Decrease in deferred income taxes, net 8.9
Decrease in receivables, net 175.9 111.7
Decease (increase) in inventories 16.7 (15.6)
Decrease in accounts payable
and other accrued liabilities (215.9) (286.8)
Decrease in other liabilities (27.9) (68.8)
Increase in other assets (108.7) (28.7)
Other 9.4 (1.7)
------- -------
Net cash provided by (used for)
operating activities 116.4 (74.2)
------- -------
Cash flows from investing activities
Proceeds from investments 4,838.1 5,785.7
Purchases of investments (4,847.9) (5,793.4)
Investment in marketable software (65.9) (73.0)
Capital additions of properties (51.8) (56.4)
Capital additions of outsourcing assets (96.6) (108.4)
Purchases of businesses (2.3) (2.0)
Proceeds from sale of businesses 28.0
------- -------
Net cash used for investing activities (226.4) (219.5)
------- -------
Cash flows from financing activities
Net reduction in short-term borrowings (.1) (1.1)
Minority shareholder dividends (5.8)
Proceeds from exercise of stock options 12.3
Payments of long-term debt (200.0)
Financing fees (.8)
------- -------
Net cash (used for) provided by financing
activities (200.9) 5.4
------- -------
Effect of exchange rate changes on cash
and cash equivalents (25.5) 17.5
------- -------
Decrease in cash and cash
equivalents (336.4) (270.8)
Cash and cash equivalents, beginning of
period 830.2 719.3
------- -------
Cash and cash equivalents, end of period $493.8 $448.5
======= =======