News Release
Investor Contact:
Jack McHale, 215-986-6050
Jack.McHale@unisys.com
Media Contacts:
Jim Kerr, 215-986-5795
Jim.Kerr@unisys.com
UNISYS ANNOUNCES FOURTH-QUARTER AND FULL-YEAR 2008 FINANCIAL RESULTS
COMPANY MOVING AGGRESSIVELY ON PLAN TO SIMPLIFY BUSINESS MODEL, FOCUS RESOURCES
AND INVESTMENTS, AND STRENGTHEN COMPETITIVENESS AND PROFITABILITY
FULL-YEAR OPERATING CASH FLOW RISES 47% OVER 2007
BLUE BELL, Pa., February 10, 2009 - Unisys Corporation (NYSE: UIS) today
reported a net loss of $58.0 million, or 16 cents a share, on revenue of $1.28
billion for the fourth quarter of 2008. The results included a net cost-
reduction charge of $99.0 million related to previously announced headcount
reductions, facility consolidations, and asset write-downs related to portfolio
exits. In the fourth quarter of 2007, the company reported net income of $13.8
million, or 4 cents a share, on revenue of $1.54 billion. The 17% year-over-year
revenue decline in the quarter reflected weak global economic conditions as
well as a significant impact from foreign currency fluctuations. The stronger
U.S. dollar resulted in an approximately 7 percentage-point negative impact on
revenue in the quarter.
Unisys said that it generated $255 million of operating cash flow for the full
year of 2008, up 47 percent from 2007 levels. The company ended the year with
$6.1 billion in services backlog.
Under Chairman and CEO Ed Coleman, who joined the company last October, Unisys
is taking aggressive actions to simplify its business structure, concentrate
and focus its global resources, and enhance the company's profitability and
competitiveness.
"We are moving quickly on actions to turn around the business, return this
company to profitability, and generate cash," Coleman said. "To do this, we are
building on the company's strengths while focusing our resources in fewer
markets and portfolio areas where we can clearly differentiate ourselves and
deliver superior value for our clients. We are also working to maximize cost-
efficiency across our global operations and strengthen our balance sheet."
Unisys said it is focused on four key business priorities:
* Unisys is concentrating its investments and resources on business
opportunities in fewer, more profitable markets within the IT marketplace;
* To drive market success and margin expansion, Unisys is focused on creating
clearly differentiated value propositions within each of its focused markets
and solution offerings;
* To drive margin expansion and deliver cost-competitive services to its
clients, Unisys is focused on enhancing its services labor delivery model;
* To reduce its overhead expense, Unisys is simplifying its business,
streamlining reporting lines and processes, and creating clear lines of
accountability for results.
Tied to its business simplification efforts, the company said it is exploring
and acting upon a wide range of options to reduce costs. As previously
reported, based on opportunities that have already been identified, Unisys is
taking actions to reduce its annual cost structure by more than $225 million.
These actions are primarily in SG&A but also include delivery costs. Actions
being taken include reductions in third-party expenses, facility
consolidations, headcount reductions of approximately 1,300 positions
worldwide, and a suspension of company matching contributions to the U.S.
401(k) plan. Based on the timing of actions, Unisys expects about 90% of the
total $225 million of expense savings to flow through its financial results in
2009.
"While this looks to be a difficult year for organizations operating in the
current economic environment, we are firmly committed to showing clear,
demonstrable progress in 2009," Coleman said.
OVERALL FOURTH-QUARTER HIGHLIGHTS
Revenue in the United States declined 9 percent in the fourth quarter to $575
million. Revenue in international markets declined 22 percent to $705 million.
On a constant currency basis, international revenue declined 11 percent in the
quarter.
The company's fourth-quarter 2008 results include the $99.0 million of net cost-
reduction charges as well as $6.5 million of pretax retirement-related income.
Results in the fourth quarter of 2007 included $55.1 million of net cost-
reduction charges and $11.6 million of pretax retirement-related expense.
Including these items, Unisys reported an overall gross profit margin of 18.6
percent and operating profit margin of (3.7) percent in the fourth quarter of
2008. These compared to a gross margin of 27.4 percent and an operating profit
margin of 4.5 percent in the fourth quarter of 2007.
FOURTH-QUARTER BUSINESS SEGMENT RESULTS
Note: 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 12 percent in the
fourth quarter of 2008 compared with the year-ago quarter. Reflecting the lower
revenue volumes, gross profit margin in the services business declined to 16.9
percent in the fourth quarter compared with 19.6 percent a year ago, while
services operating margin declined to 3.2 percent compared with 4.5 percent a
year ago.
Services orders showed double-digit declines in the fourth quarter. Services
order backlog at December 31, 2008 was $6.1 billion, down 11 percent from $6.9
billion at December 31, 2007. On a constant currency basis, year-ending 2008
services backlog was down 1% from year-ending 2007 levels.
Customer revenue in the company's technology segment declined 40 percent from
the fourth quarter of 2007. The revenue decline primarily reflected lower sales
of ClearPath mainframes, following strong sales in the third quarter of 2008.
The prior-year results included $18.8 million of quarterly royalty revenue from
an intellectual property agreement with Nihon Unisys Limited (NUL) that ended
in March 2008. Reflecting the lower levels of ClearPath sales, gross profit
margin in the technology business declined to 43.7 percent compared with 53.9
percent in the year-ago quarter, while technology operating margin declined to
6.7 percent compared with 20.5 percent in the fourth quarter of 2007.
CASH FLOW HIGHLIGHTS
Unisys generated $138 million of cash from operations in the fourth quarter of
2008 compared with $247 million of cash flow from operations in the year-ago
quarter. The company used approximately $11 million of cash in the current
quarter for restructuring payments compared to approximately $28 million in the
year-ago period.
Capital expenditures for full-year 2008 declined to $294 million compared to
$309 million in 2007. Capital expenditures in the fourth quarter of 2008
increased to $80 million compared to $71 million in the year-ago quarter; the
increase in the quarter was driven by initial startup on two new U.S. public
sector clients. After deducting for capital expenditures, Unisys generated $58
million of free cash in the quarter compared with free cash flow of $176
million in the fourth quarter of 2007.
For the full year of 2008, Unisys generated $255 million of cash from
operations compared with $173 million of cash flow from operations in full-year
2007. The company used approximately $60 million of cash in 2008 for
restructuring payments compared to approximately $152 million in 2007. After
capital expenditures, Unisys used $39 million of free cash in 2008 compared
with free cash usage of $136 million in 2007.
Unisys ended 2008 with $544 million of cash on hand.
FULL-YEAR 2008 RESULTS
For the full year of 2008, the company reported a net loss of $130.1 million,
or 36 cents a share, on revenue of $5.23 billion. These results include $103.1
million of net pre-tax cost reduction charges and $3.8 million of pre-tax
retirement-related income.
For the year ended December 31, 2007, Unisys reported a net loss of $79.1
million, or 23 cents per share, on revenue of $5.65 billion. The full-year 2007
results included:
* net pre-tax cost reduction charges of approximately $105 million;
* $82.4 million of pre-tax retirement-related expense;
* a pre-tax gain of $24.7 million on the sale of the company's media solutions
business; and
* a $39.4 million tax benefit related to an income tax settlement.
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 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. In particular,
statements concerning anticipated reductions in the company's cost structure
assume that the company will fully and successfully implement the associated
cost reduction actions. The expected amount of anticipated cost savings is also
subject to currency exchange rate fluctuations with regard to actions taken
outside the U.S. The expense savings expected in 2009 are subject to the risk
that the company may not implement the related actions as quickly or as fully
as currently planned. Other risks and uncertainties that could affect the
company's future results include general economic and business conditions,
particularly the current weak global economy and tight credit markets; the
possibility that the company's cash usage will be in excess of current
estimates; 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.: 0210/8955
http://www.unisys.com/about__unisys/news_a_events/02108955.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 Year
Ended December 31 Ended December 31
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Revenue
Services $1,117.4 $1,267.6 $4,603.6 $4,846.7
Technology 162.1 268.1 629.6 805.8
-------- -------- -------- --------
1,279.5 1,535.7 5,233.2 5,652.5
Costs and expenses
Cost of revenue:
Services 951.7 1,008.7 3,765.9 3,989.3
Technology 90.1 105.9 340.6 376.2
-------- -------- -------- --------
1,041.8 1,114.6 4,106.5 4,365.5
Selling, general and
administrative 255.1 304.3 957.0 1,022.1
Research and development 30.4 47.4 129.0 179.0
-------- -------- -------- --------
1,327.3 1,466.3 5,192.5 5,566.6
-------- -------- -------- --------
Operating profit (loss) (47.8) 69.4 40.7 85.9
Interest expense 20.8 20.2 85.1 76.3
Other income
(expense), net (8.7) (3.6) (32.6) (6.1)
-------- -------- -------- --------
Income (loss) before
income taxes (77.3) 45.6 (77.0) 3.5
Provision (benefit) for
income taxes (19.3) 31.8 53.1 82.6
-------- -------- -------- --------
Net income (loss) ($58.0) $13.8 ($130.1) ($79.1)
======== ======== ======== ========
Earnings (loss) per share
Basic ($ .16) $ .04 ($ .36) ($ .23)
======== ======== ======== ========
Diluted ($ .16) $ .04 ($ .36) ($ .23)
======== ======== ======== ========
Shares used in the per share
computations (thousands):
Basic 365,201 352,502 359,777 349,661
======== ======== ======== ========
Diluted 365,201 352,936 359,777 349,661
======== ======== ======== ========
UNISYS CORPORATION
SEGMENT RESULTS
(Unaudited)
(Millions)
Elimi-
Total nations Services* Technology*
-------- -------- -------- ----------
Three Months Ended
December 31, 2008
- ------------------
Customer revenue $1,279.5 $1,117.4 $162.1
Intersegment ($69.8) 4.5 65.3
-------- -------- -------- --------
Total revenue $1,279.5 ($69.8) $1,121.9 $227.4
======== ======== ======== ========
Gross profit percent 18.6% 16.9% 43.7%
======== ======== ========
Operating profit (loss)
percent (3.7%) 3.2% 6.7%
======== ======== ========
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%
======== ======== ========
Year Ended
December 31, 2008
- ------------------
Customer revenue $5,233.2 $4,603.6 $629.6
Intersegment ($232.0) 13.9 218.1
-------- -------- -------- --------
Total revenue $5,233.2 ($232.0) $4,617.5 $847.7
======== ======== ======== ========
Gross profit percent 21.5% 18.1% 43.5%
======== ======== ========
Operating profit
percent 0.8% 3.0% 4.1%
======== ======== ========
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%
======== ======== ========
* Results exclude cost reduction actions
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Millions)
December 31,
2008 December 31,
(Unaudited) 2007
---------- ----------
Assets
Current assets
Cash and cash equivalents $544.0 $830.2
Accounts and notes receivable, net 818.5 1,059.2
Inventories
Parts and finished equipment 64.7 91.9
Work in process and materials 70.7 79.2
Deferred income taxes 23.8 18.0
Prepaid expense and other
current assets 116.7 133.7
---------- ----------
Total 1,638.4 2,212.2
---------- ----------
Properties 1,284.8 1,336.9
Less accumulated depreciation
and amortization 1,008.3 1,004.7
---------- ----------
Properties, net 276.5 332.2
---------- ----------
Outsourcing assets, net 314.9 409.4
Marketable software, net 202.0 268.8
Prepaid postretirement assets 20.7 497.0
Deferred income taxes 87.6 93.8
Goodwill 189.4 200.6
Other long-term assets 94.6 123.1
---------- ----------
Total $2,824.1 $4,137.1
========== ==========
Liabilities and stockholders' equity
Current liabilities
Notes payable $0.0 $0.1
Current maturities of long-term debt 1.5 204.3
Accounts payable 379.2 419.6
Other accrued liabilities 1,045.7 1,272.0
---------- ----------
Total 1,426.4 1,896.0
---------- ----------
Long-term debt 1,059.1 1,058.3
Long-term postretirement liabilities 1,497.0 420.7
Other long-term liabilities 295.9 395.5
Stockholders' equity
Common stock 3.7 3.6
Accumulated deficit (2,596.0) (2,465.9)
Other capital 4,054.5 4,011.8
Accumulated other comprehensive loss (2,916.5) (1,182.9)
---------- ----------
Stockholders' (deficit) equity (1,454.3) 366.6
---------- ----------
Total $2,824.1 $4,137.1
========== ==========
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Millions)
Year Ended
December 31
--------------------
2008 2007
-------- --------
Cash flows from operating activities
Net loss ($130.1) ($79.1)
Add (deduct) items to reconcile
net loss to net cash provided by
operating activities:
Employee stock compensation expense 1.1 7.7
Company stock issued for U.S. 401(k) plan 41.8 47.4
Depreciation and amortization
of properties 105.7 115.1
Depreciation and amortization of
outsourcing assets 162.6 143.8
Amortization of marketable software 149.7 121.6
Disposals of capital assets 12.9 14.2
Gain on sale of assets (24.7)
(Increase) decrease in deferred
income taxes, net (9.9) 82.7
Decrease in receivables, net 186.7 176.2
Decease in inventories 27.2 10.7
Decrease in accounts payable
and other accrued liabilities (110.9) (298.9)
Decrease in other liabilities (66.7) (103.3)
Increase in other assets (119.7) (32.2)
Other 4.2 (8.1)
------- -------
Net cash provided by
operating activities 254.6 173.1
------- -------
Cash flows from investing activities
Proceeds from investments 6,208.2 7,718.5
Purchases of investments (6,190.3) (7,728.3)
Investment in marketable software (84.5) (94.0)
Capital additions of properties (76.9) (77.5)
Capital additions of outsourcing assets (133.1) (137.5)
Purchases of businesses (6.4) (1.2)
Proceeds from sale of businesses 29.3
------- -------
Net cash used for investing activities (283.0) (290.7)
------- -------
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)
Proceeds from issuance of long-term debt 204.2
Financing fees (.8)
------- -------
Net cash (used for) provided by financing
activities (200.9) 209.6
------- -------
Effect of exchange rate changes on cash
and cash equivalents (56.9) 18.9
------- -------
(Decrease) increase in cash and cash
equivalents (286.2) 110.9
Cash and cash equivalents, beginning of
period 830.2 719.3
------- -------
Cash and cash equivalents, end of period $544.0 $830.2
======= =======