News Release
Investor Contact:
Niels Christensen, 215-986-6651
Niels.Christensen@unisys.com
Media Contact:
Jim Kerr, 215-986-5795
Jim.Kerr@unisys.com
UNISYS ANNOUNCES SECOND-QUARTER 2014 FINANCIAL RESULTS
BLUE BELL, Pa., July 22, 2014 - Unisys Corporation (NYSE: UIS) today
reported a second-quarter 2014 net loss of $12.1 million, or a loss of
24 cents per diluted share, which included $17.9 million of pension
expense. In the second quarter of 2013, the company reported net income
of $20.4 million, or 46 cents per diluted share, which included $21.9
million of pension expense. Excluding pension expense in both periods,
non-GAAP earnings per diluted share(1) in the second quarter of 2014 was
11 cents compared with 91 cents in the second quarter of 2013.
Second-quarter 2014 revenue declined 6 percent to $806 million from $859
million in the year-ago quarter. Foreign currency translations had a one
percentage-point positive impact on year-over-year revenue comparisons in
the quarter. On a sequential basis, second-quarter 2014 revenue was up 6
percent from $762 million in the first quarter of 2014.
"Our second-quarter 2014 results were impacted by lower sales of our
flagship ClearPath family of enterprise software and servers, which can
vary significantly from quarter to quarter based on the timing of client
transactions," said Unisys Chairman and CEO Ed Coleman. "However, we were
pleased to see sequential improvement in results over the first quarter
of 2014 and we look for a strong second half of 2014 in our technology
business driven by sales of ClearPath as well as increased traction in
our Stealth cybersecurity and Forward! server products.
"In our services business, we saw strong order growth in the quarter and
were pleased by recent wins such as a significant contract with the
Commonwealth of Pennsylvania to deliver one of the largest secure, cloud-
based, on-demand IT computing implementations by a U.S. state
government," Coleman said. "This contract is one more example of Unisys
providing innovative, modern mission-critical solutions in the
marketplace."
SECOND-QUARTER COMPANY AND BUSINESS SEGMENT HIGHLIGHTS
Second-quarter 2014 North America revenue declined 10 percent while
international revenue declined 3 percent from the second quarter of 2013.
On a constant currency(2) basis, international revenue declined 4 percent
compared with the second quarter of 2013 as declines in Asia-Pacific
offset growth in Europe and Latin America.
On lower revenue, second-quarter 2014 gross profit margin declined to
20.5 percent from 23.4 percent in the second quarter of 2013. Operating
expenses (SG&A and R&D expenses) decreased 8 percent from the year-ago
period. The company reported a second-quarter 2014 operating profit
of $15.8 million, or 2.0 percent of revenue, compared with an operating
profit of $38.0 million, or 4.4 percent of revenue, in the second quarter
of 2013.
Second-quarter 2014 services revenue declined 4 percent from the second
quarter of 2013 as growth in outsourcing and core maintenance was more
than offset by declines in systems integration and infrastructure
services. Reflecting the lower services revenue, second-quarter 2014
services gross profit margin declined to 16.8 percent from 18.2 percent a
year ago. On reduced operating expenses, services operating profit margin
was consistent year-over-year at 4.0 percent.
Second-quarter 2014 services orders showed substantial gains both
sequentially and from year-ago levels driven by growth in outsourcing
orders. Services backlog at June 30, 2014 was $4.7 billion, down 2
percent from December 31, 2013 levels.
Second-quarter 2014 technology revenue declined 21 percent from the
second quarter of 2013 driven primarily by lower sales of ClearPath
enterprise servers and software. Reflecting the lower ClearPath sales,
second-quarter 2014 technology gross profit margin declined to 50.2
percent compared with 59.4 percent in the year-ago quarter and technology
operating profit margin declined to 1.9 percent compared with 23.9
percent in the year-ago quarter.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Unisys generated $3 million of cash from operations in the second quarter
of 2014, including $48 million of pension contributions. In the second
quarter of 2013, the company generated $16 million of cash from
operations, which included $35 million of pension contributions. Capital
expenditures in the second quarter of 2014 were $45 million compared with
$38 million in the year-ago quarter. After capital expenditures, the
company used $42 million of free cash(3) compared with $22 million of
free cash usage in the second quarter of 2013. Free cash flow before
pension contributions was $6 million in the second quarter of 2014
compared with $13 million in the year-ago quarter.
During the second quarter of 2014 the company returned $13.1 million to
shareholders through the repurchase of common shares. Overall, through
June 30, 2014 the company has repurchased a total of $25.7 million of
common shares under a $50 million share repurchase authorization that
expires on December 31, 2014.
At June 30, 2014, the company reported a cash balance of $574 million and
total debt of $210 million.
NON-GAAP INFORMATION
Unisys reports its results in accordance with Generally Accepted
Accounting Principles (GAAP) in the United States. However, in an effort
to provide investors with additional perspective regarding the company's
results as determined by GAAP, the company also discusses, in its
earnings press release and/or earnings presentation materials, non-GAAP
information which management believes provides useful information to
investors. Our management uses supplemental non-GAAP financial measures
internally to understand, manage and evaluate our business and assess
operational alternatives. These non-GAAP measures may include non-GAAP
earnings per diluted share, free cash flow, free cash flow before pension
contributions, and constant currency.
Our non-GAAP measures are not intended to be considered in isolation or
as substitutes for results determined in accordance with GAAP and should
be read only in conjunction with our consolidated financial statements
prepared in accordance with GAAP. (See GAAP to non-GAAP reconciliations
attached.)
(1) Non-GAAP earnings per diluted share - The company recorded pension
expense of $17.9 million and $21.9 million during the second quarters of
2014 and 2013, respectively. In an effort to provide investors with a
perspective on the company's earnings without these expenses, they are
excluded from the non-GAAP earnings per diluted share calculations.
(2) Constant currency - The company refers to growth rates at constant
currency or adjusting for currency so that the business results can be
viewed without the impact of fluctuations in foreign currency exchange
rates to facilitate comparisons of the company's business performance
from one period to another. Constant currency for revenue is calculated
by retranslating current and prior period results at a consistent rate.
This approach is based on the pricing currency for each country which is
typically the functional currency. Generally, when the dollar either
strengthens or weakens against other currencies, the growth at constant
currency rates will be higher or lower, respectively, than growth
reported at actual exchange rates.
(3) Free cash flow - To better understand the trends in our business, we
believe that it is helpful to present free cash flow, which we define as
cash flow from operations less capital expenditures. Management believes
this measure gives investors an additional perspective on cash flow from
operating activities in excess of amounts required for reinvestment.
Because of the significance of the company's pension funding obligations,
free cash flow before pension funding is also provided.
CONFERENCE CALL
Unisys will hold a conference call today at 5:30 p.m. Eastern Time to
discuss its results. The listen-only Webcast, as well as the accompanying
presentation materials, can be accessed 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 company. We provide a
portfolio of IT services, software, and technology that solves critical
problems for clients. We specialize in helping clients secure their
operations, increase the efficiency and utilization of their data
centers, enhance support to their end users and constituents, and
modernize their enterprise applications. To provide these services and
solutions, we bring together offerings and capabilities in outsourcing
services, systems integration and consulting services, infrastructure
services, maintenance services, and high-end server technology. With
approximately 23,000 employees, Unisys serves commercial organizations
and government agencies throughout the world. 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 the company's ability to drive
profitable growth in consulting and systems integration; the company's
ability to take on, successfully implement and grow outsourcing
operations; market demand for the company's high-end enterprise servers
and maintenance on those servers; the potential adverse effects of
aggressive competition in the information services and technology
marketplace; the company's ability to retain significant clients; the
company's ability to effectively anticipate and respond to volatility and
rapid technological change in its industry; the adverse effects of global
economic conditions; the company's significant pension obligations and
potential requirements to make significant cash contributions to its
defined benefit pension plans; the success of the company's program to
reduce costs, focus its global resources and simplify its business
structure; the risks 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 subject it 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 risk that
breaches of data security could expose the company to legal liability and
could harm its business and reputation; the performance and capabilities
of third parties with whom the company has commercial relationships; the
risks of doing business internationally when more than half of the
company's revenue is derived from international operations; the company's
ability to access capital and credit markets to address its liquidity
needs; the potential for intellectual property infringement claims to be
asserted against the company or its clients; the possibility that pending
litigation could affect the company's results of operations or cash flow;
the business and financial risk in implementing future dispositions or
acquisitions; and the company's consideration of all available
information following the end of the quarter and before the filing of the
Form 10-Q and the possible impact of this subsequent event information on
its financial statements for the reporting period. Additional discussion
of factors that could affect the company's future results is contained in
its periodic filings with the Securities and Exchange Commission. The
company assumes no obligation to update any forward-looking statements.
####
RELEASE NO.: 0722/9267
Unisys is a registered trademark of Unisys Corporation. Any other brand
or product referenced herein is acknowledged to be a trademark or
registered trademark of its respective holders.
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Millions, except per share data)
Three Months Six Months
Ended June 30 Ended June 30
------------------ ------------------
2014 2013 2014 2013
-------- -------- -------- --------
Revenue
Services $712.9 $739.7 $1,403.8 $1,462.7
Technology 93.5 118.9 164.3 205.8
-------- -------- -------- --------
806.4 858.6 1,568.1 1,668.5
Costs and expenses
Cost of revenue:
Services 600.2 614.0 1,192.4 1,216.8
Technology 41.0 43.9 77.5 90.2
-------- -------- -------- --------
641.2 657.9 1,269.9 1,307.0
Selling, general and
administrative 133.6 144.9 272.1 287.1
Research and development 15.8 17.8 30.2 34.8
-------- -------- -------- --------
790.6 820.6 1,572.2 1,628.9
-------- -------- -------- --------
Operating profit (loss) 15.8 38.0 (4.1) 39.6
Interest expense 2.3 2.6 4.3 5.3
Other income (expense), net (2.5) 14.1 (12.3) 9.2
-------- -------- -------- --------
Income (loss) before
income taxes 11.0 49.5 (20.7) 43.5
Provision for income taxes 19.9 22.7 35.9 44.1
-------- -------- -------- --------
Consolidated net
income (loss) (8.9) 26.8 (56.6) (0.6)
Net income attributable to
noncontrolling interests 3.2 2.3 6.3 4.8
-------- -------- -------- --------
Net income (loss) attributable
to Unisys Corporation (12.1) 24.5 (62.9) (5.4)
Preferred stock dividend - 4.1 2.7 8.1
-------- -------- -------- --------
Net income (loss) attributable
to Unisys Corporation
common shareholders ($12.1) $20.4 ($65.6) ($13.5)
======== ======== ======== ========
Earnings (loss) per common share attributable
to Unisys Corporation
Basic ($ .24) $ .47 ($ 1.35) ($ .31)
======== ======== ======== ========
Diluted ($ .24) $ .46 ($ 1.35) ($ .31)
======== ======== ======== ========
Shares used in the per share
computations (thousands):
Basic 50,843 43,780 48,593 43,918
Diluted 50,843 44,195 48,593 43,918
UNISYS CORPORATION
SEGMENT RESULTS
(Unaudited)
(Millions)
Elimi-
Total nations Services Technology
-------- -------- -------- ----------
Three Months Ended
June 30, 2014
------------------
Customer revenue $806.4 $712.9 $93.5
Intersegment ($13.8) 0.1 13.7
-------- -------- -------- --------
Total revenue $806.4 ($13.8) $713.0 $107.2
======== ======== ======== ========
Gross profit percent 20.5% 16.8% 50.2%
======== ======== ========
Operating profit
percent 2.0% 4.0% 1.9%
======== ======== ========
Three Months Ended
June 30, 2013
------------------
Customer revenue $858.6 $739.7 $118.9
Intersegment ($16.9) 0.4 16.5
-------- -------- -------- --------
Total revenue $858.6 ($16.9) $740.1 $135.4
======== ======== ======== ========
Gross profit percent 23.4% 18.2% 59.4%
======== ======== ========
Operating profit
percent 4.4% 4.0% 23.9%
======== ======== ========
Six Months Ended
June 30, 2014
------------------
Customer revenue $1,568.1 $1,403.8 $164.3
Intersegment ($23.4) 0.3 23.1
-------- -------- -------- --------
Total revenue $1,568.1 ($23.4) $1,404.1 $187.4
======== ======== ======== ========
Gross profit percent 19.0% 16.3% 46.9%
======== ======== ========
Operating profit
(loss) percent (0.3%) 3.0% (8.0%)
======== ======== ========
Six Months Ended
June 30, 2013
------------------
Customer revenue $1,668.5 $1,462.7 $205.8
Intersegment ($34.2) 0.9 33.3
-------- -------- -------- --------
Total revenue $1,668.5 ($34.2) $1,463.6 $239.1
======== ======== ======== ========
Gross profit percent 21.7% 17.8% 53.5%
======== ======== ========
Operating profit
percent 2.4% 3.5% 13.6%
======== ======== ========
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions)
June 30, December 31,
2014 2013
---------- ----------
Assets
Current assets
Cash and cash equivalents $574.2 $639.8
Accounts and notes receivable, net 515.7 683.1
Inventories
Parts and finished equipment 27.2 32.8
Work in process and materials 22.5 22.3
Deferred income taxes 17.8 24.1
Prepaid expense and other
current assets 144.3 138.7
---------- ----------
Total 1,301.7 1,540.8
---------- ----------
Properties 1,136.5 1,095.5
Less accumulated depreciation
and amortization 956.9 920.8
---------- ----------
Properties, net 179.6 174.7
---------- ----------
Outsourcing assets, net 107.2 115.5
Marketable software, net 142.3 129.1
Prepaid postretirement assets 120.5 83.7
Deferred income taxes 121.6 112.3
Goodwill 190.1 188.7
Other long-term assets 173.1 165.2
---------- ----------
Total $2,336.1 $2,510.0
========== ==========
Liabilities and deficit
Current liabilities
Notes payable $0.1 $0.0
Accounts payable 223.1 246.7
Deferred revenue 351.9 402.4
Other accrued liabilities 356.9 375.7
---------- ----------
Total 932.0 1,024.8
---------- ----------
Long-term debt 210.0 210.0
Long-term postretirement liabilities 1,599.6 1,697.2
Long-term deferred revenue 114.1 122.7
Other long-term liabilities 108.9 119.2
Commitments and contingencies
Total deficit (628.5) (663.9)
---------- ----------
Total $2,336.1 $2,510.0
========== ==========
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Millions)
Six Months Ended
June 30
------------------
2014 2013 *
------- -------
Cash flows from operating activities
Consolidated net loss ($56.6) ($0.6)
Add (deduct) items to reconcile consolidated net
loss to net cash provided by operating activities:
Foreign currency transaction loss 6.3 6.5
Employee stock compensation 9.3 8.9
Depreciation and amortization of properties 25.0 23.7
Depreciation and amortization of
outsourcing assets 29.1 25.5
Amortization of marketable software 27.0 31.0
Disposals of capital assets 0.4 0.2
Gain on sale of business (0.7) -
Pension contributions (103.1) (61.3)
Pension expense 37.4 46.0
Decrease in deferred income taxes, net 10.5 18.7
Decrease in receivables, net 170.6 33.3
Decrease in inventories 5.8 1.0
Decrease in accounts payable
and other accrued liabilities (111.9) (83.5)
Decrease in other liabilities (28.6) (11.0)
Decrease (increase) in other assets 2.1 (8.7)
Other 0.8 0.5
------- -------
Net cash provided by operating activities 23.4 30.2
------- -------
Cash flows from investing activities
Proceeds from investments 2,909.1 2,450.2
Purchases of investments (2,899.0) (2,452.9)
Investment in marketable software (40.3) (29.6)
Capital additions of properties (29.0) (16.2)
Capital additions of outsourcing assets (20.1) (18.3)
Other 1.6 (0.6)
------- -------
Net cash used for investing activities (77.7) (67.4)
------- -------
Cash flows from financing activities
Purchases of common stock (14.0) (11.5)
Dividends paid on preferred shares (4.0) (8.1)
Proceeds from exercise of stock options 2.8 1.2
Net proceeds from short-term borrowings 0.1 0.2
------- -------
Net cash used for financing activities (15.1) (18.2)
------- -------
Effect of exchange rate changes on cash
and cash equivalents 3.8 (24.6)
------- -------
Decrease in cash and cash equivalents (65.6) (80.0)
Cash and cash equivalents, beginning of
period 639.8 655.6
------- -------
Cash and cash equivalents, end of period $574.2 $575.6
======= =======
*Certain components of net cash provided by operating
activities were changed to present pension expense
separately, consistent with the 2014 presentation.
(1)
UNISYS CORPORATION
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(Unaudited)
(Millions, except per share data)
Three Months Six Months
Ended June 30 Ended June 30
----------------- -----------------
2014 2013 2014 2013
-------- -------- -------- --------
GAAP net income (loss)
attributable to Unisys Corporation
common shareholders ($12.1) $20.4 ($65.6) ($13.5)
Pension expense, net of tax 17.9 21.9 37.2 44.2
-------- -------- -------- --------
Non-GAAP net income (loss)
attributable to Unisys Corporation
common shareholders 5.8 42.3 (28.4) 30.7
Add preferred stock dividend 0.0 4.1 0.0 8.1
-------- -------- -------- --------
Non-GAAP net income (loss)
attributable to Unisys
Corporation for diluted
earnings per share $5.8 $46.4 ($28.4) $38.8
======== ======== ======== ========
Weighted average
shares (thousands) 50,843 43,780 48,593 43,918
Plus incremental shares from assumed conversion:
Employee stock plans 260 415 0 449
Preferred stock 0 6,913 0 0
-------- -------- -------- --------
GAAP adjusted weighted
average shares 51,103 51,108 48,593 44,367
======== ======== ======== ========
Diluted earnings (loss) per share
GAAP basis
GAAP net income (loss)
attributable to Unisys
Corporation for diluted
earnings per share ($12.1) $20.4 ($65.6) ($13.5)
Divided by adjusted weighted
average shares 50,843 44,195 48,593 43,918
GAAP earnings (loss)
per diluted share ($ .24) $ .46 ($ 1.35) ($ .31)
======== ======== ======== ========
Non-GAAP basis
Non-GAAP net income (loss)
attributable to Unisys
Corporation for diluted
earnings per share $5.8 $46.4 ($28.4) $30.7
Divided by Non-GAAP adjusted
weighted average shares 51,103 51,108 48,593 44,367
Non-GAAP earnings (loss)
per diluted share $ .11 $ .91 ($ .58) $ .69
======== ======== ======== ========
(2)
UNISYS CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
(Unaudited)
(Millions)
FREE CASH FLOW
--------------
Three Months Six Months
Ended June 30 Ended June 30
----------------- -----------------
2014 2013 2014 2013
-------- -------- -------- --------
Cash provided by operations $3.3 $16.1 $23.4 $30.2
Additions to marketable
software (19.6) (14.8) (40.3) (29.6)
Additions to properties (13.8) (12.6) (29.0) (16.2)
Additions to outsourcing
assets (11.4) (10.8) (20.1) (18.3)
-------- -------- -------- --------
Free Cash Flow (41.5) (22.1) (66.0) (33.9)
Pension funding 47.6 34.7 103.1 61.3
-------- -------- -------- --------
Free cash flow before
pension funding $6.1 $12.6 $37.1 $27.4
======== ======== ======== ========