Unisys Announces First-Quarter 2008 Financial ResultsCompany reports $28.0 million operating profit, double-digit services orders growth
“We continued to improve our operating profit in the first quarter despite some weakness in our U.S. business,” said Unisys President and Chief Executive Officer Joseph W. McGrath. “Our federal business was impacted by contracting delays at certain agencies, and we saw some impact in our U.S. technology sales as organizations tightened spending on IT projects due to economic concerns. Even with this, we were able to continue improving profit margins in our services business as a result of our repositioning actions over the past two years.
“We were also pleased with continued revenue growth in outsourcing and double-digit gains in services orders in the quarter,” McGrath said. “Based on this order strength and a strong pipeline, we look for our federal business to recover in the second quarter and for our services business to return to growth as we move through the year.”
Unisys reported pretax income of $0.4 million in the first quarter of 2008 compared with a pretax loss of $23.0 million in the first quarter of 2007. The company incurred $23.8 million of tax expense in the current quarter compared with a $26.6 million tax benefit in the year-ago period, which included a $39.4 million benefit for settlement of a tax audit. After taxes, the company reported a first-quarter 2008 net loss of $23.4 million, or diluted loss per share of 7 cents, compared with net income of $3.6 million, or diluted earnings of 1 cent per share, in the year-ago period. Unisys results in the year-ago period included a $32.7 million pre-tax restructuring charge and a $23.7 million pre-tax gain on the sale of a business. Pretax retirement-related expense in the first quarter of 2008 was $0.6 million compared with $23.5 million in the year-ago period.
First-Quarter Company Results
Services orders showed substantial double-digit gains in the first quarter, driven by order gains for outsourcing and systems integration and consulting. Services order backlog at March 31, 2008 was $6.97 billion, up 2 percent from $6.86 billion at year-end 2007.
Revenue in the United States declined 11 percent in the quarter to $537 million, reflecting declines in the company’s technology and federal businesses. Revenue in international markets increased 3 percent to $764 million. On a constant currency basis, international revenue declined 6 percent in the quarter.
The company’s gross profit margin and operating profit margin in the first quarter of 2008 improved to 22.5 percent and 2.2 percent, respectively. These compared with gross and operating profit margins of 19.1 percent and (2.2) percent, respectively, in the first quarter of 2007.
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 these items.
Customer revenue in the company’s services segment declined 1 percent in the first quarter of 2008 compared with the year-ago period. The company reported revenue growth in outsourcing, which was more than offset by revenue declines in infrastructure services and core maintenance. Systems integration and consulting revenue was flat in the quarter. Gross profit margin in the services business improved to 18.5 percent compared with 15.0 percent a year ago. Services operating margin improved to 2.3 percent compared with (1.0) percent a year ago.
Customer revenue in the company’s technology segment declined 16 percent from the first quarter of 2007, reflecting double-digit declines in both enterprise servers and specialized technologies. The technology revenue decline was centered in the company’s U.S. and federal businesses; international technology revenue grew in the quarter. Gross profit margin in the technology business was 42.9 percent compared with 43.3 percent a year ago. Technology operating margin in the quarter was 0.8 percent compared with 3.5 percent in the first quarter of 2007.
Cash Flow and Balance Sheet Highlights
Unisys used $49 million of cash from operations in the first quarter of 2008 compared with operational cash usage of $104 million in the year-ago quarter. The company used approximately $21 million of cash in the first quarter of 2008 for restructuring payments compared to approximately $50 million in the year-ago period.
Capital expenditures in the first quarter of 2008 were $65 million compared to $83 million in the year-ago quarter. After deducting for capital expenditures, Unisys used $114 million of free cash in the quarter compared with free cash usage of $187 million in the first quarter of 2007.
During the quarter the company redeemed at par all $200 million of its 7 7/8% senior notes due 2008. The company ended the quarter with $490 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 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 successfully implement its repositioning strategy; the company’s ability to retain significant clients; 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 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 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.
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UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Millions, except per share data)
Three Months
Ended March 31
-------------------
2008 2007
-------- --------
Revenue
Services $1,137.1 $1,152.9
Technology 164.2 195.1
-------- --------
1,301.3 1,348.0
Costs and expenses
Cost of revenue:
Services 922.2 993.9
Technology 85.9 96.7
-------- --------
1,008.1 1,090.6
Selling, general and administrative 232.5 244.6
Research and development 32.7 42.4
-------- --------
1,273.3 1,377.6
-------- --------
Operating profit (loss) 28.0 (29.6)
Interest expense 21.6 18.9
Other income (expense), net (6.0) 25.5
-------- --------
Income (loss) before income taxes 0.4 (23.0)
Provision (benefit) for
income taxes 23.8 (26.6)
-------- --------
Net income (loss) ($23.4) $3.6
======== ========
Earnings (loss) per share
Basic ($ .07) $ .01
======== ========
Diluted ($ .07) $ .01
======== ========
Shares used in the per share
computations (thousands):
Basic 354,798 346,421
======== ========
Diluted 354,798 348,338
======== ========
UNISYS CORPORATION
SEGMENT RESULTS
(Unaudited)
(Millions)
Elimi-
Total nations Services* Technology*
-------- -------- -------- ----------
Three Months Ended
March 31, 2008
------------------
Customer revenue $1,301.3 $1,137.1 $164.2
Intersegment ($43.7) 2.7 41.0
-------- -------- -------- --------
Total revenue $1,301.3 ($43.7) $1,139.8 $205.2
======== ======== ======== ========
Gross profit percent 22.5% 18.5% 42.9%
======== ======== ========
Operating profit
percent 2.2% 2.3% 0.8%
======== ======== ========
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%
======== ======== ========
* Results exclude cost reduction actions
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Millions)
March 31,
2008 December 31,
(Unaudited) 2007
---------- ----------
Assets
Current assets
Cash and cash equivalents $490.2 $830.2
Accounts and notes receivable, net 1,031.7 1,059.2
Inventories
Parts and finished equipment 90.9 91.9
Work in process and materials 84.1 79.2
Deferred income taxes 18.0 18.0
Prepaid expense and other
current assets 150.4 133.7
---------- ----------
Total 1,865.3 2,212.2
---------- ----------
Properties 1,354.3 1,336.9
Less accumulated depreciation
and amortization 1,030.5 1,004.7
---------- ----------
Properties, net 323.8 332.2
---------- ----------
Outsourcing assets, net 391.4 409.4
Marketable software, net 261.0 268.8
Prepaid postretirement assets 529.8 497.0
Deferred income taxes 93.8 93.8
Goodwill 201.2 200.6
Other long-term assets 125.0 123.1
---------- ----------
Total $3,791.3 $4,137.1
========== ==========
Liabilities and stockholders' equity
Current liabilities
Notes payable $0.1 $0.1
Current maturities of long-term debt 3.7 204.3
Accounts payable 379.9 419.6
Other accrued liabilities 1,214.6 1,272.0
---------- ----------
Total 1,598.3 1,896.0
---------- ----------
Long-term debt 1,061.3 1,058.3
Long-term postretirement liabilities 414.1 420.7
Other long-term liabilities 367.3 395.5
Stockholders' equity
Common stock 3.6 3.6
Accumulated deficit (2,489.3) (2,465.9)
Other capital 4,026.6 4,011.8
Accumulated other comprehensive loss (1,190.6) (1,182.9)
---------- ----------
Stockholders' equity 350.3 366.6
---------- ----------
Total $3,791.3 $4,137.1
========== ==========
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Millions)
Three Months Ended
March 31
-------------------
2008 2007
------- -------
Cash flows from operating activities
Net income (loss) ($23.4) $3.6
Add (deduct) items to reconcile
net income (loss) to net cash
used for operating activities:
Employee stock compensation expense 6.0 2.3
Company stock issued for U.S. 401(k) plan 8.8 9.5
Depreciation and amortization
of properties 26.7 27.4
Depreciation and amortization of
outsourcing assets 42.4 38.0
Amortization of marketable software 30.5 33.4
Gain on sale of assets (23.7)
Increase in deferred income taxes, net (2.3)
Decrease (increase) in receivables, net 42.5 (5.3)
Increase in inventories (2.2) (11.9)
Decrease in accounts payable
and other accrued liabilities (129.0) (135.3)
Decrease in other liabilities (14.5) (29.2)
Increase in other assets (42.5) (13.1)
Other 5.4 2.3
------- -------
Net cash used for operating activities (49.3) (104.3)
------- -------
Cash flows from investing activities
Proceeds from investments 1,646.6 1,922.4
Purchases of investments (1,675.9) (1,925.4)
Investment in marketable software (22.4) (24.3)
Capital additions of properties (14.6) (19.3)
Capital additions of outsourcing assets (27.9) (39.3)
Purchases of businesses (.4) (1.2)
Proceeds from sale of assets 28.3
------- -------
Net cash used for investing activities (94.6) (58.8)
------- -------
Cash flows from financing activities
Net reduction in short-term borrowings (1.1)
Proceeds from exercise of stock options 7.0
Payments of long-term debt (200.0)
Financing fees (.8)
------- -------
Net cash (used for) provided by financing
activities (200.8) 5.9
------- -------
Effect of exchange rate changes on cash
and cash equivalents 4.7 2.1
------- -------
Decrease in cash and cash
equivalents (340.0) (155.1)
Cash and cash equivalents, beginning of
period 830.2 719.3
------- -------
Cash and cash equivalents, end of period $490.2 $564.2
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### Contacts Jack McHale, 215-986-6050
Jim Kerr, 215-986-5795 |
