Attached files
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 FIRST-QUARTER 2015 FINANCIAL RESULTS
* Revenue declines 5 percent (Revenue grows 1 percent on a constant
currency(1) basis)
* Diluted loss per share of 87 cents vs $1.15 in 1Q 2014
* Non-GAAP diluted loss per share(2) of 32 cents vs 74 cents in 1Q 2014
* Company launches program to enhance competitiveness; Restructuring
charge of approximately $300 million expected over the next several
quarters
BLUE BELL, Pa., April 23, 2015 - Unisys Corporation (NYSE: UIS) today
reported a first-quarter 2015 net loss of $43.2 million, or 87 cents per
diluted share, which included $27.4 million of pension expense. In the
first quarter of 2014, the company reported a net loss of $53.5 million,
or $1.15 per diluted share, which included $19.3 million of pension
expense. Excluding pension expense in both periods, the non-GAAP diluted
loss per share in the first quarter of 2015 was 32 cents compared to 74
cents in the first quarter of 2014.
First-quarter 2015 revenue declined 5 percent to $721 million from $762
million in the year-ago quarter. First-quarter 2015 revenue grew 1
percent on a constant currency basis.
"We were pleased to see revenue growth of 1 percent on a constant
currency basis during the first quarter of 2015 and 13 percent growth in
our U.S. Federal government business," said Unisys President and CEO
Peter Altabef. "While our technology margins increased, our service
margins declined. We are taking actions to streamline our business by
enhancing our competitiveness and accelerating the pace of innovation.
Our focus is on making Unisys an agile leader that can anticipate and
rapidly respond to market opportunities globally."
In connection with organizational initiatives designed to create a more
competitive cost structure and rebalance the company's global skill set
to take advantage of growth opportunities, Unisys expects to recognize a
pretax restructuring charge currently estimated at approximately $300
million over the next several quarters. The company expects to reduce
worldwide headcount by approximately 8 percent. As a result of these
actions, the company expects to generate annualized savings of
approximately $200 million by the end of 2016.
FIRST-QUARTER COMPANY AND BUSINESS SEGMENT HIGHLIGHTS
U.S. and Canada revenue rose 9 percent in the quarter. Revenue from the
rest of the world declined 16 percent. On a constant currency basis,
international revenue declined 5 percent.
U.S. Federal government revenue in the first quarter of 2015 grew 13
percent versus the year-ago quarter. Public Sector revenue, which
includes U.S. state and local and international governments, declined 10
percent. Financial industry revenue also declined by 10 percent. Revenue
from Commercial industry clients declined 7 percent.
First-quarter 2015 services revenue declined 6 percent from the prior-
year quarter. On a constant currency basis, services revenue was flat.
First-quarter 2015 services gross profit margin decreased to 14.1 percent
from 15.8 percent a year ago while services operating profit (loss)
margin declined to (1.3) percent from 1.5 percent a year ago.
First-quarter 2015 services orders increased from year-ago levels
primarily driven by higher orders for Cloud and Infrastructure Services.
Services backlog at March 31, 2015 was $4.5 billion compared to $4.8
billion at December 31, 2014. Services backlog at March 31, 2015 was
flat compared to March 31, 2014 and up on a constant currency basis.
First-quarter 2015 technology revenue rose 3 percent from the prior-year
quarter driven by higher sales of our enterprise software and servers. On
a constant currency basis, technology revenue increased by 13 percent.
Reflecting the higher enterprise software and server sales, first-quarter
2015 technology gross profit margin rose to 49.6 percent from 41.3
percent in the year-ago quarter and technology operating profit (loss)
margin increased to 5.2 percent from (16.4) percent in the year-ago
quarter.
The company reported an overall first-quarter 2015 gross profit margin of
16.2 percent compared with 17.5 percent in the year-ago quarter.
Operating expenses (SG&A and R&D expenses) declined 4 percent from the
year-ago period. The company reported a first-quarter 2015 operating loss
of $30.0 million compared with an operating loss of $19.9 million in the
first quarter of 2014. Pension expense was $8.4 million higher in the
first quarter of 2015.
The company reported a first-quarter 2015 pretax loss of $27.7 million
compared with a pretax loss of $31.7 million in the year-ago quarter.
Excluding pension expense in both periods, the company reported a non-
GAAP pretax profit(3) of $0.2 million in the first quarter of 2015
compared with a non-GAAP pretax loss of $12.2 million in the first
quarter of 2014.
CASH FLOW AND BALANCE SHEET HIGHLIGHTS
Unisys used $43 million of cash from operations in the first quarter of
2015 compared to $20 million in cash from operations generated in the
first quarter of 2014. Cash from operations included pension
contributions of $39 million in the first quarter of 2015, a decrease
from $56 million in the first quarter of 2014. Capital expenditures in
the first quarter of 2015 were $57 million compared with $45 million in
the year-ago quarter. After capital expenditures, the company used $101
million of free cash(4) in the first quarter of 2015 compared with free
cash usage of $25 million in the first quarter of 2014. The company had
free cash usage before pension contributions of $62 million in the first
quarter of 2015 compared with free cash flow before pension contributions
of $31 million in the year-ago quarter.
At March 31, 2015, the company reported a cash balance of $402 million
and total debt of $224 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 constant
currency, non-GAAP diluted earnings per share, non-GAAP pretax profit,
free cash flow, and free cash flow before pension contributions.
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) 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.
(2) Non-GAAP diluted earnings/loss per share - Unisys recorded pension
expense of $27.4 million and $19.3 million during the first quarters of
2015 and 2014, respectively. In an effort to provide investors with a
perspective on the company's earnings without these charges, they are
excluded from the non-GAAP diluted earnings/loss per share calculations.
(3) Non-GAAP pretax profit/loss - Unisys recorded pension expense of
$27.9 million and $19.5 million during the first quarters of 2015 and
2014, respectively. In an effort to provide investors with a perspective
on the company's profitability without these charges, they are excluded
from the non-GAAP pretax profit/loss calculations.
(4) 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 global information technology company that solves complex IT
challenges at the intersection of modern and mission critical. We work
with many of the world's largest companies and government organizations
to secure and keep their mission-critical operations running at peak
performance; streamline and transform their data centers; enhance support
to their end users and constituents; and modernize their enterprise
applications. We do this while protecting and building on their legacy IT
investments. Our offerings include outsourcing and managed services,
systems integration and consulting services, high-end server technology,
cybersecurity and cloud management software, and maintenance and support
services. Unisys has more than 20,000 associates serving clients around
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 effectively
anticipate and respond to volatility and rapid technological change in
its industry; the company's ability to maintain and grow its technology
business; the company's ability to drive profitable growth in consulting
and systems integration; the company's ability to profitably grow its
outsourcing business; the company's ability to attract, motivate and
retain experienced and knowledgeable personnel in key positions; 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 contracts may not be as profitable as
expected or provide the expected level of revenues; cybersecurity
breaches could result in significant costs and could harm the company's
business and reputation; a significant disruption in the company's IT
systems could adversely affect the company's business and reputation; 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 company's significant pension obligations and
potential requirements to make significant cash contributions to its
defined benefit pension plans; the company's ability to continue to
simplify its operations and provide services more cost efficiently; the
adverse effects of global economic conditions; contracts with U.S.
governmental agencies may subject the company to audits, criminal
penalties, sanctions and other expenses and fines; 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.: 0423/9330
Unisys and other Unisys products and services mentioned herein, as well
as their respective logos, are trademarks or registered trademarks of
Unisys Corporation. Any other brand or product referenced herein is
acknowledged to be a trademark or registered trademark of its respective
holder.
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Millions, except per share data)
Three Months
Ended March 31
-------------------
2015 2014
-------- --------
Revenue
Services $639.0 $681.7 *
Technology 82.2 80.0 *
-------- --------
721.2 761.7
Costs and expenses
Cost of revenue:
Services 564.3 583.6 *
Technology 39.9 45.1 *
-------- --------
604.2 628.7
Selling, general and administrative 128.8 138.5
Research and development 18.2 14.4
-------- --------
751.2 781.6
-------- --------
Operating loss (30.0) (19.9)
Interest expense 2.6 2.0
Other income (expense), net 4.9 (9.8)
-------- --------
Loss before income taxes (27.7) (31.7)
Provision for income taxes 13.3 16.0
-------- --------
Consolidated net loss (41.0) (47.7)
Net income attributable
to noncontrolling interests 2.2 3.1
-------- --------
Net loss attributable
to Unisys Corporation (43.2) (50.8)
Preferred stock dividend - 2.7
-------- --------
Net loss attributable
to Unisys Corporation
common shareholders ($43.2) ($53.5)
======== ========
Loss per common share attributable
to Unisys Corporation
Basic ($ .87) ($ 1.15)
======== ========
Diluted ($ .87) ($ 1.15)
======== ========
Shares used in the per share
computations (thousands):
Basic 49,821 46,343
Diluted 49,821 46,343
* Changed to conform with the 2015 presentation.
UNISYS CORPORATION
SEGMENT RESULTS
(Unaudited)
(Millions)
Elimi-
Total nations Services Technology
-------- -------- -------- ----------
Three Months Ended
March 31, 2015
------------------
Customer revenue $721.2 $639.0 $82.2
Intersegment ($6.7) - 6.7
-------- -------- -------- --------
Total revenue $721.2 ($6.7) $639.0 $88.9
======== ======== ======== ========
Gross profit percent 16.2% 14.1% 49.6%
======== ======== ========
Operating profit
(loss) percent (4.2%) (1.3%) 5.2%
======== ======== ========
Three Months Ended
March 31, 2014 *
------------------
Customer revenue $761.7 $681.7 $80.0
Intersegment ($6.1) 0.2 5.9
-------- -------- -------- --------
Total revenue $761.7 ($6.1) $681.9 $85.9
======== ======== ======== ========
Gross profit percent 17.5% 15.8% 41.3%
======== ======== ========
Operating profit
(loss) percent (2.6%) 1.5% (16.4%)
======== ======== ========
* Changed to conform with the 2015 presentation.
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions)
March 31, December 31,
2015 2014
---------- ----------
Assets
Current assets
Cash and cash equivalents $402.0 $494.3
Accounts and notes receivable, net 484.8 619.3
Inventories
Parts and finished equipment 29.0 22.2
Work in process and materials 31.3 24.5
Deferred income taxes 16.6 16.4
Prepaid expense and other
current assets 142.4 140.6
---------- ----------
Total 1,106.1 1,317.3
---------- ----------
Properties 1,004.7 1,059.4
Less accumulated depreciation
and amortization 837.4 890.7
---------- ----------
Properties, net 167.3 168.7
---------- ----------
Outsourcing assets, net 160.1 150.9
Marketable software, net 144.5 144.1
Prepaid postretirement assets 21.4 19.9
Deferred income taxes 152.4 154.6
Goodwill 179.6 183.9
Other long-term assets 200.1 209.3
---------- ----------
Total $2,131.5 $2,348.7
========== ==========
Liabilities and deficit
Current liabilities
Current maturities of long-term debt $2.2 $1.8
Accounts payable 230.3 262.5
Deferred revenue 316.6 348.3
Other accrued liabilities 314.2 385.1
---------- ----------
Total 863.3 997.7
---------- ----------
Long-term debt 221.6 222.2
Long-term postretirement liabilities 2,272.1 2,369.9
Long-term deferred revenue 109.7 119.5
Other long-term liabilities 86.1 91.8
Commitments and contingencies
Total deficit (1,421.3) (1,452.4)
---------- ----------
Total $2,131.5 $2,348.7
========== ==========
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Millions)
Three Months Ended
March 31
-------------------
2015 2014
------- -------
Cash flows from operating activities
Consolidated net loss ($41.0) ($47.7)
Add (deduct) items to reconcile consolidated net loss
to net cash (used for) provided by operating activities:
Foreign currency transaction loss - 5.8
Employee stock compensation 4.4 7.2
Depreciation and amortization of properties 11.7 12.0
Depreciation and amortization of
outsourcing assets 12.7 13.3
Amortization of marketable software 16.3 14.7
Other non-cash operating activities (0.1) (0.1)
Disposals of capital assets 1.4 0.3
Gain on sale of business - (0.7)
Pension contributions (38.7) (55.5)
Pension expense 27.9 19.5
(Increase)decrease in deferred
income taxes, net (4.4) 2.8
Decrease in receivables, net 106.8 121.2
(Increase) decrease in inventories (15.1) 3.0
Decrease in accounts payable
and other accrued liabilities (106.4) (66.0)
Decrease in other liabilities (11.1) (9.6)
Increase in other assets (7.7) (0.1)
------- -------
Net cash (used for) provided by
operating activities (43.3) 20.1
------- -------
Cash flows from investing activities
Proceeds from investments 1,153.4 1,431.6
Purchases of investments (1,126.7) (1,429.0)
Investment in marketable software (16.7) (20.7)
Capital additions of properties (13.9) (15.2)
Capital additions of outsourcing assets (26.7) (8.7)
Other 1.5 0.9
------- -------
Net cash used for investing activities (29.1) (41.1)
------- -------
Cash flows from financing activities
Purchases of common stock - (.9)
Payments of long-term debt (0.3) -
Dividends paid on preferred shares - (4.0)
Proceeds from exercise of stock options 3.5 2.6
------- -------
Net cash provided by (used for)
financing activities 3.2 (2.3)
------- -------
Effect of exchange rate changes on cash
and cash equivalents (23.1) (2.7)
------- -------
Decrease in cash and cash equivalents (92.3) (26.0)
Cash and cash equivalents, beginning of
period 494.3 639.8
------- -------
Cash and cash equivalents, end of period $402.0 $613.8
======= =======
(1)
UNISYS CORPORATION
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(Unaudited)
(Millions, except per share data)
Three Months
Ended March 31
------------------
2015 2014
-------- --------
GAAP net loss attributable to Unisys
Corporation common shareholders ($43.2) ($53.5)
Pension expense, net of tax 27.4 19.3
-------- --------
Non-GAAP net loss attributable to Unisys
Corporation common shareholders (15.8) (34.2)
Add preferred stock dividend 0.0 0.0
-------- --------
Non-GAAP net loss attributable to Unisys
Corporation for diluted earnings per share ($15.8) ($34.2)
======== ========
Weighted average shares (thousands) 49,821 46,343
Plus incremental shares from assumed conversion:
Employee stock plans 0 0
Preferred stock 0 0
-------- --------
GAAP adjusted weighted average shares 49,821 46,343
======== ========
Diluted earnings per share
GAAP basis
GAAP net loss attributable to Unisys
Corporation for diluted earnings per share ($43.2) ($53.5)
Divided by adjusted weighted average shares 49,821 46,343
GAAP loss per diluted share ($ .87) ($ 1.15)
======== ========
Non-GAAP basis
Non-GAAP net loss attributable to Unisys
Corporation for diluted earnings per share ($15.8) ($34.2)
Divided by Non-GAAP adjusted
weighted average shares 49,821 46,343
Non-GAAP loss per diluted share ($ .32) ($ .74)
======== ========
(2)
UNISYS CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
(Unaudited)
(Millions)
FREE CASH FLOW
--------------
Three Months
Ended March 31
------------------
2015 2014
-------- --------
Cash (used for) provided by operations ($43.3) $20.1
Additions to marketable software (16.7) (20.7)
Additions to properties (13.9) (15.2)
Additions to outsourcing assets (26.7) (8.7)
-------- --------
Free Cash Flow (100.6) (24.5)
Pension funding 38.7 55.5
-------- --------
Free cash flow before pension funding ($61.9) $31.0
======== ========
(3)
UNISYS CORPORATION
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(Unaudited)
(Millions, except per share data)
Three Months
Ended March 31
------------------
2015 2014
-------- --------
GAAP loss before income taxes ($27.7) ($31.7)
FAS87 pension charges 27.9 19.5
-------- --------
Non-GAAP income (loss) before income taxes $0.2 ($12.2)
======== ========
