UNISYS CORPORATION
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)
Total Eliminations 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 STATEMENTS 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 (106.4) (66.0)
liabilities
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 - (0.9)
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 (23.1) (2.7)
equivalents
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)
SOURCE Unisys Corporation
CONTACT: Investor, Niels Christensen, 215-986-6651,
Niels.Christensen@unisys.com, Media, Jim Kerr, 215-986-5795,
Jim.Kerr@unisys.comUNISYS : 1st Quarter Results
April 24, 2015 at 02:01 am EDT
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