RNS Number:6579L
Unisys Corp
15 October 2001
Media Contact: Jay Grossman, Unisys, 215-986-6948
jay.grossman@unisys.com
Maureen O'Brien, Unisys, 215-986-3978
maureen.obrien@unisys.com
Investor Contact: Jim Kerr, Unisys, 215-986-5795
jim.kerr@unisys.com
Unisys Third-Quarter 2001 Earnings Meet Expectations; Company to
Take Additional Actions to Reduce Cost Structure
BLUE BELL, Pa, October 15, 2001 -- Unisys Corporation (NYSE: UIS) today reported
third-quarter 2001 net income of $20.9 million, or 7 cents per diluted share,
compared to pro forma net income of $44.2 million, or 14 cents per diluted
share, in the year-ago quarter. Third-quarter 2001 revenue was $1.38 billion, a
decline of 6% compared to pro forma revenue of $1.46 billion in the year-ago
period. Excluding a negative 5-percentage point impact from foreign currency
fluctuations, revenue declined 1% from the year-ago period. The pro forma third-
quarter 2000 results exclude low-margin commodity hardware business that the
company has de-emphasized through its focus on higher value-added business
areas. Including de-emphasized commodity hardware, the company's reported net
income in the third quarter of 2000 was $42.9 million on revenue of $1.69
billion.
Due to increased economic uncertainties worldwide, Unisys also announced that it
plans to take actions in the fourth quarter of 2001 to further reduce its cost
structure.
Comments from Chairman and CEO Larry Weinbach
"I was pleased by our profit performance under extraordinarily difficult
circumstances this quarter," said Unisys Chairman and CEO Lawrence A. Weinbach.
"The tragic events of September 11, which took such a terrible toll on countless
people's lives, added greater uncertainty to an already fragile global economic
climate. In this environment, we saw organizations across our targeted
industries -- particularly in airlines and travel, financial services, and
communications -- delay planned I.T. decisions. This resulted late in the
quarter in a sharp falloff in expected orders for enterprise servers and for
networking and systems integration projects.
"Still, we were able to meet our profit targets for the quarter by staying
focused on closing certain key business deals and by continuing to aggressively
control expenses. We reduced selling, general, and administrative expenses by
16% from year-ago levels and have cut SG&A expenses so far in 2001 by 13% over
the first nine months of 2000. This discipline on controlling expenses, along
with the progress we've made in strengthening our balance sheet and cutting
interest expense, have been a key to our continued profitability throughout this
challenging period. I am also encouraged by the improving profit trends in our
services business, which now accounts for about 75% of our revenue.
"We also made progress on several other fronts this quarter. In our services
business, we continued to grow our outsourcing business as part of our strategy
to increase our annuity-based revenue stream. In systems integration, where
business conditions remain challenging, we are using this period of industry
turmoil and consolidation to enhance our skills base by hiring recognized
industry experts to lead our industry practices. In our technology business, in
September we began initial shipments, on schedule, of new high-end ClearPath
Plus systems based on our leading-edge CMP architecture. Customer acceptance of
the new system has been good, and we look for shipments to increase in the
fourth quarter, although at a lower rate than previously expected due to
economic uncertainties.
"We are committed to continuing to take the necessary actions to weather this
difficult period and position the company for stronger results when business
conditions improve," Weinbach said. As a result, the company will reduce its
cost structure by taking an estimated pre-tax charge of $200 million in the
fourth quarter of 2001 to cover a workforce reduction of approximately 3,000
people and other actions. This program includes an early retirement incentive
for certain eligible groups of U.S. employees. At the same time, Unisys said it
plans to continue to invest in enhancing its skills mix in services and funding
further development and marketing of its high-end, CMP-based servers.
Overall Company Highlights
Unisys reported that U.S. revenue declined 5% in the third quarter compared to
the year-ago period. Revenue in international markets decreased 6% in the
quarter. On a constant currency basis, international revenue was up 2% as gains
in Japan, Latin America, and Europe more than offset declines in Pacific/Asia.
Total worldwide orders showed very substantial declines in the quarter,
reflecting the falloff in expected orders late in the quarter. The order decline
was broad-based across all geographies and businesses, with technology orders
particularly impacted.
The company reported an overall third-quarter 2001 gross profit margin of 27.6%,
down from 31.9% in the year-ago period, and an operating profit margin of 3.2%
in the third quarter, down from 5.4% a year ago.
Business Segment Highlights
Customer revenue in the company's services business was flat in the third
quarter compared to the year-ago period as continued growth in outsourcing was
offset by declines in other services businesses. On a constant currency basis,
revenue grew 4% in the quarter. Gross profit margins in the services business
declined 3 percentage points from year-ago levels to 20.8% but increased from
19.2% in the second quarter of 2001. Services operating margins improved to 2.2%
from 1.6% a year ago and from 0.9% in the second quarter of 2001, reflecting
cost reductions.
Customer revenue in the company's technology business declined 21% from prior-
year levels, primarily driven by lower shipments of ClearPath systems.
Reflecting the lower ClearPath sales in the quarter, gross margins in the
technology business decreased 4 percentage points over the year-ago period to
42.1% and operating margins decreased 5 percentage points from the year-ago
period to 7.5%.
Cash Flow and Balance Sheet Highlights
Unisys used $75 million of cash from operations in the third quarter compared to
operational cash flow of $37 million in the year-ago period. The use of cash
flow in the quarter largely reflected a significant reduction in accounts
payable. The company ended the third quarter with $220 million of cash on hand.
Unisys also said that it had completed today the redemption of the remaining
$14.9 million outstanding of its 11 3/4% senior notes due 2004. The notes were
redeemed at 103.917% of par.
Year-to-Date Results
For the nine months ended September 30, 2001, Unisys reported net income of
$119.5 million before special items, or 37 cents per diluted common share. This
compared to pro forma net income of $211.0 million before special items, or 67
cents per diluted common share, for the nine months of 2000. Revenue through the
first nine months of 2001 was $4.46 billion compared to pro forma revenue of
$4.41 billion for the same period in 2000. Including discontinued commodity
hardware, net income in the first nine months of 2000 was $205.7 million, before
special items, on revenue of $4.96 billion.
Business Outlook
"The current business environment remains highly uncertain as organizations
reduce costs and review their spending priorities," Weinbach said. "As a result,
short-term forecasting is more difficult. Our current view is that the fourth
quarter will be more challenging than we had expected, particularly in our
technology business. We look for sales of enterprise servers to remain soft,
despite availability of our new line of high-end ClearPath Plus systems, as some
customers defer purchases until their own business levels recover. However, by
continuing to improve the profitability of our services business, and by staying
vigilant on costs, we believe we can achieve fourth-quarter earnings of 10-15
cents per share. These earnings expectations are before the planned fourth-
quarter charge discussed earlier. As we work through this uncertain period, we
remain focused on our strategy of pursuing targeted business opportunities --
such as business process outsourcing, managed network services, security, and
server consolidation -- that leverage our strengths and provide clear value to
our clients. This work positions us well to benefit as economic conditions
improve."
Conference Call
Unisys will hold a conference call to discuss the results today from 4:30 - 5:30
EDT. The listen-only audiocast can be accessed via a link on the Unisys Investor
Web site at www.unisys.com/investor. An audio replay of the Webcast will be
available for about 10 days following the call.
About Unisys
Unisys is an e-business solutions company whose employees help customers in 100
countries apply information technology to seize opportunities and overcome
challenges of the Internet economy. Unisys people integrate and deliver the
solutions, services, platforms and network infrastructure required by business
and government to transform their organizations for success in this new era. The
company offers a rich portfolio of Unisys e-@ction Solutions for e-business
based on its expertise in vertical industry solutions, network services,
outsourcing, systems integration and multivendor support, coupled with
enterprise-class server and related technologies. The primary vertical markets
Unisys serves worldwide include financial services, transportation,
communications, publishing and commercial sectors, as well as the public sector,
including federal government customers. Unisys is headquartered in Blue Bell,
Pennsylvania, in the Greater Philadelphia area. For more information on the
company, access the Unisys home page on the World Wide Web at www.unisys.com.
Investor information can be found at www.unisys.com/investor.
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. 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. The factors that could affect the company's
future financial results are discussed more fully in the company's latest Form
10-Q as filed with the Securities and Exchange Commission.
RELEASE NO.: 1001/8063 (See accompanying financial information)
http://www.unisys.com/news/releases/2001/oct/10158063.asp
Unisys and e-@ction are registered trademarks 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 STATEMENT OF INCOME - PROFORMA
EXCLUDING EXTRAORDINARY ITEMS
(Millions, except per share data)
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
2001 2000 2001 2000
-------- -------- -------- --------
Revenue $1,376.0 $1,460.6 $4,461.2 $4,414.2
-------- -------- -------- --------
Costs and expenses
Cost of revenue 996.1 994.7 3,256.3 2,942.3
Selling, general and
administrative 262.7 311.4 784.4 900.5
Research and development 73.4 75.4 224.6 230.9
-------- -------- -------- --------
1,332.2 1,381.5 4,265.3 4,073.7
-------- -------- -------- --------
Operating income 43.8 79.1 195.9 340.5
Interest expense 16.5 18.5 50.0 57.7
Other income
(expense), net 3.9 6.5 32.6 36.5
-------- -------- -------- --------
Income before income taxes 31.2 67.1 178.5 319.3
Provision for income taxes 10.3 22.9 59.0 108.3
-------- -------- -------- --------
Net income $20.9 $44.2 $119.5 $211.0
======== ======== ======== ========
Diluted earnings per share $ .07 $ .14 $ .37 $ .67
======== ======== ======== ========
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Millions, except per share data)
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
2001 2000 2001 2000
-------- -------- -------- --------
Revenue $1,376.0 $1,690.9 $4,461.2 $4,956.7
-------- -------- -------- --------
Costs and expenses
Cost of revenue 996.1 1,216.2 3,256.3 3,461.9
Selling, general and
administrative 262.7 320.1 784.4 924.1
Research and development 73.4 77.5 224.6 237.8
-------- -------- -------- --------
1,332.2 1,613.8 4,265.3 4,623.8
-------- -------- -------- --------
Operating income 43.8 77.1 195.9 332.9
Interest expense 16.5 18.5 50.0 57.7
Other income
(expense), net 3.9 6.4 32.6 36.5
-------- -------- -------- --------
Income before income taxes 31.2 65.0 178.5 311.7
Provision for income taxes 10.3 22.1 59.0 106.0
-------- -------- -------- --------
Income before
extraordinary items 20.9 42.9 119.5 205.7
Extraordinary items (17.2) (19.8)
-------- -------- -------- --------
Net income $20.9 $42.9 $102.3 $185.9
======== ======== ======== ========
Earnings per share
Basic
Before extraordinary items $ .07 $ .14 $ .37 $ .66
Extraordinary items (.05) (.06)
-------- -------- -------- --------
Total $ .07 $ .14 $ .32 $ .60
======== ======== ======== ========
Diluted
Before extraordinary items $ .07 $ .14 $ .37 $ .65
Extraordinary items (.05) (.06)
-------- -------- -------- --------
Total $ .07 $ .14 $ .32 $ .59
======== ======== ======== ========
Shares used in the per share
computations (thousands):
Basic 318,761 313,744 317,576 312,473
======== ======== ======== ========
Diluted 320,155 315,516 319,527 316,539
======== ======== ======== ========
UNISYS CORPORATION
SUPPLEMENTAL SUMMARY - PROFORMA
(Millions)
Elimi-
Total nations Services Technology
-------- -------- -------- ----------
Three Months Ended
September 30, 2001
------------------
Customer revenue $1,376.0 $1,051.3 $324.7
Intersegment ($102.0) 20.3 81.7
-------- -------- -------- --------
Total revenue $1,376.0 ($102.0) $1,071.6 $406.4
======== ======== ======== ========
Gross profit percent 27.6% 20.8% 42.1%
======== ======== ========
Operating income
percent 3.2% 2.2% 7.5%
======== ======== ========
Three Months Ended
September 30, 2000
------------------
Customer revenue $1,460.6 $1,048.0 $412.6
Intersegment ($96.1) 21.7 74.4
-------- -------- -------- --------
Total revenue $1,460.6 ($96.1) $1,069.7 $487.0
======== ======== ======== ========
Gross profit percent 31.9% 23.8% 46.0%
======== ======== ========
Operating income
percent 5.4% 1.6% 12.3%
======== ======== ========
Nine Months Ended
September 30, 2001
------------------
Customer revenue $4,461.2 $3,311.7 $1,149.5
Intersegment ($267.0) 51.8 215.2
-------- -------- -------- --------
Total revenue $4,461.2 ($267.0) $3,363.5 $1,364.7
======== ======== ======== ========
Gross profit percent 27.0% 19.3% 42.9%
======== ======== ========
Operating income
percent 4.4% 1.8% 12.1%
======== ======== ========
Nine Months Ended
September 30, 2000
------------------
Customer revenue $4,414.2 $3,097.6 $1,316.6
Intersegment ($319.6) 55.2 264.4
-------- -------- -------- --------
Total revenue $4,414.2 ($319.6) $3,152.8 $1,581.0
======== ======== ======== ========
Gross profit percent 33.3% 22.8% 49.0%
======== ======== ========
Operating income
percent 7.7% 1.2% 18.0%
======== ======== ========
UNISYS CORPORATION
SUPPLEMENTAL SUMMARY
(Millions)
Elimi-
Total nations Services Technology
-------- -------- -------- ----------
Three Months Ended
September 30, 2001
------------------
Customer revenue $1,376.0 $1,051.3 $324.7
Intersegment ($102.0) 20.3 81.7
-------- -------- -------- --------
Total revenue $1,376.0 ($102.0) $1,071.6 $406.4
======== ======== ======== ========
Gross profit percent 27.6% 20.8% 42.1%
======== ======== ========
Operating income
percent 3.2% 2.2% 7.5%
======== ======== ========
Three Months Ended
September 30, 2000
------------------
Customer revenue $1,690.9 $1,200.2 $490.7
Intersegment ($92.8) 10.6 82.2
-------- -------- -------- --------
Total revenue $1,690.9 ($92.8) $1,210.8 $572.9
======== ======== ======== ========
Gross profit percent 28.1% 21.6% 38.9%
======== ======== ========
Operating income
percent 4.6% 1.5% 9.8%
======== ======== ========
Nine Months Ended
September 30, 2001
------------------
Customer revenue $4,461.2 $3,311.7 $1,149.5
Intersegment ($267.0) 51.8 215.2
-------- -------- -------- --------
Total revenue $4,461.2 ($267.0) $3,363.5 $1,364.7
======== ======== ======== ========
Gross profit percent 27.0% 19.3% 42.9%
======== ======== ========
Operating income
percent 4.4% 1.8% 12.1%
======== ======== ========
Nine Months Ended
September 30, 2000
------------------
Customer revenue $4,956.7 $3,454.1 $1,502.6
Intersegment ($326.7) 35.2 291.5
-------- -------- -------- --------
Total revenue $4,956.7 ($326.7) $3,489.3 $1,794.1
======== ======== ======== ========
Gross profit percent 30.2% 21.1% 43.3%
======== ======== ========
Operating income
percent 6.7% 1.1% 15.3%
======== ======== ========
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEET
(Millions)
September 30,December 31,
2001 2000
---------- ----------
Assets
Current assets
Cash and cash equivalents $219.7 $378.0
Accounts and notes receivable, net 989.3 1,247.4
Inventories
Parts and finished equipment 247.1 249.4
Work in process and materials 151.3 176.1
Deferred income taxes 464.1 460.6
Other current assets 128.2 75.5
---------- ----------
Total 2,199.7 2,587.0
---------- ----------
Properties 1,429.4 1,400.6
Less accumulated depreciation 890.2 890.7
---------- ----------
Properties, net 539.2 509.9
---------- ----------
Investments at equity 204.7 225.8
Software, net of accumulated amortization 308.3 296.7
Prepaid pension cost 1,213.9 1,063.0
Deferred income taxes 583.6 583.6
Goodwill 168.6 186.3
Other assets 376.0 261.0
---------- ----------
Total $5,594.0 $5,713.3
========== ==========
Liabilities and stockholders' equity
Current liabilities
Notes payable $278.5 $209.5
Current maturities of long-term debt 4.2 16.8
Accounts payable 558.8 847.7
Other accrued liabilities 1,059.3 1,319.1
Income taxes payable 267.3 288.3
---------- ----------
Total 2,168.1 2,681.4
---------- ----------
Long-term debt 611.9 536.3
Other liabilities 547.6 309.5
Stockholders' equity
Common stock 3.2 3.2
Accumulated deficit (727.1) (829.4)
Other capital 3,700.3 3,656.0
Accumulated other comprehensive loss (710.0) (643.7)
---------- ----------
Stockholders' equity 2,266.4 2,186.1
---------- ----------
Total $5,594.0 $5,713.3
========== ==========
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions)
Nine Months Ended
September 30
-----------------
2001 2000
------ ------
Cash flows from operating activities
Income before extraordinary items $119.5 $205.7
Add (deduct) items to reconcile
income before extraordinary items
to net cash provided by (used for)
operating activities:
Extraordinary items (17.2) (19.8)
Depreciation 100.6 103.9
Amortization:
Marketable software 88.3 90.2
Goodwill 12.5 14.6
(Increase) in deferred income
taxes, net (3.5) (9.6)
Decrease in receivables, net 161.0 8.4
Decrease (increase) in inventories 27.0 (46.2)
(Decrease) in accounts payable
and other accrued liabilities (561.7) (335.6)
(Decrease) increase in income taxes payable (21.0) 10.5
Increase (decrease) in other liabilities 241.9 (3.4)
(Increase) in other assets (226.8) (110.6)
Other 14.7 19.2
------- -------
Net cash used for operating activities (64.7) (72.7)
------- -------
Cash flows from investing activities
Proceeds from investments 1,976.6 525.1
Purchases of investments (1,967.5) (454.0)
Investment in marketable software (100.0) (113.6)
Capital additions of properties (134.8) (143.2)
Purchases of businesses (2.2) (13.9)
Proceeds from sales of properties 17.0
------- -------
Net cash used for investing activities (227.9) (182.6)
------- -------
Cash flows from financing activities
Proceeds from issuance of long-term debt 389.9
Payments of long-term debt (354.3) (447.2)
Net proceeds from short-term borrowings 68.9 442.5
Proceeds from employee stock plans 26.2 42.5
------- -------
Net cash provided by financing activities 130.7 37.8
------- -------
Effect of exchange rate changes on cash
and cash equivalents 3.6 (11.6)
------- -------
Decrease in cash and cash equivalents (158.3) (229.1)
Cash and cash equivalents, beginning of
period 378.0 464.0
------- -------
Cash and cash equivalents, end of period $219.7 $234.9
------- -------
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