Unisys Announces Fourth-Quarter and Full-Year 2011 Financial Results; Third Consecutive Year of Profitability and Positive Free Cash Flow
BLUE BELL, Pa., Jan. 31, 2012 /PRNewswire/ --
-- Reported full year 2011 diluted EPS from continuing operations of $2.71
vs. $3.67 in 2010; Non-GAAP diluted EPS(1) of $4.43 in 2011 vs. $3.72 in
2010
-- Reported fourth quarter 2011 diluted EPS from continuing operations of
$1.94 vs. $2.20 in the year ago quarter; Non-GAAP 4Q11 diluted EPS(1) of
$2.08 vs. $2.21 in 4Q10
-- Ended the year with cash exceeding debt by $355 million compared to $4
million a year ago; Company announces further debt reduction actions of
$65.5 million
Unisys Corporation (NYSE: UIS) today reported fourth-quarter 2011 net income from continuing operations of $94.3 million, or $1.94 per diluted share. The results include a pretax charge of $7.6 million related to debt reduction. This compared with fourth-quarter 2010 net income from continuing operations of $95.2 million, or $2.20 per diluted share, which included $0.7 million of pretax debt reduction charges. Excluding debt reduction charges, non-GAAP diluted earnings per share in the fourth quarter of 2011 was $2.08 compared to $2.21 in the year-ago quarter. Revenue in the fourth quarter of 2011 declined 6 percent to $985 million compared with $1.04 billion in the year-ago quarter. About half of the decline was due to lower revenue in the company's U.S. Federal business and the remainder was primarily due to lower third-party equipment sales in the rest of the business. Foreign currency fluctuations had an insignificant impact on year-over-year revenue comparisons in the quarter.
For the full year of 2011, Unisys reported pretax income of $206.0 million and net income from continuing operations of $120.5 million, or $2.71 per diluted share. The results included $85.2 million of pretax charges related to debt reduction. This compared with full-year 2010 pretax income of $222.9 million and net income from continuing operations of $158.9 million, or $3.67 per diluted share, which included $2.1 million of pretax debt reduction charges. Excluding debt reduction charges, full-year 2011 non-GAAP pretax income(2) was $291.2 million and non-GAAP diluted earnings per share was $4.43 compared to full-year 2010 non-GAAP pretax income(2) of $225.0 million and non-GAAP diluted earnings per share of $3.72. Full-year 2011 revenue declined 4 percent to $3.85 billion compared with full-year 2010 revenue of $4.02 billion. Excluding the U.S. Federal business, full-year revenue increased 1 percent over full-year 2010 revenue. Foreign currency fluctuations had a three percentage-point positive impact on revenue in the year.
"We closed 2011 with another quarter of progress toward our financial goals," said Unisys Chairman and CEO Ed Coleman. "We increased our pretax profit, further reduced debt, and continued to grow both IT outsourcing and systems integration revenue excluding our U.S. Federal business. We were also pleased with strong double-digit services order growth in the quarter.
"For the full year of 2011, we made good progress against our three-year financial objectives," Coleman said. "Excluding debt reduction charges, we grew our pretax profit by 29 percent. Free cash flow improved by 37 percent to $183 million. During the year we reduced our debt by $464 million to $360 million and today we are announcing steps to further reduce our debt in 2012.
"At the top line, our revenue in 2011 was impacted by a 23 percent decline in our U.S. Federal business. Outside this business we grew our services revenue by 3 percent and achieved a services operating profit margin in our targeted 8 to 10 percent range. In our technology business, while our overall revenue was down due to lower third-party equipment sales, we met our goal of maintaining stable ClearPath revenue.
"In 2012 we look to make continued progress toward our financial goals while further enhancing our market differentiation and delivering service excellence to our customers," Coleman added. "In our U.S. Federal business, while market conditions remain challenging, we are focused on improving our results in this important market and delivering innovative solutions that help our customers operate more effectively and efficiently."
Fourth-Quarter Company and Business Segment Results
Revenue from the company's U.S. Federal business declined approximately $36 million, or about 18 percent, in the quarter, reflecting the ending of the company's contract with the U.S. Transportation Security Administration in November 2010 as well as continued budget challenges in the U.S. Federal market.
The company's profit margins in the fourth quarter of 2011 were impacted by the lower revenue in the U.S. Federal business and a $9 million year-over-year increase in pension expense. Unisys reported a fourth-quarter 2011 gross profit margin of 28.4 percent, down from 29.8 percent in the year-ago quarter. Operating expenses (selling, general and administrative expenses plus research and development) declined 10 percent year-over-year. Unisys reported fourth-quarter 2011 operating profit of $121.6 million, or 12.3 percent of revenue, compared to operating profit of $134.6 million, or 12.9 percent of revenue, in the fourth quarter of 2010.
Fourth-quarter 2011 services revenue declined 3 percent year-over-year, reflecting lower U.S. Federal services revenue. Excluding the U.S. Federal business, services revenue grew 2 percent from the year-ago quarter, driven by continued growth in IT outsourcing and systems integration revenue. Services gross profit margin declined to 20.0 percent compared with 21.9 percent a year ago. Reflecting the impact of lower U.S. Federal revenue, services operating profit margin declined to 7.6 percent compared with 8.0 percent a year ago. Excluding the U.S. Federal business, fourth-quarter 2011 services operating profit margin increased over the prior year and was within the company's targeted 8 to 10 percent range.
Fourth-quarter 2011 services orders showed double-digit growth in the quarter, reflecting substantial order gains for long-term IT outsourcing contracts as well as order gains for systems integration projects. Services backlog at December 31, 2011 was $5.5 billion, a decrease of 4 percent from December 31, 2010.
Fourth-quarter 2011 technology revenue declined 19 percent in the quarter, driven by lower sales of third-party equipment. Sales of ClearPath software and servers were essentially flat year-over-year. Reflecting the higher mix of ClearPath revenue, technology gross profit margins improved to 65.9 percent compared with 56.5 percent in the year-ago quarter, while technology operating profit margin improved to 37.7 percent compared with 30.1 percent a year ago.
Cash Flow and Balance Sheet Results
Unisys generated $159 million of cash from operations in the fourth quarter of 2011 compared with $187 million in the year-ago quarter. Capital expenditures in the fourth quarter of 2011 were $33 million compared with $41 million in the year-ago quarter. The company generated $126 million of free cash flow(3) in the fourth quarter of 2011 compared with free cash flow of $146 million in the year-ago quarter.
For the full year of 2011, the company generated $317 million of cash from operations compared with $337 million in 2010. Capital expenditures were $134 million in 2011 compared with $203 million in 2010. Unisys generated $183 million of free cash flow(3) in 2011 compared with free cash flow of $134 million in 2010.
For the full year of 2011, the company reduced its debt by $464 million, or 56 percent. At December 31, 2011, Unisys reported $715 million of cash on hand and $360 million of total debt.
As part of its debt reduction program, Unisys is calling for redemption its 14.25% senior secured notes due September 2015 and a portion of its 12.5% senior notes due January 2016. The $65.5 million of notes will be redeemed in accordance with the provisions of the notes.
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 pretax income, non-GAAP earnings per diluted share and free cash flow.
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) (2) Non-GAAP pretax income and non-GAAP earnings per diluted share -- As a result of the debt reductions, Unisys recorded pretax charges of $7.6 million and $85.2 million, respectively, during the fourth quarter and full year of 2011, and $0.7 million and $2.1 million, respectively, during the fourth quarter and full year of 2010. In an effort to provide investors with a perspective on the company's earnings without these charges, they are excluded from the non-GAAP pretax income and earnings per diluted share calculations.
(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.
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 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 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 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; the company's ability to use its U.S. Federal net operating loss carryforwards and other tax attributes; and the company's consideration of all available information following the end of the year and before the filing of the Form 10-K 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.: 0131/9086
Unisys is a registered trademark of Unisys Corporation. Any other brands and products referenced herein are acknowledged to be trademarks or registered trademarks of their respective holders.
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Millions, except per share data)
Three Months Year
Ended December 31 Ended December 31
----------------- -----------------
2011 2010 2011 2010
---- ---- ---- ----
Revenue
Services $835.3 $859.7 $3,354.6 $3,457.4
Technology 150.0 184.9 499.2 562.2
----- ----- ----- -----
985.3 1,044.6 3,853.8 4,019.6
Costs and
expenses
Cost of
revenue:
Services 662.2 661.3 2,672.8 2,731.8
Technology 42.8 72.2 194.0 216.1
---- ---- ----- -----
705.0 733.5 2,866.8 2,947.9
Selling,
general
and
administrative 139.8 158.4 586.3 617.1
Research
and
development 18.9 18.1 76.1 78.9
---- ---- ---- ----
863.7 910.0 3,529.2 3,643.9
----- ----- ------- -------
Operating
profit 121.6 134.6 324.6 375.7
Interest
expense 11.4 25.0 63.1 101.8
Other
income
(expense),
net 1.1 (6.4) (55.5) (51.0)
--- ---- ----- -----
Income
from
continuing
operations
before
income
taxes 111.3 103.2 206.0 222.9
Provision
for
income
taxes 12.4 6.1 64.8 58.8
---- --- ---- ----
Consolidated
income
before
discontinued
operations 98.9 97.1 141.2 164.1
Income
from
discontinued
operations,
net of
taxes - 4.0 - 77.2
--- --- --- ----
Net income 98.9 101.1 141.2 241.3
Less: Net
income
attributable
to
noncontrolling
interests 0.6 1.9 7.2 5.2
Less:
Preferred
stock
dividends 4.0 - 13.5 -
--- --- ---- ---
Net income
attributable
to Unisys
Corporation
common
shareholders $94.3 $99.2 $120.5 $236.1
===== ===== ====== ======
Amounts
attributable
to Unisys
Corporation
common
shareholders
Income
from
continuing
operations,
net of
tax $94.3 $95.2 $120.5 $158.9
Income
from
discontinued
operations,
net of
tax - 4.0 - 77.2
--- --- --- ----
Net income
attributable
to Unisys
Corporation
common
shareholders $94.3 $99.2 $120.5 $236.1
===== ===== ====== ======
Earnings
per
common
share
attributable
to Unisys
Corporation
Basic
Continuing
operations $2.17 $2.24 $2.79 $3.74
Discontinued
operations .00 .09 .00 1.81
Total $2.17 $2.33 $2.79 $5.55
===== ===== ===== =====
Diluted
Continuing
operations $1.94 $2.20 $2.71 $3.67
Discontinued
operations .00 .09 .00 1.78
Total $1.94 $2.29 $2.71 $5.45
===== ===== ===== =====
Shares used in the per
share computations
(thousands):
Basic 43,392 42,642 43,145 42,562
Diluted 50,799 43,326 49,478 43,333
UNISYS CORPORATION
SEGMENT RESULTS
(Unaudited)
(Millions)
Total Eliminations Services Technology
----- ------------ -------- ----------
Three Months Ended
December 31, 2011
-----------------
Customer revenue $985.3 $835.3 $150.0
Intersegment ($32.4) 3.6 28.8
Total revenue $985.3 ($32.4) $838.9 $178.8
====== ====== ====== ======
Gross profit percent 28.4% 20.0% 65.9%
==== ==== ====
Operating profit
percent 12.3% 7.6% 37.7%
==== === ====
Three Months Ended
December 31, 2010
-----------------
Customer revenue $1,044.6 $859.7 $184.9
Intersegment ($31.7) 2.3 29.4
Total revenue $1,044.6 ($31.7) $862.0 $214.3
======== ====== ====== ======
Gross profit percent 29.8% 21.9% 56.5%
==== ==== ====
Operating profit
percent 12.9% 8.0% 30.1%
==== === ====
Year Ended
December 31, 2011
-----------------
Customer revenue $3,853.8 $3,354.6 $499.2
Intersegment ($102.6) 6.3 96.3
Total revenue $3,853.8 ($102.6) $3,360.9 $595.5
======== ======= ======== ======
Gross profit percent 25.6% 20.0% 56.9%
==== ==== ====
Operating profit
percent 8.4% 6.9% 21.5%
=== === ====
Year Ended
December 31, 2010
-----------------
Customer revenue $4,019.6 $3,457.4 $562.2
Intersegment ($116.6) 5.9 110.7
Total revenue $4,019.6 ($116.6) $3,463.3 $672.9
======== ======= ======== ======
Gross profit percent 26.7% 20.1% 55.0%
==== ==== ====
Operating profit
percent 9.3% 6.7% 21.1%
=== === ====
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions)
December 31, December 31,
2011 2010
---- ----
Assets
Current assets
Cash and cash equivalents $714.9 $828.3
Accounts and notes
receivable, net 673.0 789.7
Inventories
Parts and finished
equipment 38.1 44.8
Work in process and
materials 26.7 44.1
Deferred income taxes 27.1 40.7
Prepaid expense and other
current assets 123.6 127.8
----- -----
Total 1,603.4 1,875.4
------- -------
Properties 1,257.2 1,339.0
Less accumulated
depreciation and
amortization 1,065.9 1,119.3
Properties, net 191.3 219.7
----- -----
Outsourcing assets, net 137.9 162.3
Marketable software, net 129.8 143.8
Prepaid postretirement
assets 43.9 31.2
Deferred income taxes 181.5 179.6
Goodwill 192.5 197.9
Other long-term assets 131.9 211.0
----- -----
Total $2,612.2 $3,020.9
======== ========
Liabilities and
stockholders' deficit
Current liabilities
Current maturities of
long-term debt $0.9 $0.8
Accounts payable 241.6 260.7
Deferred revenue 448.1 556.3
Other accrued liabilities 425.5 518.9
----- -----
Total 1,116.1 1,336.7
------- -------
Long-term debt 358.8 823.2
Long-term postretirement
liabilities 2,224.0 1,509.2
Long-term deferred revenue 120.3 149.4
Other long-term
liabilities 104.0 136.2
Commitments and
contingencies
Total stockholders'
deficit (1,311.0) (933.8)
-------- ------
Total $2,612.2 $3,020.9
======== ========
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions)
Year Ended
December 31
-----------
2011 2010
---- ----
Cash flows from operating activities
Consolidated income before
discontinued operations $141.2 $164.1
Income from discontinued operations,
net of taxes - 77.2
Add (deduct) items to reconcile
consolidated net
income to net cash provided by
operating activities:
Foreign currency transaction loss - 19.9
Loss on debt extinguishment 85.2 2.1
Employee stock compensation 13.9 9.4
Company stock issued for U.S. 401(k)
plan 11.8 -
Depreciation and amortization of
properties 66.4 75.8
Depreciation and amortization of
outsourcing assets 62.7 111.9
Amortization of marketable software 65.7 62.9
Disposals of capital assets 1.4 9.8
Gain on sale of businesses and assets (2.2) (65.5)
Decrease (increase) in deferred
income taxes, net 28.6 (34.4)
Decrease (increase) in receivables,
net 92.1 (31.9)
Decrease in inventories 22.1 12.4
(Decrease) increase in accounts
payable and other accrued
liabilities (214.4) 56.5
Decrease in other liabilities (50.6) (38.4)
Increase in other assets (5.9) (94.2)
Other (0.8) (0.8)
Net cash provided by operating
activities 317.2 336.8
----- -----
Cash flows from investing activities
Proceeds from investments 691.2 417.4
Purchases of investments (688.2) (416.5)
Restricted deposits 50.7 23.4
Investment in marketable software (51.7) (55.8)
Capital additions of properties (42.2) (64.1)
Capital additions of outsourcing
assets (40.5) (83.2)
Net proceeds from sale of businesses
and assets (15.6) 117.2
----- -----
Net cash used for investing
activities (96.3) (61.6)
----- -----
Cash flows from financing activities
Proceeds from issuance of preferred
stock, net of issuance costs 249.7 -
Payments of long-term debt (555.7) (92.8)
Dividends paid to noncontrolling
interests (0.4) -
Dividends paid on preferred shares (12.2) -
Proceeds from exercise of stock
options 1.4 1.4
Financing fees (2.2) (0.1)
---- ----
Net cash used for financing
activities (319.4) (91.5)
------ -----
Effect of exchange rate changes on
cash and cash equivalents (14.9) (3.0)
----- ----
(Decrease) increase in cash and cash
equivalents (113.4) 180.7
Cash and cash equivalents, beginning
of period 828.3 647.6
Cash and cash equivalents, end of
period $714.9 $828.3
====== ======
( 1 )
UNISYS CORPORATION
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP
MEASURES
(Unaudited)
(Millions, except per share data)
Three Months Year
Ended December 31 Ended December 31
----------------- -----------------
2011 2010 2011 2010
---- ---- ---- ----
GAAP net
income from
continuing
operations
attributable
to Unisys
Corporation
common
shareholders $94.3 $95.2 $120.5 $158.9
Debt
reduction
charges,
net of tax 7.6 0.7 85.2 2.1
--- --- ---- ---
Non-GAAP
net income
from
continuing
operations
attributable
to Unisys
Corporation
common
shareholders 101.9 95.9 205.7 161.0
Add
preferred
stock
dividends 4.0 0.0 13.5 0.0
--- --- ---- ---
Non-GAAP
net income
from
continuing
operations
attributable
to Unisys
Corporation
for diluted
earnings
per share $105.9 $95.9 $219.2 $161.0
====== ===== ====== ======
Weighted
average
shares
(thousands) 43,392 42,642 43,145 42,562
Plus
incremental
shares from
assumed
conversion
of employee
stock plans
and
preferred
stock 7,407 684 6,333 771
----- --- ----- ---
GAAP
Adjusted
weighted
average
shares 50,799 43,326 49,478 43,333
====== ====== ====== ======
Earnings per
Share
GAAP basis
----------
GAAP net
income from
continuing
operations
attributable
to Unisys
Corporation
for diluted
earnings
per share $98.3 $95.2 $134.0 $158.9
Divided by
adjusted
weighted
average
shares 50,799 43,326 49,478 43,333
GAAP net
income per
diluted
share
from
continuing
operations $1.94 $2.20 $2.71 $3.67
===== ===== ===== =====
Non-GAAP
basis
--------
Non-GAAP
net income
from
continuing
operations
attributable
to Unisys
Corporation
for diluted
earnings
per share $105.9 $95.9 $219.2 $161.0
Divided by
Non-GAAP
adjusted
weighted
average
shares 50,799 43,326 49,478 43,333
Non-GAAP
net income
per diluted
share
from
continuing
operations $2.08 $2.21 $4.43 $3.72
===== ===== ===== =====
( 2 )
UNISYS CORPORATION
RECONCILIATION OF GAAP INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES TO
NON-GAAP INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES
(Unaudited)
(Millions)
Three Months Year
Ended December 31 Ended December 31
----------------- -----------------
2011 2010 2011 2010
---- ---- ---- ----
GAAP income
from
continuing
operations
before
income
taxes $111.3 $103.2 $206.0 $222.9
Debt
reduction
charges 7.6 0.7 85.2 2.1
--- --- ---- ---
Non-GAAP
income
from
continuing
operations
before
income
taxes $118.9 $103.9 $291.2 $225.0
====== ====== ====== ======
( 3 )
UNISYS CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
(Unaudited)
(Millions)
FREE CASH FLOW
--------------
Three Months Year
Ended December 31 Ended December 31
----------------- -----------------
2011 2010 2011 2010
---- ---- ---- ----
Cash
provided
by
operations $159.5 $186.8 $317.2 $336.8
Additions
to
marketable
software (14.8) (14.0) (51.7) (55.8)
Additions
to
properties (9.3) (14.4) (42.2) (64.1)
Additions
to
outsourcing
assets (9.2) (12.8) (40.5) (83.2)
Free
Cash
Flow $126.2 $145.6 $182.8 $133.7
====== ====== ====== ======
SOURCE Unisys Corporation