Unisys Announces Second-Quarter 2010 Financial Results
Compared to Q2 2009:
- Operating income rose 58 percent to $106.7 million; operating profit margin of 10.1 percent, up from 6.1 percent
- Net income from continuing operations of $59.4 million, up 77 percent
- Net income of $120.2 million vs. $38.1 million
- Diluted EPS from continuing operations rose to $1.37 vs. $.90
- Diluted EPS rose to $2.77 vs. $1.02
- Total revenue declined 4 percent (half the decline attributable to divested businesses)
- Technology revenue grew 47 percent; third consecutive quarter of ClearPath mainframe revenue growth
- IT outsourcing revenue grew high single digits outside of US federal business
- International revenue grew 3 percent
- Operating expenses (SG&A + R&D expenses) declined 6 percent
- Increased quarterly operating cash flow and generated positive free cash flow for Q210
BLUE BELL, Pa., July 27 /PRNewswire-FirstCall/ -- Unisys Corporation (NYSE: UIS) today reported second-quarter 2010 net income of $120.2 million, or $2.77 per diluted share, compared with net income of $38.1 million, or $1.02 per diluted share, in the year-ago quarter. The current quarter results include a pre-tax gain of approximately $65 million related to the sale of the company's health information management (HIM) business. Second-quarter 2010 net income from continuing operations increased to $59.4 million, or $1.37 per diluted share, from $33.5 million, or 90 cents per diluted share, in the year-ago period. Operating results of the HIM business, and the gain on the sale, are being reported as a discontinued operation.
Revenue in the second quarter of 2010 declined 4 percent (2 percent excluding divested businesses) to $1.06 billion compared with $1.10 billion in the year-ago quarter. Revenue declined 5 percent (3 percent excluding divested businesses) on a constant currency basis.
Revenue in the United States was $450 million and declined 13 percent due to the impact of divestitures and lower U.S. federal government revenue. Revenue in international markets grew 3 percent (flat in constant currency) to $606 million.
"The second quarter was another solid quarter for Unisys," said Unisys Chairman and CEO Ed Coleman. "Driven by a strong performance in our technology business, we reported an operating profit margin of 10.1 percent in the quarter and delivered our fifth consecutive quarter of improved year-over-year profitability. Sales of ClearPath servers grew year-over-year for the third straight quarter and we also saw high single digit percent growth in our IT outsourcing revenue excluding our U.S. federal government business. We continued to strengthen the balance sheet and reshape the company, focusing on those elements that are integral to the delivery of our security, data center transformation, end user outsourcing and application modernization solutions."
Overall Margins
Unisys reported a second-quarter gross profit margin of 27.3 percent, up from 23.7 percent a year ago, and a second-quarter operating profit margin of 10.1 percent, up from 6.1 percent a year ago. The increased margins primarily reflected higher sales of ClearPath mainframes in the current quarter.
Second-Quarter Business Segment Results
Customer revenue in the company's services segment declined 9 percent (7 percent excluding divested businesses) compared with the year-ago quarter. On lower revenue, services gross profit margin declined to 19.0 percent compared with 20.7 percent a year ago, while services operating margin declined to 6.0 percent compared with 7.4 percent a year ago. Services revenue and operating margins improved sequentially from the first quarter of 2010 by 5 percent and 140 basis points respectively.
Services backlog at June 30, 2010 was $5.7 billion, up from $5.5 billion at June 30, 2009 and down from $5.9 billion of services backlog at March 31, 2010. The decrease from March 31, 2010 is primarily attributable to currency exchange rate movements. Services orders declined single digits from year-ago levels.
Customer revenue in the company's technology segment increased 47 percent (56 percent excluding divested businesses) from the second quarter of 2009, driven by substantial growth in ClearPath mainframe revenue. Reflecting the higher ClearPath sales, the company reported a technology gross profit margin of 61.3 percent and an operating profit margin of 27.4 percent in the quarter. These compared with a gross profit margin of 40.4 percent and operating margin of (5.4) percent in the year-ago quarter.
Cash Flow and Balance Sheet Highlights
Unisys generated $52 million of cash from operations in the second quarter of 2010 compared with $48 million of cash flow from operations in the second quarter of 2009. Capital expenditures in the second quarter of 2010 declined to $48 million compared with $53 million in the year-ago quarter. The company generated $4 million of free cash flow (cash from operations less capital expenditures) in the second quarter of 2010 compared with free cash usage of $5 million in the second quarter of 2009.
As previously announced, on April 30, 2010 the company completed the sale of its HIM business. Net cash proceeds from the sale were approximately $126 million. Under the terms of certain of the company's debt agreements, the proceeds can be used for certain capital expenditures, the acquisition of certain assets and the repayment of certain debt obligations. During the second quarter, the company used approximately $25 million of the proceeds for such purposes. At June 30, 2010, approximately $101 million of proceeds remain as restricted cash included in other long-term assets on the company's balance sheet.
At June 30, 2010, Unisys reported $497 million of cash on hand.
Conference Call
Unisys will hold a conference call today at 8:15 a.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.
Constant Currency
The company refers to revenue 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 or adjusting for currency will be higher or lower than growth reported at actual exchange rates.
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 24,000 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 adverse effects of global economic conditions; the company's ability to access credit markets to address its liquidity needs; 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 potential adverse effects of aggressive competition in the information services and technology marketplace; the company's ability to effectively anticipate and respond to volatility and rapid technological change in its industry; the company's ability to retain significant clients; the company's ability to take on, successfully implement and grow outsourcing operations; the company's ability to drive profitable growth in consulting and systems integration; market 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 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 business and financial risk in implementing future dispositions or acquisitions; the potential for 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; 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. Unisys assumes no obligation to update any forward-looking statements.
RELEASE NO.: 0727/8981
Unisys is a registered trademark 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 STATEMENTS OF INCOME
(Unaudited)
(Millions, except per share data)
Three Months Six Months
Ended June 30 Ended June 30
------------------ ------------------
2010 2009 * 2010 2009 *
-------- -------- -------- --------
Revenue
Services $911.3 $1,002.5 $1,782.7 $1,959.1
Technology 145.0 98.7 271.9 214.8
-------- -------- -------- --------
1,056.3 1,101.2 2,054.6 2,173.9
Costs and expenses
Cost of revenue:
Services 726.0 786.1 1,433.6 1,572.5
Technology 42.0 54.5 96.6 126.3
-------- -------- -------- --------
768.0 840.6 1,530.2 1,698.8
Selling, general and
administrative 160.5 167.8 316.9 339.9
Research and development 21.1 25.1 41.9 52.5
-------- -------- -------- --------
949.6 1,033.5 1,889.0 2,091.2
-------- -------- -------- --------
Operating profit 106.7 67.7 165.6 82.7
Interest expense 25.3 21.2 51.8 43.0
Other income (expense), net (7.6) 3.0 (44.4) (3.7)
-------- -------- -------- --------
Income from continuing operations
before income taxes 73.8 49.5 69.4 36.0
Provision for income taxes 13.2 13.5 24.5 26.3
-------- -------- -------- --------
Consolidated net income from
continuing operations 60.6 36.0 44.9 9.7
Net income attributable to
noncontrolling interests (1.2) (2.5) (2.4) (4.8)
-------- -------- -------- --------
Net income from continuing
operations attributable
to Unisys Corporation 59.4 33.5 42.5 4.9
Income from discontinued operations,
net of taxes 60.8 4.6 66.1 8.8
-------- -------- -------- --------
Net income attributable to
Unisys Corporation $120.2 $38.1 $108.6 $13.7
======== ======== ======== ========
Earnings per share attributable
to Unisys Corporation
Basic
Continuing operations $ 1.39 $ .91 $ 1.00 $ .13
Discontinued operations $ 1.43 $ .12 $ 1.56 $ .24
-------- -------- -------- --------
Total $ 2.82 $ 1.03 $ 2.56 $ .37
======== ======== ======== ========
Diluted
Continuing operations $ 1.37 $ .90 $ .98 $ .13
Discontinued operations $ 1.40 $ .12 $ 1.52 $ .24
-------- -------- -------- --------
Total $ 2.77 $ 1.02 $ 2.50 $ .37
======== ======== ======== ========
Shares used in the per share
computations (thousands):
Basic 42,590 37,032 42,494 37,018
======== ======== ======== ========
Diluted 43,329 37,449 43,356 37,278
======== ======== ======== ========
* Reclassified for discontinued operations
UNISYS CORPORATION
SEGMENT RESULTS
(Unaudited)
(Millions)
Elimi-
Total nations Services Technology
-------- -------- -------- ----------
Three Months Ended
June 30, 2010
------------------
Customer revenue $1,056.3 $911.3 $145.0
Intersegment ($36.2) 1.5 34.7
-------- -------- -------- --------
Total revenue $1,056.3 ($36.2) $912.8 $179.7
======== ======== ======== ========
Gross profit percent 27.3% 19.0% 61.3%
======== ======== ========
Operating profit
percent 10.1% 6.0% 27.4%
======== ======== ========
Three Months Ended
June 30, 2009 *
------------------
Customer revenue $1,101.2 $1,002.5 $98.7
Intersegment ($47.3) 1.6 45.7
-------- -------- -------- --------
Total revenue $1,101.2 ($47.3) $1,004.1 $144.4
======== ======== ======== ========
Gross profit percent 23.7% 20.7% 40.4%
======== ======== ========
Operating profit (loss)
percent 6.1% 7.4% (5.4%)
======== ======== ========
Six Months Ended
June 30, 2010
------------------
Customer revenue $2,054.6 $1,782.7 $271.9
Intersegment ($59.2) 2.3 56.9
-------- -------- -------- --------
Total revenue $2,054.6 ($59.2) $1,785.0 $328.8
======== ======== ======== ========
Gross profit percent 25.5% 18.6% 57.2%
======== ======== ========
Operating profit
percent 8.1% 5.3% 21.2%
======== ======== ========
Six Months Ended
June 30, 2009 *
------------------
Customer revenue $2,173.9 $1,959.1 $214.8
Intersegment ($85.2) 3.3 81.9
-------- -------- -------- --------
Total revenue $2,173.9 ($85.2) $1,962.4 $296.7
======== ======== ======== ========
Gross profit percent 21.9% 18.3% 36.7%
======== ======== ========
Operating profit (loss)
percent 3.8% 4.8% (8.6%)
======== ======== ========
* Reclassified for discontinued operations
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions)
June 30, December 31,
2010 2009 *
---------- ----------
Assets
Current assets
Cash and cash equivalents $496.5 $647.6
Accounts and notes receivable, net 786.2 779.7
Inventories
Parts and finished equipment 56.0 57.5
Work in process and materials 34.8 43.0
Deferred income taxes 24.5 19.9
Prepaid expense and other
current assets 128.7 141.8
Assets of discontinued operations - 82.1
---------- ----------
Total 1,526.7 1,771.6
---------- ----------
Properties 1,353.9 1,370.6
Less accumulated depreciation
and amortization 1,128.1 1,143.2
---------- ----------
Properties, net 225.8 227.4
---------- ----------
Outsourcing assets, net 175.8 213.7
Marketable software, net 147.1 151.5
Deferred income taxes 161.3 180.6
Goodwill 192.2 198.5
Other long-term assets 285.5 213.6
---------- ----------
Total $2,714.4 $2,956.9
========== ==========
Liabilities and stockholders' deficit
Current liabilities
Current maturities of long-term debt $0.7 $65.8
Accounts payable 265.3 300.4
Deferred revenue 459.5 450.6
Other accrued liabilities 435.1 567.1
Liabilities of discontinued operations - 39.2
---------- ----------
Total 1,160.6 1,423.1
---------- ----------
Long-term debt 835.7 845.9
Long-term postretirement liabilities 1,507.7 1,640.6
Long-term deferred revenue 150.3 176.3
Other long-term liabilities 140.2 142.7
Commitments and contingencies
Total stockholders' deficit (1,080.1) (1,271.7)
---------- ----------
Total $2,714.4 $2,956.9
========== ==========
* Reclassified for discontinued operations
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Millions)
Six Months Ended
June 30
--------------------
2010 2009
-------- --------
Cash flows from operating activities
Consolidated net income from
continuing operations $44.9 $9.7
Income from discontinued operations,
net of taxes 66.1 8.8
Add (deduct) items to reconcile
consolidated net income to net cash
provided by operating activities:
Foreign currency transaction loss 19.9 -
Employee stock compensation 5.8 3.8
Depreciation and amortization
of properties 39.6 48.4
Depreciation and amortization of
outsourcing assets 58.6 75.7
Amortization of marketable software 31.2 49.7
Disposals of capital assets 7.4 5.6
Gain on sale of businesses and assets (62.0) -
Loss on extinguishment of debt 1.4 -
(Increase) decrease in deferred income
taxes, net (9.3) 3.9
(Increase) decrease in receivables, net (52.2) 101.7
Decrease in inventories 5.8 15.8
Decrease in accounts payable
and other accrued liabilities (65.6) (206.2)
(Decrease) increase in other liabilities (34.4) 21.8
Increase in other assets (35.0) (52.0)
Other 1.0 1.0
------- -------
Net cash provided by operating activities 23.2 87.7
------- -------
Cash flows from investing activities
Proceeds from investments 211.8 200.9
Purchases of investments (211.4) (199.6)
Restricted deposits (80.6) (72.3)
Investment in marketable software (27.3) (29.5)
Capital additions of properties (37.3) (18.1)
Capital additions of outsourcing assets (51.7) (53.2)
Purchases of businesses - (1.5)
Proceeds from sale of businesses
and assets 130.3 -
------- -------
Net cash used for investing activities (66.2) (173.3)
------- -------
Cash flows from financing activities
Proceeds from exercise of stock options 1.2 -
Payments of long-term debt (78.0) -
Financing fees (.1) (.7)
------- -------
Net cash used for financing activities (76.9) (.7)
------- -------
Effect of exchange rate changes on cash
and cash equivalents (31.2) 17.3
------- -------
Decrease in cash and cash equivalents (151.1) (69.0)
Cash and cash equivalents, beginning of
period 647.6 544.0
------- -------
Cash and cash equivalents, end of period $496.5 $475.0
======= =======
SOURCE Unisys Corporation
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