Unisys Announces Fourth-Quarter and Full Year 2015 Financial Results

Jan 28, 2016, 16:30 ET from Unisys Corporation

BLUE BELL, Pa., Jan. 28, 2016 /PRNewswire/ -- Unisys Corporation (NYSE: UIS) today reported fourth quarter and full year 2015 results.

4Q 2015:

  • Revenue of $790 million
  • Operating profit margin of 2.0 percent; 12.1 percent(1) before cost reduction charges and other expense of $53 million and pension expense of $27 million
  • Diluted earnings per share of $0.02
  • Non-GAAP diluted earnings per share(2) of $1.58

Full Year 2015:

  • Revenue of $3,015 million
  • Operating profit margin of (1.8) percent; 5.8 percent before cost reduction charges and other expense of $123 million and pension expense of $109 million
  • Diluted loss per share of ($2.20)
  • Non-GAAP diluted earnings per share of $2.26

"Our progress as a provider of higher-value, industry-focused IT solutions continues," said Unisys President and CEO Peter Altabef. "Our efforts to reduce costs, sharpen our market focus and enhance our offerings continued to improve our competitiveness and positioning in the marketplace. In the fourth quarter, services revenue continued to grow in constant currency, our non-GAAP operating profitability improved, we made a number of critical leadership additions, and our Stealth offering continued to gain traction."

Summary of Business Results

  • Fourth quarter 2015
    • Company:
      • Revenue of $790 million declined 13 percent year-over-year; down 6 percent in constant currency(3) as Services revenue growth in constant currency was offset by lower Technology revenue.
      • Overall operating profit margin of 2.0 percent includes cost reduction charges and other expense and pension expense. Fourth quarter 2015 non-GAAP operating profit margin was 12.1 percent, an increase of 100 basis points from the prior year.
    • Services:
      • Service revenue, which represented 82 percent of total revenue, declined by 6 percent, growing 2 percent in constant currency; the fourth consecutive quarter of year-over-year growth in constant currency principally reflected higher Application Services revenue.
      • Services operating profit margin was 3.6 percent, an increase of 20 basis points from the prior year, reflecting the benefit of cost reduction actions taken in 2015.
    • Technology:
      • Technology revenue, which represented 18 percent of total revenue, declined 35 percent, down 30 percent in constant currency, reflecting reduced ClearPath Forward™ revenue, which can vary significantly from quarter-to-quarter based on the timing of license renewals, and lower sales of low-margin third party equipment.
      • Operating profit margin improved to 46.8 percent from 36.1 percent in the prior year due to a higher proportion of software revenue and the benefit of operating cost reductions.
  • Full Year 2015
    • Company:
      • Revenue of $3,015 million declined 10 percent year-over-year; down 2 percent in constant currency, reflecting lower Technology revenue.
      • Overall operating profit margin of (1.8) percent includes cost reduction charges and other expense and pension expense.
    • Services:
      • Services revenue, which represented 86 percent of total revenue, declined by 6 percent, growing 2 percent in constant currency. The growth in constant currency principally reflected higher Application Services revenue.
      • Services operating profit margin was 2.3 percent, a decrease of 110 basis points from the prior year, reflecting the impact of currency, which offset the benefit of cost reduction actions taken in 2015.
    • Technology:
      • Technology revenue, which represented 14 percent of total revenue, declined 28 percent, down 22 percent in constant currency, reflecting reduced ClearPath Forward™ revenue and lower sales of low-margin third party equipment.
      • Technology operating profit margin improved to 24.8 percent from 21.9 percent in the prior year due to operating cost reductions.

Cash Flow

  • Fourth quarter 2015 free cash flow(4) of $63 million rose 73 percent year-over-year due principally to lower capital expenditures. Adjusted free cash flow(5) in fourth quarter 2015 doubled from the prior year to $117 million.
  • Full year 2015 free cash flow usage of $213 million, an increase of $121 million from 2014, included $59 million in cost reduction payments and the impact of $48 million in delayed receivable payments from a large Public Sector client, which were not received until January 2016. Adjusted free cash flow usage of $6 million in 2015 declined $98 million from 2014.
  • The company ended 2015 with $365 million in cash.

2016 Outlook

  • Unisys will discuss the 2016 outlook during the quarterly earnings conference call.

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.

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. Management uses supplemental non-GAAP financial measures internally to understand, manage and evaluate the business and assess operational alternatives. 

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) Non-GAAP operating profit – During the fourth quarter and full year 2015, Unisys recorded pretax pension expense and a pretax charge in connection with cost reduction actions and other expense. In order to provide investors with additional understanding of the company's operating results, these changes are excluded from the operating profit.

 (2) Non-GAAP diluted earnings per share – During the fourth quarter and full year 2015, Unisys recorded pension expense, net of tax, and a charge, net of tax, in connection with cost reduction actions and other expense. 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) Constant currency – The company refers to growth rates in constant currency or on a constant currency basis 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 is calculated by retranslating current and prior period results at a consistent rate.

(4) Free cash flow – The company defines free cash flow 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.

(5) Adjusted free cash flow – Adjusted free cash flow provides free cash flow before the company's pension contributions or cost reduction payments in an effort to provide investors with a perspective on the company's free cash flow generation before these items.

About Unisys  Unisys is a global information technology company that works with many of the world's largest companies and government organizations to solve their most pressing IT and business challenges. Unisys specializes in providing integrated, leading-edge solutions to clients in the government, financial services and commercial markets. With more than 20,000 employees serving clients around the world, Unisys offerings include cloud and infrastructure services, application services, security solutions, and high-end server technology. 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 innovation in its industry; the company's ability to maintain and grow its technology business; the company's ability to improve margins in its services business; the company's ability to drive efficiencies across all of its operations; the company's significant pension obligations and requirements to make significant cash contributions to its defined benefit plans; financial market conditions that may inhibit the company's ability to access capital and credit markets to address its liquidity needs; 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 adverse effects of global economic conditions, acts of war, terrorism or natural disasters; 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 a significant portion of the company's revenue is derived from international operations; 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 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.: 0128/9388

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

Year

Ended December 31

Ended December 31

2015

2014

2015

2014

Revenue

  Services

$649.1

$688.7

*

$2,605.6

$2,785.7

*

  Technology

140.8

217.1

*

409.5

570.7

*

789.9

905.8

3,015.1

3,356.4

Costs and expenses

  Cost of revenue:

    Services

592.0

573.9

*

2,306.7

2,337.8

*

    Technology

38.9

87.2

*

167.5

240.8

*

630.9

661.1

2,474.2

2,578.6

Selling, general and administrative

130.0

144.0

519.6

554.1

Research and development

13.2

18.3

76.4

68.8

774.1

823.4

3,070.2

3,201.5

Operating profit (loss)

15.8

82.4

(55.1)

154.9

Interest expense

3.6

2.6

11.9

9.2

Other income (expense), net

0.2

8.8

8.2

(0.2)

Income (loss) before income taxes

12.4

88.6

(58.8)

145.5

Provision for income taxes

11.1

23.9

44.4

86.2

Consolidated net income (loss)

1.3

64.7

(103.2)

59.3

Net income attributable to

noncontrolling interests

0.2

2.9

6.7

12.6

Net income (loss) attributable to Unisys 

Corporation

1.1

61.8

(109.9)

46.7

Preferred stock dividend

-

-

-

2.7

Net income (loss) attributable to Unisys 

Corporation common shareholders

$1.1

$61.8

($109.9)

$44.0

Earnings (loss) per common share

attributable to Unisys Corporation

  Basic

$   .02

$  1.24

($  2.20)

$  .89

  Diluted

$   .02

$  1.24

($  2.20)

$  .89

Shares used in the per share computations (thousands):

  Basic

49,937

49,689

49,905

49,280

  Diluted

50,049

49,948

49,905

49,584

* Changed to conform with the 2015 presentation.

 

 

UNISYS CORPORATION

SEGMENT RESULTS

(Unaudited)

(Millions)

  Total

 Eliminations

 Services

Technology

Three Months Ended

December 31, 2015

Customer revenue

$789.9

$649.1

$140.8

Intersegment

($8.4)

-

8.4

Total revenue

$789.9

($8.4)

$649.1

$149.2

Gross profit percent

20.1%

16.2%

68.4%

Operating profit percent

2.0%

3.6%

46.8%

Three Months Ended

December 31, 2014 *

Customer revenue

$905.8

$688.7

$217.1

Intersegment

($35.5)

-

35.5

Total revenue

$905.8

($35.5)

$688.7

$252.6

Gross profit percent

27.0%

17.9%

58.2%

Operating profit percent

9.1%

3.4%

36.1%

Year Ended

December 31, 2015

Customer revenue

$3,015.1

$2,605.6

$409.5

Intersegment

($49.0)

0.1

48.9

Total revenue

$3,015.1

($49.0)

$2,605.7

$458.4

Gross profit percent

17.9%

15.8%

55.3%

Operating profit (loss) percent

(1.8%)

2.3%

24.8%

Year Ended

December 31, 2014 *

Customer revenue

$3,356.4

$2,785.7

$570.7

Intersegment

($58.4)

0.3

58.1

Total revenue

$3,356.4

($58.4)

$2,786.0

$628.8

Gross profit percent

23.2%

17.4%

55.3%

Operating profit percent

4.6%

3.4%

21.9%

* Changed to conform with the 2015 presentation.

 

 

UNISYS CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Millions)

December 31,

December 31,

2015

2014

Assets

Current assets

Cash and cash equivalents

$365.2

$494.3

Accounts and notes receivable, net

581.6

619.3

Inventories

  Parts and finished equipment

20.9

22.2

  Work in process and materials

22.9

24.5

Deferred income taxes

24.1

16.4

Prepaid expense and other current assets

121.0

140.6

Total

1,135.7

1,317.3

Properties

876.6

1,059.4

Less accumulated depreciation and amortization

722.8

890.7

Properties, net

153.8

168.7

Outsourcing assets, net

182.0

150.9

Marketable software, net

138.5

144.1

Prepaid postretirement assets

45.1

19.9

Deferred income taxes

114.5

154.6

Goodwill

177.4

183.9

Other long-term assets

196.2

209.3

Total

$2,143.2

$2,348.7

Liabilities and deficit

Current liabilities

Notes payable

$65.8

$0.0

Current maturities of long-term debt

11.0

1.8

Accounts payable

219.3

262.5

Deferred revenue

335.1

348.3

Other accrued liabilities

339.3

385.1

Total

970.5

997.7

Long-term debt

235.5

222.2

Long-term postretirement liabilities

2,111.3

2,369.9

Long-term deferred revenue

123.3

119.5

Other long-term liabilities

81.2

91.8

Commitments and contingencies

Total deficit

(1,378.6)

(1,452.4)

Total

$2,143.2

$2,348.7

 

 

UNISYS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Millions)

 Year Ended 

 December 31 

2015

2014

Cash flows from operating activities

Consolidated net (loss) income

($103.2)

$59.3

Add (deduct) items to reconcile consolidated net (loss)

income to net cash provided by operating activities:

Foreign currency transaction loss

8.4

7.4

Employee stock compensation

9.4

10.4

Depreciation and amortization of properties

57.5

52.0

Depreciation and amortization of outsourcing assets

55.7

58.1

Amortization of marketable software

66.9

58.5

Other non-cash operating activities

4.6

7.8

Disposals of capital assets

9.7

1.8

Gain on sale of business

-

(0.7)

Pension contributions

(148.3)

(183.4)

Pension expense

108.7

73.8

Decrease in deferred income taxes, net

1.2

24.8

Increase in receivables, net

(11.5)

(14.3)

(Increase) decrease in inventories

(3.7)

6.3

(Decrease) increase in accounts payable and other accrued liabilities

(61.1)

14.4

Decrease in other liabilities

(7.5)

(31.1)

Decrease (increase) in other assets

14.4

(23.7)

Net cash provided by operating activities

1.2

121.4

Cash flows from investing activities

Proceeds from investments

3,831.6

5,654.0

Purchases of investments

(3,806.2)

(5,640.3)

Investment in marketable software

(62.1)

(73.6)

Capital additions of properties

(49.6)

(53.3)

Capital additions of outsourcing assets

(102.0)

(85.9)

Other

10.4

3.8

Net cash used for investing activities

(177.9)

(195.3)

Cash flows from financing activities

Purchases of common stock

-

(35.7)

Payments of long-term debt

(10.4)

-

Dividends paid on preferred shares

-

(4.0)

Proceeds from exercise of stock options

3.7

3.4

Proceeds from issuance of long-term debt

31.8

-

Net proceeds from short-term borrowings

65.8

-

Financing fees

(0.3)

(0.6)

Net cash provided by (used for) financing activities

90.6

(36.9)

Effect of exchange rate changes on cash and cash equivalents

(43.0)

(34.7)

Decrease in cash and cash equivalents

(129.1)

(145.5)

Cash and cash equivalents, beginning of period

494.3

639.8

Cash and cash equivalents, end of period

$365.2

$494.3

 

 

( 1 )

UNISYS CORPORATION

RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES

(Unaudited)

(Millions, except per share data)

Three Months Ended

Year Ended

December 31, 2015

December 31, 2015

GAAP net income (loss)

  attributable to Unisys Corporation

  common shareholders

$1.1

($109.9)

Cost reduction and other expense, net of tax

51.5

116.5

Pension expense, net of tax

26.7

106.6

Non-GAAP net income

  attributable to Unisys Corporation

  common shareholders

79.3

113.2

Add preferred stock dividend

0.0

0.0

Non-GAAP net income

  attributable to Unisys Corporation

  for diluted earnings per share

$79.3

$113.2

Weighted average shares (thousands)

49,937

49,905

Plus incremental shares from assumed conversion:

Employee stock plans

112

150

Preferred stock

0

0

GAAP adjusted weighted average shares

50,049

50,055

Diluted earnings per share

GAAP basis

GAAP net income (loss)

  attributable to Unisys Corporation

  for diluted earnings per share

$1.1

($109.9)

Divided by adjusted weighted average shares

50,049

49,905

GAAP earnings (loss) per diluted share

$   .02

($   2.20)

Non-GAAP basis

Non-GAAP net income

  attributable to Unisys Corporation

  for diluted earnings per share

$79.3

$113.2

Divided by Non-GAAP adjusted weighted average shares

50,049

50,055

Non-GAAP earnings per diluted share

$   1.58

$   2.26

 

 

(2)

UNISYS CORPORATION

RECONCILIATION OF GAAP OPERATING PROFIT TO NON-GAAP OPERATING PROFIT

(Unaudited)

(Millions)

Three Months

Year

Ended December 31

Ended December 31

2015

2014

2015

2014

GAAP operating profit (loss)

$15.8

$82.4

($55.1)

$154.9

Cost reduction and other expense

52.5

0.0

122.5

0.0

FAS87 pension expense

27.2

18.3

108.7

73.8

Non-GAAP operating profit

$95.5

$100.7

$176.1

$228.7

Customer Revenue

$789.9

$905.8

$3,015.1

$3,356.4

GAAP operating profit (loss) %

2.0%

9.1%

(1.8%)

4.6%

Non-GAAP operating profit %

12.1%

11.1%

5.8%

6.8%

 

 

(3)

UNISYS CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP

(Unaudited)

(Millions)

FREE CASH FLOW

Three Months

Year

Ended December 31

Ended December 31

2015

2014

2015

2014

Cash provided by operations

$109.7

$105.5

$1.2

$121.4

Additions to marketable software

(15.3)

(17.5)

(62.1)

(73.6)

Additions to properties

(9.4)

(11.4)

(49.6)

(53.3)

Additions to outsourcing assets

(21.6)

(40.0)

(102.0)

(85.9)

Free cash flow

63.4

36.6

(212.5)

(91.4)

Pension funding

32.7

22.1

148.3

183.4

Cost reduction funding

20.9

-

58.5

-

Free cash flow before pension & cost reduction funding

$117.0

$58.7

($5.7)

$92.0

 

SOURCE Unisys Corporation



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