Unisys Announces First-Quarter 2013 Financial Results

BLUE BELL, Pa., April 23, 2013 /PRNewswire/ --

• Revenue declines 13 percent on lower systems integration, technology revenue; IT outsourcing revenue grows
• Diluted loss per share of 77 cents vs. diluted EPS of 30 cents in 1Q 2012
• Cash from operations of $14 million vs. $33 million in 1Q 2012

Unisys Corporation (NYSE: UIS) today reported a first-quarter 2013 net loss of $33.9 million, or a loss of 77 cents per diluted share, which included $22.3 million of pension expense and a $6.5 million loss associated with the recent Venezuelan currency devaluation.   In the first quarter of 2012, the company reported net income of $13.4 million, or 30 cents per diluted share, which included $24.6 million of pension expense and a $7.2 million debt reduction charge. Excluding pension expense and debt reduction charges, the non-GAAP diluted loss per share⁽¹⁾ in the first quarter of 2013 was 26 cents compared with non-GAAP diluted EPS of 97 cents in the first quarter of 2012.

First-quarter 2013 revenue declined 13 percent to $810 million from $928 million in the year-ago quarter. Foreign currency fluctuations had a one percentage point negative impact on revenue in the first quarter.

"This was a difficult quarter for us as lower revenue impacted our bottom-line results," said Unisys Chairman and CEO Ed Coleman. "We saw lower revenue in our technology business following a strong fourth quarter in 2012 where we benefited from some earlier-than-expected ClearPath revenue.  In services, while we were pleased to see growth in our strategic IT outsourcing business in the quarter, we were disappointed in the decline in our project-based systems integration business, where the market for discretionary projects remains soft and where we need to improve our execution.

"We expect continuing challenges as we work through softness in our services business and recognize the need to maintain a competitive cost structure in line with our revenue performance," Coleman said.  "We are focused on reversing the decline in systems integration.  In technology, given the variability of our sales from quarter to quarter, we measure this business on an annual basis and continue to focus on maintaining flat revenue for the full year."

First-Quarter Company and Business Segment Highlights

U.S. revenue declined 15 percent in the quarter while international revenue declined 11 percent.  On a constant currency basis⁽²⁾, international revenue declined 9 percent with declines in all regions except for Latin America. 

The company reported an overall first-quarter 2013 gross profit margin of 19.9 percent, down from 24.3 percent in the year-ago quarter. Operating expenses (SG&A and R&D expenses) decreased 1 percent from the year-ago period.  The company reported a first-quarter 2013 operating profit of $1.6 million compared with an operating profit of $64.4 million in the first quarter of 2012.  

First-quarter 2013 services revenue declined 12 percent from the prior-year quarter as declines in systems integration, infrastructure services, and core maintenance offset revenue growth in IT outsourcing. Reflecting the lower services revenue, first-quarter 2013 services gross profit margin declined to 17.4 percent from 18.9 percent a year ago while services operating profit margin declined to 3.1 percent from 5.0 percent a year ago.

First-quarter 2013 services order signings showed a slight decrease from year-ago levels as strong growth in IT outsourcing orders were offset by order declines in other areas. Services backlog at March 31, 2013 was $5.1 billion, flat from December 31, 2012 levels.  

First-quarter 2013 technology revenue declined 18 percent from the prior-year quarter driven by lower sales of ClearPath enterprise software and servers.  Reflecting the lower ClearPath sales, first-quarter 2013 technology gross profit margin declined to 45.8 percent from 62.2 percent in the year-ago quarter and technology operating profit margin declined to 0.2 percent from 25.6 percent in the year-ago quarter.  

Cash Flow and Balance Sheet Highlights

Unisys generated $14 million of cash from operations in the first quarter of 2013, including $27 million of pension contributions. In the first quarter of 2012, the company generated $33 million of cash from operations, which included $68 million of pension contributions. Capital expenditures in the first quarter of 2013 were $26 million compared with $30 million in the year-ago quarter. After capital expenditures, the company used $12 million of free cash⁽³⁾ in the first quarter of 2013 compared with free cash flow of $3 million in the first quarter of 2012. Free cash flow before pension contributions was $15 million in the first quarter of 2013 compared with $71 million in the year-ago quarter.  

At March 31, 2013, the company reported a cash balance of $629 million and total debt of $211 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 non-GAAP diluted earnings per share, free cash flow, free cash flow before pension contributions, and constant currency.

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⁾ Non-GAAP diluted earnings/loss per share - As a result of debt reduction actions, Unisys recorded a charge of $7.2 million during the first quarter of 2012. The company also recorded pension expense of $22.3 million and $24.6 million during the first quarters of 2013 and 2012, 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.

⁽²⁾ 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.

⁽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. 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 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 risk that breaches of data security could expose the company to legal liability and could harm its business and reputation; 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; 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.: 0423/9163

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.

SOURCE Unisys Corporation