REG-Unisys Corp: Final Results

Wed Jan 30, 2013 2:00am EST

* Reuters is not responsible for the content in this press release.

Unisys Announces Fourth-Quarter and Full-Year 2012 Financial Results 

BLUE BELL, Pa., Jan. 30, 2013  -- 

Fourth-Quarter 2012 

    -- Revenue down 1 percent vs. 4Q 2011; flat on a constant currency(1) basis 
    -- Diluted EPS of $1.67 vs. $1.94 in 4Q 2011 
    -- Non-GAAP diluted EPS(2) of $2.27 vs. $2.22 in 4Q 2011 
    -- Free cash flow(3) of $118 million; free cash flow of $144 million before 
       pension contributions 

Full-Year 2012 

    -- Revenue down 4 percent vs. FY 2011; down 1 percent on a constant currency basis 
    -- Diluted EPS of $2.84 vs. $2.71 for FY 2011 
    -- Non-GAAP diluted EPS of $5.50 vs. $5.18 for FY 2011 
    -- Free cash flow of $129 million; free cash flow of $330 million before pension 
       contributions 

Unisys Corporation (http://www.unisys.com/ ) (NYSE: UIS) today reported fourth-
quarter 2012 net income of $81.8 million, or $1.67 per diluted share, which included 
$30.4 million of pension expense. In the fourth quarter of 2011, the company 
reported net income of $94.3 million, or $1.94 per diluted share, which included 
$6.7 million of pension expense and a $7.6 million debt reduction charge. Excluding 
pension expense and debt reduction charges, non-GAAP diluted earnings per share in 
the fourth quarter of 2012 was $2.27 compared with $2.22 in the fourth quarter of 
2011. Fourth-quarter 2012 revenue declined 1 percent to $979 million from $985 
million in the fourth quarter of 2011. Fourth-quarter 2012 revenue was flat year-
over-year on a constant currency basis.   

For the full year of 2012, Unisys reported net income of $129.4 million, or $2.84 
per diluted share, which included $105.4 million of pension expense and $30.6 
million of debt reduction charges. For the full year of 2011, the company reported 
net income of $120.5 million, or $2.71 per diluted share, which included $28.0 
million of pension expense, $85.2 million of debt reduction charges and an $8.9 
million charge related to the settlement of a Brazilian non-income tax matter.  
Excluding these items, non-GAAP earnings per share for the full year of 2012 was 
$5.50 compared with $5.18 for the full year of 2011. Full-year 2012 revenue declined 
4 percent to $3.71 billion from full-year 2011 revenue of $3.85 billion. On a 
constant currency basis, full-year 2012 revenue declined 1 percent compared with the 
full year of 2011. 

"We had a good finish to the year driven by a strong performance in our technology 
business," said Unisys Chairman and CEO Ed Coleman. "Sales of our ClearPath software 
and servers grew in the quarter and for the year, exceeding our goal, as customers 
responded positively to continued innovations in our flagship technology platform. 
In our services business, we were pleased to see our revenue and margins improve in 
the quarter from a challenging third quarter, although we still have more work to do 
to meet our services growth and margin targets.

"These results capped off another year of progress for Unisys," Coleman said. "In an 
uncertain business environment, we increased our profitability and generated 
significant free cash flow. From a balance sheet perspective, we achieved a major 
milestone for the company by eliminating the rest of our high-interest debt and 
completing our multi-year program to reduce debt by $1 billion. We also continued to 
enhance our solution portfolio to strengthen our competitive profile. We remain 
focused on driving profitable growth in the year ahead."

Fourth-Quarter Company and Business Segment Highlights
International revenue grew 6 percent in the fourth quarter, largely offsetting a 10 
percent decline in U.S. revenue. On a constant currency basis, international revenue 
grew 7 percent as increases in Europe and Latin America offset declines in Asia 
Pacific.  

The company reported an overall fourth-quarter 2012 gross profit margin of 29.2 
percent, up from 28.4 percent in the year-ago quarter. Operating expenses (SG&A and 
R&D expenses) increased 8 percent from the year-ago period, reflecting higher 
pension expense and investments in growth programs. Fourth-quarter 2012 operating 
profit declined to 11.7 percent of revenue from 12.3 percent of revenue in the 
fourth quarter of 2011. The company reported fourth-quarter 2012 operating profit of 
$114.6 million, which included $31.5 million of pension expense, compared with a 
fourth-quarter 2011 operating profit of $121.6 million, which included $8.1 million 
of pension expense. 

Fourth-quarter 2012 services revenue declined 4 percent (3 percent on a constant 
currency basis) from the prior-year quarter. Fourth-quarter 2012 services gross 
profit margin improved slightly to 20.2 percent from 20.0 percent a year ago while 
services operating profit margin declined to 6.6 percent from 7.6 percent a year 
ago.   

Fourth-quarter 2012 services order signings declined from year-ago levels. Services 
backlog at December 31, 2012 was $5.1 billion, an 8 percent decrease from services 
backlog at December 31, 2011.  

Fourth-quarter 2012 technology revenue grew 16 percent from the prior-year quarter 
driven by strong sales of ClearPath software and servers. Reflecting the higher 
ClearPath sales, fourth-quarter 2012 technology gross profit margin improved to 68.1 
percent from 65.9 percent in the year-ago quarter and technology operating profit 
margin improved to 43.9 percent from 37.7 percent in the year-ago quarter. 

Cash Flow and Balance Sheet Highlights
Unisys generated $154 million of cash from operations in the fourth quarter of 2012, 
including $26 million of pension contributions. In the fourth quarter of 2011, the 
company generated $159 million of cash from operations, which included $19 million 
of pension contributions. Capital expenditures in the fourth quarter of 2012 were 
$36 million compared with $33 million in the year-ago quarter. The company generated 
$118 million of free cash flow in the fourth quarter of 2012 compared with free cash 
flow of $126 million in the fourth quarter of 2011. Free cash flow before pension 
contributions was $144 million in the fourth quarter of 2012 compared with $145 
million in the year-ago quarter.  

Unisys made $202 million in pension contributions in 2012 compared with $83 million 
of pension contributions in 2011. For the full year of 2012, the company generated 
free cash flow of $330 million before pension contributions compared with $266 
million of free cash flow before pension contributions in 2011.

During 2012 Unisys eliminated all remaining high-interest debt and met, more than a 
year early, its goal of reducing debt by 75 percent from September 2010 levels. 
Since 2008 the company has reduced its debt by $1 billion.

At December 31, 2012, the company reported a cash balance of $656 million and total 
debt of $210 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, 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) 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.
(2) Non-GAAP diluted earnings per share - As a result of debt reduction actions, 
Unisys recorded a charge of $7.6 million during the fourth quarter of 2011. The 
company also recorded pension expense of $30.4 million and $6.7 million during the 
fourth quarters of 2012 and 2011, respectively. For the full years of 2012 and 2011, 
Unisys recorded debt reduction charges of $30.6 million and $85.2 million, 
respectively, and pension expense of $105.4 million and $28.0 million, respectively. 
In addition, for full year 2011 the company incurred a charge of $8.9 million 
related to a Brazil non-income tax case. 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 per 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. Because of the significance of the company's 
pension funding obligations in 2012, 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 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.: 0129/9151

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         Year
                             Ended December 31  Ended December 31
                            -----------------   -----------------
                               2012    2011      2012       2011
                               ----    ----      ----       ----
Revenue
  Services                    $805.7   835.3   3,192.4   $3,354.6
  Technology                   173.6   150.0     514.0      499.2
                               -----   -----     -----      -----
                               979.3   985.3   3,706.4    3,853.8
Costs and expenses
  Cost of revenue:
    Services                   640.7   662.2   2,567.7    2,672.8
    Technology                  52.7    42.8     165.2      194.0
                                ----    ----     -----      -----
                               693.4   705.0   2,732.9    2,866.8
Selling, general and
 administrative                150.8   139.8     572.8      586.3
Research and development        20.5    18.9      81.5       76.1
                               864.7   863.7   3,387.2    3,529.2
                               -----   -----   -------    -------
Operating profit               114.6   121.6     319.2      324.6

Interest expense                 2.5    11.4      27.5       63.1
Other income (expense), net     (2.7)    1.1     (37.6)     (55.5)
                                ----     ---     -----      -----
Income before income taxes     109.4   111.3     254.1      206.0

Provision for income taxes      20.5    12.4      97.3       64.8
                                ----    ----      ----       ----
Consolidated net income         88.9    98.9     156.8      141.2
Net income attributable to
   noncontrolling interests      3.0     0.6      11.2        7.2

Net income attributable to 
   Unisys Corporation           85.9    98.3     145.6      134.0

Preferred stock dividend         4.1     4.0      16.2       13.5
                                 ---     ---      ----       ----
Net income attributable to
   Unisys Corporation common
   shareholders                $81.8   $94.3    $129.4     $120.5


Earnings per common share
   attributable to Unisys 
   Corporation
    Basic                      $1.86   $2.17     $2.95      $2.79
    Diluted                    $1.67   $1.94     $2.84      $2.71


Shares used in the per share
 computations (thousands):
  Basic                       43,976  43,392    43,864     43,145
  Diluted                     51,307  50,799    51,216     49,478

 
                                        UNISYS CORPORATION
                                         SEGMENT RESULTS
                                           (Unaudited)
                                            (Millions)

                           Total    Eliminations    Services   Technology
                           -----    ------------    --------   ----------
Three Months Ended
December 31, 2012
------------
Customer revenue          $979.3                    $805.7     $173.6
Intersegment                             ($37.3)       1.8       35.5
Total revenue             $979.3         ($37.3)    $807.5     $209.1
                          ======         ======     ======     ======

Gross profit
 percent                    29.2%                     20.2%      68.1%
                            ====                      ====       ====
Operating profit
 percent                    11.7%                      6.6%      43.9%
                            ====                       ===       ====

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%
                            ====                       ===       ====

Year Ended
December 31, 2012
------------
Customer revenue        $3,706.4                  $3,192.4     $514.0
Intersegment                            ($123.1)       3.8      119.3
Total revenue           $3,706.4        ($123.1)  $3,196.2     $633.3
                        ========        =======   ========     ======

Gross profit
 percent                    26.3%                     20.0%      63.9%
                            ====                      ====       ====
Operating profit
 percent                     8.6%                      6.4%      33.1%
                             ===                       ===       ====

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%
                             ===                       ===       ====


                            UNISYS CORPORATION
                       CONSOLIDATED BALANCE SHEETS
                               (Unaudited)
                               (Millions)

                                        December 31,          December 31,
                                            2012                  2011
                                            ----                  ----
Assets
Current assets
Cash and cash equivalents                  $655.6                $714.9
Accounts and notes receivable, net          670.2                 673.0
Inventories
    Parts and finished equipment             29.3                  38.1
    Work in process and materials            20.7                  26.7
Deferred income taxes                        21.6                  27.1
Prepaid expense and other current
 assets                                     115.0                 123.6
Total                                     1,512.4               1,603.4
                                          -------               -------

Properties                                1,262.2               1,257.2
Less accumulated depreciation
 and amortization                         1,085.8               1,065.9
Properties, net                             176.4                 191.3
                                            -----                 -----
Outsourcing assets, net                     126.3                 137.9
Marketable software, net                    124.2                 129.8
Prepaid postretirement assets                 3.3                  43.9
Deferred income taxes                       162.7                 181.5
Goodwill                                    192.3                 192.5
Other long-term assets                      122.8                 131.9
Total                                    $2,420.4              $2,612.2
                                         ========              ========

Liabilities and deficit
Current liabilities
Current maturities of long-term debt         $0.3                  $0.9
Accounts payable                            228.6                 241.6
Deferred revenue                            389.5                 448.1
Other accrued liabilities                   411.9                 425.5
Total                                     1,030.3               1,116.1
                                          -------               -------

Long-term debt                              210.0                 358.8
Long-term postretirement liabilities      2,553.5               2,224.0
Long-term deferred revenue                  123.1                 120.3
Other long-term liabilities                  92.2                 104.0
Commitments and contingencies
Total deficit                            (1,588.7)             (1,311.0)
Total                                    $2,420.4              $2,612.2
                                         ========              ========
 
                                    UNISYS CORPORATION
                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        (Unaudited)
                                        (Millions)

                                                             Year Ended
                                                             December 31
                                                             -----------
                                                            2012    2011
                                                            ----    ----
Cash flows from operating activities
Consolidated net income                                   $156.8  $141.2
Add (deduct) items to reconcile consolidated net
 income to net cash provided by operating activities:
Loss on debt extinguishment                                 30.6    85.2
Employee stock compensation                                 14.3    13.9
Company stock issued for U.S. 401(k) plan                    6.2    11.8
Depreciation and amortization of properties                 54.7    66.4
Depreciation and amortization of outsourcing assets         57.9    62.7
Amortization of marketable software                         62.0    65.7
Disposals of capital assets                                  6.3     1.4
Gain on sale of businesses and assets                      (11.7)   (2.2)
Decrease in deferred income taxes, net                      36.5    28.6
(Increase) decrease in receivables, net                    (11.2)   92.1
Decrease in inventories                                     14.2    22.1
Decrease in accounts payable and other accrued
 liabilities                                               (73.7) (214.4)
Decrease in other liabilities                             (200.7)  (50.6)
Decrease (increase) in other assets                        121.8    (5.9)
Other                                                       (2.7)   (0.8)
Net cash provided by operating activities                  261.3   317.2
                                                           -----   -----

Cash flows from investing activities
     Proceeds from investments                           4,108.5   691.2
     Purchases of investments                           (4,107.2) (688.2)
     Restricted deposits                                    (0.6)   50.7
     Investment in marketable software                     (56.4)  (51.7)
     Capital additions of properties                       (40.1)  (42.2)
     Capital additions of outsourcing assets               (36.1)  (40.5)
     Net proceeds from sale of businesses and assets         5.2   (15.6)
Net cash used for investing activities                    (126.7)  (96.3)
                                                          ------   -----

Cash flows from financing activities
     Proceeds from issuance of preferred stock, net
      of issuance costs                                        -   249.7
     Payments of long-term debt                           (388.9) (555.7)
     Dividends paid to noncontrolling interests             (4.5)   (0.4)
     Dividends paid on preferred shares                    (16.2)  (12.2)
     Proceeds from exercise of stock options                 0.4     1.4
     Proceeds from issuance of long-term debt              204.8       -
     Financing fees                                            -    (2.2)
Net cash used for financing activities                    (204.4) (319.4)
                                                          ------  ------

Effect of exchange rate changes on cash 
 and cash equivalents                                       10.5   (14.9)
                                                            ----   -----

Decrease in cash and cash equivalents                      (59.3) (113.4)
Cash and cash equivalents, beginning of period             714.9   828.3
Cash and cash equivalents, end of period                   $655.6  $714.9
                                                           ======  ======
 
                                           ( 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
                                     -----------------     -----------------
                                     2012         2011      2012       2011
                                     ----         ----      ----       ----
GAAP net income
  attributable to Unisys
  Corporation common
  shareholders                      $81.8        $94.3    $129.4     $120.5

Debt reduction charges,
  net of tax                          0.0          7.6      30.6       85.2
Brazil non-income tax
  case, net of tax                                                      8.9
FAS87 pension charges,
  net of tax                         30.4          6.7     105.4       28.0
                                     ----          ---     -----       ----

Non-GAAP net income
  attributable to Unisys
  Corporation common
  shareholders                      112.2        108.6     265.4      242.6

Add preferred stock dividend          4.1          4.0      16.2       13.5
                                      ---          ---      ----       ----

Non-GAAP net income
  attributable to Unisys
  Corporation for diluted
  earnings per share               $116.3       $112.6    $281.6     $256.1
                                   ======       ======    ======     ======

Weighted average shares
  (thousands)                      43,976       43,392    43,864     43,145

Plus incremental shares from
  assumed conversion:
                                      419          494       439        553
     Employee stock plans
                                    6,913        6,913     6,913      5,780
     Preferred stock


GAAP Adjusted weighted average
  shares                           51,307       50,799    51,216     49,478
                                   ======       ======    ======     ======


Diluted earnings per share

GAAP basis
----------
GAAP net income
  attributable to Unisys
  Corporation for diluted
  earnings per share                $85.9         $98.3   $145.6     $134.0

Divided by adjusted weighted
  average shares                   51,307        50,799   51,216     49,478

GAAP net income per diluted
  share                             $1.67         $1.94    $2.84      $2.71
                                    =====         =====    =====      =====

Non-GAAP basis
--------------
Non-GAAP net income
  attributable to Unisys
  Corporation for diluted
  earnings per share               $116.3        $112.6    $281.6     $256.1

Divided by Non-GAAP
  adjusted weighted average
  shares                           51,307        50,799    51,216     49,478

Non-GAAP net income per
  diluted share                     $2.27         $2.22     $5.50      $5.18
                                    =====         =====     =====      =====



                                             ( 2 )
                                      UNISYS CORPORATION
                               RECONCILIATION OF GAAP TO NON-GAAP
                                         (Unaudited)
                                          (Millions)

FREE CASH FLOW
--------------

                                      Three Months           Year
                                   Ended December 31    Ended December 31
                                   -----------------    -----------------
                                      2012     2011       2012    2011
                                      ----     ----       ----    ----
Cash provided by operations         $153.9   $159.5     $261.3  $317.2
Additions to marketable software     (13.5)   (14.8)     (56.4)  (51.7)
Additions to properties              (14.1)    (9.3)     (40.1)  (42.2)
Additions to outsourcing assets       (8.3)    (9.2)     (36.1)  (40.5)
                                      ----     ----      -----   -----
Free cash flow                       118.0    126.2      128.7   182.8
Pension funding                       26.4     19.1      201.5    82.7
Free cash flow before
 pension funding                    $144.4   $145.3     $330.2  $265.5
                                    ======   ======     ======  ======


CONTACT: Investor Contact: Niels Christensen, +1-215-986-6651, 
Niels.Christensen@unisys.com; Media Contact: Jim Kerr, +1-215-986-5795, 
Jim.Kerr@unisys.com  



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