REG-Unisys Corp: 1st Quarter Results <Origin Href="QuoteRef">UIS.N</Origin>
22/04/2016 07:05
Unisys Announces First-Quarter 2016 Financial Results
BLUE BELL, Pa., April 21, 2016 --
1Q 2016:
* Revenue of $667 million, down 8 percent year-over-year (3 percent in
constant currency(1))
* Diluted loss per share of ($0.80) versus ($0.87) in 1Q 2015
* Non-GAAP diluted earnings per share(2) of $0.11 versus diluted loss per
share of ($0.32) in 1Q 2015
* $100 million increase in adjusted free cash flow(3) year-over-year
Unisys Corporation (NYSE: UIS) today reported first quarter 2016 results
highlighted by year-over-year increases in both operating profit margin and
free cash flow.
The company reported an operating profit margin of (4.1) percent including cost
reduction charges and pension expense. First quarter 2016 non-GAAP operating
profit margin(4) was 2.9 percent, an increase of 320 basis points from the
prior year. In addition, the company reported first quarter 2016 free cash flow
usage of $12 million(5), an $89 million improvement year-over-year due to
higher operating cash flow and lower capital expenditures. Adjusted free cash
flow in first quarter 2016 increased $100 million from the prior year.
"Our first quarter results represent a step toward our goal of improving
profitability and cash flow," said Unisys President and CEO Peter Altabef. "We
also continued to deepen our vertical go-to-market capabilities and leadership
team and expand our security solutions during the quarter."
Summary of First Quarter 2016 Business Results
Company:
* Revenue of $667 million declined 8 percent year-over-year; down 3 percent
in constant currency.
* Overall operating profit margin of (4.1) percent includes cost reduction
charges and pension expense. First quarter 2016 non-GAAP operating profit
margin was 2.9 percent, an increase of 320 basis points from the prior
year.
Services:
* Services revenue, which represented 89 percent of total revenue, declined
by 7 percent, down 2 percent in constant currency.
* Services operating profit margin was 0.7 percent, an increase of 200 basis
points from the prior year, reflecting the benefit of cost reduction
actions taken during the past twelve months.
Technology:
* Technology revenue, which represented 11 percent of total revenue, declined
13 percent, down 10 percent in constant currency, reflecting reduced
ClearPath Forward™ revenue, which can vary significantly from
quarter-to-quarter based on the timing of license renewals.
* Operating profit margin improved to 18.1 percent from 5.2 percent in the
prior year due to the benefit of operating cost reductions.
Cash Flow:
* First quarter 2016 free cash flow usage of $12 million improved $89 million
year-over-year due to higher operating cash flow and lower capital
expenditures. Adjusted free cash flow in first quarter 2016 increased $100
million to $38 million from the prior year.
* During the first quarter 2016, the company completed a convertible senior
notes offering that generated net proceeds of approximately $160 million.
* At March 31, 2016, the company had $514 million in cash.
Executing on Business Strategy
Unisys business strategy, laid out in 2015, is to execute on several key areas
for improved business performance in 2016: go-to-market vertical market
orientation; security solutions, most notably Unisys Stealth™; and
higher-value, advisory consulting services. The company has announced business
wins, strategic moves and implementation successes covering each of these
areas, including in the past week:
* The global delivery of Unisys Stealth(cloud)™ on the Microsoft Azure Cloud,
a platform used by more than 66 percent of Fortune 500 companies in 140
countries.
* The successful implementation of Stealth(core) to protect ANGKASA's
self-service banking kiosks in Malaysia.
* A new agreement to deliver Stealth(mobile) to Mitel clients. Mitel is a new
Unisys client that will use Stealth to protect its systems, data and
intellectual property and leverage Stealth to protect users across its
global network.
* A contract with the State of Washington, Division of Child Support,
Department of Social & Health Services to deliver managed data center
services and ClearPath Forward services.
* A contract with China's HubSky, a new Unisys client, to deliver cloud/data
center design and consulting services.
In addition, the company made three major leadership announcements in Q1:
* Inder M. Singh as senior vice president and chief marketing and strategy
officer. Immediately prior to joining Unisys, Singh was a managing director
at SunTrust Robinson Humphrey, Inc., where he provided equity research and
advice across the technology, media and telecommunications sectors. Singh
has also held strategy and financial leadership positions at Comcast, Cisco
Systems, and AT&T.
* Andy Stafford as senior vice president of Services. Most recently, Stafford
was a senior managing director at Accenture, where he led the firm's Global
Delivery Network for Technology. Prior to Accenture, Stafford held senior
positions with Xchanging, Virgin Group, Deloitte Consulting, Computacenter
and Andersen Consulting.
* Eric Crabtree as the global leader of our Financial Services vertical
industry group. Crabtree most recently served as managing director of
omni-channel banking at Royal Bank of Scotland. He previously held senior
executive leadership positions at Barclays Bank and Washington Mutual, and
founded an advisory and consulting firm focused on the financial services
industry.
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) 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.
(2) Non-GAAP diluted earnings per share - During the first quarter 2016, Unisys
recorded pension expense, net of tax, and a charge, net of tax, in connection
with cost reduction actions. 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) 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.
(4) Non-GAAP operating profit - During the first quarter 2016, Unisys recorded
pretax pension expense and a pretax charge in connection with cost reduction
actions. In order to provide investors with additional understanding of the
company's operating results, these changes are excluded from the operating
profit.
(5) 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.
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 http://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 improve margins in its
services business; the company's ability to sell new products while maintaining
its installed base in its technology business; the company's ability to access
financing markets to refinance its outstanding debt; the company's ability to
realize anticipated cost savings and to successfully implement its cost
reduction initiatives 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; the company's ability to
attract, motivate and retain experienced and knowledgeable personnel in key
positions; the risks of doing business internationally when a significant
portion of the company's revenue is derived from international operations; 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 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.: 0421/9418
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.
UIS-Q
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Millions, except per share data)
Three Months
Ended March 31
2016 2015
Revenue
Services $595.1 $639.0
Technology 71.7 82.2
666.8 721.2
Costs and expenses
Cost of revenue:
Services 533.7 564.3
Technology 34.6 39.9
568.3 604.2
Selling, general and administrative 110.1 128.8
Research and development 16.0 18.2
694.4 751.2
Operating loss (27.6) (30.0)
Interest expense 4.4 2.6
Other income (expense), net (1.2) 4.9
Loss before income taxes (33.2) (27.7)
Provision for income taxes 5.5 13.3
Consolidated net loss (38.7) (41.0)
Net income attributable to
noncontrolling 1.2 2.2
interests
Net loss attributable to Unisys
Corporation common ($39.9) ($43.2)
shareholders
Loss per common share
attributable to
Unisys Corporation
Basic ($ .80) ($ .87)
Diluted ($ .80) ($ .87)
Shares used in the per share computations (thousands):
Basic 50,004 49,821
Diluted 50,004 49,821
UNISYS CORPORATION
SEGMENT RESULTS
(Unaudited)
(Millions)
Total Eliminations Services Technology
Three Months Ended
March 31, 2016
Customer revenue $666.8 $595.1 $71.7
Intersegment ($5.6) - 5.6
Total revenue $666.8 ($5.6) $595.1 $77.3
Gross profit 14.8% 14.2% 48.6%
percent
Operating profit (4.1%) 0.7% 18.1%
(loss) percent
Three Months Ended
March 31, 2015
Customer revenue $721.2 $639.0 $82.2
Intersegment ($6.7) - 6.7
Total revenue $721.2 ($6.7) $639.0 $88.9
Gross profit 16.2% 14.1% 49.6%
percent
Operating profit (4.2%) (1.3%) 5.2%
(loss) percent
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions)
March 31, December 31,
2016 2015 *
Assets
Current assets
Cash and cash equivalents $513.8 $365.2
Accounts and notes receivable, net 520.8 581.6
Inventories
Parts and finished equipment 18.8 20.9
Work in process and materials 27.7 22.9
Prepaid expense and other current assets 125.9 120.9
Total 1,207.0 1,111.5
Properties 891.1 876.6
Less accumulated depreciation and 739.0 722.8
amortization
Properties, net 152.1 153.8
Outsourcing assets, net 190.1 182.0
Marketable software, net 136.5 138.5
Prepaid postretirement assets 57.4 45.1
Deferred income taxes 133.3 127.4
Goodwill 179.4 177.4
Other long-term assets 209.3 194.3
Total $2,265.1 $2,130.0
Liabilities and deficit
Current liabilities
Notes payable $65.7 $65.8
Current maturities of long-term debt 11.1 11.0
Accounts payable 216.0 219.3
Deferred revenue 343.5 335.1
Other accrued liabilities 309.2 329.9
Total 945.5 961.1
Long-term debt 388.2 233.7
Long-term postretirement liabilities 2,070.4 2,111.3
Long-term deferred revenue 131.4 123.3
Other long-term liabilities 83.9 79.2
Commitments and contingencies
Total deficit (1,354.3) (1,378.6)
Total $2,265.1 $2,130.0
* Certain amounts have been reclassified to conform with the 2016
presentation.
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions)
Three Months Ended
March 31
2016 2015
Cash flows from operating activities
Consolidated net loss ($38.7) ($41.0)
Add (deduct) items to reconcile consolidated net loss
to net cash provided by (used for) operating
activities:
Foreign currency transaction loss 0.1 -
Non-cash interest expense 0.7 -
Employee stock compensation 3.2 4.4
Depreciation and amortization of properties 9.6 11.7
Depreciation and amortization of outsourcing assets 11.1 12.7
Amortization of marketable software 16.4 16.3
Other non-cash operating activities 0.3 (0.1)
Disposals of capital assets 0.3 1.4
Pension contributions (31.6) (38.7)
Pension expense 20.3 27.9
Increase in deferred income taxes, net (6.9) (4.4)
Decrease in receivables, net 69.4 106.8
Increase in inventories (1.9) (15.1)
Decrease in accounts payable and other accrued (35.2) (106.4)
liabilities
Increase (decrease) in other liabilities 3.4 (11.1)
Decrease (increase) in other assets 3.7 (7.7)
Net cash provided by (used for) operating activities 24.2 (43.3)
Cash flows from investing activities
Proceeds from investments 1,365.0 1,153.4
Purchases of investments (1,367.8) (1,126.7)
Investment in marketable software (14.3) (16.7)
Capital additions of properties (6.6) (13.9)
Capital additions of outsourcing assets (15.1) (26.7)
Other (0.6) 1.5
Net cash used for investing activities (39.4) (29.1)
Cash flows from financing activities
Proceeds from issuance of long-term debt 190.0 -
Payments for capped call transactions (24.3) -
Issuance costs relating to long-term debt (6.2) -
Payments of long-term debt (0.7) (0.3)
Proceeds from exercise of stock options - 3.5
Net cash provided by financing activities 158.8 3.2
Effect of exchange rate changes on cash and cash 5.0 (23.1)
equivalents
Increase (decrease) in cash and cash equivalents 148.6 (92.3)
Cash and cash equivalents, beginning of period 365.2 494.3
Cash and cash equivalents, end of period $513.8 $402.0
( 1 )
UNISYS CORPORATION
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(Unaudited)
(Millions, except per share data)
Three Months
Ended March 31
2016 2015
GAAP net loss
attributable to Unisys Corporation
common shareholders ($39.9) ($43.2)
Cost reduction expense, net of tax 24.7 0.0
Pension expense, net of tax 20.6 27.4
Non-GAAP net income (loss)
attributable to Unisys Corporation
common shareholders 5.4 (15.8)
Add interest expense on convertible notes 0.7 0.0
Non-GAAP net income (loss)
attributable to Unisys Corporation
for diluted earnings per share $6.1 ($15.8)
Weighted average shares (thousands) 50,004 49,821
Plus incremental shares from assumed conversion:
Employee stock plans 134 0
Convertible notes 0 0
GAAP adjusted weighted average shares 50,138 49,821
Diluted earnings (loss) per share
GAAP basis
GAAP net loss
attributable to Unisys Corporation
for diluted earnings per share ($39.9) ($43.2)
Divided by adjusted weighted average shares 50,004 49,821
GAAP loss per diluted share ($ .80) ($
.87)
Non-GAAP basis
Non-GAAP net income (loss)
attributable to Unisys Corporation
for diluted earnings per share $5.4 ($15.8)
Divided by Non-GAAP adjusted weighted average 50,138 49,821
shares
Non-GAAP earnings (loss) per diluted share $ .11 ($
.32)
(2)
UNISYS CORPORATION
RECONCILIATION OF GAAP OPERATING PROFIT TO NON-GAAP OPERATING PROFIT
(Unaudited)
(Millions)
Three Months
Ended March 31
2016 2015
GAAP operating loss ($27.6) ($30.0)
Cost reduction expense 26.9 0.0
FAS87 pension expense 20.3 27.9
Non-GAAP operating profit (loss) $19.6 ($2.1)
Customer Revenue $666.8 $721.2
GAAP operating loss % (4.1%) (4.2%)
Non-GAAP operating profit (loss) % 2.9% (0.3%)
(3)
UNISYS CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
(Unaudited)
(Millions)
FREE CASH FLOW
Three Months
Ended March 31
2016 2015
Cash provided by (used for) operations $24.2 ($43.3)
Additions to marketable software (14.3) (16.7)
Additions to properties (6.6) (13.9)
Additions to outsourcing assets (15.1) (26.7)
Free cash flow (11.8) (100.6)
Pension funding 31.6 38.7
Cost reduction funding 18.0 -
Free cash flow before pension & cost $37.8 ($61.9)
reduction funding
SOURCE Unisys Corporation
CONTACT: Investor Contact: Niels Christensen, 215-986-6651,
niels.christensen@unisys.com, or Media Contact: John Clendening, 214-403-1981,
john.clendening@unisys.com
END
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