REG-Unisys Corp: Half-yearly Report <Origin Href="QuoteRef">UIS.N</Origin>
24/07/2015 07:12
Unisys Announces Second-Quarter 2015 Financial Results
--Revenue of $765 million: Down 5 percent year over year; Up 4 percent in
constant currency(1)
--Diluted loss per share of $1.17 vs diluted loss per share of $0.24 in 2Q
2014; Reflects charge of $0.97 per share related to the first phase of the
previously announced cost reduction actions
--Non-GAAP diluted earnings per share(2) of $0.33 vs $0.11 in 2Q 2014
BLUE BELL, Pa., July 23, 2015 -- Unisys Corporation (NYSE: UIS) today reported
a second-quarter 2015 net loss of $58.2 million, or $1.17 per diluted share,
which included cost reduction charges of $48.6 million and $25.9 million of
pension expense. In the second quarter of 2014, the company reported a net loss
of $12.1 million, or $0.24 per diluted share, which included $17.9 million of
pension expense. Excluding cost reduction charges and pension expense in both
periods, the non-GAAP diluted earnings per share in the second quarter of 2015
increased to $0.33 from $0.11 in the second quarter of 2014.
Second-quarter 2015 revenue declined 5 percent to $765 million from $806
million in the year-ago quarter. On a constant currency basis second-quarter
2015 revenue grew 4 percent.
"We were pleased to see solid revenue growth on a constant currency basis
during the quarter," said Unisys President and CEO Peter Altabef. "We are
aggressively implementing our new operating model to be a more nimble, focused
and responsive company that anticipates and rapidly responds to market
opportunities globally."
The company is implementing organizational initiatives designed to reduce its
cost structure and rebalance the company's global skill set to take advantage
of growth opportunities. These actions are estimated to generate annualized
savings of approximately $200 million by the end of 2016. As previously
announced, Unisys expects to recognize a pretax restructuring charge estimated
at approximately $300 million over the next several quarters. The first of
these charges, totaling $53 million, is reflected in the second quarter 2015
results.
Second-Quarter Company and Business Segment Highlights
Revenue from the Government sector, which represented 44 percent of the
quarter's revenue, was up 3 percent and 10 percent on a constant currency
basis. Government sector revenue was driven by strong performance from the U.S.
Federal government group which grew 32 percent. Revenue from the Commercial
sector was 34 percent of the quarter's revenue and declined 4 percent, but was
up 8 percent on a constant currency basis. Revenue from the Financial Services
sector was 22 percent of the quarter's revenue and declined 19 percent, down 11
percent on a constant currency basis.
Geographically, U.S. and Canada revenue rose 23 percent in the quarter. Revenue
from the rest of the world declined 24 percent and 10 percent on a constant
currency basis.
Second-quarter 2015 services revenue declined 6 percent from the prior-year
quarter. On a constant currency basis, services revenue rose 3 percent led by
growth in application services.
Second-quarter 2015 services orders decreased from year-ago levels due to lower
orders for cloud and infrastructure services in the U.S. and Canada. Services
backlog at June 30, 2015 was $4.4 billion compared to $4.8 billion at December
31, 2014 and $4.7 billion at June 30, 2014.
Second-quarter 2015 technology revenue was flat versus the prior-year quarter
and increased by 10 percent on a constant currency basis.
The company reported an overall second-quarter 2015 gross profit margin of 16.3
percent compared with 20.5 percent in the year-ago quarter. This 420 basis
point decline included 270 basis points related to the cost reduction charges
and increased pension expense. The remaining 150 basis point decline included
90 basis points caused by currency fluctuations and 60 basis points that
reflected lower services and technology margins explained below, partially
offset by a higher percentage of our overall revenue coming from technology.
Second-quarter 2015 services gross profit margin decreased to 15.7 percent from
16.9 percent a year ago. This 120 basis point decline included 60 basis points
related to negative currency fluctuations. The remaining 60 basis point
reduction was attributable to higher transition costs in cloud and
infrastructure services, partially offset by increased gross margins from the
growth in application services.
Second-quarter 2015 technology gross profit margin decreased to 43.9 percent
from 49.8 percent in the year-ago quarter. Currency fluctuations negatively
affected technology gross margins by 430 basis points. The remaining 160 basis
points decline reflected a higher proportion of revenue from non-proprietary
technology.
Operating expenses (SG&A and R&D expenses) included $39.2 million of the cost
reduction charges in the second quarter 2015. Excluding these charges,
operating expenses declined 10 percent from the year-ago period, down 1 percent
on a constant currency basis.
The company reported a second-quarter 2015 pretax loss of $50.8 million
compared with pretax income of $11.0 million in the year-ago quarter. Excluding
the cost reduction charges and pension expense in both periods, the company
reported a non-GAAP pretax profit(3) of $28.2 million in the second quarter of
2015 compared with $28.9 million in the second quarter of 2014.
Cash Flow and Balance Sheet Highlights
Unisys generated $72.3 million in adjusted EBITDA(4) in the second quarter of
2015 compared to $76.9 million in the second quarter of 2014. The company used
$21 million of cash from operations in the second quarter of 2015 including
cost reduction payments of $13 million and pension contributions of $37
million. During the second quarter of 2014, cash from operations totaled $3
million including pension contributions of $48 million. Capital expenditures in
the second quarter of 2015 were $54 million compared with $45 million in the
year-ago quarter.
At June 30, 2015, the company reported a cash balance of $365 million and total
debt of $256 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 constant currency, non-GAAP diluted earnings per share,
non-GAAP pretax profit, and adjusted EBITDA.
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 - Unisys recorded pension expense, net
of tax, of $25.9 million and $17.9 million during the second quarters of 2015
and 2014, respectively. Unisys recorded a charge, net of tax, of $48.6 million
in connection with cost reduction actions during the second quarter of 2015. 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) Non-GAAP pretax profit - Unisys recorded pension expense of $26.4 million
and $17.9 million during the second quarters of 2015 and 2014, respectively.
Unisys recorded a pretax charge of $52.6 million in connection with cost
reduction actions during the second quarter of 2015. In an effort to provide
investors with a perspective on the company's profitability without these
charges, they are excluded from the non-GAAP pretax profit/loss calculations.
(4) Adjusted EBITDA - Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA) is an approximate measure of a company's operating cash
flow based on data from the company's income statement. EBITDA is calculated as
earnings before the deduction of net income attributable to noncontrolling
interests, other (income) expense, net, interest expense, taxes, depreciation,
and amortization and non-cash share-based expense. Management believes this
measure may be relevant to investors due to the level of fixed assets and
related depreciation charges. This measure is also of interest to the company's
creditors, since it provides a perspective on earnings available for interest
payments. Unisys recorded pretax pension expense of $26.4 million and $17.9
million, respectively, during the second quarters of 2015 and 2014. During the
second quarter of 2015, Unisys recorded a pretax charge of $52.6 million in
connection with cost reduction actions. In order to provide investors with
additional understanding of the company's operating results, these charges are
excluded from the Adjusted EBITDA calculation.
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 global information technology company that solves organizations'
most pressing IT and business challenges. With more than 20,000 employees
serving clients around the world, our offerings include cloud and
infrastructure services, application services, business process outsourcing
services, and high-end server technology. For more information, visit http://
www.unisys.com/.
Follow us on Twitter and LinkedIn.
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 change
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 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
company's significant pension obligations and potential requirements to make
significant cash contributions to its defined benefit pension plans; the
adverse effects of global economic conditions; 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 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.: 0723/9349
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 Six Months
Ended June 30 Ended June 30
2015 2014 2015 2014
Revenue
Services $661.5 $703.4 * $1,300.5 $1,385.1 *
Technology 103.3 103.0 * 185.5 183.0 *
764.8 806.4 1,486.0 1,568.1
Costs and expenses
Cost of revenue:
Services 585.7 593.6 * 1,150.0 1,177.2 *
Technology 54.8 47.6 * 94.7 92.7 *
640.5 641.2 1,244.7 1,269.9
Selling, general and 145.4 133.6 274.2 272.1
administrative
Research and development 28.4 15.8 46.6 30.2
814.3 790.6 1,565.5 1,572.2
Operating (loss) profit (49.5) 15.8 (79.5) (4.1)
Interest expense 2.7 2.3 5.3 4.3
Other income (expense), net 1.4 (2.5) 6.3 (12.3)
(Loss) income before income (50.8) 11.0 (78.5) (20.7)
taxes
Provision for income taxes 5.1 19.9 18.4 35.9
Consolidated net loss (55.9) (8.9) (96.9) (56.6)
Net income attributable to
noncontrolling 2.3 3.2 4.5 6.3
interests
Net loss attributable to
Unisys
Corporation (58.2) (12.1) (101.4) (62.9)
Preferred stock dividend - - - 2.7
Net loss attributable to
Unisys
Corporation ($58.2) ($12.1) ($101.4) ($65.6)
common
shareholders
Loss per common share
attributable to
Unisys
Corporation
Basic ($ 1.17) ($ .24) ($ 2.03) ($ 1.35)
Diluted ($ 1.17) ($ .24) ($ 2.03) ($ 1.35)
Shares used in the per share computations
(thousands):
Basic 49,927 50,843 49,874 48,593
Diluted 49,927 50,843 49,874 48,593
* Changed to conform with the
2015 presentation.
UNISYS CORPORATION
SEGMENT RESULTS
(Unaudited)
(Millions)
Total Eliminations Services Technology
Three Months
Ended
June 30, 2015
Customer $764.8 $661.5 $103.3
revenue
Intersegment ($22.0) 0.1 21.9
Total revenue $764.8 ($22.0) $661.6 $125.2
Gross profit 16.3% 15.7% 43.9%
percent
Operating (6.5%) 2.2% 15.6%
profit (loss)
percent
Three Months
Ended
June 30, 2014
*
Customer $806.4 $703.4 $103.0
revenue
Intersegment ($7.8) 0.1 7.7
Total revenue $806.4 ($7.8) $703.5 $110.7
Gross profit 20.5% 16.9% 49.8%
percent
Operating 2.0% 3.6% 4.3%
profit
percent
Six Months
Ended
June 30, 2015
Customer $1,486.0 $1,300.5 $185.5
revenue
Intersegment ($28.7) 0.1 28.6
Total revenue $1,486.0 ($28.7) $1,300.6 $214.1
Gross profit 16.2% 14.9% 46.3%
percent
Operating (5.3%) 0.4% 11.3%
profit (loss)
percent
Six Months
Ended
June 30, 2014
*
Customer $1,568.1 $1,385.1 $183.0
revenue
Intersegment ($13.9) 0.3 13.6
Total revenue $1,568.1 ($13.9) $1,385.4 $196.6
Gross profit 19.0% 16.3% 46.1%
percent
Operating (0.3%) 2.6% (4.7%)
profit (loss)
percent
* Changed to conform with the
2015 presentation.
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions)
June 30, December
31,
2015 2014
Assets
Current assets
Cash and cash equivalents $364.8 $494.3
Accounts and notes 517.4 619.3
receivable, net
Inventories
Parts and finished equipment 26.2 22.2
Work in process and 29.4 24.5
materials
Deferred income taxes 16.6 16.4
Prepaid expense and other 141.8 140.6
current assets
Total 1,096.2 1,317.3
Properties 1,018.5 1,059.4
Less accumulated depreciation 854.0 890.7
and amortization
Properties, net 164.5 168.7
Outsourcing assets, net 174.4 150.9
Marketable software, net 144.6 144.1
Prepaid postretirement assets 31.7 19.9
Deferred income taxes 160.5 154.6
Goodwill 180.6 183.9
Other long-term assets 211.1 209.3
Total $2,163.6 $2,348.7
Liabilities and deficit
Current liabilities
Current maturities of $10.9 $1.8
long-term debt
Accounts payable 233.9 262.5
Deferred revenue 318.4 348.3
Other accrued liabilities 355.8 385.1
Total 919.0 997.7
Long-term debt 244.6 222.2
Long-term postretirement 2,258.1 2,369.9
liabilities
Long-term deferred revenue 110.4 119.5
Other long-term liabilities 87.4 91.8
Commitments and contingencies
Total deficit (1,455.9) (1,452.4)
Total $2,163.6 $2,348.7
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions)
Six Months Ended
June 30
2015 2014
Cash flows from operating activities
Consolidated net loss ($96.9) ($56.6)
Add (deduct) items to reconcile consolidated net
loss
to net cash (used for) provided by operating
activities:
Foreign currency transaction loss 0.6 6.3
Employee stock compensation 6.2 9.3
Depreciation and amortization of properties 22.7 25.0
Depreciation and amortization of outsourcing 26.1 29.1
assets
Amortization of marketable software 32.9 27.0
Other non-cash operating activities 2.9 0.8
Disposals of capital assets 5.0 0.4
Gain on sale of business - (0.7)
Pension contributions (75.7) (103.1)
Pension expense 54.3 37.4
(Increase) decrease in deferred income taxes, (7.2) 10.5
net
Decrease in receivables, net 62.3 170.6
(Increase) decrease in inventories (10.1) 5.8
Decrease in accounts payable and other accrued (84.1) (111.9)
liabilities
Decrease in other liabilities (14.3) (28.6)
Decrease in other assets 10.9 2.1
Net cash (used for) provided by operating (64.4) 23.4
activities
Cash flows from investing activities
Proceeds from investments 2,203.1 2,909.1
Purchases of investments (2,174.4) (2,899.0)
Investment in marketable software (33.4) (40.3)
Capital additions of properties (24.7) (29.0)
Capital additions of outsourcing assets (52.7) (20.1)
Other (1.7) 1.6
Net cash used for investing activities (83.8) (77.7)
Cash flows from financing activities
Purchases of common stock - (14.0)
Payments of long-term debt (0.6) -
Dividends paid on preferred shares - (4.0)
Proceeds from exercise of stock options 3.7 2.8
Proceeds from issuance of long-term debt 31.8 -
Net proceeds from short-term borrowings - 0.1
Net cash provided by (used for) financing 34.9 (15.1)
activities
Effect of exchange rate changes on cash and cash (16.2) 3.8
equivalents
Decrease in cash and cash equivalents (129.5) (65.6)
Cash and cash equivalents, beginning of period 494.3 639.8
Cash and cash equivalents, end of period $364.8 $574.2
( 1 )
UNISYS CORPORATION
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(Unaudited)
(Millions, except per share data)
Three Months Six Months
Ended June 30 Ended June 30
2015 2014 2015 2014
GAAP net loss
attributable to Unisys Corporation
common shareholders ($58.2) ($12.1) ($101.4) ($65.6)
Cost reduction expense, net of tax 48.6 0.0 48.6 0.0
Pension expense, net of tax 25.9 17.9 53.3 37.2
Non-GAAP net income (loss)
attributable to Unisys Corporation
common shareholders 16.3 5.8 0.5 (28.4)
Add preferred stock dividend 0.0 0.0 0.0 0.0
Non-GAAP net income (loss)
attributable to Unisys Corporation
for diluted earnings per share $16.3 $5.8 $0.5 ($28.4)
Weighted average shares (thousands) 49,927 50,843 49,874 48,593
Plus incremental shares from assumed
conversion:
Employee stock plans 155 260 187 0
Preferred stock 0 0 0 0
GAAP adjusted weighted average shares 50,082 51,103 50,061 48,593
Diluted earnings per share
GAAP basis
GAAP net loss
attributable to Unisys Corporation
for diluted earnings per share ($58.2) ($12.1) ($101.4) ($65.6)
Divided by adjusted weighted average shares 49,927 50,843 49,874 48,593
GAAP loss per diluted share ($ 1.17) ($ .24) ($ 2.03) ($ 1.35)
Non-GAAP basis
Non-GAAP net income (loss)
attributable to Unisys Corporation
for diluted earnings per share $16.3 $5.8 $0.5 ($28.4)
Divided by Non-GAAP adjusted weighted average 50,082 51,103 50,061 48,593
shares
Non-GAAP earnings (loss) per diluted share $ .33 $ .11 $ .01 ($ .58)
( 2 )
UNISYS CORPORATION
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(Unaudited)
(Millions)
Three Months Six Months
Ended June 30 Ended June 30
2015 2014 2015 2014
GAAP (loss) income before income taxes ($50.8) $11.0 ($78.5) ($20.7)
Cost reduction expense 52.6 0.0 52.6 0.0
FAS87 pension expense 26.4 17.9 54.3 37.4
Non-GAAP income before income taxes $28.2 $28.9 $28.4 $16.7
( 3 )
UNISYS CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
(Unaudited)
(Millions)
EBITDA
Three Months Six Months
Ended June 30 Ended June 30
2015 2014 2015 2014
Net loss attributable to Unisys Corporation ($58.2) ($12.1) ($101.4) ($65.6)
common shareholders
Preferred stock dividend - - - 2.7
Net income attributable to noncontrolling 2.3 3.2 4.5 6.3
interests
Non-cash share-based expense 1.8 2.1 6.2 9.3
Other (income) expense, net (1.4) 2.5 (6.3) 12.3
Interest expense 2.7 2.3 5.3 4.3
Provision for income taxes 5.1 19.9 18.4 35.9
Depreciation 24.4 28.8 48.8 54.1
Amortization 16.6 12.3 32.9 27.0
EBITDA ($6.7) $59.0 $8.4 $86.3
Pension expense 26.4 17.9 54.3 37.4
Cost reduction charges 52.6 - 52.6 -
Adjusted EBITDA $72.3 $76.9 $115.3 $123.7
SOURCE: Unisys Corporation
CONTACT: Investor Contact: Niels Christensen, 215-986-6651,
Niels.Christensen@unisys.com; Media Contact: Jim Kerr, 215-986-5795,
Jim.Kerr@unisys.com
END
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