Unisys Corporation
Media Contact:
Elizabeth Douglass, 215-986-6583
elizabeth.douglass@unisys.com
or
Investor Contact:
Jim Kerr, 215-986-5795
jim.kerr@unisys.com
Unisys Reports 9% Revenue Growth and Meets Earnings Target for Third
Quarter of 2003; Cash From Operations Doubles From Prior Year; Company
On Track to Achieve Earnings Per Share Target of 77 Cents for
Full-Year 2003
Unisys Corporation (NYSE:UIS) reported today that its revenue grew 9%
in the third quarter of 2003 and it met its targeted earnings per
share (EPS) range for the quarter. Unisys generated $114 million of
cash from operations in the quarter compared to $57 million in the
year-ago period, and the company reaffirmed its outlook for
double-digit EPS growth for the full year of 2003.
For the third quarter of 2003, Unisys reported net income of $56.2
million, or 17 cents per share, compared to net income of $59.0
million, or 18 cents per share, in the year-ago quarter. The
third-quarter 2003 results reflected a decrease in pension income from
$37 million in the third quarter of 2002 to $9 million in the current
quarter. Revenue for the third quarter of 2003 was $1.45 billion, up
from revenue of $1.33 billion in the year-ago period. Currency had a 4
percentage-point positive impact on the company's revenue in the third
quarter, as the U.S. dollar remained weak against most major
currencies worldwide.
Comments from Chairman and CEO Larry Weinbach
"We delivered a strong performance in the third quarter of 2003," said
Unisys Chairman and CEO Lawrence A. Weinbach. "In what is typically a
seasonally weak quarter for the technology industry, we met our
financial expectations by staying focused and continuing to execute
our value-added strategy. We achieved earnings per share of 17 cents
in the quarter, which was within our targeted EPS range of 15 to 20
cents. This was achieved despite a $28 million decrease in pension
income compared to the prior year.
"I am pleased by the growth we're seeing at the top line. We grew our
third-quarter 2003 revenue by 9% -- our third straight quarter of
revenue growth. This was driven by growth in both our services and
technology businesses. Our services business showed continued
double-digit growth, driven by growth in all of our service lines. Our
technology business delivered 3% revenue growth in a tough industry
environment. Sales of our ClearPath systems rebounded in the quarter
and showed year-over-year double-digit growth, and sales of our
high-end, Intel-based ES7000 servers grew more than 50% again this
quarter compared to the prior-year quarter."
Key highlights of the quarter included:
-- Continued expansion of the company's security offerings. In the
third quarter Unisys was selected for three additional pilot projects
as part of the "Operation Safe Commerce" program funded by the U.S.
Transportation Security Administration (TSA). Unisys is now leading
four pilot projects -- more than any other services supplier in the
program -- to help design and test new processes and technologies for
securing the flow of goods coming into key U.S. seaports. The
company's commercial partners in this secure supply-chain initiative
include Sara Lee and Motorola. These pilot projects build on the
company's ongoing work with homeland security.
-- Expansion of the Unisys Business Blueprinting strategy announced
earlier in 2003. Unisys has seen strong client interest in its
innovative Business Blueprinting services. Through these services,
Unisys consultants and industry experts work with clients to create
standards-based, digital models that link strategy to the business
processes, software applications, and systems that support the
strategy. Unisys is creating Blueprints for more than a dozen focused
industry segments, including enterprise payments, life and pensions
administration, cargo security, and justice and public safety. These
Blueprints can be applied in consulting and systems integration
projects, or in longer-term outsourcing and business process utility
arrangements.
-- Continued double-digit growth in the Unisys ES7000 server sales.
Unisys continues to see strong momentum in this program, with both new
and existing clients ordering multiple units of the ES7000 to run
enterprise applications and consolidate low-end servers. New ES7000
customers purchasing multiple units in the third quarter included
Vodafone, the U.S. Army Reserve, Konica Europe, and Banco Pactual in
Brazil.
"Our solutions are innovative, leading-edge, and -- most important --
they add value to our clients' business," Weinbach said. "Few IT
services providers can offer the end-to-end portfolio of value-added
services and servers that Unisys offers. And even fewer have the
in-depth domain expertise to apply these end-to-end capabilities to
meet specific industry problems."
Overall Company Highlights
Unisys reported revenue growth in both its U.S. and international
markets in the third quarter. U.S. revenue grew 11% to $684 million,
driven by continued strong growth in the company's U.S. Federal
government business. Revenue in international markets increased 7% to
$766 million, as growth in Europe more than offset a revenue decline
in Latin America and a slight revenue decline in the Asia/Pacific
region. On a constant currency basis, revenue in international markets
was flat in the quarter.
Unisys said total worldwide orders showed double-digit declines in the
third quarter. Services orders declined principally due to lower
outsourcing orders, which can vary significantly quarter to quarter
because of the size and complexity of the contracts. The third quarter
of 2002 included a large U.S. outsourcing contract. Technology orders
were up over the prior year. Geographically, U.S. orders showed
double-digit declines while international orders rose in the quarter
compared to the prior year.
Early in the fourth quarter of 2003, Unisys signed a 10-year contract
with HBOS plc that is expected to add about $140 million of revenue to
the Unisys payment processing operation in the U.K. This further
solidifies Unisys position as the leading provider of payment
processing services in that country.
Unisys reported an overall third-quarter 2003 gross profit margin of
29.3% compared to 30.3% in the year-ago period. Operating profit
margins increased slightly to 7.3% from 7.2% in the year-ago quarter.
Selling, general, and administrative (SG&A) expenses increased
slightly from third-quarter 2002 levels. As a percentage of revenue,
SG&A expenses declined to 17.3% of revenue in the third quarter of
2003 compared to 18.1% of revenue in the year-ago quarter.
Business Segment Highlights
Customer revenue in the company's services segment grew 11% in the
third quarter, driven by growth in all service lines. Primarily
reflecting significantly lower levels of pension income, gross profit
margins in the services business declined 2.7 percentage points from
year-ago levels to 19.8%, and services operating margins declined 1.8
percentage points from a year ago to 3.9%.
Customer revenue in the company's technology segment grew 3% in the
third quarter, driven by growth in the company's enterprise server
business. Unisys reported double-digit sales growth in ClearPath
systems and more than 50% sales growth in ES7000 servers over the
prior-year quarter. Reflecting a richer mix of ClearPath servers and
software, gross margins in the technology business increased 6.7
percentage points from year-ago levels to 53.1%, and technology
operating margins increased 6.4 percentage points from a year ago to
16.5%.
Cash Flow and Balance Sheet Highlights
Unisys generated $114 million of cash flow from operations in the
third quarter compared to $57 million in the year-ago quarter. The
improvement in operational cash flow in the quarter primarily
reflected improved working capital management. Cash expenditures for
prior restructuring actions were $6 million in the third quarter of
2003 compared to $24 million in the year-ago quarter.
Capital expenditures in the third quarter of 2003 were $98 million,
including $72 million invested in revenue-generating projects. This
compared to capital expenditures of $80 million, including $59 million
for revenue-generating projects, in the year-ago quarter. Unisys had
$403 million of cash on hand at September 30, 2003.
Year-to-Date Results
For the nine months ended September 30, 2003, Unisys reported net
income of $147.2 million, or 44 cents per diluted share, compared to
net income of $133.9 million, or 41 cents per diluted share, in the
first nine months of 2002. Revenue for the first nine months of 2003
was $4.27 billion compared to revenue of $4.05 billion in the first
nine months of 2002.
Business Outlook
"We are on track to achieve our strategic and financial objectives for
2003," Weinbach said. "While the global environment remains
challenging, we are steadily enhancing the Unisys reputation in key
growth areas such as business process outsourcing, managed services,
security, and high-end Intel-based servers. For the full year of 2003,
we continue to look for targeted earnings per share of 77 cents on mid
single-digit revenue growth."
Conference Call
Unisys will hold a conference call today at 8:15 a.m. Eastern Time to
discuss its results. The listen-only Webcast, as well as the
accompanying presentation materials, can be accessed via a link 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 services and solutions
company. Our people combine expertise in systems integration,
outsourcing, infrastructure, server technology and consulting with
precision thinking and relentless execution to help clients, in more
than 100 countries, quickly and efficiently achieve competitive
advantage. 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. 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. The
factors that could affect the company's future financial results are
discussed more fully in the company's periodic reports as filed with
the Securities and Exchange Commission.
RELEASE NO: 1015/8343 (See accompanying financial information)
http://www.unisys.com/about__unisys/news_a_events/10158343.htm
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
(Millions, except per share data)
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
2003 2002 2003 2002
-------- -------- -------- --------
Revenue
Services $1,124.3 $1,016.3 $3,394.7 $3,104.8
Technology 325.4 316.0 878.9 949.8
-------- -------- -------- --------
1,449.7 1,332.3 4,273.6 4,054.6
Costs and expenses
Cost of revenue:
Services 886.1 766.5 2,675.4 2,362.0
Technology 138.5 162.8 393.9 495.8
-------- -------- -------- --------
1,024.6 929.3 3,069.3 2,857.8
Selling, general and
administrative 251.0 241.3 737.1 732.2
Research and
development 68.2 65.5 198.7 192.6
-------- -------- -------- --------
1,343.8 1,236.1 4,005.1 3,782.6
-------- -------- -------- --------
Operating income 105.9 96.2 268.5 272.0
Interest expense 17.2 17.6 51.3 53.2
Other income
(expense), net (4.7) 9.5 2.5 (18.9)
-------- -------- -------- --------
Income before income
taxes 84.0 88.1 219.7 199.9
Provision for income
taxes 27.8 29.1 72.5 66.0
-------- -------- -------- --------
Net income $56.2 $59.0 $147.2 $133.9
======== ======== ======== ========
Earnings per share
Basic $ .17 $ .18 $ .45 $ .41
======== ======== ======== ========
Diluted $ .17 $ .18 $ .44 $ .41
======== ======== ======== ========
Shares used in the per
share computations
(thousands):
Basic 330,033 324,075 328,675 322,792
======== ======== ======== ========
Diluted 333,979 324,669 331,317 324,079
======== ======== ======== ========
UNISYS CORPORATION
SEGMENT RESULTS
(Millions)
Elimi-
Total nations Services Technology
-------- -------- -------- ----------
Three Months Ended
September 30, 2003
------------------
Customer revenue $1,449.7 $1,124.3 $325.4
Intersegment ($66.4) 7.3 59.1
-------- -------- -------- --------
Total revenue $1,449.7 ($66.4) $1,131.6 $384.5
======== ======== ======== ========
Gross profit percent 29.3% 19.8% 53.1%
======== ======== ========
Operating profit
percent 7.3% 3.9% 16.5%
======== ======== ========
Three Months Ended
September 30, 2002
------------------
Customer revenue $1,332.3 $1,016.3 $316.0
Intersegment ($69.4) 6.5 62.9
-------- -------- -------- --------
Total revenue $1,332.3 ($69.4) $1,022.8 $378.9
======== ======== ======== ========
Gross profit percent 30.3% 22.5% 46.4%
======== ======== ========
Operating profit
percent 7.2% 5.7% 10.1%
======== ======== ========
Nine Months Ended
September 30, 2003
------------------
Customer revenue $4,273.6 $3,394.7 $878.9
Intersegment ($225.6) 19.2 206.4
-------- -------- -------- --------
Total revenue $4,273.6 ($225.6) $3,413.9 $1,085.3
======== ======== ======== ========
Gross profit percent 28.2% 19.5% 50.0%
======== ======== ========
Operating profit
percent 6.3% 4.2% 12.0%
======== ======== ========
Nine Months Ended
September 30, 2002
------------------
Customer revenue $4,054.6 $3,104.8 $949.8
Intersegment ($233.0) 32.2 200.8
-------- -------- -------- --------
Total revenue $4,054.6 ($233.0) $3,137.0 $1,150.6
======== ======== ======== ========
Gross profit percent 29.5% 22.0% 45.2%
======== ======== ========
Operating profit
percent 6.7% 5.5% 10.0%
======== ======== ========
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Millions)
September 30, December 31,
2003 2002
---------- ----------
Assets
Current assets
Cash and cash equivalents $402.7 $301.8
Accounts and notes receivable, net 961.8 955.6
Inventories
Parts and finished equipment 136.2 165.3
Work in process and materials 113.6 127.5
Deferred income taxes 313.8 311.3
Other current assets 86.3 84.5
---------- ----------
Total 2,014.4 1,946.0
---------- ----------
Properties 1,718.2 1,542.7
Less accumulated depreciation
and amortization 1,033.7 932.9
---------- ----------
Properties, net 684.5 609.8
---------- ----------
Investments at equity 124.2 111.8
Marketable software, net 329.0 311.8
Deferred income taxes 1,476.0 1,476.0
Goodwill 165.6 160.6
Other long-term assets 392.4 365.4
---------- ----------
Total $5,186.1 $4,981.4
========== ==========
Liabilities and stockholders' equity
Current liabilities
Notes payable $20.3 $77.3
Current maturities of long-term debt 1.8 4.4
Accounts payable 416.6 532.5
Other accrued liabilities 1,242.2 1,341.4
Income taxes payable 248.6 228.9
---------- ----------
Total 1,929.5 2,184.5
---------- ----------
Long-term debt 1,047.4 748.0
Accrued pension liabilities 660.9 727.7
Other long-term liabilities 472.5 465.2
Stockholders' equity
Common stock 3.3 3.3
Accumulated deficit (526.4) (673.5)
Other capital 3,801.3 3,763.1
Accumulated other comprehensive loss (2,202.4) (2,236.9)
---------- ----------
Stockholders' equity 1,075.8 856.0
---------- ----------
Total $5,186.1 $4,981.4
========== ==========
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions)
Nine Months Ended
September 30
------------------
2003 2002
------- -------
Cash flows from operating activities
Net income $147.2 $133.9
Add (deduct) items to reconcile
net income to net cash provided
by operating activities:
Depreciation and amortization
of properties 131.4 111.7
Amortization:
Marketable software 92.2 90.1
Deferred outsourcing contract costs 23.5 14.1
(Increase) in deferred
income taxes, net (2.5) (2.5)
(Increase) decrease in receivables, net (32.3) 208.0
Decrease in inventories 43.0 88.2
(Decrease) in accounts payable
and other accrued liabilities (180.0) (375.8)
Increase in income taxes payable 19.8 7.0
(Decrease) in other liabilities (56.8) (33.3)
(Increase) in other assets (29.9) (178.8)
Other 6.5 7.4
------- -------
Net cash provided by operating activities 162.1 70.0
------- -------
Cash flows from investing activities
Proceeds from investments 3,626.1 2,360.1
Purchases of investments (3,663.2) (2,384.0)
Investment in marketable software (109.4) (105.0)
Capital additions of properties (177.9) (151.8)
Purchases of businesses (2.0) (4.8)
------- -------
Net cash used for investing activities (326.4) (285.5)
------- -------
Cash flows from financing activities
Proceeds from issuance of long-term debt 293.3
Net (reduction in) proceeds from
short-term borrowings (57.0) 33.8
Proceeds from employee stock plans 21.0 21.9
Payments of long-term debt (3.8) (1.6)
------- -------
Net cash provided by financing activities 253.5 54.1
------- -------
Effect of exchange rate changes on cash
and cash equivalents 11.7 1.7
------- -------
Increase (decrease) in cash
and cash equivalents 100.9 (159.7)
Cash and cash equivalents, beginning of
period 301.8 325.9
------- -------
Cash and cash equivalents, end of period $402.7 $166.2
======= =======