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Unisys Announces Fourth-Quarter and Full-Year 2007 Financial ResultsCompany reports significant improvement in operating profit and $247 million in operating cash flow for fourth quarter of 2007
BLUE BELL, Pa., January 29, 2008 – Unisys Corporation (NYSE: UIS) today reported $247 million in fourth-quarter operating cash flow and its highest full-year operating profit since 2003 as the company closed a year of significant progress in its multi-year repositioning program.
Unisys reported fourth-quarter 2007 operating income of $69.4 million, which included $55 million of net cost reduction charges and $11.6 million of retirement-related expense. These results compared with fourth-quarter 2006 operating income of $68.6 million, which included a $10 million benefit for changes in estimates for previously recorded cost reduction charges and $47.6 million of retirement-related expense. Fourth-quarter 2007 operating profit before the impact of these items improved by $30 million, or 29 percent, year over year.
For the full year of 2007, the company reported operating income of $85.9 million compared with a full-year 2006 operating loss of $326.8 million, a year-over-year improvement of $413 million. The 2007 results include $105 million of net cost reduction charges and $82.4 million of retirement-related expense, and the 2006 results include net cost reduction charges of $316 million and $153.8 million of retirement-related expense. Before the impact of these items in both years, full-year 2007 operating income improved by $130 million, or 91 percent, year over year.
Revenue for the fourth quarter of 2007 declined 1 percent to $1.54 billion from $1.55 billion in the year-ago quarter. Full-year 2007 revenue declined 2 percent to $5.65 billion compared with $5.76 billion in 2006. Foreign currency exchange rates had an approximately 5 percentage-point positive impact on revenue in the quarter and an approximately 4 percentage point positive impact on revenue for the full year.
Comments from President and CEO Joseph W. McGrath
“Our revenue declined in 2007 as we de-emphasized low-margin, non-strategic areas of the business,” McGrath said. “Within our overall revenue base, however, we are seeing a mix change as our strategic programs grow. Collectively, these strategic programs – outsourcing, enterprise security, open source solutions, Microsoft solutions, and real-time infrastructure solutions – now represent the majority of our overall revenue and grew about 10 percent in 2007. As we continue to build out these programs, while further streamlining our operations and reducing costs, we expect to continue our profit improvement in 2008.”
Fourth-Quarter Company Results
Services orders showed mid single-digit declines in the fourth quarter, driven by order declines for infrastructure services and systems integration and consulting. Outsourcing orders grew in the quarter. For the full year of 2007, services orders were flat compared with 2006. The company closed 2007 with $6.9 billion of firm services order backlog, up 4 percent from $6.6 billion of firm services backlog at year-end 2006.
Revenue in the United States declined 4 percent in the quarter to $629 million while revenue in international markets increased 1 percent to $907 million. On a constant currency basis, international revenue declined 8 percent in the quarter.
The company’s gross profit margin and operating profit margin in the fourth quarter of 2007 improved to 27.4 percent and 4.5 percent, respectively. These compared with gross and operating profit margins of 24.9 percent and 4.4 percent, respectively, in the fourth quarter of 2006.
Fourth-Quarter Business Segment Results
Customer revenue in the company’s services segment declined 2 percent in the fourth quarter of 2007 compared with the year-ago period. The company reported continued revenue growth in outsourcing, which was more than offset by revenue declines in other services businesses. Gross profit margin in the services business improved to 19.6 percent compared with 16.9 percent a year ago. Services operating margin improved to 4.5 percent compared with 1.2 percent a year ago.
Customer revenue in the company’s technology segment increased 6 percent from the fourth quarter of 2006. Within technology, the company saw strong double-digit revenue growth for its ClearPath enterprise servers. Gross profit margin in the technology business increased to 53.9 percent from 49.0 percent a year ago while operating margin increased to 20.5 percent compared to 13.7 percent in the fourth quarter of 2006.
Cash Flow and Balance Sheet Highlights
Capital expenditures in the fourth quarter of 2007 were $71 million compared to $58 million in the year-ago quarter. The increase was due to investments in outsourcing assets related to new outsourcing engagements. After deducting for capital expenditures, Unisys generated $176 million of free cash in the quarter compared with $109 million in the fourth quarter of 2006.
The company ended 2007 with $830 million of cash, which included the proceeds of an offering of $210 million of 12.5% senior notes placed in the fourth quarter. The company offered the new notes to refinance $200 million of its 7 7/8% senior notes due 2008. The 7 7/8% senior notes were redeemed on January 11, 2008.
Full-Year 2007 Results
For the year ended December 31, 2007, Unisys reported a net loss of $79.1 million, or 23 cents per share. These results included:
For the year ended December 31, 2006, Unisys reported a net loss of $278.7 million, or 81 cents per share. These results included:
Conference Call
UNISYS CORPORATION Three Months Year Interest expense 20.2 19.3 76.3 77.2 UNISYS CORPORATION Elimi- Gross profit percent 27.4% 19.6% 53.9% Gross profit percent 24.9% 16.9% 49.0% Year Ended Gross profit percent 22.8% 17.4% 47.0% Gross profit percent 17.5% 15.1% 44.2% * Results exclude cost reduction actions December 31, December 31,
Year Ended 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 26,000 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 general economic and business conditions; the effects of aggressive competition in the information services and technology markets on the company’s revenues, pricing and margins and on the competitiveness of its product and services offerings; the level of demand for the company’s products and services and the company’s ability to anticipate and respond to changes in technology and customer preferences; the company’s ability to grow outsourcing and infrastructure services and its ability to effectively and timely complete the related solutions implementations, client transitions to the new environment and work force and facilities rationalizations; the company’s ability to continue to effectively address its challenging outsourcing operations through negotiations or operationally and to fully recover the associated outsourcing assets; the company’s ability to drive profitable growth in consulting and systems integration; the level of demand for the company’s high-end enterprise servers; the company’s ability to effectively rightsize its cost structure; the risks of doing business internationally and the potential for infringement claims to be asserted against the company or its clients. Additional discussion of these and other factors that could affect Unisys future results is contained in its periodic filings with the Securities and Exchange Commission. Unisys assumes no obligation to update any forward-looking statements.
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