Net loss of $11.6 million or 27 cents per share includes previously announced $45.7 million debt reduction charge
Non-GAAP EPS of 93 cents(1)
Results impacted by continued weakness in U.S. Federal marketplace and lower technology revenue
Outside the U.S. Federal business, services revenue essentially flat year over year
Sixth consecutive quarter of year-over-year growth in IT outsourcing revenue outside the U.S. Federal business
Improved services operating profit margin sequentially and year over year to 7.1 percent
Generated adjusted EBITDA(2) of $106 million
Further strengthened balance sheet; reduced debt by $179 million in quarter
Cash net of debt increased by $518 million from a year ago
Unisys Corporation UIS -3.24% today reported a second-quarter 2011 net loss of $11.6 million, or a loss of 27 cents per diluted share. The results include a previously announced charge of $45.7 million related to debt reduction and a pre-tax charge of $13.5 million related to the loss of an old non-income tax case concerning the company’s former Brazilian manufacturing operations. Excluding these charges, non-GAAP earnings per diluted share were 93 cents in the quarter. In the second quarter of 2010, the company reported net income from continuing operations of $59.2 million, or $1.36 per diluted share. Revenue in the second quarter of 2011 declined 10 percent to $937 million compared with $1.04 billion in the year-ago quarter. Foreign currency fluctuations had a five percentage-point positive impact on revenue in the quarter.
“Our second-quarter results were impacted by continued softness in the U.S. Federal marketplace and lower sales of ClearPath systems,” said Unisys Chairman and CEO Ed Coleman. “In spite of this, we made important progress in the quarter against our three-year financial goals. Outside the U.S. Federal business, our overall services revenue was essentially flat year over year and we grew our IT outsourcing revenue for the sixth consecutive quarter. We improved our services operating profit margin, both sequentially and year-over-year, to 7.1 percent as we work toward a consistent 8 to 10 percent services operating margin target. We also continued to strengthen the balance sheet in the quarter, further reducing debt by $179 million. Cash net of debt has increased $518 million from a year ago.
“The decline in ClearPath sales in the quarter followed growth last quarter and in 2010,” Coleman said. “As ClearPath sales can vary greatly from quarter to quarter, we believe the best way to measure this business is on an annual basis. We continue to focus on achieving our goal of maintaining flat ClearPath revenue compared with 2010.”
Overall Company and Business Segment Highlights
Unisys said its overall profit margins in the quarter were impacted by lower sales of ClearPath systems and a $9.9 million increase in pension expense. The company reported a second-quarter 2011 gross profit margin of 22.8 percent, down from 27.8 percent in the year-ago quarter. Operating expenses (selling, general and administrative expenses plus research and development) declined 9 percent from the year-ago quarter. Second-quarter 2011 operating profit was $48.1 million, or 5.1 percent of revenue, compared to $106.5 million, or 10.3 percent of revenue, in the second quarter of 2010.
Second-quarter 2011 services revenue declined 6 percent year over year, primarily reflecting $50 million lower revenue in the company’s U.S. Federal business. Outside of the U.S. Federal business, services revenue was essentially flat with the second quarter of 2010 as growth in IT outsourcing and infrastructure services was offset by a decline in systems integration. Services gross profit margin improved to 20.1 percent compared with 19.3 percent a year ago, reflecting continued improvements in service delivery execution. Services operating profit margin improved to 7.1 percent compared with 6.1 percent a year ago.
Services backlog at June 30, 2011 was $5.7 billion, an increase of 3 percent from June 30, 2010. Second-quarter services orders showed double-digit declines in the quarter reflecting lower outsourcing orders.
Second-quarter 2011 technology revenue declined 35 percent from the prior-year quarter. The decline was due to lower sales of ClearPath systems following growth in the prior quarter and in 2010. Reflecting the lower ClearPath sales, technology gross profit margins declined to 49.0 percent compared with 61.2 percent in the year-ago quarter and technology operating profit margin declined to 2.4 percent compared with 26.8 percent a year ago.
Cash Flow and Balance Sheet Highlights
Unisys generated $36 million of cash from operations in the second quarter of 2011 compared with $52 million in the year-ago quarter. Excluding the debt reduction charge and the impact of the Brazilian tax matter, the company generated adjusted EBITDA of $106 million in the second quarter of 2011. Capital expenditures in the second quarter of 2011 declined to $29 million compared with $48 million in the year-ago quarter. The company generated $7 million of free cash flow (cash provided by operations less capital expenditures) in the second quarter of 2011. This compared with free cash flow of $4 million in the year-ago quarter.
As previously announced, on April 11 the company completed a cash tender offer for principal amounts of $134.8 million of its 14-1/4% Senior Secured Notes due 2015 and $44.1 million of its 12-3/4% Senior Security Notes due 2014. At June 30, 2011, Unisys reported total debt of $447 million and a cash balance of $625 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 earnings per diluted share 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 condensed consolidated financial statements prepared in accordance with GAAP.
(1) Non-GAAP earnings per diluted share – Unisys completed debt redemptions of $211.0 million in principal during the first quarter of 2011 and $178.9 million in principal during the second quarter of 2011. As a result of the debt reductions, Unisys recorded charges of $31.8 million and $45.7 million, respectively, during the first and second quarters of 2011. In addition, during the second quarter of 2011 the company recorded an after-tax charge of $8.9 million related to the Brazilian matter discussed above. In an effort to provide investors with a perspective on the company’s earnings without these unusual charges, they are excluded from the non-GAAP earnings per diluted share calculation. (See GAAP to non-GAAP reconciliation attached.)
(2) 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 interest expenses, taxes, depreciation, and amortization. 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.
In addition to the debt reduction charge in the second quarter of 2011 referenced above, the company recorded a pre-tax charge of $13.5 million related to the Brazilian matter discussed above. In order to provide investors with an understanding of the company’s operating results, these unusual charges are excluded from the Adjusted EBITDA calculation. (See GAAP to non-GAAP reconciliation attached.)
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 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.
Source:http://www.marketwatch.com/story/unisys-announces-second-quarter-2011-financial-results-2011-07-25?reflink=MW_news_stmp
