Fourth-Quarter 2012 Financial Results - Unisys€¦ · • 4Q12 diluted EPS of $1.67 vs. $1.94 in...

Fourth-Quarter 2012 Financial Results January 29, 2013

www.unisys.com/investor

Ed Coleman

Chairman & CEO

Janet Haugen

Chief Financial Officer

© 2013 Unisys Corporation. All rights reserved. 2

Disclaimer

• Statements made by Unisys during today's presentation that are not historical facts, including those regarding future performance, are forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and assumptions and involve risks and uncertainties that could cause actual results to differ from expectations. These risks and uncertainties are discussed in the company's reports filed with the SEC and in today's earnings release.

• This presentation also includes non-GAAP financial measures including Constant Currency, non-GAAP Diluted Earnings per Share, Free Cash Flow, non-GAAP Operating Profit, EBITDA, Adjusted EBITDA, Net Cash (Debt) and non-GAAP Pretax Income. Definitions of these non-GAAP financial measures and reconciliations to GAAP measures are included in this presentation.

• These presentation materials can be accessed through a link on the Unisys Investor Web site at www.unisys.com/investor. Information in this presentation is as of January 29, 2013 and Unisys undertakes no duty to update this information.

http://www.unisys.com/investor

Ed Coleman

Chairman & CEO


4Q and Full-Year 2012 Overview

• Good finish to the year

• Strong performance in our technology business

• 4Q12 diluted EPS of $1.67 vs. $1.94 in 4Q11

• 4Q12 non-GAAP diluted EPS* of $2.27 vs. $2.22 in 4Q11

• FY12 diluted EPS of $2.84 vs. $2.71 for FY11

• FY12 non-GAAP diluted EPS* of $5.50 vs. $5.18 for FY11

• Strong cash flow

– $330M in free cash flow* before pension contribution in 2012 vs. $266M in 2011

*See Schedules A, B, and C: GAAP to non-GAAP Reconciliation


Three Year Financial Goals

Three Year Goals

2011 – 2013

Full-Year 2012

Progress

Pre-tax Profit

• Increase annual pre-tax profit to $350M in

2013, excluding any change in pension

income/expense from 2010 levels

• 2012 pretax profitability was $254M

• 2012 pension expense was $111M

above 2010 levels

Debt Reduction

• By year end 2013, reduce our outstanding

debt by 75% (or $625M) from September

30, 2010 levels

• Achieved debt reduction goal in 3Q12

• Net cash positive for nine consecutive quarters

Operational Efficiency

• Consistently deliver 8-10% services

operating margin

• Services operating margin was 6.4%

• Excluding U.S. Federal, services operating

margin was 7.6%

Revenue Growth

• Grow IT outsourcing and system

integration at market rates

• Maintain stable Technology revenue

• ITO revenue declined 2% Y/Y

• SI revenue declined 7% Y/Y

• Technology revenue grew 3% Y/Y


Unisys – Delivering a Safer and More Secure Connected World

Our Four Areas

of Strength How We Compete

Growth Opportunities

Through Disruptive IT Trends

Security

• Differentiate with our expertise in

delivering mission critical IT

solutions and services.

• Place the customer at the center of

our actions to continuously improve

their loyalty.

• Build a high performing sales culture

that delivers predictable, profitable

growth.

• Maintain a narrow focus in our

portfolio of solutions and markets we

serve.

• Go-to-market through direct and

reseller sales channels.

• Continuously improve our

operational efficiencies.

Data Center

Transformation

and Outsourcing (including our

ClearPath offerings)

Application

Modernization

and Outsourcing

End User

Outsourcing

and Support


New Investments to Drive Growth

ClearPath Forward Unisys Stealth Solution Suite

Reseller Channel

Marketing Apps Management

Janet Haugen

SVP & CFO


$M (excluding EPS) 4Q12 4Q11 Y/Y Ch FY12 FY11 Y/Y Ch

Revenue $979 $985 (1%) $3,706 $3,854 (4%)

Gross Profit $286 $280 2% $974 $987 (1%)

Gross Profit Margin 29.2% 28.4% 0.8 pts 26.3% 25.6% 0.7 pts

Operating Expenses (SG&A plus R&D) $171 $159 8% $654 $662 (1%)

Operating Profit $115 $122 (6%) $319 $325 (2%)

Operating Profit Margin 11.7% 12.3% (0.6 pts) 8.6% 8.4% 0.2 pts

Interest Expense $3 $11 $28 $63

Other Income (Expense) ($3) $1 ($38) ($56)

Pretax Income $109 $111 (2%) $254 $206 23%

Tax Provision $21 $12 $97 $65

Net Income $82 $94 (13%) $129 $121 7%

Diluted Earnings per Share $1.67 $1.94 (14%) $2.84 $2.71 5%

Non-GAAP Diluted Earnings per Share* $2.27 $2.22 2% $5.50 $5.18 6%

Financial Results

*See Schedules A and B: GAAP to non-GAAP Reconciliation


Operating Profit

-3

52

140

330

373

411

375 376

359

301

338 325

347

378

326 319

-45

9

107

306

352

397

366 373 366

317

363 359

398

441

411 427

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

-$100

$0

$100

$200

$300

$400

$500

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12

TTM Operating Profit (OP) TTM OP Excluding Pension*

OP as a % of Revenue OP (Excluding Pension) as a % of Revenue*

$M Trailing Twelve Months Operating Profit % of

Revenue

*See Schedule D: GAAP to non-GAAP Reconciliation


Segment Revenue

4Q11

Revenue = $985M

4Q12

Revenue = $979M

Technology 15%

Technology 18%

Services 85% Services 82%

Full Year 2012

Revenue = $3,706M

Technology 13%

Services 87%

Full Year 2011

Revenue = $3,854M

• Services revenue down 4%Y/Y; down 3% in constant currency

• Technology revenue grew 16% Y/Y; up 17% in constant currency

4Q12 Full Year 2012

Technology 14%

Services 86%

• Services revenue down 5% Y/Y; down 2% in constant currency

• Technology revenue grew 3% Y/Y; up 6% in constant currency


Services Revenue by Portfolio

$M 4Q12 Y/Y Ch FY12 Y/Y Ch

Services Revenue $806 (4%) $3,192 (5%)

Gross Margin 20.2% 20 bp 20.0% --

Operating Margin 6.6% (100 bp) 6.4% (50 bp)

Revenue by Portfolio 4Q12 Y/Y Ch FY12 Y/Y Ch

Systems Integration $278 (4%) $1,079 (7%)

Information

Technology

Outsourcing

$298 (4%) $1,213 (2%)

Infrastructure Services $112 (9%) $442 (9%)

Core Maintenance $51 3% $195 (10%)

Business Process

Outsourcing $67 6% $263 3%

34% 35%

38% 37%

14% 14%

6% 6%

8% 8%

0%

25%

50%

75%

100%

FY12 FY11

BPO

Core

ISS

ITO

SI

Services Revenue

Services portfolio revenue as a %

of Unisys services revenue


Technology Revenue by Portfolio

Technology Revenue $M 4Q12 Y/Y Ch FY12 Y/Y Ch

Technology

Revenue $174 16% $514 3%

Gross Margin 68.1% 220 bp 63.9% 700 bp

Operating Margin 43.9% 620 bp 33.1% 1160 bp

Revenue by

Portfolio 4Q12 Y/Y Ch FY12 Y/Y Ch

Enterprise Class

Software & Servers $160 13% $480 8%

Other Technology $14 52% $34 (39%)

93% 89%

7% 11%

0%

25%

50%

75%

100%

FY12 FY11

OtherTechnology

EnterpriseClassSoftware &Servers

Technology portfolio revenue as a %

of Unisys technology revenue


U.S.

Federal

14%

Unisys Revenue Profile

U.S.

Federal

14%

Industry Full Year 2012

Geography Full Year 2012

4Q12

Y/Y

FY12

Y/Y

North America Excluding U.S. Federal

(5%) (3%)

(7%) 2%

Europe/Africa 9% (2%)

Asia Pacific (3%) 8%

Latin America (8%) (13%)

4Q12

Y/Y

FY12

Y/Y

Public Sector Excluding U.S. Federal

(5%) (3%)

(9%) (2%)

Commercial (11%) (2%)

Financial 26% 2%

Europe/ Africa

33%

North America

41%

Latin America

11% Asia Pacific

15%

Public Sector

41%

Commercial 35%

Financial 24%


38% 47%

38% 28%

24% 25%

0%

25%

50%

75%

100%

4Q12 FY12

HomelandSecurity

Defense &Intelligence

Civilian

U.S. Federal Government Business

Business Mix

Revenue Y/Y

4Q12 (9%)

Full Year 2012 (20%)

$157 $152

$181

$162

$125 $121

$129

$148

$0

$50

$100

$150

$200

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12

Federal Revenue $M

FY11 = $652 FY12 = $523


4Q12 Services Order Highlights

• Services orders declined Y/Y; increased sequentially

• Services orders by geography:

– Orders rose Y/Y in Asia Pacific

– Orders declined Y/Y in North America, Europe and Latin America

• Services orders by portfolio:

– Systems Integration and BPO orders grew Y/Y

– ITO and Core Maintenance orders down Y/Y but up sequentially

– Infrastructure services orders declined Y/Y

• Closed 4Q12 with $5.1B in services backlog vs. $5.5B at 4Q11

– $640M of services backlog expected to turn into 1Q13 services revenue

– Approximately $2.1B (41%) of services backlog expected to convert to revenue in 2013


Cash Flow Comparison

$M 4Q12 4Q11 FY12 FY11

Cash Flow From Operations $154 $159 $261 $317

Capital Expenditures $36 $33 $132 $134

Free Cash Flow* $118 $126 $129 $183

Pension Funding $26 $19 $202 $83

Free Cash Flow Before Pension Funding* $144 $145 $330 $266

Depreciation & Amortization $46 $45 $175 $195

EBITDA* $155 $167 $445 $457

Adjusted EBITDA* $187 $183 $584 $590

Cash Balance at December 31 $656 $715

Debt Balance at December 31 $210 $360

Net Cash at December 31 $445 $355

*See Schedules C and E : GAAP to non-GAAP Reconciliation


Reducing Leverage

-$750

-$500

-$250

$0

$250

$500

$750

$1,000

$1,250

$1,500

4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12

Long-Term Debt (LTD) AR Securitization\Revolver Cash Net Cash*$M

See Schedule F: GAAP to non-GAAP Reconciliation

*Net Cash = Cash less LTD and utilization under AR securitization\revolver facility.


Update on Pension

Worldwide P&L Impact ($M) 2012 2013E

Total Pension Expense $108 $93

U.S. Qualified Defined Benefit Pension Plan

Expected Return on Assets 8.00% 8.00%

Actual Return 13.78% --

U.S. GAAP Discount Rate at 12/31/11

4.96%

at 12/31/12

4.01%

International Qualified Defined Benefit Pension Plans

Expected Return on Assets 6.59% 6.40%

Weighted Average U.S. GAAP Discount Rate at 12/31/11

4.65%

at 12/31/12

3.92%

All estimates are based on expected asset returns and discount rate assumptions as calculated at December 31, 2012.


Update on Pension Cash Requirements

Cash Funding Requirements ($M) 2012 2013E 2014E 2015E 2016E 2017E

U.S. Qualified Defined Benefit Pension Plan $111 $34 $95 $150 $145 $160

Other Defined Benefit Pension Plans $91 $112 $95 $85 $75 $75

Total $202 $146 $190 $235 $220 $235

All estimates are based on expected asset returns and discount rate assumptions as calculated at December 31, 2012. Contributions to

international plans are based on local regulations and agreements. Funding requirements are likely to change for 2014 and beyond based

on -- among other items -- market conditions, changes in discount rates, and changes in currency rates.

Questions & Answers


Non-GAAP Financial Measures

In an effort to provide investors with additional information regarding the company's results as

determined by generally accepted accounting principles (GAAP), the company also discusses, in its

earnings press release and/or earnings presentation materials, the following non-GAAP information

which management believes provides useful information to investors.

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.

Non-GAAP Diluted Earnings Per Share – As a result of debt reductions, Unisys recorded charges, net of tax, of

$0.0 million and $7.6 million, respectively, during the fourth quarters of 2012 and 2011. Unisys recorded debt

reduction charges, net of tax, of $30.6 million and $85.2 million, respectively, during 2012 and 2011. The

company also recorded pension expense, net of tax, of $30.4 million and $6.7 million, respectively, during the

fourth quarters of 2012 and 2011. Unisys recorded pension expense, net of tax, of $105.4 million and $28.0

million, respectively, during 2012 and 2011. In addition, during the second quarter of 2011 the company recorded

an after-tax charge of $8.9 million related to the loss of an old non-income tax case concerning the company's

former Brazilian manufacturing operations. 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 per share calculations.



Free Cash Flow – To better understand the trends in our business, we believe that it is helpful to present free

cash flow, which we define 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. Because of the significance of the company's pension funding obligations in 2012, free

cash flow before pension funding is also provided.

Non-GAAP Operating Profit – In order to provide investors a better understanding of the company's operational

results, this measure attempts to show operating profit excluding the effect of pension income and expense.

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.

Adjusted EBITDA – Unisys completed debt reductions in 4Q11. As a result of these reductions, Unisys recorded

a pretax charge of $7.6 million during the fourth quarter of 2011. Unisys recorded pretax debt reduction charges of

$30.6 million and $85.2 million, respectively, during 2012 and 2011. In addition, during the second quarter of 2011

the company recorded 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. The company also recorded pretax pension

expense of $31.5 million and $8.1 million, respectively, during the fourth quarter of 2012 and 2011. Unisys

recorded pretax pension expense of $108.2 million and $34.3 million, respectively, during 2012 and 2011. In order

to provide investors with additional understanding of the company's operating results, these charges are excluded

from the Adjusted EBITDA calculation.



Net Cash (Debt) – In an effort to help investors better understand the debt held by the company, this measure

takes into account not only the total debt obligations of the company, but the significance of debt compared to its

cash balances. Net Cash (Debt) is calculated by subtracting Long-Term Debt and utilization under the company's

Accounts Receivable securitization/revolver facility from the company's cash balance.

Non-GAAP Pretax Income – Unisys completed debt reductions in 4Q11. As a result of these reductions, Unisys

recorded a pretax charge of $7.6 million during the fourth quarter 2011. Unisys recorded pretax debt reduction

charges of $30.6 million and $85.2 million, respectively, during 2012 and 2011. In addition, during the second

quarter of 2011 the company recorded 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. The company also recorded pretax

pension expense of $31.5 million and $8.1 million, respectively, during the fourth quarters of 2012 and 2011.

Unisys recorded pretax pension expense of $108.2 million and $34.3 million, respectively, during 2012 and 2011.

In order to provide investors with additional understanding of the company's operating results, these charges are

excluded from the Pretax Income calculation.


Schedule A: GAAP to Non-GAAP Reconciliation

Non-GAAP Diluted Earnings per Share

$M except share and per share data 4Q12 4Q11

GAAP net income attributable to Unisys Corporation common shareholders $81.8 $94.3

Debt reduction charge, net of tax -- 7.6

Pension expense, net of tax 30.4 6.7

Non-GAAP net income attributable to Unisys Corporation common shareholders $112.2 $108.6

Add preferred stock dividends 4.1 4.0

Non-GAAP net income attributable to Unisys Corporation for diluted earnings per share $116.3 $112.6

Weighted average shares (thousands) 43,976 43,392

Plus incremental shares from assumed conversion of employee stock plans and preferred stock 7,331 7,407

Adjusted weighted average shares 51,307 50,799

Earnings per Share

GAAP basis


Divided by weighted average shares 51,307 50,799

GAAP net income per share $1.67 $1.94

Non-GAAP basis


Divided by adjusted weighted average shares 51,307 50,799

Non-GAAP diluted earnings per share $2.27 $2.22


Schedule B: GAAP to Non-GAAP Reconciliation

Non-GAAP Diluted Earnings per Share

$M except share and per share data FY12 FY11


Debt reduction charges, net of tax 30.6 85.2

Brazil non-income tax case, net of tax -- 8.9

Pension expense, net of tax 105.4 28.0

Non-GAAP net income attributable to Unisys Corporation common shareholders $265.4 $242.6

Add preferred stock dividends 16.2 13.5


Weighted average shares (thousands) 43,864 43,145

Plus incremental shares from assumed conversion of employee stock plans and preferred stock 7,352 6,333

Adjusted weighted average shares 51,216 49,478

Earnings per Share

GAAP basis


Divided by weighted average shares 51,216 49,478

GAAP net income per share $2.84 $2.71

Non-GAAP basis


Divided by adjusted weighted average shares 51,216 49,478

Non-GAAP diluted earnings per share $5.50 $5.18


Schedule C: GAAP to Non-GAAP Reconciliation

Free Cash Flow

$M 4Q12 4Q11 FY12 FY11

Cash Provided by Operations $153.9 $159.5 $261.3 $317.2

Capital Expenditures (35.9) (33.3) (132.6) (134.4)

Free Cash Flow $118.0 $126.2 $128.7 $182.8

Pension Funding 26.4 19.1 201.5 82.7

Free Cash Flow Before Pension Funding $144.4 $145.3 $330.2 $265.5


Schedule D: GAAP to Non-GAAP Reconciliation

Trailing Twelve Months Operating Profit Excluding Pension

$M 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12

Reported

Revenue 1,269.3 1,242.3 1,213.0 1,043.8 1,076.9 1,106.4 1,158.6 977.4 1,037.0 960.6 1,044.6 911.2 937.2 1,020.1 985.3 928.4 921.3 877.4 979.3

Operating

Profit 14.8 23.2 (55.7) 15.2 69.1 111.6 134.1 58.5 106.5 76.1 134.6 41.9 48.1 113.0 121.6 64.4 79.0 61.2 114.6

Pension

(Inc)/Exp (8.8) (15.0) (16.0) (2.9) (8.9) (5.2) (6.6) (0.3) (1.2) (0.8) (0.6) 9.0 8.7 8.5 8.1 25.7 21.1 29.9 31.5

TTM

Revenue 4,768.4 4,576.0 4,440.1 4,385.7 4,319.3 4,279.4 4,133.6 4,019.6 3,953.4 3,853.6 3,913.1 3,853.8 3,871.0 3,855.1 3,712.4 3,706.4

TTM

Operating

Profit

(2.5) 51.8 140.2 330.0 373.3 410.7 375.2 375.7 359.1 300.7 337.6 324.6 347.1 378.0 326.2 319.2

OPM % (0.1%) 1.1% 3.2% 7.5% 8.6% 9.6% 9.1% 9.3% 9.1% 7.8% 8.6% 8.4% 9.0% 9.8% 8.8% 8.6%

Excluding

Pension

Op Profit

Excluding

Pension

6.0 8.2 (71.7) 12.3 60.2 106.4 127.5 58.2 105.3 75.3 134.0 50.9 56.8 121.5 129.7 90.1 100.1 91.1 146.1

TTM Op

Profit

Excluding

Pension

(45.2) 9.0 107.2 306.4 352.3 397.4 366.3 372.8 365.5 317.0 363.2 358.9 398.1 441.4 411.0 427.4

OPM % (0.9%) 0.2% 2.4% 7.0% 8.2% 9.3% 8.9% 9.3% 9.2% 8.2% 9.3% 9.3% 10.3% 11.4% 11.1% 11.5%


Schedule E: GAAP to Non-GAAP Reconciliation

EBITDA and Adjusted EBITDA

$M 4Q12 4Q11 FY12 FY11

Net Income Attributable to Unisys $85.9 $98.3 $145.6 $134.0

Interest Expense 2.5 11.4 27.5 63.1

Income Tax Provision 20.5 12.4 97.3 64.8

Depreciation & Amortization 46.2 44.9 174.6 194.8

EBITDA $155.1 $167.0 $445.0 $456.7

Debt Reduction Charges -- 7.6 30.6 85.2

Pension Expense 31.5 8.1 108.2 34.3

Brazil Tax Matter -- -- -- 13.5

Adjusted EBITDA $186.6 $182.7 $583.8 $589.7

Earnings before Interest, Taxes, Depreciation and Amortization


Schedule F: GAAP to Non-GAAP Reconciliation

Net Cash (Debt)

$M 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12

Long-Term Debt

(Including

Current

Maturities)

1,060.6 1,060.3 1,061.2 911.0 911.7 847.4 836.4 837.5 824.0 619.3 447.4 445.3 359.7 295.5 292.4 210.8 210.3

AR

Securitization /

Revolver Usage

141.0 120.0 130.0 118.0 100.0 - - - - - - - - - - - -

Subtotal 1,201.6 1,180.3 1,191.2 1,029.0 1,011.7 847.4 836.4 837.5 824.0 619.3 447.4 445.3 359.7 295.5 292.4 210.8 210.3

Cash 544.0 468.7 475.0 473.6 647.6 468.5 496.5 688.7 828.3 833.1 625.0 667.3 714.9 654.7 659.7 541.6 655.6

Net Cash (Debt) (657.6) (711.6) (716.2) (555.4) (364.1) (378.9) (339.9) (148.8) 4.3 213.8 177.6 222.0 355.2 359.2 367.3 330.8 445.3


Schedule G: GAAP to Non-GAAP Reconciliation

Non-GAAP Pretax Income

$M 4Q12 4Q11 FY12 FY11

Pretax Income $109.4 $111.3 $254.1 $206.0

Debt Reduction -- 7.6 30.6 85.2

Pension Expense 31.5 8.1 108.2 34.3

Brazil Tax Matter -- -- -- 13.5

Non-GAAP Pre-tax Income $140.9 $127.0 $392.9 $339.0


Thank You

www.unisys.com/investor

Fourth-Quarter 2012 Financial Results - Unisys€¦ · • 4Q12 diluted EPS of $1.67 vs. $1.94 in...

Documents

Transcript of Fourth-Quarter 2012 Financial Results - Unisys€¦ · • 4Q12 diluted EPS of $1.67 vs. $1.94 in...