Based on preliminary, unaudited results for the quarter, Unisys expects to report a loss of 7 – 10 cents per share for the fourth quarter of 2004.
The company previously expected between 27 – 31 cents per share.
Unisys will record a pretax, non-cash impairment charge of approximately $120 million, or 25 cents per share, to write off contract-related capitalized assets associated with a previously discussed challenging outsourcing operation.
The company indicated that approximately 8 cents per share of the earnings shortfall was caused by the revenue recognition treatment on a large, complex, multi-element contract signed in December. Unisys had anticipated that revenue on the hardware and operating system software elements of this contract would be recognized in the fourth quarter as equipment was delivered and accepted and as software licenses began. However, upon review of the final contract, it was determined that the appropriate accounting would be to recognize revenue on a month-to-month basis over the five-year term of the contract. The company noted that the timing of revenue recognition on this contract has no impact on expected revenue, profit, or cash flows to the company over the contract term.
Unisys will record an after-tax benefit of about $25 million, or 8 cents per share, principally due to the favorable settlement of income tax audit issues in the quarter.
These are all factors taken into consideration for the fourth-quarter results expectations.
“We are disappointed by our fourth-quarter results, which came in below our expectations,” said Unisys President and CEO Joseph W. McGrath. “As we finalize the results and complete our business reviews, we will provide further details on the quarter when we report our actual results. We remain confident in our value-added strategy and are committed to delivering against our financial objectives for 2005.”
McGrath said the company has not changed its previous outlook for non-GAAP full-year 2005 earnings per share.
“This is a mid-sized player in a fairly tough and competitive business,” pointed out David Garrity, from Caris & Co. “I don’t expect Unisys will likely find its way clear of operational issues for some time.”
These fourth-quarter 2004 results are preliminary, subject to the completion of year-end closing.
Unisys plans to release its final fourth-quarter 2004 results on Tuesday, January 25 before the opening of trading on the New York Stock Exchange. Then, the company will hold a conference call with the financial community.
Murdok | Breaking eBusiness News
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