SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________.
Commission file number 1-8729
UNISYS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 38-0387840
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification No.)
Township Line and Union Meeting Roads
Blue Bell, Pennsylvania 19424
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 986-4011
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. YES [X] NO [ ]
Number of shares of Common Stock outstanding as of March 31, 1998:
251,397,623.
<PAGE> 2
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEET
(Millions)
<CAPTION>
March 31,
1998 December 31,
(Unaudited) 1997
----------- ------------
<S> <C> <C>
Assets
- ------
Current assets
Cash and cash equivalents $ 654.7 $ 803.0
Accounts and notes receivable, net 864.4 967.3
Inventories
Finished equipment and supplies 272.5 289.7
Work in process and raw materials 295.7 271.1
Deferred income taxes 453.6 461.4
Other current assets 95.8 94.0
--------- --------
Total 2,636.7 2,886.5
--------- --------
Properties 1,760.5 1,774.1
Less-Accumulated depreciation 1,198.4 1,192.9
--------- --------
Properties, net 562.1 581.2
--------- --------
Investments at equity 214.9 215.7
Software, net of accumulated amortization 259.5 259.0
Prepaid pension cost 776.3 762.4
Deferred income taxes 665.7 665.7
Other assets 208.7 220.8
--------- --------
Total $ 5,323.9 $5,591.3
========= ========
Liabilities and stockholders' equity
- ------------------------------------
Current liabilities
Notes payable $ 51.8 $ 40.6
Current maturities of long-term debt 15.4 213.1
Accounts payable 803.0 817.1
Other accrued liabilities 1,200.7 1,307.2
Dividends payable 26.6 26.6
Estimated income taxes 195.2 172.8
--------- --------
Total 2,292.7 2,577.4
--------- --------
Long-term debt 1,436.2 1,438.3
Other liabilities 359.3 369.7
Stockholders' equity
Preferred stock 1,420.1 1,420.1
Common stock, issued: 1998, 252.3;
1997, 250.2 2.5 2.5
Accumulated deficit (1,700.7) (1,736.8)
Other capital 1,513.8 1,520.1
--------- --------
Stockholders' equity 1,235.7 1,205.9
--------- --------
Total $ 5,323.9 $5,591.3
========= ========
See notes to consolidated financial statements.
</TABLE>
<PAGE> 3
<TABLE>
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(Millions, except per share data)
<CAPTION>
Three Months Ended March 31
---------------------------
1998 1997
-------- --------
<S> <C> <C>
Revenue $1,649.7 $1,530.7
-------- --------
Costs and expenses
Cost of revenue 1,090.5 1,015.0
Selling, general and administrative 330.2 328.8
Research and development 72.9 80.3
-------- --------
1,493.6 1,424.1
-------- --------
Operating income 156.1 106.6
Interest expense 46.5 60.4
Other income (expense), net (11.6) (15.6)
-------- --------
Income before income taxes 98.0 30.6
Estimated income taxes 35.3 11.3
-------- --------
Net income 62.7 19.3
Dividends on preferred shares 26.7 30.1
-------- --------
Earnings (loss) on common shares $ 36.0 $ (10.8)
======== =========
Earnings (loss) per common share
Basic $ .14 $ (.06)
======== =========
Diluted $ .14 $ (.06)
======== =========
See notes to consolidated financial statements.
</TABLE>
<PAGE> 4
<TABLE>
UNISYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(Millions)
<CAPTION>
Three Months Ended
March 31
-------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities
Net income $ 62.7 $ 19.3
Add (deduct) items to reconcile net income
to net cash provided by (used for)
operating activities:
Depreciation 33.0 39.0
Amortization:
Marketable software 26.8 22.5
Goodwill 1.6 11.6
Decrease in deferred income taxes, net 7.9
Decrease in receivables, net 105.7 56.5
(Increase) in inventories ( 7.4) ( 5.2)
(Decrease) in accounts payable and
other accrued liabilities (126.8) (259.9)
Increase (decrease) in estimated income taxes 22.4 ( 20.5)
Increase (decrease) in other liabilities .4 ( 25.7)
(Increase) decrease in other assets ( 5.7) 12.8
Other 3.9 12.6
------- --------
Net cash provided by (used for) operating
activities 124.5 (137.0)
------- --------
Cash flows from investing activities
Proceeds from investments 403.2 332.7
Purchases of investments (399.4) (323.3)
Proceeds from sales of properties 1.0
Investment in marketable software ( 27.3) ( 25.6)
Capital additions of properties ( 30.0) ( 37.3)
Purchases of businesses ( 6.4)
------- --------
Net cash used for investing activities ( 53.5) ( 58.9)
------- --------
Cash flows from financing activities
Redemption of redeemable preferred stock (100.0)
Proceeds from issuance of debt 195.2
Principal payments of debt (401.0)
Net proceeds from short-term borrowings 11.2 .8
Dividends paid on preferred shares ( 26.7) ( 31.4)
Other 16.9
------- --------
Net cash used for financing activities (204.4) (130.6)
------- --------
Effect of exchange rate changes on
cash and cash equivalents ( 14.9) ( 14.7)
------- --------
Net cash used for continuing operations (148.3) (341.2)
Net cash used for discontinued operations ( 1.6)
------- --------
(Decrease) in cash and cash equivalents (148.3) (342.8)
Cash and cash equivalents, beginning of period 803.0 1,029.2
------- --------
Cash and cash equivalents, end of period $ 654.7 $ 686.4
======= ========
See notes to consolidated financial statements.
</TABLE>
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the financial information furnished
herein reflects all adjustments necessary for a fair presentation of
the financial position, results of operations and cash flows for the
interim periods specified. These adjustments consist only of normal
recurring accruals. Because of seasonal and other factors, results
for interim periods are not necessarily indicative of the results to
be expected for the full year.
a. The shares used in the computations of earnings per share are as
follows (in thousands):
Three Months Ended
March 31,
------------------
1998 1997
------- -------
Basic 248,586 173,000
Diluted 262,833 173,000
b. Comprehensive income for the three months ended March 31, 1998
and 1997, includes the following components (in millions):
1998 1997
---- ----
Net income $ 62.7 $ 19.3
Other comprehensive income (loss)
Foreign currency translation adjustment ( 29.3) ( 25.6)
Related tax expense (benefit) ( .5) 6.4
------- -------
Total other comprehensive income (loss) ( 28.8) ( 32.0)
------- -------
Comprehensive income (loss) $ 33.9 $( 12.7)
======= =======
Accumulated other comprehensive income (loss), (all of which
relates to foreign currency translation adjustments) as of
March 31, 1998 and December 31, 1997 is as follows (in millions):
March 31, December 31,
1998 1997
--------- -----------
Balance at beginning of period $(448.1) $(390.1)
Translation adjustments ( 28.8) ( 58.0)
------- -------
Balance at end of period $(476.9) $(448.1)
======= =======
c. Certain prior year balance sheet amounts have been reclassified
to conform to the 1998 presentation.
<PAGE> 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
- ---------------------
For the three months ended March 31, 1998, the Company reported net income of
$62.7 million compared to $19.3 million for the three months ended March 31,
1997. After payment of preferred dividends, the Company earned $.14 per
common share on a diluted basis compared to a loss of $.06 a year ago.
Total revenue for the quarter ended March 31, 1998 was $1.65 billion,
up 8% from revenue of $1.53 billion for the quarter ended March 31, 1997.
Excluding the negative impact of foreign currency fluctuations, revenue in the
current quarter rose 11%. Total gross profit percent was 33.9% in the first
quarter of 1998 compared to 33.7% in the year-ago period.
For the three months ended March 31, 1998, selling, general and administrative
expenses were $330.2 million compared to $328.8 million for the three months
ended March 31, 1997. Research and development expenses were $72.9 million
compared to $80.3 million a year earlier. The decline was largely due to the
Company's cost reduction actions.
For the first quarter of 1998, the Company reported an operating income
percent of 9.5% compared to 7.0% for the first quarter of 1997.
Information by business unit is presented below (in millions):
<TABLE>
<CAPTION>
Global
Elimi- Information Customer Computer
Total nations Services Services Systems
-------- ------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
Three Months Ended
March 31, 1998
- ------------------
Customer revenue $1,649.7 $509.8 $523.6 $616.3
Intercompany $(129.7) 1.0 18.4 110.3
-------- ------- ------ ------ ------
Total revenue $1,649.7 $(129.7) $510.8 $542.0 $726.6
======== ======= ====== ====== ======
Gross profit percent 33.9% 24.1% 23.8% 44.4%
======== ====== ====== ======
Operating income
percent 9.5% 1.4% 6.8% 17.9%
======== ====== ====== ======
Three Months Ended
March 31, 1997
- ------------------
Customer revenue $1,530.7 $430.2 $478.5 $622.0
Intercompany $(114.2) 5.2 16.3 92.7
-------- ------- ------ ------ ------
Total revenue $1,530.7 $(114.2) $435.4 $494.8 $714.7
======== ======= ====== ====== ======
Gross profit percent 33.7% 14.2% 30.0% 43.8%
======== ====== ====== ======
Operating income
percent 7.0% (11.4)% 10.1% 16.1%
======== ====== ====== ======
</TABLE>
<PAGE> 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Cont'd).
Customer revenue in the quarter from Information Services was $509.8 million,
up 19% from $430.2 million in 1997 as a result of growth in both systems
integration and outsourcing. The gross profit percent was 24.1% in the current
quarter compared to 14.2% in the year-ago period. This increase reflects the
increased focus on quality and discipline in proposals and service delivery,
continued benefits from completing problem contracts, and the continued focus
on higher-growth, higher-margin solution programs. In addition the prior year
quarter included an approximately $25 million charge for operational issues
associated with a few large, multi-year contracts. Information Services
operating income percent (operating income as a percent of total revenue) was
1.4% for the first quarter of 1998 compared to a negative 11.4% for the first
quarter of 1997.
In Global Customer Services, customer revenue for the three months ended March
31, 1998 was $523.6 million, up 9% from $478.5 million for the three months
ended March 31, 1997. The increase was due to growth in distributed computing
support services revenue which more than offset a continuing decline in core
maintenance revenue. The gross profit percent for Global Customer Services was
23.8% compared to 30.0% in the year-ago quarter. Approximately one-half of
the revenue growth and one-half of the gross profit decline was due to the
continuing rollout of a large Federal government networking project. In
addition to the margin impact from the Federal government networking contract,
margins in this business continue to be impacted by the commoditization of
hardware components within network integration projects and the ongoing shift
from proprietary maintenance toward distributed computing support services.
The operating income percent for the first quarter of 1998 was 6.8% compared
to 10.1% last year.
Computer Systems customer revenue for the first quarter of 1998 was $616.3
million, down slightly from $622.0 million in the first quarter of 1997. In
the quarter, an increase in ClearPath revenue was offset by a decline, as
expected, in personal computer revenue. This reflects the Company's decision
to discontinue the manufacturing and assembly of PCs and low-end servers to
focus its technology resources on mid-range and enterprise-class servers. The
Company has reached an agreement in principle with Hewlett-Packard Company to
supply notebooks, personal computers, and entry-level Intel-based servers as
part of a complete technology solution for its customers. Computer Systems
gross profit percent was 44.4% compared to 43.8% last year. The operating
income percent for the first quarter of 1998 was 17.9% compared to 16.1% last
year.
Interest expense for the three months ended March 31, 1998 was $46.5 million
compared to $60.4 million for the three months ended March 31, 1997. The
decline was principally due to the Company's debt reduction program.
Other income (expense), net, which can vary from quarter to quarter, was an
expense of $11.6 million in the current quarter compared to an expense of
$15.6 million in the year-ago quarter. The change was mainly due to lower
goodwill amortization due to the December 1997 write-off of goodwill related
to the Sperry/Burroughs merger offset by a charge in the current quarter for
the early retirement of debt.
Income before income taxes was $98.0 million in the first quarter of 1998
compared to $30.6 million last year. The provision for income taxes was $35.3
million in the current period compared to $11.3 million in the year-ago period.
Effective January 1, 1998, the Company changed the functional currency of its
Brazilian operations from the U.S. dollar to the Brazilian local currency
because the Brazilian economy is no longer considered highly inflationary.
This change did not have a material effect on the Company's consolidated
financial position, consolidated results of operations, or liquidity.
Effective January 1, 1998, the Company adopted the American Institute of
Certified Public Accountants Statement of Position ("SOP") 97-2, "Software
Revenue Recognition".
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Cont'd).
This SOP provides guidance on applying generally accepted accounting
principles in recognizing revenue on software transactions. Adoption of SOP
97-2 did not have a material effect on the Company's consolidated financial
position, consolidated results of operations, or liquidity.
Financial Condition
- -------------------
Cash and cash equivalents at March 31, 1998 were $654.7 million compared to
$803.0 million at December 31, 1997. During the three months ended March 31,
1998 cash provided by operations was $124.5 million compared to a year-ago
cash usage of $137.0 million. The increase in cash provided of $261.5 million
was due in large part to improved working capital management, including
improvements in inventory turns and accounts receivable days outstanding.
Cash used for investing activities during the first quarter of 1998 was $53.5
million compared to $58.9 million during the first quarter of 1997.
Cash used for financing activities during the quarter was $204.4 million
compared to $130.6 million in the year-ago period. Included in the current
period were proceeds of $195.2 million from issuance of debt, offset by
principal payments of debt of $401.0 million. Last year's usage included
$100.0 million for the redemption of Series C Cumulative Convertible Preferred
Stock.
At March 31, 1998, total debt was $1.5 billion, a decline of $188.6 million
from December 31, 1997. On January 30, 1998, the Company issued $200 million
of 7 7/8% senior notes due 2008. The net proceeds from the sale of the notes
were used to call $200 million principal amount of the 10 5/8% senior notes
due 1999. On February 5, 1998, the Company redeemed all $197.5 million of its
9 1/2% senior notes due on July 15, 1998.
The Company may, from time to time, redeem, tender for, or repurchase its
securities in the open market or in privately negotiated transactions
depending upon availability, market conditions, and other factors.
The Company has a $200 million revolving credit facility that expires in June
1999. The facility includes certain financial tests that must be met as
conditions to a borrowing and provides that no amounts may be outstanding
under the facility for a minimum of 20 consecutive days in each quarter. The
facility may not be used to refinance other debt. The amount the Company may
borrow at any given time is dependent upon the amount of certain of its
accounts receivable and inventory. As of March 31, 1998, there were no
borrowings outstanding under the facility and the entire $200 million was
available for borrowings.
At March 31, 1998, the Company had deferred tax assets in excess of deferred
tax liabilities of $1,419 million. For the reasons cited below, management
determined that it is more likely than not that $1,026 million of such assets
will be realized, therefore resulting in a valuation allowance of $393
million.
The Company evaluates quarterly the realizability of its net deferred tax
assets by assessing its valuation allowance and by adjusting the amount of
such allowance, if necessary. The factors used to assess the likelihood of
realization are the Company's forecast of future taxable income, which is
adjusted by applying probability factors and available tax planning strategies
that could be implemented to realize deferred tax assets. The combination of
these factors is expected to be sufficient to realize the $1,026 million of
net deferred tax assets. Approximately $3.0 billion of future taxable income
(predominantly U.S.) is needed to realize all of the net deferred tax assets.
The Company's net deferred tax assets include substantial amounts of net
operating loss and tax credit carryforwards. Failure to achieve forecasted
taxable income might affect the ultimate realization of the net deferred tax
assets. See "Factors That May Affect Future Results" below.
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Cont'd).
Stockholders' equity increased $29.8 million during the three months ended
March 31, 1998, principally reflecting net income of $62.7 million and
proceeds from the issuance of stock related to stock option and employee plans
of $24.9 million, offset in part by preferred stock dividends declared of
$26.6 million and translation adjustments of $28.8 million.
Factors That May Affect Future Results
- --------------------------------------
From time to time, the Company provides information containing "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 risks, uncertainties, and other factors that could cause the
Company's actual results to differ materially from expectations. In addition
to changes in general economic and business conditions and natural disasters,
these include, but are not limited to, the factors discussed below.
The Company operates in an industry characterized by aggressive competition,
rapid technological change, evolving technology standards, and short product
life cycles. Future operating results will depend on the Company's ability to
design, develop, introduce, deliver, or obtain new products and services on a
timely and cost-effective basis; on its ability to mitigate the effects of
competitive pressures and volatility in the information technology and
services industry on revenues, pricing, and margins; on its ability to
effectively manage the shift of its business mix away from traditional high-
margin product and services offerings; and on its ability to successfully
attract and retain highly skilled people.
Certain of the Company's systems integration contracts are fixed-price
contracts under which the Company assumes the risk for the delivery of the
contracted services at an agreed-upon price. Future results will depend on
the Company's ability to profitably perform these services contracts and bid
and obtain new contracts.
Approximately 60% of the Company's total revenue derives from international
operations. The risks of doing business internationally include foreign
currency exchange rate fluctuations, changes in political or economic
conditions, trade protection measures, and import or export licensing
requirements.
Many computer systems will experience problems handling dates beyond the year
1999 and therefore need to be modified prior to the year 2000 in order to
remain functional. The Company has been taking actions to ensure both the
internal readiness of its computer systems and the compliance of computer
products and software sold by it to customers for handling dates beginning in
the year 2000. The Company does not believe that the cost of these actions
will have a material adverse effect on the Company's results of operations or
financial condition. However, future results may be adversely affected by a
delay in, or increased costs associated with, the implementation of these
actions, or by the Company's inability to implement them.
In the course of providing complex, integrated solutions to customers, the
Company frequently forms alliances with third parties that have complementary
products, services, or skills. Future results will depend in part on the
performance and capabilities of these third parties, including their ability
to deal effectively with the year 2000 issue. Future results will also depend
upon the ability of external suppliers to deliver components at reasonable
prices and in a timely manner and on the financial condition of and the
Company's relationship with distributors and other indirect channel partners.
<PAGE> 10
Part II - OTHER INFORMATION
- ------- -----------------
Item 1. Legal Proceedings
The Company is involved in two lawsuits with Ceska Sporitelna, a.s., a savings
bank in the Czech Republic (the "Bank"). The disputes relate to contracts
entered into in 1992 and 1994 between the Bank and certain of the Company's
foreign subsidiaries to design and implement a computer system, including
hardware and custom software, for the Bank's headquarters and branch offices
throughout the Czech Republic. In the first action, the Company is a
defendant in Ceska Sporitelna, a.s. v. Unisys Corporation, filed in the
United States District Court for the Eastern District of Pennsylvania in
June, 1996. The Bank alleges that Unisys made a series of fraudulent
misrepresentations in connection with these contracts. The Bank seeks to
recover more than $100 million, together with punitive damages. The Company
believes it has meritorious defenses to these allegations and intends to
defend them vigorously. The Company has filed a counterclaim in this action
alleging fraud, negligent misrepresentation, intentional interference with
prospective business relations and breach of contract by the Bank, and the
Company seeks to recover more than $100 million, together with punitive
damages. Trial is currently scheduled for August, 1998. In the second
action, the Company's subsidiary, Unisys International Services B.V., is the
plaintiff in an arbitration captioned Unisys International
Services B.V. v. Ceska Sporitelna, a.s., filed in March, 1998, in Vienna,
Austria. Unisys International seeks to recover, among other amounts,
approximately $21.1 million from the Bank for hardware, software and services
delivered to and used by the Bank.
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
See Exhibit Index
(b) Reports on Form 8-K
During the quarter ended March 31, 1998, the Company filed two
Current Reports on Form 8-K, dated January 15, 1998 and January 27,
1998, respectively, to report under Items 5 and 7 of such Form.
<PAGE> 11
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
UNISYS CORPORATION
Date: May 14, 1998 By: /s/ Robert H. Brust
--------------- ----------------------------
Robert H. Brust
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
By: /s/Janet M. Brutschea Haugen
----------------------------
Janet M. Brutschea Haugen
Vice President and Controller
(Chief Accounting Officer)
<PAGE> 12
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
11 Statement of Computation of Earnings Per Share for the three
months ended March 31, 1998 and 1997
12 Statement of Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
EXHIBIT 11
<TABLE>
UNISYS CORPORATION
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
(Millions, except share data)
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Basic Earnings Per Common Share
Net income $ 62.7 $ 19.3
Less dividends on preferred shares ( 26.7) ( 30.1)
----------- -----------
Net income (loss) available to common
stockholders $ 36.0 $( 10.8)
=========== ===========
Weighted average shares 248,586,237 172,999,549
=========== ===========
Basic earnings per share $ .14 $( .06)
=========== ===========
Diluted Earnings Per Common Share
Net income (loss) available to common
stockholders $ 36.0 $( 10.8)
Plus impact of assumed conversions
Interest expense on 8 1/4% Convertible Notes
due 2006, net of tax .4
----------- -----------
Net income (loss) available to common
stockholders plus assumed conversions $ 36.4 $( 10.8)
=========== ===========
Weighted average shares 248,586,237 172,999,549
Plus incremental shares from assumed
conversions
Employee stock plans 10,205,990
8 1/4% Convertible Notes due 2006 4,040,847
----------- -----------
Adjusted weighted average shares 262,833,074 172,999,549
=========== ===========
Diluted earnings per share
$ .14 $( .06)
=========== ===========
The average shares listed below were not
included in the computation of diluted
earnings per share because to do so would
have been antidilutive for the periods
presented.
Employee stock plans 1,370,313
8 1/4% convertible notes due 2006 43,490,909
8 1/4% convertible notes due 2000 33,697,387
Series A preferred stock 47,450,272 47,454,135
</TABLE>
Exhibit 12
<TABLE>
UNISYS CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (UNAUDITED)
($ in millions)
<CAPTION>
Three
Months
Ended
Mar.31, Years Ended December 31
------- -------------------------------------
1998 1997 1996 1995 1994 1993
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing
operations before income taxes $ 98.0 $(758.8) $ 93.7 $(781.1) $ 14.6 $370.9
Add (deduct) share of loss
(income) of associated
companies -- 5.9 (4.9) 5.0 16.6 14.5
------ ------ ------ ------- ------ ------
Subtotal 98.0 (752.9) 88.8 (776.1) 31.2 385.4
------ ------ ------ ------- ------ ------
Interest expense (net of
interest capitalized) 46.5 233.2 249.7 202.1 203.7 241.7
Amortization of debt issuance
expenses 1.2 6.7 6.3 5.1 6.2 6.6
Portion of rental expense
representative of interest 14.0 56.2 59.2 65.3 65.0 70.5
------ ------ ------- ------- ------ ------
Total Fixed Charges 61.7 296.1 315.2 272.5 274.9 318.8
------ ------ ------- ------- ------ ------
Earnings (loss) from continuing
operations before income
taxes and fixed charges $159.7 $(456.8) $404.0 $(503.6) $306.1 $704.2
====== ======= ====== ======= ====== ======
Ratio of earnings to fixed
charges 2.59 (a) 1.28 (a) 1.11 2.21
====== ====== ======= ======= ====== ======
(a) Earnings for the years ended December 31, 1997 and 1995 were inadequate
to cover fixed charges by approximately $752.9 and $776.1 million,
respectively.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 655
<SECURITIES> 0
<RECEIVABLES> 854
<ALLOWANCES> (66)
<INVENTORY> 568
<CURRENT-ASSETS> 2,637
<PP&E> 1,760
<DEPRECIATION> 1,198
<TOTAL-ASSETS> 5,324
<CURRENT-LIABILITIES> 2,293
<BONDS> 1,436
0
1,420
<COMMON> 3
<OTHER-SE> (187)
<TOTAL-LIABILITY-AND-EQUITY> 5,324
<SALES> 727
<TOTAL-REVENUES> 1,650
<CGS> 322
<TOTAL-COSTS> 1,091
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2
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<INCOME-PRETAX> 98
<INCOME-TAX> 35
<INCOME-CONTINUING> 63
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
