The company expects to offset any federal taxable gains from the
sale with its existing unrestricted tax assets and expects
additional tax assets to be generated by the aforementioned pension
contributions.
"In addition to the benefits from a meaningfully improved
balance sheet, we see Unisys as having significant financial upside
potential, as Enterprise Solutions has always represented the key
area for improvements to efficiency and therefore our
profitability," said Mike Thomson,
senior vice president and CFO of Unisys. "Unisys will continue to
execute on plans already established for driving improved operating
margin, while also retaining the disciplined focus on cash flow
that has been key to our recent transformation."
Built on Strong Performance,
Innovative Solutions
"Our innovative solutions and focus on security have made us a
critical partner to many of the largest, most complex enterprises
in the world and helped improve the financial performance of
Enterprise Solutions in recent periods," Eric Hutto, senior vice president and president,
Enterprise Solutions said. "We will use the same
technology-enabled, intellectual property-based solutions that have
helped drive the company's recent success, such as Unisys
Stealth®, CloudForte®, InteliServe™ and
ClearPath Forward®. Our increased capital structure
flexibility will allow for further investment in new solutions and
more optionality in deal pursuits, with a disciplined focus on
optimizing cash flow and profitability."
Tax Asset Protection Plan
In conjunction with the transaction, Unisys also announced today
that it has adopted a Tax Asset Protection Plan (the "Plan"), which
is designed to protect Unisys' tax assets in contemplation of the
sale discussed in this release. This Plan is similar to tax benefit
protection plans adopted by other public companies with significant
tax attributes.
Unisys' ability to use its tax attributes would be significantly
limited if there were an "ownership change" for federal tax law
purposes, which generally occurs when the percentage of Unisys'
ownership of one or more 5% shareholders has increased by more than
50% over the lowest percentage owned by such shareholders at any
time during the prior three years (calculated on a rolling
basis).
The Plan is designed to protect Unisys' valuable tax assets by
reducing the likelihood of an 'ownership change' through actions
involving Unisys' securities.
As part of the Plan, Unisys has declared a dividend of one
preferred share purchase right (a "Right") for each outstanding
share of Unisys common stock, par value $0.01 per share, payable to stockholders of
record as of February 15,
2020 as well as to holders of Unisys common stock issued after
that date. In the Plan, the acquisition of 4.9% or more of the
Unisys common stock would trigger the operation of the Rights.
There is no guarantee, however, that the Plan will prevent Unisys
from experiencing an ownership change.
Unisys' Board of Directors has the discretion under certain
circumstances to exempt acquisitions of Unisys' securities from the
provisions of the Plan. The Plan may be amended by Unisys' Board at
any time.
The issuance of the Rights will not affect Unisys' reported
earnings per share and is not taxable to Unisys or its
stockholders.
Additional information regarding the Plan will be contained in a
Form 8-K and in a Registration Statement on Form 8-A that Unisys
Corporation filed with the Securities and Exchange Commission
today.
Advisors
Centerview Partners LLC is serving as exclusive financial
advisor and Sullivan & Cromwell LLP is serving as legal advisor
to Unisys.
Conference Call
A conference call will be hosted at 8:00am EST on February 6,
2020 to provide an overview of the transaction and to
address questions from the financial and advisory community. Please
use the link below to access the webcast:
https://services.choruscall.com/links/uis200206.html
(1) The preliminary results set forth in this
release are unaudited and remain subject to completion of the
company's financial closing procedures. The company will report its
fourth quarter and full-year 2019 financial results during its
previously announced conference call to be held on February 25, 2020.
Non-GAAP and Other Information
Although appropriate under generally accepted accounting
principles ("GAAP"), the company's results reflect revenue and
charges that the company believes are not indicative of its ongoing
operations and that can make its revenue, profitability and
liquidity results difficult to compare to prior periods,
anticipated future periods, or to its competitors' results. These
items consist of certain portions of revenue, post-retirement, debt
exchange and cost-reduction and other expenses. Management believes
each of these items can distort the visibility of trends associated
with the company's ongoing performance. Management also believes
that the evaluation of the company's financial performance can be
enhanced by use of supplemental presentation of its results that
exclude the impact of these items in order to enhance consistency
and comparativeness with prior or future period results. The
following measures are often provided and utilized by the company's
management, analysts, and investors to enhance comparability of
year-over-year results, as well as to compare results to other
companies in our industry.
(2) Non-GAAP adjusted revenue – In 2018
and 2019, the company's non-GAAP results reflect adjustments to
exclude certain revenue. In 2018, this includes revenue from
software license extensions and renewals, which were contracted for
in 2017 and properly recorded as revenue at that time under the
revenue recognition rules then in effect (ASC 605). Upon adoption
of the new revenue recognition rules (ASC 606) on January 1, 2018, and since the company adopted
ASC 606 under the modified retrospective method whereby prior
periods were not restated, the company was required to include
$53 million in the cumulative effect
adjustment to retained earnings on January
1, 2018. ASC 606 requires revenue related to software
license renewals or extensions to be recorded when the new license
term begins, which in the case of the $53
million was January 1, 2018.
The company has excluded revenue and related profit for these
software licenses in its non-GAAP results since it has been
previously reported in 2017. This is a one-time adjustment and it
will not reoccur in future periods. Additionally, the company's
non-GAAP results include adjustments to exclude certain revenue and
related profit relating to reimbursements from the company's
check-processing JV partners for restructuring expenses included as
part of the company's restructuring program.
(3) Non-GAAP operating profit – The
company recorded pretax post-retirement expense and pretax charges
in connection with cost-reduction activities, debt exchange and
other expenses. For the company, non-GAAP operating profit excluded
these items. The company believes that this profitability measure
is more indicative of the company's operating results and aligns
those results to the company's external guidance, which is used by
the company's management to allocate resources and may be used by
analysts and investors to gauge the company's ongoing performance.
During 2018 and 2019, the company included the non-GAAP adjustments
discussed in (2) herein.
(4) EBITDA & adjusted EBITDA –
Earnings before interest, taxes, depreciation and amortization
("EBITDA") is calculated by starting with net income (loss)
attributable to Unisys Corporation common shareholders and adding
or subtracting the following items: net income attributable to
noncontrolling interests, interest expense (net of interest
income), provision for income taxes, depreciation and amortization.
Adjusted EBITDA further excludes post-retirement, debt exchange,
and cost-reduction and other expenses, non-cash share-based
expense, and other (income) expense adjustments. In order to
provide investors with additional understanding of the company's
operating results, these charges are excluded from the adjusted
EBITDA calculation. During 2018 and 2019, the company included the
adjustments discussed in (2) herein.
(5) Last twelve months effective 9/30/19,
derived from Unisys' accounting records, which are maintained in
accordance with GAAP. The U.S. Federal business has not been run on
a standalone basis, and as such, certain adjustments were based on
management's best estimates of standalone assumptions.
(6) Pro forma adjusted EBITDA excludes
last twelve months Adjusted EBITDA for U.S. Federal business as of
9/30/19.
About Unisys
Unisys is a global information technology company that builds
high-performance, security-centric solutions for the most demanding
businesses and governments. Unisys offerings include security
software and services; digital transformation and workplace
services; industry applications and services; and innovative
software operating environments for high-intensity enterprise
computing. For more information on how Unisys builds better
outcomes securely for its clients across the Government, Commercial
and Financial Services markets, visit www.unisys.com.
Follow Unisys on Twitter and LinkedIn.
Forward-Looking Statements
Any statements contained in this release are not historical
facts, including those regarding future performance, are
forward-looking statements under the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are based on
current expectations, assumptions, anticipated events or trend,
beliefs relating to matters that are not historical in nature and
involve risks and uncertainties that could cause actual results to
differ from expectations, all of which are difficult to predict and
many of which are beyond the control of the company. Actual results
may differ materially from the company's current expectations
depending upon a number of factors affecting the company's business
and risks associated with the transaction. These factors include,
among others: the ability to close the transaction on the expected
timing or at all; the ability to obtain required antitrust
regulatory approval for the transaction; the risk that a condition
to closing of the transaction may not be satisfied on a timely
basis or at all; the failure of the transaction to close for any
other reason; buyer's access to financing for the acquisition on a
timely basis; the difficulty of predicting the timing or outcome of
pending or future litigation or government investigations; the
ability of the company to achieve the intended benefits of the
transactions (including, without limitation, risks related to the
ability of the company to repay certain indebtedness and reduce
pension obligations following the closing of the transaction); the
risk related to the diversion of management's attention from the
company's ongoing business operations; the effect of the
announcement or pendency of the transaction on the company's
business relationships (including, without limitation, customers
and suppliers and other third parties), operating results, and
business generally; the risk related to the change of the company's
business structure and a smaller size of the company following the
closing of the transaction; the effect of the announcement or
disruption from the transaction making it more difficult to retain
and hire key personnel; the risk related to the company's ability
to operate its business as a going-concern following the closing of
the transaction. These risks and uncertainties are discussed in the
company's reports filed with the SEC, including but not limited to
the company's annual report on Form 10-K and in its subsequent
reports on Form 10-Q and periodic reports on Form 8-K, and from
time to time in the company's other investor communications. Except
as expressly required by law, the company assumes no obligation to
update any forward-looking statement to reflect events or
circumstances that occur after the date on which the statement is
made.
RELEASE NO.: 0206/9745
Unisys and other Unisys products and services mentioned herein,
as well as their respective logos, are trademarks or registered
trademarks of Unisys Corporation. Any other brand or product
referenced herein is acknowledged to be a trademark or registered
trademark of its respective holder.
UIS-C
CONTACT: Investors: Courtney
Holben, Unisys, 215-986-3379, courtney.holben@unisys.com;
Media: John Clendening, Unisys,
214-403-1981, john.clendening@unisys.com or Jared Levy, Sard
Verbinnen & Co., 212-687-8080, Unisys-SVC@sardverb.com