What changed in this filing

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Item 1. Financial Statements

2023-05-02 compared with 2022-11-23 · 114 added, 281 removed, 453 unchanged (47% of the section changed)

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Services $ 403.9 $ 392.1

Technology 112.5 54.6

461.2 488.0 1,422.9 1,515.1

Costs and expenses

2 unchanged sentences

Technology 41.3 38.0

356.9 361.1 1,083.1 1,106.8

Selling, general and administrative 102.9 104.4

Research and development 6.2 6.5

469.2 462.9 1,420.7 1,405.6

Operating (loss) income ( 8.0 ) 25.1 2.2 109.5

Operating income (loss) 49.9 ( 23.5 )

Interest expense 7.6 8.4

1 unchanged sentence

Loss before income taxes ( 154.6 ) ( 52.9 )

Provision for (benefit from) income taxes 0.7 10.9 25.1 ( 33.8 )

Provision for income taxes 19.9 4.1

Consolidated net loss ( 174.5 ) ( 57.0 )

Net income (loss) attributable to noncontrolling interests 0.2 0.2 0.8 ( 1.0 )

Net income attributable to noncontrolling interests 0.9 0.3

Net loss attributable to Unisys Corporation $ ( 175.4 ) $ ( 57.3 )

6 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Consolidated net loss $ ( 174.5 ) $ ( 57.0 )

Other comprehensive income (loss)

Other comprehensive income

Foreign currency translation 24.4 ( 17.7 )

Postretirement adjustments, net of tax of $ 14.4 and $ 35.2 in 2022 and $ 7.4 and $ 45.2 in 2021

89.1 63.4 234.8 408.6

Total other comprehensive (loss) income ( 1.8 ) 26.9 30.6 371.8

Comprehensive (loss) income ( 41.7 ) 8.4 ( 83.1 ) 53.5

Postretirement adjustments, net of tax of $( 3.0 ) in 2023 and $ 6.7 in 2022

Total other comprehensive income 202.7 39.6

Comprehensive income (loss) 28.2 ( 17.4 )

Less comprehensive income (loss) attributable to noncontrolling interests 0.8 ( 0.9 )

Comprehensive (loss) income attributable to Unisys Corporation $ ( 41.8 ) $ 9.2 $ ( 82.6 ) $ 54.0

Comprehensive income (loss) attributable to Unisys Corporation $ 27.4 $ ( 16.5 )

See notes to consolidated financial statements

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS (Unaudited)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Current assets:

19 unchanged sentences

Total assets $ 2,066.4 $ 2,065.6

Liabilities and deficit

Total liabilities and equity

Current liabilities:

16 unchanged sentences

Accumulated other comprehensive loss ( 2,873.2 ) ( 3,076.0 )

Total Unisys Corporation stockholders’ deficit ( 184.1 ) ( 113.7 )

Total Unisys Corporation stockholders' equity (deficit) 16.7 ( 14.7 )

Noncontrolling interests 37.3 36.5

Total deficit ( 135.3 ) ( 64.4 )

Total liabilities and deficit $ 2,058.1 * $ 2,419.5

* These consolidated financial statements reflect a change of $ 15.2 million to increase both assets and liabilities, as compared to the previously filed consolidated financial statements on November 7, 2022.

Total equity 54.0 21.8

Total liabilities and equity $ 2,066.4 $ 2,065.6

See notes to consolidated financial statements

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities

Consolidated net loss $ ( 174.5 ) $ ( 57.0 )

Adjustments to reconcile consolidated net loss to net cash (used for) provided by operating activities:

Foreign currency losses 6.3 3.2

Adjustments to reconcile consolidated net loss to net cash provided by (used for) operating activities:

Foreign currency gains ( 3.7 ) ( 2.2 )

Non-cash interest expense 0.3 0.4

15 unchanged sentences

Other liabilities ( 3.8 ) ( 2.3 )

Net cash (used for) provided by operating activities ( 22.2 ) 64.5

Net cash provided by (used for) operating activities 12.8 ( 33.0 )

Cash flows from investing activities

Purchase of businesses, net of cash acquired ( 0.3 ) ( 150.4 )

Proceeds from investments 830.2 939.0

3 unchanged sentences

Capital additions of outsourcing assets ( 2.7 ) ( 2.4 )

Purchase of businesses, net of cash acquired — ( 0.3 )

Other ( 0.4 ) ( 0.4 )

2 unchanged sentences

Payments of long-term debt ( 7.2 ) ( 7.7 )

Proceeds from issuance of long-term debt — 1.5

Proceeds from exercise of stock options — 4.5

Other ( 0.4 ) ( 3.5 )

6 unchanged sentences

UNISYS CORPORATION

CONSOLIDATED STATEMENTS OF DEFICIT (Unaudited)

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) (Unaudited)

Unisys Corporation

6 unchanged sentences

Balance at March 31, 2023 $ 54.0 $ 16.7 $ 0.7 $ ( 1,690.4 ) $ ( 156.3 ) $ 4,735.9 $ ( 2,873.2 ) $ 37.3

Consolidated net income (loss) ( 16.8 ) ( 17.1 ) ( 17.1 ) 0.3

Stock-based activity 5.1 5.1 ( 0.2 ) 5.3

Translation adjustments ( 95.6 ) ( 92.3 ) ( 92.3 ) ( 3.3 )

Postretirement plans 88.4 85.1 85.1 3.3

Balance at June 30, 2022 $ ( 98.5 ) $ ( 147.2 ) $ 0.7 $ ( 1,483.4 ) $ ( 155.9 ) $ 4,721.9 $ ( 3,230.5 ) $ 48.7

Consolidated net (loss) income ( 39.9 ) ( 40.1 ) ( 40.1 ) 0.2

Stock-based activity 4.9 4.9 4.9

Translation adjustments ( 90.9 ) ( 87.4 ) ( 87.4 ) ( 3.5 )

Postretirement plans 89.1 85.7 85.7 3.4

Balance at September 30, 2022 $ ( 135.3 ) $ ( 184.1 ) $ 0.7 $ ( 1,523.5 ) $ ( 155.9 ) $ 4,726.8 $ ( 3,232.2 ) $ 48.8

Unisys Corporation

2 unchanged sentences

Consolidated net (loss) income ( 57.0 ) ( 57.3 ) ( 57.3 ) 0.3

Capped call on conversion of notes — — ( 30.8 ) 30.8

Stock-based activity 2.2 2.2 ( 3.5 ) 5.7

2 unchanged sentences

Balance at March 31, 2022 $ ( 79.6 ) $ ( 128.0 ) $ 0.7 $ ( 1,466.3 ) $ ( 155.7 ) $ 4,716.6 $ ( 3,223.3 ) $ 48.4

Consolidated net loss ( 142.3 ) ( 140.8 ) ( 140.8 ) ( 1.5 )

Stock-based activity 4.5 4.5 ( 0.2 ) 4.7

Translation adjustments 16.8 16.4 16.4 0.4

Postretirement plans 143.0 142.7 142.7 0.3

Balance at June 30, 2021 $ ( 263.8 ) $ ( 308.8 ) $ 0.7 $ ( 1,259.1 ) $ ( 152.1 ) $ 4,697.8 $ ( 3,596.1 ) $ 45.0

Consolidated net (loss) income ( 18.5 ) ( 18.7 ) ( 18.7 ) 0.2

Stock-based activity 5.3 5.3 — 5.3

Translation adjustments ( 36.5 ) ( 33.9 ) ( 33.9 ) ( 2.6 )

Postretirement plans 63.4 61.8 61.8 1.6

Balance at September 30, 2021 $ ( 250.1 ) $ ( 294.3 ) $ 0.7 $ ( 1,277.8 ) $ ( 152.1 ) $ 4,703.1 $ ( 3,568.2 ) $ 44.2

See notes to consolidated financial statements

5 unchanged sentences

The financial statements and footnotes are unaudited.

In the opinion of management, the financial information furnished herein reflects all adjustments necessary for a fair statement of the results of operations, comprehensive income (loss), financial position, cash flows and deficit for the interim periods specified.

These adjustments consist only of normal recurring accruals except as disclosed herein.

7 unchanged sentences

As future events and their effects cannot be determined with precision, actual results could differ materially from these estimates.

Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

Changes in those estimates resulting from continuing changes in the economic environment such as rising interest rates, inflation, fluctuation in foreign exchange rates and the ongoing conflict in Ukraine, will be reflected in the financial statements in future periods.

The company’s accounting policies are set forth in detail in Note 1 of the Notes to Consolidated Financial Statements in the company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission.

1 unchanged sentence

The company believes that these critical accounting policies and estimates affect its more significant estimates and judgments used in the preparation of the company’s consolidated financial statements.

Note 2 - Accounting Standards

Effective January 1, 2022, the company adopted Accounting Standards Update (ASU) No.

2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

This guidance requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts.

Deferred revenue acquired in a business combination is no longer required to be measured at its fair value, which had historically resulted in a deferred revenue impairment at the date of acquisition.

The company will adopt this guidance for acquisitions completed on or after January 1, 2022.

Note 3 - Acquisitions

On December 14, 2021, the company acquired 100 % of CompuGain LLC (CompuGain), a leading cloud solutions provider, for a purchase price consideration of $ 85.3 million on a cash-free, debt-free basis.

The company funded the cash consideration and acquisition-related costs with cash on hand.

The acquisition enhanced the company’s delivery of rapid and agile cloud migration, application modernization and data value realization to our clients.

The fair values of the total net assets acquired was as follows:

Receivables $ 7.8

Prepaid expenses and other current assets 0.7

Properties and other long-term assets 0.2

Operating lease right-of-use assets 0.2

Accounts payable and accruals ( 7.4 )

Long-term operating lease liabilities ( 0.1 )

Intangible assets 45.9

Goodwill 38.0

In the second quarter of 2022, the company finalized its valuation of assets acquired and liabilities assumed resulting in measurement period adjustments that decreased goodwill by $ 27.5 million primarily related to an increase of $ 27.6 million in the fair value of the acquired intangible assets.

Goodwill is the excess of the purchase price consideration over the fair value of the underlying intangible assets and net liabilities assumed.

The goodwill represents expected synergies, intellectual capital and the acquired assembled workforce, none of which qualify for recognition as a separate intangible asset.

Goodwill determined by the allocation of the purchase price was recorded in the company’s Cloud, Applications & Infrastructure Solutions segment and is deductible for tax purposes.

The following table summarizes the fair value of the intangible assets acquired and the related weighted average amortization period:

Weighted Average Amortization Period in Years Fair Value

Customer relationships 12.0 $ 44.6

Trademark 4.0 1.3

The company’s consolidated financial statements include the results of CompuGain commencing as of the acquisition date.

Revenue and earnings for CompuGain have not been presented as the impact is not material to the company’s consolidated financial statements.

For the nine months ended September 30, 2022, the company incurred and expensed acquisition-related costs of $ 0.4 million, Acquisition-related costs are included within selling, general and administrative expenses on the consolidated statements of income (loss).

Note 2 - Cost-Reduction Actions

During the three months ended September 30, 2022, the company recognized cost-reduction charges and other costs of $ 8.1 million.

The charges related to work-force reductions were $ 0.5 million for changes in estimates.

In addition, the company recorded charges of $ 7.6 million comprised of $ 1.9 million for net foreign currency losses related to exiting foreign countries, $ 4.7 million for asset impairments and $ 1.0 million for other expenses related to cost-reduction efforts.

During the three months ended September 30, 2021, the company recognized net cost-reduction charges and other costs of $ 0.8 million.

The net credits related to work-force reductions were $ 0.6 million, principally related to severance costs, and were comprised of:

(a) a charge of $ 0.7 million and (b) a credit of $ 1.3 million for changes in estimates.

In addition, the company recorded net charges of $ 1.4 million comprised of a charge of $ 1.3 million for net foreign currency losses related to exiting foreign countries, a charge of $ 0.5 million for asset impairments and a credit of $ 0.4 million related to other cost-reduction efforts.

During the nine months ended September 30, 2022, the company recognized net cost-reduction charges and other costs of $ 14.2 million.

The credit related to work-force reductions was $ 0.4 million for changes in estimates.

In addition, the company recorded charges of $ 14.6 million comprised of $ 4.8 million for net foreign currency losses related to exiting foreign countries, $ 9.4 million for asset impairments and a net charge of $ 0.4 million for other expenses related to cost-reduction efforts.

During the nine months ended September 30, 2021, the company recognized net cost-reduction charges and other costs of $ 14.4 million.

The net credits related to work-force reductions were $ 2.5 million, principally related to severance costs, and were comprised of:

During the three months ended March 31, 2023, the company recognized net charges related to workforce reductions of $ 0.7 million, principally related to severance costs.

These net charges were comprised of:

(a) a charge of $ 2.6 million and (b) a credit of $ 1.9 million for changes in estimates.

In addition, the company recorded charges of $ 16.9 million comprised of $ 2.9 million for net foreign currency losses related to exiting foreign countries, $ 7.3 million for asset impairments and $ 6.7 million for other expenses related to cost-reduction efforts.

In addition, the company recorded a credit of $ 3.5 million for net foreign currency gains related to exiting foreign countries.

During the three months ended March 31, 2022, the company recognized net cost-reduction charges and other costs of $ 3.0 million.

The credit related to workforce reductions was $ 0.6 million for changes in estimates.

In addition, the company recorded net charges of $ 3.6 million comprised of a charge of $ 1.1 million for net foreign currency losses related to exiting foreign countries, a charge of $ 3.8 million for asset impairments and a credit of $ 1.3 million for changes in estimates related to other cost-reduction efforts.

The charges (credits) were recorded in the following statement of income (loss) classifications:

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Cost of revenue $ 0.6 $ 2.7

6 unchanged sentences

Balance at December 31, 2022 $ 11.7 $ 4.2 $ 7.5

Additional provisions 2.6 0.8 1.8

Payments ( 2.8 ) ( 1.4 ) ( 1.4 )

1 unchanged sentence

Translation adjustments 0.1 — 0.1

Balance at September 30, 2022 $ 6.3 $ 1.3 $ 5.0

Expected future utilization on balance at September 30, 2022:

Balance at March 31, 2023 $ 9.7 $ 2.9 $ 6.8

Expected future utilization on balance at March 31, 2023:

Short-term $ 9.7 $ 2.9 $ 6.8

2 unchanged sentences

Three Months Ended

September 30, 2022 Three Months Ended

September 30, 2021

Plans International

Plans Total U.S.

Plans International

Service cost (i)

$ 0.4 $ — $ 0.4 $ 0.7 $ — $ 0.7

Interest cost 38.2 28.7 9.5 38.2 29.4 8.8

Expected return on plan assets ( 66.1 ) ( 47.4 ) ( 18.7 ) ( 69.8 ) ( 50.0 ) ( 19.8 )

Amortization of prior service benefit ( 1.2 ) ( 0.6 ) ( 0.6 ) ( 1.3 ) ( 0.7 ) ( 0.6 )

Recognized net actuarial loss 40.5 31.4 9.1 45.8 34.0 11.8

Net periodic pension expense (income) $ 11.8 $ 12.1 $ ( 0.3 ) $ 13.6 $ 12.7 $ 0.9

Nine Months Ended

September 30, 2022 Nine Months Ended

September 30, 2021

March 31, 2023 Three Months Ended

March 31, 2022

Plans International

7 unchanged sentences

Recognized net actuarial loss 22.1 19.9 2.2 40.9 30.7 10.2

Settlement losses (ii) (iii)

Settlement losses (ii)

183.2 183.2 — — — —

2 unchanged sentences

All other components of net periodic pension expense (income) are reported in other (expense), net in the consolidated statements of income (loss).

(ii) In the second quarter of 2021, the company’s primary pension plan related to its Dutch subsidiary was transferred to a multi-client circle within a multi-employer fund.

This action resulted in a pre-tax settlement loss of $ 182.6 million for the nine months ended September 30, 2021.

Additionally, the company’s Swiss subsidiary transferred its defined benefit pension plans to a multiple-employer collective foundation.

This action resulted in a pre-tax settlement loss of $ 28.1 million for the nine months ended September 30, 2021.

(iii) In January 2021, the company purchased a group annuity contract to transferred projected benefit obligations related to its U.S.

(ii) In March 2023, the company purchased a group annuity contract, with plan assets, for approximately $ 265 million to transfer projected benefit obligations related to approximately 8,650 retirees of one of the company’s U.S.

defined benefit pension plans.

This action resulted in a pre-tax settlement loss of $ 158.0 million for the nine months ended September 30, 2021.

In 2022, the company expects to make cash contributions of approximately $ 38.5 million primarily for the company’s international defined benefit pension plans.

This action resulted in a pre-tax settlement loss of $ 183.2 million for the three months ended March 31, 2023.

In 2023, the company expects to make cash contributions of approximately $ 40 million primarily for its international defined benefit pension plans.

In 2022, the company made cash contributions of $ 39.3 million to its worldwide defined benefit pension plans.

During the nine months ended September 30, 2022 and 2021, the company made cash contributions of $ 30.9 million and $ 40.3 million, respectively.

During the three months ended March 31, 2023 and 2022, the company made cash contributions of $ 14.5 million and $ 15.1 million, respectively.

At the end of each year, the company estimates its future cash contributions to its U.S.

2 unchanged sentences

qualified defined benefit pension plan assets, as well as changes in pension legislation, discount rate changes, asset return changes, or changes in economic or demographic trends, could require the company to make cash contributions to its U.S.

defined benefit pension plans.

defined benefit pension plans in different amounts and on a different schedule than previously contemplated.

Net periodic postretirement benefit income is presented below:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Service cost (i)

$ 0.1 $ 0.1 $ 0.2 $ 0.3

Interest cost 0.8 0.5

1 unchanged sentence

Recognized net actuarial gain ( 0.7 ) ( 0.5 )

Amortization of prior service cost ( 0.4 ) ( 0.4 ) ( 1.1 ) ( 1.2 )

Amortization of prior service benefit ( 0.3 ) ( 0.3 )

Net periodic postretirement benefit income $ ( 0.3 ) $ ( 0.4 )

1 unchanged sentence

All other components of net periodic postretirement benefit expense (income) are reported in other (expense), net in the consolidated statements of income (loss).

The company expects to make cash contributions of approximately $ 6 million to its postretirement benefit plan in 2022.

The company expects to make cash contributions of $ 4.0 million to its postretirement benefit plan in 2023.

In 2022, the company made cash contributions of $ 4.3 million to its postretirement benefit plan.

For the nine months ended September 30, 2022 and 2021, the company made cash contributions of $ 3.0 million and $ 3.3 million, respectively.

For the three months ended March 31, 2023 and 2022, the company made cash contributions of $ 1.9 million and $ 1.1 million, respectively.

Note 4 - Stock Compensation

Under stockholder approved stock-based plans, stock options, stock appreciation rights, restricted stock and restricted stock units may be granted to officers, directors and other key employees.

As of September 30, 2022, the company has granted non-qualified stock options, restricted stock and restricted stock units under these plans.

As of March 31, 2023, the company has granted restricted stock and restricted stock units under these plans.

The company recognizes compensation cost, net of a forfeiture rate, in selling, general and administrative expense, and recognizes compensation cost only for those awards expected to vest.

The company estimates the forfeiture rate based on its historical experience and its expectations about future forfeitures.

During the nine months ended September 30, 2022 and 2021, the company recorded $ 15.2 million and $ 11.5 million of share-based restricted stock and restricted stock unit compensation expense, respectively.

During the three months ended March 31, 2023 and 2022, the company recorded $ 4.7 million and $ 6.6 million of share-based restricted stock and restricted stock unit compensation expense, respectively.

Restricted stock and restricted stock unit awards may contain time-based units, performance-based units, total shareholder return market-based units, or a combination of these units.

3 unchanged sentences

Restricted stock unit grants for the company’s directors vest upon award and compensation expense for such awards is recognized upon grant.

A summary of restricted stock and restricted stock unit (RSU) activity for the nine months ended September 30, 2022 follows (shares in thousands):

A summary of restricted stock and restricted stock unit (RSU) activity for the three months ended March 31, 2023 follows (shares in thousands):

and RSU Weighted-

3 unchanged sentences

Forfeited and expired ( 206 ) 23.39

Outstanding at September 30, 2022 2,348 23.71

The aggregate weighted-average grant-date fair value of restricted stock and restricted stock units granted during the nine months ended September 30, 2022 and 2021 was $ 27.0 million and $ 32.4 million, respectively.

Outstanding at March 31, 2023 3,809 12.30

The aggregate weighted-average grant-date fair value of restricted stock and restricted stock units granted during the three months ended March 31, 2023 and 2022 was $ 13.8 million and $ 22.2 million, respectively.

The fair value of restricted stock and restricted stock units with time and performance conditions was determined based on the trading price of the company’s common shares on the date of grant.

The fair value of awards with market conditions was estimated using a Monte Carlo simulation with the following weighted-average assumptions:

Nine Months Ended

September 30,

Three Months Ended

Weighted-average fair value of grant $ 7.32 $ 34.14

9 unchanged sentences

(iii) Represents the remaining life of the longest performance period.

As of September 30, 2022, there was $ 34.0 million of total unrecognized compensation cost related to outstanding restricted stock and restricted stock units granted under the company’s plans.

As of March 31, 2023, there was $ 30.8 million of total unrecognized compensation cost related to outstanding restricted stock and restricted stock units granted under the company’s plans.

That cost is expected to be recognized over a weighted-average period of 2.2 years.

The aggregate weighted-average grant-date fair value of restricted stock and restricted stock units vested during the nine months ended September 30, 2022 and 2021 was $ 16.6 million and $ 14.8 million, respectively.

The aggregate weighted-average grant-date fair value of restricted stock and restricted stock units vested during the three months ended March 31, 2023 and 2022 was $ 6.6 million and $ 14.0 million, respectively.

Common stock issued upon the lapse of restrictions on restricted stock and restricted stock units are newly issued shares.

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Postretirement expense* $ ( 192.9 ) $ ( 9.7 )

Foreign exchange losses** ( 5.9 ) ( 2.1 ) ( 6.3 ) ( 3.0 )

Foreign exchange gains** 3.7 2.2

Environmental costs and other, net*** ( 7.7 ) ( 13.5 )

Total other (expense), net $ ( 196.9 ) $ ( 21.0 )

*Includes $ 368.7 million in the nine months ended September 30, 2021 of settlement losses related to defined benefit pension plans.

**Includes net foreign losses of $ 1.9 million and $ 1.3 million, respectively, in the three months ended September 30, 2022 and 2021, related to substantial completion of liquidation of foreign subsidiaries.

Includes net foreign currency losses of $ 4.8 million and $ 2.9 million, respectively, in the nine months ended September 30, 2022 and 2021, related to substantial completion of liquidation of foreign subsidiaries.

*Includes $ 183.2 million in the three months ended March 31, 2023 of a settlement loss related to one of the company’s U.S.

defined benefit pension plans.

**Includes net foreign exchange gains of $ 3.5 million and net foreign exchange losses of $ 1.1 million, respectively, in the three months ended March 31, 2023 and 2022, related to substantial completion of liquidation of foreign subsidiaries.

***Environmental costs relate to a previously disposed business.

Note 6 - Income Taxes

1 unchanged sentence

These rules also require that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or the entire deferred tax asset will not be realized.

The company evaluates the realizability of its deferred tax assets by assessing its valuation allowance and by adjusting the amount of such allowance, if necessary.

The realization of the company’s net deferred tax assets as of September 30, 2022 is primarily dependent on the ability to generate sustained taxable income in various jurisdictions.

Judgment is required to estimate forecasted future taxable income, which may be impacted by future business developments, actual results, strategic

operational and tax initiatives, legislative, and other economic factors and developments.

The company evaluates the realizability of its deferred tax assets by assessing its valuation allowance and by adjusting such amount, if necessary.

The realization of the company’s net deferred tax assets as of March 31, 2023 is primarily dependent on the ability to generate sustained taxable income in various jurisdictions.

Judgment is required to estimate forecasted future taxable income, which may be impacted by future business developments, actual results, strategic operational and tax initiatives, legislative, and other economic factors and developments.

Any increase or decrease in the valuation allowance would result in additional or lower income tax expense in that period and could have a significant impact on that period’s earnings.

As a result of its projections of future taxable income, the company has determined that a portion of its non-U.S.

net deferred tax assets no longer requires a valuation allowance as of September 30, 2022.

The release of the valuation allowance for the three and nine months ended September 30, 2022 was approximately $ 10.4 million and $ 12.1 million, respectively, primarily in the United Kingdom and other European jurisdictions.

A full valuation allowance is currently maintained for all U.S.

11 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Basic loss per common share computation:

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Anti-dilutive weighted-average stock options and restricted stock units (i)

339 764 531 857

(i) Amounts represent shares excluded from the computation of diluted loss per share, as their effect, if included, would have been anti-dilutive for the periods presented.

3 unchanged sentences

Net contract assets (liabilities) are as follows:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Contract assets - current $ 17.2 $ 28.9

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Revenue recognized that was included in deferred revenue at the beginning of the period $ 65.1 $ 82.9

2 unchanged sentences

These costs are classified as current or noncurrent based on the timing of when the company expects to recognize the expense.

The current and noncurrent portions of deferred commissions are included in prepaid expenses and other current assets and in other long-term assets, respectively, in the company’s consolidated balance sheets.

At September 30, 2022 and December 31, 2021, the company had $ 4.1 million and $ 6.7 million, respectively, of deferred commissions.

The current and noncurrent portions of deferred commissions are included in prepaid expenses, other current assets and in other long-term assets, respectively, in the company’s consolidated balance sheets.

At March 31, 2023 and December 31, 2022, the company had $ 3.2 million and $ 4.9 million, respectively, of deferred commissions.

Amortization expense related to deferred commissions was as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Deferred commissions - amortization expense (i)

$ 0.5 $ 0.6 $ 2.4 $ 2.2

(i) Reported in selling, general and administrative expense in the company’s consolidated statements of income (loss).

2 unchanged sentences

These costs are included in outsourcing assets, net in the company’s consolidated balance sheets.

The amount of such costs at September 30, 2022 and December 31, 2021 was $ 38.8 million and $ 56.2 million, respectively.

The amount of such costs at March 31, 2023 and December 31, 2022 was $ 31.4 million and $ 34.8 million, respectively.

These costs are amortized over the initial contract life and reported in cost of revenue.

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Costs to fulfill a contract - amortization expense $ 2.2 $ 8.9

6 unchanged sentences

The company enters into foreign exchange forward contracts, generally having maturities of three months or less, which have not been designated as hedging instruments.

At September 30, 2022 and December 31, 2021, the notional amount of these contracts was $ 484.9 million and $ 552.2 million, respectively.

At March 31, 2023 and December 31, 2022, the notional amount of these contracts was $ 468.7 million and $ 533.5 million, respectively.

The fair value of these forward contracts is based on quoted prices for similar but not identical financial instruments;

1 unchanged sentence

The following table summarizes the fair value of the company’s foreign exchange forward contracts.

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Balance Sheet Location

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Statement of Income Location

3 unchanged sentences

The carrying amounts of these financial assets and liabilities approximate fair value due to their short maturities.

Such financial instruments are not included in the following table that provides information about the estimated fair values of other financial instruments that are not measured at fair value in the consolidated balance sheets as of September 30, 2022 and December 31, 2021.

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Carrying Amount Fair Value Carrying Amount Fair Value

7 unchanged sentences

Balance at December 31, 2022 $ 287.1 $ 140.5 $ 38.0 $ 98.3 $ 10.3

Acquisition - Measurement period adjustment (see Note 3) ( 27.5 ) — ( 27.5 ) — —

Translation adjustments 0.1 0.1 — — —

Balance at September 30, 2022 $ 286.2 $ 139.6 $ 38.0 $ 98.3 $ 10.3

At September 30, 2022, the amount of goodwill allocated to reporting units with negative net assets within Other was $ 10.3 million.

Balance at March 31, 2023 $ 287.2 $ 140.6 $ 38.0 $ 98.3 $ 10.3

At March 31, 2023, there was no goodwill allocated to reporting units with negative net assets.

Intangible Assets, Net

Intangible assets, net at September 30, 2022 consists of the following:

Intangible assets, net at March 31, 2023 consists of the following:

Gross Carrying Amount Accumulated Amortization Net Carrying Amount

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(ii) Amortization expense is included within selling, general and administrative expense in the consolidated statements of income (loss).

See Note 3 for measurement period adjustment.

For the three months ended September 30, 2022 and 2021 amortization expense was $ 2.4 million and $ 1.2 million, respectively.

For the nine months ended September 30, 2022 and 2021 amortization expense was $ 7.7 million and $ 1.7 million, respectively.

The future amortization relating to acquired intangible assets at September 30, 2022 was estimated as follows:

For the three months ended March 31, 2023 and 2022 amortization expense was $ 2.5 million and $ 2.4 million, respectively.

The future amortization relating to acquired intangible assets at March 31, 2023 was estimated as follows:

Future Amortization Expense

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Long-term debt is comprised of the following:

September 30, 2022 December 31, 2021

6.875 % senior secured notes due November 1, 2027 (Face value of $ 485.0 million less unamortized issuance costs of $ 6.0 and $ 6.9 million at September 30, 2022 and at December 31, 2021)

March 31, 2023 December 31, 2022

6.875 % senior secured notes due November 1, 2027 (Face value of $ 485.0 million less unamortized issuance costs of $ 5.5 and $ 5.8 million at March 31, 2023 and at December 31, 2022)

$ 479.5 $ 479.2

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Senior Secured Notes due 2027

The company has $ 485.0 million aggregate principal amount of its 6.875 % Senior Secured Notes due 2027 (the 2027 Notes).

The company has outstanding $ 485.0 million aggregate principal amount of its 6.875 % Senior Secured Notes due 2027 (the 2027 Notes).

The 2027 Notes pay interest semiannually on May 1 and November 1 and will mature on November 1, 2027, unless earlier repurchased or redeemed.

The 2027 Notes are fully and unconditionally guaranteed on a senior secured basis by Unisys Holding Corporation, Unisys NPL, Inc., Unisys AP Investment Company I, CompuGain LLC and CompuGain Public Services, LLC, each of which is a U.S.

corporation or limited liability company that is directly or indirectly owned by the company (the subsidiary guarantors).

The 2027 Notes are fully and unconditionally guaranteed on a senior secured basis by Unisys Holding Corporation, Unisys NPL, Inc.

and Unisys AP Investment Company I, each of which is a U.S.

corporation that is directly or indirectly owned by the company (the subsidiary guarantors).

The 2027 Notes and the related guarantees rank equally in right of payment with all of the existing and future senior debt of the company and its subsidiary guarantors and senior in right of payment to any future subordinated debt of the company and its subsidiary guarantors.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Contractual interest coupon $ 8.3 $ 8.3

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Total $ 8.6 $ 8.6

Convertible Senior Notes Due 2021

On March 3, 2021, the company completed the conversion of $ 84.2 million aggregate principal amount of the 2021 Notes that remained outstanding for a combination of cash and shares of the company’s common stock.

As a result of the conversion of the outstanding 2021 Notes, the company delivered to the holders (i) aggregate cash payments totaling approximately $ 86.5 million, which included an aggregate cash payment for outstanding principal of approximately $ 84.2 million, an aggregate cash payment for accrued interest of approximately $ 2.3 million and a nominal cash payment in lieu of fractional shares, and (ii) the issuance of 4,537,123 shares of the company’s common stock.

The issuance of the common stock was made in exchange for the 2021 Notes pursuant to an exemption from the registration requirements provided by Section 3(a)(9) of the Securities Act of 1933, as amended.

The company also received 1,251,460 shares of its common stock, now held in treasury stock, from the settlement of the capped call transactions that the company had entered into with the initial purchasers and/or affiliates of the initial purchasers of the 2021 Notes in connection with the issuance of the 2021 Notes.

As a result, the net number of outstanding shares of the company’s common stock following the conversion of the 2021 Notes increased by 3,285,663 shares.

Interest expense related to the 2021 Notes was as follows:

Nine Months Ended September 30, 2021

Contractual interest coupon $ 0.8

Amortization of debt discount 0.5

Amortization of debt issuance costs 0.1

The company has a $ 27.7 million Installment Payment Agreement (IPA) maturing on December 20, 2023 with a syndicate of financial institutions to finance the acquisition of certain software licenses necessary for the provision of services to a client.

Interest accrues at an annual rate of 7.0 % and the company is required to make monthly principal and interest payments on each agreement in arrears.

At September 30, 2022, $ 5.4 million was reported in current maturities of long-term debt.

At March 31, 2023 and December 31, 2022, $ 4.1 million and $ 5.5 million, was reported in current maturities of long-term debt, respectively.

The company has a vendor agreement in the amount of $ 19.3 million to finance the acquisition of certain software licenses used to provide services to our clients and for its own internal use.

Interest accrues at an annual rate of 5.47 % and the company is required to make annual principal and interest payments in advance with the last payment due on March 1, 2024.

At September 30, 2022, $ 4.0 million was reported in current maturities of long-term debt.

At March 31, 2023 and December 31, 2022, $ 4.2 million and $ 4.0 million, was reported in current maturities of long-term debt, respectively.

Asset Based Lending (ABL) Credit Facility

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Availability under the credit facility is subject to a borrowing base calculated by reference to the company’s receivables.

At September 30, 2022, the company had no borrowings and $ 6.3 million of letters of credit outstanding, and availability under the facility was $ 66.3 million net of letters of credit issued.

amount of such pension payments, no default or event of default has occurred under the Amended and Restated ABL Credit Facility, the company’s liquidity is above $ 130.0 million and the company is in compliance with the then applicable fixed charge coverage ratio on a pro forma basis.

At March 31, 2023, the company had no borrowings and $ 6.6 million of letters of credit outstanding, and availability under the facility was $ 64.0 million net of letters of credit issued.

The Amended and Restated ABL Credit Facility is subject to a springing maturity, under which the Amended and Restated ABL Credit Facility will immediately mature 91 days prior to any date on which contributions to pension funds in the United States in an amount in excess of $ 100.0 million are required to be paid unless the company is able to meet certain conditions, including that the company has the liquidity (as defined in the Amended and Restated ABL Credit Facility) to cash settle the amount of such pension payments, no default or event of default has occurred under the Amended and Restated ABL Credit Facility, the company’s liquidity is above $ 130.0 million and the company is in compliance with the then applicable fixed charge coverage ratio on a pro forma basis.

The Amended and Restated ABL Credit Facility is guaranteed by the subsidiary guarantors and any future material domestic subsidiaries.

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Events of default include non-payment, failure to comply with covenants, materially incorrect representations and warranties, change of control and default under other debt aggregating at least $ 50.0 million, subject to relevant cure periods, as applicable.

At September 30, 2022, the company has met all covenants and conditions under its various lending and funding agreements.

At March 31, 2023, the company has met all covenants and conditions under its various lending and funding agreements.

For at least the next 12 months, the company expects to continue to meet these covenants and conditions.

Note 13 - Litigation and Contingencies

There are various lawsuits, claims, investigations and proceedings that have been brought or asserted against the company, which arise in the ordinary course of business, including actions with respect to commercial and government contracts, labor and employment, employee benefits, environmental matters, intellectual property and non-income tax matters.

The company is involved in a wide range of lawsuits, claims, investigations and proceedings, which arise in the ordinary course of business, including actions with respect to commercial and government contracts, labor and employment, employee benefits, environmental matters, intellectual property and non-income tax matters.

Further, given the rapidly evolving external landscape of cybersecurity, privacy and data protection laws, regulations and threat actors, the company and its clients have been and will continue to be subject to actions or proceedings in various jurisdictions.

These matters can involve a number of different parties, including competitors, clients, current or former employees, government and regulatory agencies, stockholders and representatives of the locations in which the company does business.

The company records a provision for these matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable.

Because of uncertainties related to these matters, accruals are based only on the best information available at the time.

Any provisions are reviewed at least quarterly and are adjusted to reflect the impact and status of settlements, rulings, advice of counsel and other information and events pertinent to a particular matter.

The company believes that it has valid defenses with respect to legal matters pending against it.

Based on its experience, the company also believes that the damage amounts claimed in the lawsuits disclosed below are not a meaningful indicator of the company’s potential liability.

Litigation is inherently unpredictable, however, and it is possible that the company’s results of operations or cash flow could be materially affected in any particular period by the resolution of one or more of the legal matters pending against it.

These adjustments could have a material impact on our results of operations and financial position.

The company intends to defend itself vigorously with respect to legal matters pending against it.

Based on its experience, the company also believes that the damage amounts claimed in the matters disclosed below are not a meaningful indicator of the company’s potential liability.

Litigation is inherently unpredictable and unfavorable resolutions could occur.

Whether any losses, damages or remedies finally determined in any claim, suit, investigation or proceeding could reasonably have a material effect on the company’s business, financial condition, results of operations or cash flows will depend on a number of variables, including:

the timing and amount of such losses or damages;

the structure and type of any such remedies;

the significance of the impact any such losses, damages or remedies may have in the company’s consolidated financial statements;

and the unique facts and circumstances of the particular matter that may give rise to additional factors.

Accordingly, it is possible that an adverse outcome from such matters could be material to the company’s financial condition, results of operations and cash flows in any particular reporting period.

Notwithstanding that the ultimate results of the lawsuits, claims, investigations and proceedings that have been brought or asserted against the company are not currently determinable, the company believes that at March 31, 2023, it has adequate provisions for any such matters.

The following is a summary of the more significant legal matters involving the company.

The company’s Brazilian operations, along with those of many other companies doing business in Brazil, are involved in various litigation matters, including numerous governmental assessments related to indirect and other taxes, as well as disputes associated with former employees and contract labor.

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The company believes that appropriate accruals have been established for such matters based on information currently available.

At September 30, 2022, excluding those matters that have been assessed by management as being remote as to the likelihood of ultimately resulting in a loss, the amount related to unreserved tax-related matters, inclusive of any related interest, is estimated to be up to approximately $ 103.3 million.

At March 31, 2023, excluding those matters that have been assessed by management as being remote as to the likelihood of ultimately resulting in a loss, the amount related to unreserved tax-related matters, inclusive of any related interest, is estimated to be up to approximately $ 111 million.

On November 11, 2022, a purported stockholder of the company filed a putative securities class action complaint in the United States District Court for the Eastern District of Pennsylvania against the company and certain of its current officers, alleging violations of the Securities Exchange Act of 1934, as amended, based on allegedly false or misleading statements related to projections and certain other statements positively characterizing the company’s momentum, business, prospects and operations, and the effectiveness of the company’s internal control over financial reporting and the company’s disclosure controls and procedures.

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With respect to the specific legal proceedings and claims described above, except as otherwise noted, either (i) the amount or range of possible losses in excess of amounts accrued, if any, is not reasonably estimable or (ii) the company believes that the amount or range of possible losses in excess of amounts accrued that are estimable would not be material.

Litigation is inherently unpredictable and unfavorable resolutions could occur.

Accordingly, it is possible that an adverse outcome from such matters could exceed the amounts accrued in an amount that could be material to the company’s financial condition, results of operations and cash flows in any particular reporting period.

Notwithstanding that the ultimate results of the lawsuits, claims, investigations and proceedings that have been brought or asserted against the company are not currently determinable, the company believes that at September 30, 2022, it has adequate provisions for any such matters.

Note 14 - Accumulated Other Comprehensive Loss

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Balance at December 31, 2022 $ ( 3,076.0 ) $ ( 977.4 ) $ ( 2,098.6 )

Other comprehensive (loss) income before reclassifications ( 84.3 ) ( 199.4 ) 115.1

Other comprehensive income (loss) before reclassifications 3.3 26.8 ( 23.5 )

Amounts reclassified from accumulated other comprehensive loss 199.5 ( 3.5 ) 203.0

Current period other comprehensive income (loss) 31.9 ( 194.6 ) 226.5

Balance at September 30, 2022 $ ( 3,232.2 ) $ ( 1,060.8 ) $ ( 2,171.4 )

Current period other comprehensive income 202.8 23.3 179.5

Balance at March 31, 2023 $ ( 2,873.2 ) $ ( 954.1 ) $ ( 1,919.1 )

Amounts reclassified out of accumulated other comprehensive loss are as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Translation adjustments:

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Postretirement plans (ii) :

Amortization of prior service cost ( 1.6 ) ( 1.6 ) ( 4.5 ) ( 4.7 )

Amortization of prior service benefit ( 1.3 ) ( 1.7 )

Amortization of actuarial losses 21.5 40.4

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Note 15 - Supplemental Cash Flow Information

Nine Months Ended

September 30,

Three Months Ended

Cash paid during the period for:

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The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the total of the amounts shown in the consolidated statements of cash flows.

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Cash and cash equivalents $ 391.9 $ 391.8

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Note 16 - Segment Information

Effective January 1, 2022, the company changed the grouping of certain immaterial revenue streams.

As a result, certain prior period segment revenue as well as the related cost of sales amounts have been reclassified to be comparable to the current period’s presentation.

In addition, during the second quarter of 2022, the company renamed its Cloud and Infrastructure Solutions segment as Cloud, Applications & Infrastructure Solutions to better represent the nature of the segment’s operations.

There was no change to the composition of the segment or its historical results.

The company’s reportable segments are as follows:

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The accounting policies of each segment are the same as those followed by the company as a whole.

Intersegment sales and transfers are priced as if the sales or transfers were to third parties.

Accordingly, the ECS segment records intersegment revenue and manufacturing profit on hardware and software shipments to customers under contracts of other segments.

These segments, in turn, record customer revenue and marketing profits on such shipments of company hardware and software to customers.

In the company’s consolidated statements of income (loss), the manufacturing costs of products sourced from the ECS segment and sold to other segments’ customers are reported in cost of revenue for these other segments.

Also included in the ECS segment’s sales and gross profit are sales of hardware and software sold to other segments for internal use in their engagements.

The amount of such profit included in gross profit of the ECS segment for the three and nine months ended September 30, 2021 was $ 0.3 million and $ 1.4 million, respectively.

The sales and profit on these transactions are eliminated in consolidation.

The company evaluates segment performance based on gross profit exclusive of the service cost component of postretirement income or expense, restructuring charges, amortization of purchased intangibles and unusual and nonrecurring items, which are included in other gross profit.

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Total Segments DWS CA&I ECS

Three Months Ended September 30, 2022

Customer revenue $ 390.1 $ 130.1 $ 122.3 $ 137.7

Intersegment — — — —

Total revenue $ 390.1 $ 130.1 $ 122.3 $ 137.7

Gross profit $ 107.3 $ 19.7 $ 6.8 $ 80.8

Three Months Ended September 30, 2021

Customer revenue $ 410.4 $ 143.2 $ 115.9 $ 151.3

Intersegment — — — —

Total revenue $ 410.4 $ 143.2 $ 115.9 $ 151.3

Gross profit $ 123.2 $ 17.7 $ 6.8 $ 98.7

Total Segments DWS CA&I ECS

Nine Months Ended September 30, 2022

Customer revenue $ 1,207.7 $ 382.1 $ 381.5 $ 444.1

Intersegment — — — —

Total revenue $ 1,207.7 $ 382.1 $ 381.5 $ 444.1

Three Months Ended March 31, 2023

Revenue $ 445.2 $ 131.0 $ 126.0 $ 188.2

Gross profit $ 157.5 $ 15.6 $ 16.4 $ 125.5

Nine Months Ended September 30, 2021

Customer revenue $ 1,284.9 $ 434.5 $ 358.3 $ 492.1

Intersegment 1.4 — — 1.4

Total revenue $ 1,286.3 $ 434.5 $ 358.3 $ 493.5

Three Months Ended March 31, 2022

Revenue $ 374.5 $ 124.8 $ 129.1 $ 120.6

Gross profit $ 85.8 $ 16.0 $ 7.0 $ 62.8

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Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Total segment revenue $ 445.2 $ 374.5

Other revenue 71.2 72.2

Elimination of intercompany revenue — — — ( 1.4 )

Total consolidated revenue $ 516.4 $ 446.7

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Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Total segment gross profit $ 157.5 $ 85.8

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Other (expense), net ( 196.9 ) ( 21.0 )

Total earnings (loss) before income taxes $ ( 39.2 ) $ ( 7.6 ) $ ( 88.6 ) $ ( 352.1 )

Other revenue and other gross profit are comprised of an aggregation of a number of immaterial business activities that principally provide for the management of processes and functions for clients in select industries, helping them improve performance and reduce costs.

Total loss before income taxes $ ( 154.6 ) $ ( 52.9 )

Other revenue and other gross profit are comprised of an aggregation of a number of immaterial business activities and cost reductions charges.

These businesses principally provide for the management of processes and functions for clients in select industries, helping them improve performance and reduce costs.

Geographic information about the company’s revenue, which is principally based on location of the selling organization, is presented below:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

United States $ 201.0 $ 199.0

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Remaining performance obligations represent the transaction price of firm orders for which work has not been performed and excludes (1) contracts with an original expected length of one year or less and (2) contracts for which the company recognizes revenue at the amount to which it has the right to invoice for services performed.

At September 30, 2022, the company had approximately $ 0.5 billion of remaining performance obligations of which approximately 9 % is estimated to be recognized as revenue by the end of 2022, 34 % by the end of 2023, 24 % by the end of 2024, 13 % by the end of 2025 and 20 % thereafter.

Note 20 - Subsequent Event

Subsequent to quarter-end and through the date of this filing, the company has experienced a significant decline in its market capitalization, from $ 0.5 billion to $ 0.3 billion.

Management is evaluating whether this decline represents a triggering event for assessing the goodwill and intangible asset balances for impairment in the fourth quarter of 2022.

As of September 30, 2022, the balances of the company’s goodwill and intangible asset were $ 286.2 million and $ 54.8 million, respectively.

At March 31, 2023, the company had approximately $ 0.6 billion of remaining performance obligations of which approximately 26 % is estimated to be recognized as revenue by the end of 2023, 28 % by the end of 2024, 19 % by the end of 2025, 15 % by the end of 2026 and 12 % thereafter.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements