This discussion and analysis of the company's financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and the related notes included elsewhere in this quarterly report. In
this discussion and analysis of the company's financial condition and results of
operations, the company has included information that may constitute
"forward-looking" statements, as defined in the Private Securities Litigation
Reform Act of 1995. Forward-looking statements provide current expectations of
future events and include any statement that does not directly relate to any
historical or current fact. Words such as "anticipates," "believes," "expects,"
"intends," "plans," "projects" and similar expressions may identify such
forward-looking statements. All forward-looking statements rely on assumptions
and are subject to risks,

                                       20


--------------------------------------------------------------------------------



uncertainties and other factors that could cause the company's actual results to
differ materially from expectations. Factors that could affect future results
include, but are not limited to, those discussed under "Risk Factors" in Part
II, Item 1A. Any forward-looking statement speaks only as of the date on which
that statement is made. 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.
Overview
On March 11, 2020, the World Health Organization declared the outbreak of
COVID-19 as a pandemic, which continues to impact the U.S. and the world. The
impact from the rapidly changing market and economic conditions due to the
COVID-19 outbreak is uncertain, disrupting the business of our customers and
partners, and has impacted our business and consolidated results of operations
and could impact our financial condition in the future. For the three months
ended June 30, 2020, revenue declined by 22.9% from the prior-year quarter. The
decline was largely due to expected declines in the company's U.K.
check-processing joint venture; impacts of COVID-19, including declines in field
services, travel and entertainment and volume-based BPO contracts; as well as
the timing of technology contract renewals. The company is unable to accurately
predict the full extent of the impact that COVID-19 will have due to numerous
uncertainties, including the severity of the disease, the duration of the
outbreak, actions that may be taken by governmental authorities, the impact to
the business of our customers and partners and other factors identified in Part
II, Item 1A "Risk Factors" in this Form 10-Q. The company has taken steps to
minimize the impact of COVID-19 on its business such as temporary salary
reductions for the senior leadership team, reduction of third-party spend such
as contractors, re-deploying its workforce based on shifting needs of the
business, limiting travel and unnecessary expenses and reducing discretionary
capital expenditures where possible. The company will continue to evaluate the
nature and extent of the impact to its business, consolidated results of
operations, and financial condition.

On March 13, 2020, the company completed the sale of its U.S. Federal business
to Science Applications International Corporation for a cash purchase price of
$1.2 billion.

Beginning January 1, 2020, the historical results of the company's U.S. Federal
business have been reflected in the company's consolidated financial statements
as discontinued operations. Prior-periods financial statements have been
reclassified to reflect the company's U.S. Federal business as discontinued
operations. Depreciation, amortization, capital expenditures, and significant
non-cash operating and investing activities related to the U.S. Federal business
were immaterial for all periods.

As a result of the sale of the company's U.S. Federal business, the company's
results of operations have been negatively impacted by certain costs that had
previously been allocated to the U.S. Federal business that now must be absorbed
by the remaining businesses. Therefore, in addition to the cost-reduction
charges recorded in the six months ended June 30, 2020, the company expects to
record an additional approximately $10 million of charges in the remainder of
2020.

As part of the company's cost reduction program, the company is closing and has
closed certain international subsidiaries. This creates non-cash currency
translation adjustment write-offs. In connection with this, the company expects
to record a one-time non-cash charge of approximately $20 million in the third
quarter of this year. In addition, in the second half of 2020, the company
expects to take a charge associated with reassessing its real estate portfolio.
On April 15, 2020, the company redeemed all $440.0 million in aggregate
principal amount of its outstanding 10.750% Senior Secured Notes due 2022 (the
Notes) for a redemption price equal to 105.375% of the aggregate principal
amount of the Notes to be redeemed plus accrued, but unpaid interest, to, but
not including, the redemption date. The redemption price paid was $487.3 million
and is made up of the following: $440.0 million principal amount due, $23.65
million call premium and $23.65 million of accrued interest through April 14,
2020. In the second quarter of 2020, the company recorded a loss on debt
extinguishment in other expense, net of $28.5 million consisting of the premium
of $23.65 million and write off of $4.8 million of unamortized discount and fees
related to the issuance of the Notes.

As of June 30, 2020, the company had contributed $315.1 million to its U.S.
qualified pension plans. During 2020, the company expects to contribute an
aggregate of approximately $600 million to its U.S. qualified defined benefit
pension plans. These contributions are expected to be applied toward the
company's required minimum contributions to these plans in 2020, 2021 and 2022.
During the three months ended June 30, 2020, the company recognized
cost-reduction charges and other costs of $7.9 million. The charges (credits)
related to work-force reductions were $(3.0) million, principally related to
severance costs, and were comprised of: (a) a charge of $1.6 million for 19
employees and (b) a credit of $4.6 million for changes in estimates. In
addition, the company recorded a credit of $0.6 million for net foreign currency
gains related to exiting foreign countries and a charge of $11.5 million for
asset impairments. The charges (credits) were recorded in the following
statement of income classifications: cost of revenue - services, $6.9 million;
selling, general and administrative expenses, $1.5 million; research and
development expenses, $0.1 million; and other expense, net, $(0.6) million.

                                       21

--------------------------------------------------------------------------------



During the three months ended June 30, 2019, the company recognized
cost-reduction charges and other costs of $2.6 million. Charges were comprised
of $0.8 million for lease abandonment costs and $1.8 million for changes in
estimates principally related to work-force reductions. The charges (credits)
were recorded in the following statement of income classifications: cost of
revenue - services, $(1.0) million and selling, general and administrative
expenses, $3.6 million.
During the six months ended June 30, 2020, the company recognized cost-reduction
charges and other costs of $35.4 million. The charges related to work-force
reductions were $5.5 million, principally related to severance costs, and were
comprised of: (a) a charge of $11.3 million for 309 employees and (b) a credit
of $5.8 million for changes in estimates. In addition, the company recorded
charges of $18.4 million for net foreign currency losses related to exiting
foreign countries and $11.5 million for asset impairments. The charges were
recorded in the following statement of income classifications: cost of revenue -
services, $12.8 million; selling, general and administrative expenses, $4.0
million; research and development expenses, $0.2 million; and other expense,
net, $18.4 million.
During the six months ended June 30, 2019, the company recognized cost-reduction
charges and other costs of $5.2 million. Charges were comprised of $4.3 million
for lease abandonment costs and asset write-offs and $0.9 million for changes in
estimates principally related to work-force reductions. The charges were
recorded in the following statement of income classifications: cost of revenue -
services, $(4.7) million; selling, general and administrative expenses, $8.6
million; and research and development expenses, $1.3 million.

Results of operations
Company results
Three months ended June 30, 2020 compared with the three months ended June 30,
2019
Revenue for the quarter ended June 30, 2020 was $438.8 million compared with
$569.4 million for the second quarter of 2019, a decrease of 22.9% from the
prior year. Foreign currency fluctuations had a 3 percentage-point negative
impact on revenue in the current period compared with the year-ago period.
Services revenue decreased 17.7% and Technology revenue decreased 51.6% in the
current quarter compared with the year-ago period. U.S. revenue decreased 16.2%
in the second quarter compared with the prior-year quarter. International
revenue decreased 26.8% in the current quarter compared with the prior-year
period due to decreases in all regions. Foreign currency had a 5
percentage-point negative impact on international revenue in the three months
ended June 30, 2020 compared with the three months ended June 30, 2019. The
declines in revenue were largely due to expected declines in the company's U.K.
check-processing joint venture; impacts of COVID-19, including declines in field
services, travel and entertainment and volume-based BPO contracts; as well as
the timing of technology contract renewals.
Total gross profit margin was 17.1% in the three months ended June 30, 2020
compared with 26.8% in the three months ended June 30, 2019. The decline was
principally due to a lower mix of higher margin software sales.
Selling, general and administrative expense in the three months ended June 30,
2020 was $80.2 million (18.3% of revenue) compared with $92.4 million (16.2% of
revenue) in the year-ago period.
Research and development (R&D) expense in the second quarter of 2020 was $3.2
million compared with $7.2 million in the second quarter of 2019.
For the second quarter of 2020, the company reported an operating loss of $8.5
million compared with an operating profit of $53.0 million in the second quarter
of 2019. The decline was principally due to the flow-through effect of lower
Technology revenue, due to the timing of technology contract renewals, on a
relatively fixed base of software development and support costs.
Interest expense for the three months ended June 30, 2020 was $4.6 million
compared with $16.2 million for the three months ended June 30, 2019. The
decline from the prior-year quarter was principally due to the redemption of the
company's Senior Secured Notes on April 14, 2020 as well as the convertible
notes exchange in 2019.
Other expense, net was expense of $53.7 million in the second quarter of 2020
compared with expense of $28.9 million in the second quarter of 2019. The
increase in expense was principally due to a $28.5 million loss on the
redemption of all $440 million aggregate principal amount of the company's
outstanding 10.750% Senior Secured Notes due 2022. Other expense, net for the
three months ended June 30, 2020 includes postretirement expense of $24.1
million, a debt extinguishment charge of $28.5 million and other of $1.1
million. Other expense, net for the three months ended June 30, 2019 includes
postretirement expense of $22.8 million and other of $6.1 million.

                                       22

--------------------------------------------------------------------------------



The loss from continuing operations before income taxes for the three months
ended June 30, 2020 was $66.8 million compared with income of $7.9 million for
the three months ended June 30, 2019. The decline was principally due to the
items discussed above.
The provision for income taxes was $9.7 million in the current quarter compared
with $3.6 million in the year-ago period. In March 2020, the U.K. published a
budget proposal that would eliminate the previously enacted income tax rate
reduction to 17%, scheduled to become effective April 1, 2020 therefore
maintaining the current rate of 19%. The proposal was enacted on July 22, 2020
and is expected to result in an estimated deferred tax benefit of approximately
$5.7 million in the third quarter of 2020.
The company evaluates quarterly the realizability of its deferred tax assets by
assessing its valuation allowance and by adjusting the amount of such allowance,
if necessary. The company records a tax provision or benefit for those
international subsidiaries that do not have a full valuation allowance against
their net deferred tax assets. Any profit or loss recorded for the company's
U.S. operations will have no provision or benefit associated with it due to the
company's valuation allowance, except with respect to withholding taxes not
creditable against future taxable income. As a result, the company's provision
or benefit for taxes may vary significantly quarter to quarter depending on the
geographic distribution of income.
Net loss from continuing operations attributable to Unisys Corporation for the
three months ended June 30, 2020 was $76.5 million, or a loss of $1.21 per
diluted share, compared with income of $0.7 million, or $0.01 per diluted share,
for the three months ended June 30, 2019.
Six months ended June 30, 2020 compared with the six months ended June 30, 2019
Revenue for the six months ended June 30, 2020 was $954.2 million compared with
$1,123.9 millions for the six months of 2019, a decrease of 15.1% from the prior
year. Foreign currency fluctuations had a 2 percentage-point negative impact on
revenue in the current period compared with the year-ago period.
Services revenue decreased 13.9% and Technology revenue decreased 21.7% in the
first half of 2020 compared with the year-ago period. U.S. revenue decreased
2.4% in the first half of 2020 compared with the year-ago period. International
revenue decreased 22.1% in the current period compared with the prior-year
period primarily due to decreases in all regions. Foreign currency had a 4
percentage-point negative impact on international revenue in the six months
ended June 30, 2020 compared with the six months ended June 30, 2019. The
declines in revenue were largely due to expected declines in the company's U.K.
check-processing joint venture; impacts of COVID-19, including declines in field
services, travel and entertainment and volume-based BPO contracts; as well as
the timing of technology contract renewals.
Total gross profit margin was 19.7% in the six months ended June 30, 2020
compared with 24.7% in the six months ended June 30, 2019.
Selling, general and administrative expense in the six months ended June 30,
2020 was $167.0 million (17.5% of revenue) compared with $183.3 million (16.3%
of revenue) in the year-ago period.
Research and development (R&D) expense in the first half of 2020 was $9.4
million compared with $16.2 million in the first half of 2019.
For the first half of 2020, the company reported an operating profit of $11.6
million compared with an operating profit of $78.2 million in the first half of
2019. The decline was principally due to the flow-through effect of lower
Technology revenue, due to the timing of technology contract renewals, on a
relatively fixed base of software development and support costs.
Interest expense for the six months ended June 30, 2020 was $18.5 million
compared with $31.7 million for the six months ended June 30, 2019. The decline
from the prior-year period was principally due to the redemption of the
company's Senior Secured Notes on April 14, 2020 as well as the convertible
notes exchange in 2019.
Other expense, net was expense of $101.8 million in the first half of 2020
compared with expense of $59.3 million in the first half of 2019. The increase
in expense was principally due a $28.5 million loss on the redemption of all
$440 million aggregate principal amount of the company's outstanding 10.750%
Senior Secured Notes due 2022 and the write off of accumulated translation
losses related to subsidiaries that were substantially liquidated during the
first half of 2020. Other expense, net for the six months ended June 30, 2020
includes postretirement expense of $46.8 million, a loss on debt extinguishment
of $28.5 million, foreign currency losses of $24.6 million and other of $1.9
million. Other expense, net for the six months ended June 30, 2019 includes
postretirement expense of $45.5 million, foreign exchange losses of $5.2 million
and other of $8.6 million.
The loss from continuing operations before income taxes for the six months ended
June 30, 2020 was $108.7 million compared with a loss of $12.8 million for the
six months ended June 30, 2019. The decline was principally due to the items
discussed above.

                                       23


--------------------------------------------------------------------------------



The provision for income taxes was $20.5 million in the current quarter compared
with $13.0 million in the year-ago period. In March 2020, the U.K. published a
budget proposal that would eliminate the previously enacted income tax rate
reduction to 17%, scheduled to become effective April 1, 2020 therefore
maintaining the current rate of 19%. The proposal was enacted on July 22, 2020
is expected to result in an estimated deferred tax benefit of approximately $5.7
million in the third quarter of 2020.
The company evaluates quarterly the realizability of its deferred tax assets by
assessing its valuation allowance and by adjusting the amount of such allowance,
if necessary. The company records a tax provision or benefit for those
international subsidiaries that do not have a full valuation allowance against
their net deferred tax assets. Any profit or loss recorded for the company's
U.S. operations will have no provision or benefit associated with it due to the
company's valuation allowance, except with respect to withholding taxes not
creditable against future taxable income. As a result, the company's provision
or benefit for taxes may vary significantly quarter to quarter depending on the
geographic distribution of income.
Net loss from continuing operations attributable to Unisys Corporation for the
six months ended June 30, 2020 was $129.7 million, or a loss of $(2.06) per
diluted share, compared with a loss of $32.0 million, or a loss of $0.62 per
diluted share, for the six months ended June 30, 2019.
Segment results
The company has two business segments: Services and Technology. Revenue
classifications within the Services and Technology segments are as follows:
•      Cloud & infrastructure services. This represents revenue from helping

clients apply cloud and as-a-service delivery models to capitalize on

business opportunities, make their end users more productive and manage


       and secure their IT infrastructure and operations more economically.


•      Application services. This represents revenue from helping clients
       transform their business processes by developing and managing new
       leading-edge applications for select industries, offering advanced data
       analytics and modernizing existing enterprise applications.

• Business process outsourcing (BPO) services. This represents revenue from

the management of critical processes and functions for clients in target

industries, helping them improve performance and reduce costs.

• Technology. This represents revenue from designing and developing software

and offering hardware and other related products to help clients improve


       security and flexibility, reduce costs and improve the efficiency of their
       data-center environments.


The accounting policies of each business 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 Technology segment
records intersegment revenue and manufacturing profit on hardware and software
shipments to customers under Services contracts. The Services segment, in turn,
records customer revenue and marketing profits on such shipments of company
hardware and software to customers. The Services segment also includes the sale
of hardware and software products sourced from third parties that are sold to
customers through the company's Services channels. In the company's consolidated
statements of income, the manufacturing costs of products sourced from the
Technology segment and sold to Services customers are reported in cost of
revenue for Services.
Also included in the Technology segment's sales and operating profit are sales
of hardware and software sold to the Services segment for internal use in
Services engagements. The amount of such profit included in operating income of
the Technology segment for the three months ended June 30, 2020 and 2019 was
zero in both periods. The amount for the six months ended June 30, 2020 and 2019
was zero and $0.2 million, respectively. The sales and profit on these
transactions are eliminated in Corporate.
The company evaluates business segment performance based on operating income
exclusive of the service cost component of pension income or expense,
restructuring charges and unusual and nonrecurring items, which are included in
Corporate. All other corporate and centrally incurred costs are allocated to the
business segments based principally on revenue, employees, square footage or
usage.

                                       24


--------------------------------------------------------------------------------



Three months ended June 30, 2020 compared with the three months ended June 30,
2019
Information by business segment is presented below:
                                     Total       Eliminations     Services

Technology


Three Months Ended June 30, 2020
Customer revenue                   $ 438.8      $         -      $ 396.0      $     42.8
Intersegment                             -             (2.4 )          -             2.4
Total revenue                      $ 438.8      $      (2.4 )    $ 396.0      $     45.2
Gross profit percent                  17.1  %                       15.5  %         42.0 %
Operating profit (loss) percent       (1.9 )%                       (0.4 )%

2.2 %



Three Months Ended June 30, 2019
Customer revenue                   $ 569.4      $         -      $ 481.0      $     88.4
Intersegment                             -             (2.1 )          -             2.1
Total revenue                      $ 569.4      $      (2.1 )    $ 481.0      $     90.5
Gross profit percent                  26.8  %                       16.5  %         78.1 %
Operating profit (loss) percent        9.3  %                        1.9  %

56.7 %

Gross profit and operating profit percent are as a percent of total revenue.




Customer revenue by classes of similar products or services, by segment, is
presented below:
                                            Three Months Ended
                                                 June 30,             Percent
                                              2020           2019      Change
Services

Cloud & infrastructure services $ 275.7 $ 320.5 (14.0 )% Application services

                          82.4            95.1      (13.4 )%
Business process outsourcing services         37.9            65.4      (42.0 )%
                                             396.0           481.0      (17.7 )%
Technology                                    42.8            88.4      (51.6 )%
Total                                   $    438.8         $ 569.4      (22.9 )%


In the Services segment, customer revenue was $396.0 million for the three
months ended June 30, 2020, down 17.7% from the three months ended June 30,
2019. Foreign currency translation had a 3 percentage-point negative impact on
Services revenue in the current quarter compared with the year-ago quarter. The
decline in revenue was largely due to expected declines in the company's U.K.
check-processing joint venture as well as the impacts of COVID-19, including
declines in field services, travel and entertainment and volume-based BPO
contracts.
Revenue from cloud & infrastructure services was $275.7 million in the current
quarter, down 14.0% compared with the prior-year quarter. Foreign currency
fluctuations had a 3 percentage-point negative impact on cloud & infrastructure
services revenue in the current period compared with the year-ago period.
Application services revenue decreased 13.4% for the three-month period ended
June 30, 2020 compared with the three-month period ended June 30, 2019. Foreign
currency fluctuations had a 6 percentage-point negative impact on application
services revenue in the current period compared with the year-ago period.
Business process outsourcing services revenue decreased 42.0% in the current
quarter compared with the prior-year quarter. Foreign currency fluctuations had
a 2 percentage-point negative impact on business process outsourcing services
revenue in the current period compared with the year-ago period. The decline was
due to reduction in volumes at the company's check-processing operations.
Services gross profit was 15.5% in the second quarter of 2020 compared with
16.5% in the year-ago period. Services operating profit percent was (0.4)% in
the three months ended June 30, 2020 compared with 1.9% in the three months
ended June 30, 2019. The decline in the Services operating profit margin was
negatively impacted by the flow-through impact of lower revenues related to the
COVID-19 impact.

                                       25


--------------------------------------------------------------------------------



In the Technology segment, customer revenue decreased 51.6% to $42.8 million in
the current quarter compared with $88.4 million in the year-ago period. Foreign
currency translation had a 2 percentage-point negative impact on Technology
revenue in the current quarter compared with the year-ago period. The decline
was largely due to the timing of software license renewals.
Technology gross profit was 42.0% in the current quarter compared with 78.1% in
the year-ago quarter. Technology operating profit percent was 2.2% in the three
months ended June 30, 2020 compared with 56.7% in the three months ended
June 30, 2019. The decreases in gross profit percent and operating profit
percent in 2020 was primarily due to a lower mix of higher margin software
sales.
Six months ended June 30, 2020 compared with the six months ended June 30, 2019
Information by business segment is presented below:
                                     Total       Eliminations     Services

Technology


Six Months Ended June 30, 2020
Customer revenue                  $   954.2     $         -      $ 821.9      $     132.3
Intersegment                              -            (4.9 )          -              4.9
Total revenue                     $   954.2     $      (4.9 )    $ 821.9      $     137.2
Gross profit percent                   19.7 %                       14.2  %          59.6 %
Operating profit (loss) percent         1.2 %                       (1.9 )%

31.5 %



Six Months Ended June 30, 2019
Customer revenue                  $ 1,123.9     $         -      $ 955.0      $     168.9
Intersegment                              -            (4.5 )          -              4.5
Total revenue                     $ 1,123.9     $      (4.5 )    $ 955.0      $     173.4
Gross profit percent                   24.7 %                       15.8  %          68.6 %
Operating profit (loss) percent         7.0 %                        0.8  %

45.9 %

Gross profit and operating profit percent are as a percent of total revenue.




Customer revenue by classes of similar products or services, by segment, is
presented below:
                                                             Six Months Ended June 30,
                                                                       2020                Percent
                                                                2020            2019        Change
Services
Cloud & infrastructure services                            $       570.9     $   642.2       (11.1 )%
Application services                                               167.5         185.6        (9.8 )%
Business process outsourcing services                               83.5         127.2       (34.4 )%
                                                                   821.9         955.0       (13.9 )%
Technology                                                         132.3         168.9       (21.7 )%
Total                                                      $       954.2     $ 1,123.9       (15.1 )%


In the Services segment, customer revenue was $821.9 million for the six months
ended June 30, 2020, down 13.9% from the six months ended June 30, 2019. Foreign
currency translation had a 2 percentage-point negative impact on Services
revenue in the current period compared with the year-ago period. The decline in
revenue was largely due to expected declines in the company's U.K.
check-processing joint venture as well as the impacts of COVID-19, including
declines in field services, travel and entertainment and volume-based BPO
contracts.
Revenue from cloud & infrastructure services was $570.9 million for the six
months ended June 30, 2020, down 11.1% compared with the prior-year period.
Foreign currency fluctuations had a 2 percentage-point negative impact on
cloud & infrastructure services revenue in the current period compared with the
year-ago period.
Application services revenue decreased 9.8% for the six-month period ended
June 30, 2020 compared with the six-month period ended June 30, 2019. Foreign
currency fluctuations had a 4 percentage-point negative impact on application
services revenue in the current period compared with the year-ago period.

                                       26

--------------------------------------------------------------------------------



Business process outsourcing services revenue decreased 34.4% in the current
period compared with the prior-year period. Foreign currency fluctuations had a
1 percentage-point negative impact on business process outsourcing services
revenue in the current period compared with the year-ago period. The decline was
due to reduction in volumes at the company's check-processing operations.
Services gross profit was 14.2% in the current period of 2020 compared with
15.8% in the year-ago period. Services operating loss percent was 1.9% in the
six months ended June 30, 2020 compared with an operating profit percent of 0.8%
in the six months ended June 30, 2019. The decline in the Services operating
profit margin was negatively impacted by the flow-through impact of lower
revenues related to the COVID-19 impact.
In the Technology segment, customer revenue decreased 21.7% to $132.3 million in
the current period compared with $168.9 million in the year-ago period. Foreign
currency translation had a 2 percentage-point negative impact on Technology
revenue in the current period compared with the year-ago period.
Technology gross profit was 59.6% in the current period compared with 68.6% in
the year-ago period. Technology operating profit percent was 31.5% in the six
months ended June 30, 2020 compared with 45.9% in the six months ended June 30,
2019. The decreases in gross profit percent and operating profit percent in 2020
was primarily due to a lower mix of higher margin software sales.

New accounting pronouncements
See Note 3 of the Notes to Consolidated Financial Statements for a full
description of recent adopted accounting pronouncements.
Financial condition
The company's principal sources of liquidity are cash on hand, cash from
operations and its revolving credit facility, discussed below. The company and
certain international subsidiaries have access to uncommitted lines of credit
from various banks. The company believes that it will have adequate sources of
liquidity to meet its expected cash requirements for at least the next twelve
months.
Cash and cash equivalents at June 30, 2020 were $782.2 million compared to
$538.8 million at December 31, 2019. The increase was due to the proceeds from
the sale of the company's U.S. Federal business.
As of June 30, 2020, $306.3 million of cash and cash equivalents were held by
the company's foreign subsidiaries and branches operating outside of the U.S.
The company may not be able to readily transfer up to one-third of these funds
out of the country in which they are located as a result of local restrictions,
contractual or other legal arrangements or commercial considerations.
Additionally, any transfers of these funds to the U.S. in the future may require
the company to accrue or pay withholding or other taxes on a portion of the
amount transferred.
During the six months ended June 30, 2020, cash used for operations was $392.1
million compared to cash usage of $19.5 million for the six months ended
June 30, 2019. The increase was principally due to higher cash contributions to
the company's U.S. qualified defined benefit pension plans, discussed above.
Cash provided by investing activities during the six months ended June 30, 2020
was $1,075.5 million compared to cash usage of $101.1 million during the six
months ended June 30, 2019. On March 13, 2020, the company sold its U.S. Federal
business and received net cash proceeds of $1,159.4 million. Net purchases of
investments were $20.6 million for the six months ended June 30, 2020 compared
with net purchases of $2.8 million in the prior-year period. Proceeds from
investments and purchases of investments represent derivative financial
instruments used to reduce the company's currency exposure to market risks from
changes in foreign currency exchange rates. In the current period, the
investment in marketable software was $36.7 million compared with $37.2 million
in the year-ago period, capital additions of properties were $10.6 million in
2020 compared with $20.8 million in 2019 and capital additions of outsourcing
assets were $15.8 million in 2020 compared with $39.7 million in 2019. Capital
additions for outsourcing assets were down compared with the prior-year period
since last year included a large amount of additions due to new business in the
prior-year period.
Cash used for financing activities during the six months ended June 30, 2020 was
$412.5 million compared to cash provided of $13.1 million during the six months
ended June 30, 2019. The increase in cash used was principally due to the
redemption of all of the company's 10.750% Senior Secured Notes due 2022. See
below.
At June 30, 2020, total debt was $205.1 million compared to $579.4 million at
December 31, 2019, principally due to the redemption of the company's 10.750%
Notes, discussed below.


                                       27


--------------------------------------------------------------------------------



On April 15, 2020, the company redeemed all $440.0 million in aggregate
principal amount of its outstanding 10.750% Senior Secured Notes due 2022 (the
Notes) for a redemption price equal to 105.375% of the aggregate principal
amount of the Notes redeemed plus accrued but unpaid interest to, but not
including, the redemption date. The redemption price paid was $487.3 million and
is made up of the following: $440.0 million of principal amount due, $23.65
million of call premium and $23.65 million of accrued interest through April 14,
2020. In the second quarter of 2020, the company recorded a loss on debt
extinguishment in other expense, net of $28.5 million consisting of the premium
of $23.65 million and write off of $4.8 million of unamortized discount and fees
related to the issuance of the Notes.
The company has a secured revolving credit facility (the "Credit Agreement")
that provides for loans and letters of credit up to an aggregate amount of
$145.0 million (with a limit on letters of credit of $30.0 million). The Credit
Agreement includes an accordion feature allowing for an increase in the amount
of the facility up to $150.0 million. Availability under the credit facility is
subject to a borrowing base calculated by reference to the company's
receivables. At June 30, 2020, the company had $59.0 million of borrowings and
$5.7 million of letters of credit outstanding, and availability under the
facility was $40.6 million net of letters of credit issued. The Credit Agreement
expires October 5, 2022, subject to a springing maturity on the date that is 91
days prior to the maturity date of the 2021 Notes unless, on such date, certain
conditions are met.
The credit facility is guaranteed by Unisys Holding Corporation, Unisys NPL,
Inc., Unisys AP Investment Company I and any future material domestic
subsidiaries. The facility is secured by the assets of the company and the
subsidiary guarantors, other than certain excluded assets, under a security
agreement entered into by the company and the subsidiary guarantors in favor of
JPMorgan Chase Bank, N.A., as agent for the lenders under the new credit
facility.
The company is required to maintain a minimum fixed charge coverage ratio if the
availability under the credit facility falls below the greater of 10% of the
lenders' commitments under the facility and $15.0 million.
The Credit Agreement contains customary representations and warranties,
including that there has been no material adverse change in the company's
business, properties, operations or financial condition. The Credit Agreement
includes limitations on the ability of the company and its subsidiaries to,
among other things, incur other debt or liens, dispose of assets and make
acquisitions, loans and investments, repurchase its equity, and prepay other
debt. 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.
At June 30, 2020, the company has met all covenants and conditions under its
various lending and funding agreements. The company expects to continue to meet
these covenants and conditions.

In 2020, the company expects to make cash contributions of approximately $634
million to its worldwide defined benefit pension plans, which are comprised of
approximately $600 million for the company's U.S. qualified defined benefit
pension plans and approximately $34 million primarily for international defined
benefit pension plans. The contributions to the company's U.S. pension plans are
expected to be applied toward the company's required minimum contributions to
these plans in 2020, 2021 and 2022. Estimates for future cash contributions are
likely to change based on a number of factors including market conditions and
changes in discount rates. The company currently anticipates that it may need to
obtain additional funding in order to make future contributions beyond 2022.
There is no assurance that the company will be able to obtain such funding or
that the company will have enough cash on hand to pay the required cash
contributions.

The company intends to continue to explore ways in which it can significantly
reduce its defined benefit pension plans liabilities. The company is targeting
approximately $1 billion of global pension liability reduction over the next
eight months. The company intends to accomplish this through a combination of
bulk lump sum buyouts, annuity purchases and other actions. The company has
started the process to execute on these targets, with the intention that the
first round of liability reductions will be completed by the end of the first
quarter of 2021. These actions may result in significant one-time non-cash
settlement charges.
The company maintains a shelf registration statement with the Securities and
Exchange Commission, which expires in June of 2021, that covers the offer and
sale of up to $700.0 million of debt or equity securities. Subject to the
company's ongoing compliance with securities laws, the company may offer and
sell debt and equity securities from time to time under the shelf registration
statement. In addition, from time to time, the company may explore a variety of
institutional debt and equity sources to fund its liquidity and capital needs.
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.

                                       28

--------------------------------------------------------------------------------

© Edgar Online, source Glimpses