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, 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
During the six months ended June 30, 2021, the company, through a combination of
transfers, annuity purchase arrangements and lump sum payments, settled gross
defined benefit pension plan liabilities of approximately $932 million. This is
in addition to approximately $276 million settled in the fourth quarter of 2020
for a total of approximately $1.2 billion of gross pension liabilities.
In January of 2021, the company purchased a group annuity contract for
$279 million to transfer projected benefit obligations related to approximately
11,600 retirees of the company's U.S. defined benefit pension plans. This action
resulted in a first quarter 2021 pre-tax settlement loss of $158.0 million.
Effective May 1, 2021, the company's primary pension plan related to its Dutch
subsidiary was transferred to a multiple-client circle within a
multiple-employer fund. This resulted in removing all of the plan's projected
benefit obligations, valued at approximately $553 million, from the company's
balance sheet. This action resulted in a second quarter 2021 pre-tax settlement
loss of $182.6 million.
In the second quarter of 2021, the company's Swiss subsidiary transferred its
defined benefit pension plan to a multi-employer collective foundation. This
resulted in removing the projected benefit obligations related to retirees under
the Swiss plan, valued at approximately $100 million, from the company's balance
sheet. The transfer required a one-time additional contribution of approximately
$10 million to the Swiss plan during the first quarter of 2021. This action
resulted in a second quarter 2021 pre-tax settlement loss of $28.1 million.
The American Rescue Plan Act, which was signed into law on March 11, 2021,
includes a provision for pension relief that extends the amortization period for
required contributions from 7 to 15 years and provides for the stabilization of
interest rates used to calculate future required contributions. As a result,
based on year-end 2020 pension data and assumptions, current projections
indicate that the company will not be required to make future cash contributions
to its U.S. qualified defined benefit pension plans for the period covered by
such projections and the company has determined that it will not make the
previously-contemplated voluntary $200 million contribution to its U.S. pension
plans in 2021.
Any future material deterioration in the value of the company's U.S. 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.
In 2021, the company expects to make cash contributions of approximately $48.7
million primarily for the company's international defined benefit pension plans.
In 2020, the company made cash contributions of $826.2 million to its worldwide
defined benefit pension plans. For the six months ended June 30, 2021 and 2020,
the company made cash contributions of $30.3 million and $329.9 million,
respectively.
On March 3, 2021, the company completed the conversion of $84.2 million
aggregate principal amount of Convertible Senior Notes due 2021 (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) 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.
                                       26

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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.
On June 3, 2021, the company acquired 100% of Unify Square, Inc. for a purchase
price consideration of $150.1 million on a cash-free, debt free basis. The
purchase price is subject to customary adjustments based on closing cash,
indebtedness and working capital. The company is funding the cash consideration
and acquisition-related costs with cash on hand, see Note 3 of the Notes to
Consolidated Financial Statements.
During the three months ended June 30, 2021, the company recognized
cost-reduction charges and other costs of $5.1 million. The charges (credits)
related to work-force reductions were $(0.3) million, principally related to
severance costs, and were comprised of: (a) a charge of $2.9 million and (b) a
credit of $(3.2) million for changes in estimates. In addition, the company
recorded charges of $5.4 million comprised of $(0.7) million for foreign
currency gains related to exiting foreign countries, $4.4 million for asset
impairments and $1.7 million of other expenses related to the cost-reduction
effort.
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 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.
During the six months ended June 30, 2021, the company recognized cost-reduction
charges and other costs of $13.6 million. The charges (credits) related to
work-force reductions were $(1.9) million, principally related to severance
costs, and were comprised of: (a) a charge of $5.8 million and (b) a credit of
$(7.7) million for changes in estimates. In addition, the company recorded
charges of $15.5 million comprised of $1.6 million for foreign currency losses
related to exiting foreign countries, $6.8 million for asset impairments and
$7.1 million of other expenses related to the cost-reduction effort.
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 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 (credits) were recorded in the following statement of income
classifications:
                                                            Three Months

Ended June 30, Six Months Ended June 30,


                                                               2021             2020             2021             2020
Cost of revenue                                             $    2.8          $  6.9          $    1.1          $ 12.8
Selling, general and administrative                              2.6             1.5               8.8             4.0
Research and development                                         0.4             0.1               2.1             0.2
Other (expenses), net                                           (0.7)           (0.6)              1.6            18.4
Total                                                       $    5.1          $  7.9          $   13.6          $ 35.4


Results of operations
Company results
Three months ended June 30, 2021 compared with the three months ended June 30,
2020
Revenue for the three months ended June 30, 2021 was $517.3 million compared
with $438.8 million for the three months of 2020, an increase of 17.9% from the
prior year. Foreign currency fluctuations had a 6 percentage-point positive
impact on revenue in the current period compared with the year-ago period.
U.S. revenue increased 15.3% in the current period compared with the year-ago
period. International revenue increased 19.6% in the current period compared
with the prior-year period principally due to increases in Europe and
Asia/Pacific. Foreign currency had a 10 percentage-point positive impact on
international revenue in the three months ended June 30, 2021 compared with the
three months ended June 30, 2020.
Gross profit margin was 27.5% in the three months ended June 30, 2021 compared
with 17.1% in the three months ended June 30, 2020. The increase was due in part
by improvements in all of the company's segments driven by higher sales of the
company's enterprise software, improvements to efficiency and related
cost-reduction initiatives.
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Selling, general and administrative expense in the three months ended June 30,
2021 was $94.6 million (18.3% of revenue) compared with $80.2 million (18.3% of
revenue) in the year-ago period.
Research and development (R&D) expense for the three months ended June 30, 2021
was $6.8 million compared with $3.2 million for the three months ended June 30,
2020.
For the three months ended June 30, 2021, the company reported an operating
profit of $40.8 million compared with an operating loss of $8.5 million for
prior year period. The increase was due in part by improvements in all the
company's segments driven by higher sales of the company's enterprise software,
improvements to efficiency and related cost-reduction initiatives.
Interest expense for the three months ended June 30, 2021 was $8.4 million
compared with $4.6 million for the three months ended June 30, 2020.
Other (expense), net was expense of $227.8 million for the three months ended
June 30, 2021 compared with expense of $53.7 million for the three months ended
June 30, 2020. Other (expense), net for the three months ended June 30, 2021
includes $210.7 million of pension settlement losses. See Note 7 of the Notes to
Consolidated Financial Statements for details of other (expense), net.
The loss from continuing operations before income taxes for the three months
ended June 30, 2021 was $195.4 million compared with a loss of $66.8 million for
the three months ended June 30, 2020. The decline was principally due to the
pension settlement losses discussed above.
The benefit for income taxes was $53.1 million in the current period compared
with a provision of $9.7 million in the year-ago period. The current period
includes income tax benefits of $51.7 million related to the pension plan
settlement losses in the Netherlands and Switzerland. In addition, the Finance
Act 2021 (the Act) was published in the Official Gazette which proposed an
income tax rate increase in the United Kingdom from 19% to 25% for the financial
year beginning April 1, 2023. The Act was enacted on June 10, 2021 and resulted
in a deferred tax benefit of approximately $17.7 million in the second quarter
of 2021.
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, 2021 was $140.8 million, or a loss of $2.10 per
diluted share, compared with a loss of $76.5 million, or a loss of $1.21 per
diluted share, for the three months ended June 30, 2020.
Six months ended June 30, 2021 compared with the six months ended June 30, 2020
Revenue for the six months ended June 30, 2021 was $1,027.1 million compared
with $954.2 million for the six months of 2020, an increase of 7.6% from the
prior year. Foreign currency fluctuations had a 4 percentage-point positive
impact on revenue in the current period compared with the year-ago period.
U.S. revenue increased 11.7% in the current period compared with the year-ago
period. International revenue increased 4.8% in the current period compared with
the prior-year period principally due to increases in Europe and Asia/Pacific.
Foreign currency had a 6 percentage-point positive impact on international
revenue in the six months ended June 30, 2021 compared with the six months ended
June 30, 2020.
Gross profit margin was 27.4% in the six months ended June 30, 2021 compared
with 19.7% in the six months ended June 30, 2020. The increase was due in part
by improvements in all the company's segments driven by higher sales of the
company's enterprise software, improvements to efficiency and related
cost-reduction initiatives.
Selling, general and administrative expense in the six months ended June 30,
2021 was $184.6 million (18.0% of revenue) compared with $167.0 million (17.5%
of revenue) in the year-ago period.
Research and development (R&D) expense for the six months ended June 30, 2021
was $12.4 million compared with $9.4 million for the six months ended June 30,
2020.
For the six months ended June 30, 2021, the company reported an operating profit
of $84.4 million compared with an operating profit of $11.6 million for prior
year period. The increase was due in part by improvements in all the company's
segments driven by higher sales of the company's enterprise software,
improvements to efficiency and related cost-reduction initiatives.
                                       28

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Interest expense for the six months ended June 30, 2021 was $18.5 million
compared with $18.5 million for the six months ended June 30, 2020.
Other (expense), net was expense of $410.4 million for the six months ended
June 30, 2021 compared with expense of $101.8 million for the six months ended
June 30, 2020. Other (expense), net for the six months ended June 30, 2021
includes $368.7 million of pension settlement losses. See Note 7 of the Notes to
Consolidated Financial Statements for details of other (expense), net.
The loss from continuing operations before income taxes for the six months ended
June 30, 2021 was $344.5 million compared with a loss of $108.7 million for the
six months ended June 30, 2020. The decline was principally due to the pension
settlement losses discussed above.
The benefit for income taxes was $44.7 million in the current period compared
with a provision of $20.5 million in the year-ago period. The current period
includes income tax benefits of $51.7 million related to the pension plan
settlement losses in the Netherlands and Switzerland. In addition, the Finance
Act 2021 (the Act) was published in the Official Gazette which proposed an
income tax rate increase in the United Kingdom from 19% to 25% for the financial
year beginning April 1, 2023. The Act was enacted on June 10, 2021 and resulted
in a deferred tax benefit of approximately $17.7 million in the second quarter
of 2021.
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, 2021 was $298.6 million, or a loss of $4.54 per
diluted share, compared with a loss of $129.7 million, or a loss of $2.06 per
diluted share, for the six months ended June 30, 2020.
Segment results
In January 2021, the company changed its organizational structure to more
effectively address evolving client needs. With these changes, the company
changed its reportable segments, but this did not impact the consolidated
financial statements as of December 31, 2020. In addition, during the second
quarter of 2021, the company renamed its ClearPath Forward® segment as
Enterprise Computing 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:
•Digital Workplace Solutions (DWS), which provides services and IP-led solutions
that support clients' employees' productivity, satisfaction and ability to
securely work anywhere, any time;
•Cloud & Infrastructure Solutions (C&I), which provides hybrid and multi-cloud
solutions in select markets to accelerate innovation and increase efficiency of
our clients' businesses; and
•Enterprise Computing Solutions (ECS), which provides server systems and
operating system software and services that are secure, innovative, and reliable
for mission-critical processing.
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, 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
months ended June 30, 2021 and 2020 was $0.4 million and zero, respectively. The
amount of such profit included in gross profit of the ECS segment for the six
months ended June 30, 2021 and 2020 was $1.1 million and zero, respectively.The
sales and profit on these transactions are eliminated in Corporate.
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 Corporate. During the first quarter of 2021, the
company also changed its internal measurement of segment profitability. Prior
period amounts have therefore been reclassified to be comparable to the current
period's presentation.
                                       29

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Three months ended June 30, 2021 compared with the three months ended June 30,
2020
A summary of the company's operations by segment is presented below:
                                        Total Segments        DWS           C&I           ECS
Three Months Ended June 30, 2021
Customer revenue                       $       440.4       $ 146.5       $ 124.4       $ 169.5
Intersegment                                     0.5             -             -           0.5
Total revenue                          $       440.9       $ 146.5       $ 124.4       $ 170.0
Gross profit percent                            32.2  %       15.2  %       12.5  %       61.3  %

Three Months Ended June 30, 2020
Customer revenue                       $       367.6       $ 133.5       $ 113.2       $ 120.9
Intersegment                                       -             -             -             -
Total revenue                          $       367.6       $ 133.5       $ 113.2       $ 120.9
Gross profit percent                            19.5  %        6.8  %        5.2  %       47.0  %

Gross profit percent is as a percent of total revenue.




Revenue from DWS was $146.5 million in the current quarter an increase of 9.7%
compared with the prior-year quarter. The increase was due in part to higher
field services volumes that were impacted by COVID-19. Foreign currency
fluctuations had a 5 percentage-point positive impact on DWS revenue in the
current period compared with the year-ago period. Gross profit percent was15.2%
in the current period compared with 6.8% in the year ago period. The increase in
gross profit was due in part by improvements driven by efficiency and related
cost-reduction initiatives.
C&I revenue was $124.4 million for the three-month period ended June 30, 2021,
an increase of 9.9% compared with the three-month period ended June 30, 2020.
The increase was driven by continued momentum with public sector clients as well
as other highly-regulated industries. Foreign currency fluctuations had a 4
percentage-point positive impact on C&I revenue in the current period compared
with the year-ago period. Gross profit percent was 12.5% in the current period
compared with 5.2% in the year ago period. The increase in gross profit was due
in part by improvements driven by efficiency and related cost-reduction
initiatives.
ECS revenue was $169.5 million for the three-month period ended June 30, 2021,
an increase of 40.2% compared with the three-month period ended June 30, 2020.
Foreign currency fluctuations had a 7 percentage-point positive impact on ECS
revenue in the current period compared with the year-ago period. Gross profit
percent was 61.3% in the current period compared with 47.0% in the year ago
period. The increase in both revenue and gross profit was principally due to
higher sales of the company's enterprise software.
                                       30

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Six months ended June 30, 2021 compared with the six months ended June 30, 2020 A summary of the company's operations by segment is presented below:


                                     Total Segments        DWS           C&I           ECS
Six Months Ended June 30, 2021
Customer revenue                    $       872.4       $ 287.6       $ 247.7       $ 337.1
Intersegment                                  1.4             -             -           1.4
Total revenue                       $       873.8       $ 287.6       $ 247.7       $ 338.5
Gross profit percent                         31.6  %       14.2  %       11.1  %       61.2  %

Six Months Ended June 30, 2020
Customer revenue                    $       803.5       $ 293.7       $ 217.2       $ 292.6
Intersegment                                  0.1             -             -           0.1
Total revenue                       $       803.6       $ 293.7       $ 217.2       $ 292.7
Gross profit percent                         21.9  %        5.5  %

1.4 % 53.6 %

Gross profit percent is as a percent of total revenue.




Revenue from DWS was $287.6 million for the six-month period ended June 30,
2021, a decline of 2.1% compared with the six-month period ended June 30, 2020.
The decline was due in part to reduced field services volumes that were impacted
by COVID-19. Foreign currency fluctuations had a 3 percentage-point positive
impact on DWS revenue in the current period compared with the year-ago period.
Gross profit percent was 14.2% in the current period compared with 5.5% in the
year ago period. The increase in gross profit was due in part by improvements
driven by efficiency and related cost-reduction initiatives.
C&I revenue was $247.7 million for the six-month period ended June 30, 2021, an
increase of 14.0% compared with the six-month period ended June 30, 2020. The
increase was driven by continued momentum with public sector clients as well as
other highly-regulated industries. Foreign currency fluctuations had a 4
percentage-point positive impact on C&I revenue in the current period compared
with the year-ago period. Gross profit percent was 11.1% in the current period
compared with 1.4% in the year ago period. The increase in gross profit was due
in part by improvements driven by efficiency and related cost-reduction
initiatives.
ECS revenue was $337.1 million for the six-month period ended June 30, 2021, an
increase of 15.2% compared with the six-month period ended June 30, 2020.
Foreign currency fluctuations had a 2 percentage-point positive impact on ECS
revenue in the current period compared with the year-ago period. Gross profit
percent was 61.2% in the current period compared with 53.6% in the year ago
period. The increase in both revenue and gross profit was principally due to
higher sales of the company's enterprise software.
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, 2021 were $596.7 million compared to
$898.5 million at December 31, 2020.
As of June 30, 2021, $311.9 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, 2021, cash used for operations was $1.0
million compared to cash usage of $392.1 million for the six months ended
June 30, 2020. The decrease in cash usage was principally due to lower cash
contributions to the company's U.S. qualified defined benefit pension plans in
the current period.
Cash used for investing activities during the six months ended June 30, 2021 was
$201.7 million compared to cash provided of $1,075.5 million during the six
months ended June 30, 2020. On June 3, 2021, the Company purchased Unify Square,
Inc. for $150.1 million, see Note 3 of the Notes to Consolidated Financial
Statements. On March 13, 2020, the company sold its U.S.
                                       31

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Federal business and received net cash proceeds of $1,159.4 million. Net
purchases of investments were $0.8 million for the six months ended June 30,
2021 compared with net purchases of $20.6 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 $29.7 million compared with $36.7
million in the year-ago period, capital additions of properties were $12.0
million in 2021 compared with $10.6 million in 2020 and capital additions of
outsourcing assets were $8.7 million in 2021 compared with $15.8 million in
2020.
Cash used for financing activities during the six months ended June 30, 2021 was
$97.9 million compared to cash used of $412.5 million during the six months
ended June 30, 2020. The decrease in cash used was principally due to higher
redemptions of debt in the prior year period.
The American Rescue Plan Act, which was signed into law on March 11, 2021,
includes a provision for pension relief that extends the amortization period for
required contributions from 7 to 15 years and provides for the stabilization of
interest rates used to calculate future required contributions. As a result,
based on year-end 2020 pension data and assumptions, current projections
indicate that the company will not be required to make future cash contributions
to its U.S. qualified defined benefit pension plans for the period covered by
such projections and the company has determined that it will not make the
previously-contemplated voluntary $200 million contribution to its U.S. pension
plans in 2021.
Any future material deterioration in the value of the company's U.S. 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.
In 2021, the company expects to make cash contributions of approximately $48.7
million primarily for the company's international defined benefit pension plans.
In 2020, the company made cash contributions of $826.2 million to its worldwide
defined benefit pension plans. For the six months ended June 30, 2021 and 2020,
the company made cash contributions of $30.3 million and $329.9 million,
respectively.
At June 30, 2021, total debt was $536.9 million compared to $629.9 million at
December 31, 2020. The reduction was principally due to the conversion of the
company's 2021 Notes.
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.
The company has a secured revolving credit facility (the Amended and Restated
ABL Credit Facility) that expires on October 29, 2025 that provides for
revolving loans and letters of credit up to an aggregate amount of $145.0
million (with a limit on letters of credit of $40.0 million), with an accordion
feature provision allowing for an increase in credit facility up to
$175.0 million upon the satisfaction of certain conditions specified in the
Amended and Restated ABL Credit Facility. Availability under the credit facility
is subject to a borrowing base calculated by reference to the company's
receivables. At June 30, 2021, the company had no borrowings and $5.7 million of
letters of credit outstanding, and availability under the facility was $103.3
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 Restarted 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 Unisys Holding
Corporation, Unisys NPL, Inc., Unisys AP Investment Company I, and Unify Square,
Inc., each is directly or indirectly owned by the company (the subsidiary
guarantors). The facility is secured by the assets of the company and the
subsidiary guarantors, other than certain excluded assets, under a
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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 credit
facility.
The company is required to maintain a minimum fixed charge coverage ratio if the
availability under the Amended and Restated ABL Credit Facility falls below the
greater of 10% of the lenders' commitments under the facility and $14.5 million.
The Amended and Restated ABL Credit Facility contains customary representations
and warranties, including, but not limited to, that there has been no material
adverse change in the company's business, properties, operations or financial
condition. The Amended and Restated ABL Credit Facility includes restrictions 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. These restrictions
are subject to several important limitations and exceptions. 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 June 30, 2021, the company has met all covenants and conditions under its
various lending and funding agreements. For at least the next twelve months, the
company expects to continue to meet these covenants and conditions.
The company maintains a shelf registration statement with the Securities and
Exchange Commission that covers the offer and sale 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material change in the company's assessment of its sensitivity
to market risk since its disclosure in its 2020 Form 10-K.
Item 4. Controls and Procedures
The company's management, with the participation of the company's Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of the company's disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the Exchange Act)) as of the end of the period covered by this report.
Based on this evaluation, the company's Chief Executive Officer and Chief
Financial Officer concluded that, as of the end of such period, the company's
disclosure controls and procedures are effective. Such evaluation did not
identify any change in the company's internal control over financial reporting
(as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act) that occurred during the fiscal quarter to which this report relates that
has materially affected, or is reasonably likely to materially affect, the
company's internal control over financial reporting.
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