SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________.
Commission file number 1-8729
UNISYS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 38-0387840
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Unisys Way
Blue Bell, Pennsylvania 19424
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 986-4011
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). YES [X] NO [ ]
Number of shares of Common Stock outstanding as of March 31, 2003:
327,776,062.
2
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements.
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Millions)
March 31,
2003 December 31,
(Unaudited) 2002
----------- ------------
Assets
- ------
Current assets
Cash and cash equivalents $ 433.1 $ 301.8
Accounts and notes receivable, net 862.7 955.6
Inventories:
Parts and finished equipment 156.9 165.3
Work in process and materials 133.3 127.5
Deferred income taxes 312.3 311.3
Other current assets 97.4 84.5
-------- --------
Total 1,995.7 1,946.0
-------- --------
Properties 1,576.0 1,542.7
Less-Accumulated depreciation and
amortization 958.2 932.9
-------- --------
Properties, net 617.8 609.8
-------- --------
Investments at equity 111.8 111.8
Marketable software, net 322.1 311.8
Deferred income taxes 1,476.0 1,476.0
Goodwill 161.7 160.6
Other long-term assets 367.8 365.4
-------- --------
Total $5,052.9 $4,981.4
======== ========
Liabilities and stockholders' equity
- ------------------------------------
Current liabilities
Notes payable $ 78.6 $ 77.3
Current maturities of long-term debt 2.5 4.4
Accounts payable 434.9 532.5
Other accrued liabilities 1,152.9 1,341.4
Income taxes payable 235.0 228.9
-------- --------
Total 1,903.9 2,184.5
-------- --------
Long-term debt 1,046.3 748.0
Accrued pension liabilities 715.1 727.7
Other long-term liabilities 486.0 465.2
Stockholders' equity
Common stock, shares issued: 2003, 329.7;
2002, 328.1 3.3 3.3
Accumulated deficit ( 635.0) ( 673.5)
Other capital 3,775.9 3,763.1
Accumulated other comprehensive loss (2,242.6) (2,236.9)
-------- --------
Stockholders' equity 901.6 856.0
-------- --------
Total $5,052.9 $4,981.4
======== ========
See notes to consolidated financial statements.
3
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Millions, except per share data)
Three Months Ended March 31
---------------------------
2003 2002
-------- --------
Revenue
Services $1,107.0 $1,049.2
Technology 291.9 313.3
-------- --------
1,398.9 1,362.5
Costs and expenses
Cost of revenue:
Services 882.5 802.4
Technology 129.3 170.8
-------- --------
1,011.8 973.2
Selling, general and administrative 243.7 245.4
Research and development 66.8 65.1
-------- --------
1,322.3 1,283.7
-------- --------
Operating income 76.6 78.8
Interest expense 15.7 17.5
Other income (expense), net (3.4) (12.4)
-------- --------
Income before income taxes 57.5 48.9
Provision for income taxes 19.0 16.2
-------- --------
Net income $ 38.5 $ 32.7
======== ========
Earnings per share
Basic $ .12 $ .10
======== ========
Diluted $ .12 $ .10
======== ========
See notes to consolidated financial statements.
4
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Millions)
Three Months Ended
March 31
------------------
2003 2002
-------- --------
Cash flows from operating activities
Net income $ 38.5 $ 32.7
Add(deduct) items to reconcile net income
to net cash (used for) provided by operating
activities:
Depreciation and amortization of properties 42.2 36.0
Amortization:
Marketable software 29.7 29.7
Deferred outsourcing contract cost 7.8 3.9
(Increase) in deferred income taxes, net ( 1.0) ( 1.5)
Decrease in receivables, net 91.9 147.6
Decrease in inventories 2.6 32.2
(Decrease) in accounts payable and
other accrued liabilities (267.8) (199.1)
Increase (decrease) in income taxes payable 6.1 ( 5.8)
Increase(decrease) in other liabilities 4.5 ( 19.4)
(Increase) in other assets ( 20.3) ( 77.0)
Other .9 30.3
------- ------
Net cash (used for) provided by operating
activities ( 64.9) 9.6
------- ------
Cash flows from investing activities
Proceeds from investments 1,279.1 701.7
Purchases of investments (1,292.7) (699.1)
Investment in marketable software ( 40.0) ( 36.3)
Capital additions of properties ( 49.4) ( 39.4)
Purchases of businesses ( .8) -
------- ------
Net cash used for investing activities ( 103.8) ( 73.1)
------- ------
Cash flows from financing activities
Proceeds from issuance of long-term debt 293.3 -
Net proceeds from short-term borrowings 1.3 15.9
Proceeds from employee stock plans 6.3 7.4
Payments of long-term debt ( 2.4) ( .5)
------- ------
Net cash provided by financing activities 298.5 22.8
------- ------
Effect of exchange rate changes on
cash and cash equivalents 1.5 ( 1.9)
------- ------
Increase (decrease) in cash and
cash equivalents 131.3 ( 42.6)
Cash and cash equivalents, beginning of period 301.8 325.9
------- -------
Cash and cash equivalents, end of period $ 433.1 $ 283.3
======= =======
See notes to consolidated financial statements.
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the financial information furnished
herein reflects all adjustments necessary for a fair presentation of
the financial position, results of operations and cash flows for the
interim periods specified. These adjustments consist only of normal
recurring accruals. Because of seasonal and other factors, results
for interim periods are not necessarily indicative of the results to
be expected for the full year.
a. The following table shows how earnings per share were computed for the
three months ended March 31, 2003 and 2002 (dollars in millions, shares
in thousands):
Three Months Ended March 31,
----------------------------
2003 2002
----------- ----------
Basic Earnings Per Share
Net income $ 38.5 $ 32.7
========= =========
Weighted average shares 327,208 321,469
========= =========
Basic earnings per share $ .12 $ .10
========= =========
Diluted Earnings Per Share
Net income $ 38.5 $ 32.7
========= =========
Weighted average shares 327,208 321,469
Plus incremental shares from assumed
conversions of employee stock plans 1,616 1,838
--------- ---------
Adjusted weighted average shares 328,824 323,307
========= =========
Diluted earnings per share $ .12 $ .10
========= =========
During the three months ended March 31, 2003, 35.2 million shares related to
employee stock plans were not included in the computation of diluted
earnings per share because to do so would have been antidilutive.
b. The company has two business segments: Services and Technology. Revenue
classifications by segment are as follows: Services - systems integration,
outsourcing, infrastructure services, and core maintenance; Technology -
enterprise-class servers and specialized technologies. 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 recognizes intersegment revenue and manufacturing profit on hardware
and software shipments to customers under Services contracts. The Services
segment, in turn, recognizes 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 March 31, 2003
and 2002 was $3.1 million and $5.6 million, respectively. The profit on
these transactions is eliminated in Corporate. The company evaluates
business segment performance on operating income exclusive of 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.
6
A summary of the company's operations by business segment for the three-month
periods ended March 31, 2003 and 2002 is presented below
(in millions of dollars):
Total Corporate Services Technology
Three Months Ended
March 31, 2003
------------------
Customer revenue $1,398.9 $1,107.0 $291.9
Intersegment $( 70.0) 5.6 64.4
-------- -------- -------- ------
Total revenue $1,398.9 $( 70.0) $1,112.6 $356.3
======== ======== ======== ======
Operating income $ 76.6 $ 2.6 $ 34.4 $ 39.6
======== ======= ======== ======
Three Months Ended
March 31, 2002
------------------
Customer revenue $1,362.5 $1,049.2 $313.3
Intersegment $( 80.7) 11.5 69.2
-------- ------- -------- ------
Total revenue $1,362.5 $( 80.7) $1,060.7 $382.5
======== ======= ======== ======
Operating income(loss) $ 78.8 $( 3.1) $ 52.4 $ 29.5
======== ======= ======== ======
Presented below is a reconciliation of total business segment operating
income to consolidated income before taxes (in millions of dollars):
Three Months Ended March 31
---------------------------
2003 2002
---- ----
Total segment operating income $ 74.0 $ 81.9
Interest expense (15.7) (17.5)
Other income (expense), net ( 3.4) (12.4)
Corporate and eliminations 2.6 ( 3.1)
------ ------
Total income before income taxes $ 57.5 $ 48.9
====== ======
Customer revenue by classes of similar products or services, by segment, is
presented below (in millions of dollars):
Three Months Ended March 31
---------------------------
2003 2002
---- ----
Services
Systems integration $ 356.4 $ 363.9
Outsourcing 409.3 342.3
Infrastructure services 200.8 204.5
Core maintenance 140.5 138.5
-------- --------
1,107.0 1,049.2
Technology
Enterprise-class servers 217.8 228.7
Specialized technologies 74.1 84.6
-------- --------
291.9 313.3
-------- --------
Total $1,398.9 $1,362.5
======== ========
7
c. Comprehensive income for the three months ended March 31, 2003 and
2002 includes the following components (in millions of dollars):
2003 2002
---- ----
Net income $ 38.5 $ 32.7
Other comprehensive income (loss)
Cash flow hedges
Income (loss), net of tax of $- and $1.1 ( .1) 2.0
Reclassification adjustments, net of tax
of $1.0 and $(1.8) 2.1 (3.5)
Foreign currency translation adjustments,
net of tax of $- and $- (7.7) 8.1
------ ------
Total other comprehensive income (5.7) 6.6
------ ------
Comprehensive income $ 32.8 $ 39.3
====== ======
Accumulated other comprehensive income (loss) as of December 31, 2002 and
March 31, 2003 is as follows (in millions of dollars):
Cash Minimum
Translation Flow Pension
Total Adjustments Hedges Liability
----- ----------- ------ ---------
Balance at December 31, 2001 $ (706.8) $(711.2) $ 4.4 $ -
Change during period (1,530.1) ( 33.8) ( 5.9) (1,490.4)
-------- ------- ------ ---------
Balance at December 31, 2002 (2,236.9) (745.0) ( 1.5) (1,490.4)
Change during period ( 5.7) ( 7.7) 2.0 -
-------- ------- ------ ---------
Balance at March 31, 2003 $(2,242.6) $(752.7) $ .5 $(1,490.4)
======== ======= ====== =========
d. The amount credited to stockholders' equity for the income tax benefit
related to the company's stock plans for the three months ended March 31,
2003 and 2002 was $1.3 million and $2.0 million, respectively. The company
expects to realize these tax benefits on future Federal income tax returns.
e. For equipment manufactured by the company, the company warrants that it will
substantially conform to relevant published specifications for twelve months
after shipment to the customer. The company will repair or replace, at its
option and expense, items of equipment that do not meet this warranty. For
company software, the company warrants that it will conform substantially to
then-current published functional specifications for ninety days from
customer's receipt. The company will provide a workaround or correction for
material errors in its software that prevents its use in a production
environment.
The company estimates the costs that may be incurred under its warranties
and records a liability in the amount of such costs at the time revenue is
recognized. Factors that affect the company's warranty liability include
the number of units sold, historical and anticipated rates of warranty
claims and cost per claim. The company quarterly assesses the adequacy of
its recorded warranty liabilities and adjusts the amounts as necessary.
Presented below is a reconciliation of the aggregate product warranty
liability (in millions of dollars):
Three Months Ended March 31,
----------------------------
2003 2002
---- ----
Balance at December 31 $19.2 $16.1
Accruals for warranties issued
during the period 4.9 2.9
Settlements made during the period (4.7) (3.5)
Changes in liability for pre-existing warranties
during the period, including expirations ( .1) .8
----- -----
Balance at March 31 $19.3 $16.3
===== =====
8
f. The company applies the recognition and measurement principles of APB
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its stock-based employee compensation
plans. For stock options, no compensation expense is reflected in net
income as all stock options granted had an exercise price equal to or
greater than the market value of the underlying common stock on the date
of grant. In addition, no compensation expense is recognized for common
stock purchases under the Employees Stock Purchase Plan. Pro forma
information regarding net income and earnings per share is required by
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," and has been determined as if the company
had accounted for its stock plans under the fair value method of SFAS No.
123. For purposes of the pro forma disclosures, the estimated fair value
of the options is amortized to expense over the options' vesting period.
The following table illustrates the effect on net income and earnings per
share if the company had applied the fair value recognition provisions of
SFAS No. 123 (in millions of dollars):
Three Months Ended March 31,
----------------------------
2003 2002
------ ------
Net income as reported $ 38.5 $ 32.7
Deduct total stock-based employee
compensation expense determined
under fair value method for all
awards, net of tax (14.5) (12.7)
------ ------
Pro forma net income $ 24.0 $ 20.0
====== ======
Earnings per share
Basic - as reported $ .12 $ .10
Basic - pro forma $ .07 $ .06
Diluted - as reported $ .12 $ .10
Diluted - pro forma $ .07 $ .06
g. Following is a breakdown of the individual components of the 2001 fourth-
quarter charge (in millions of dollars):
Work-Force
Reductions(1)
---------- Idle
Lease
Headcount Total U.S. Int'l Costs
---------------------------------------------------------------
Balance at
Dec. 31, 2002 631 $ 67.6 $ 7.4 $ 43.7 $ 16.5
Additional
Provisions 4 2.1 - .8 1.3
Utilized (435) (28.4) ( 3.6) (22.4) ( 2.4)
Reversal of
excess reserves ( 82) ( 2.4) ( 1.7) ( .7) -
Other(2) 1.3 .1 2.6 ( 1.4)
------ ------ ------ ------ ------
Balance at
March 31, 2003 118 $ 40.2 $ 2.2 $ 24.0 $ 14.0
====== ====== ====== ====== ======
Expected future
utilization:
2003 remaining
nine months 118 $ 31.1 $ 2.2 $ 22.3 $ 6.6
2004 and thereafter 9.1 - 1.7 7.4
(1) Includes severance, notice pay, medical and other benefits.
(2) Changes in estimates and translation adjustments.
Cash expenditures related to the 2001 and prior-year restructuring charges
were approximately $31 million in the three months ended March 31, 2003
compared to $35 million for the prior-year period, and are expected to be
approximately $35 million (which includes approximately $4 million related to
restructuring charges taken prior to 2001) for the remainder of 2003 and $14
million (which includes approximately $5 million related to restructuring
charges taken prior to 2001) in total for all subsequent years, principally
for work-force reductions and idle lease costs.
9
h. Effective January 1, 2003, the company adopted SFAS No. 145, "Rescission of
FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections." SFAS No. 145 rescinds SFAS No. 4, which required
that all gains and losses from extinguishment of debt be reported as an
extraordinary item. Previously recorded losses on the early extinguishment
of debt that were classified as an extraordinary item in prior periods have
been reclassified to other income (expense), net. The adoption of SFAS No.
145 had no effect on the company's consolidated financial position,
consolidated results of operations, or liquidity.
Effective January 1, 2003, the company adopted SFAS No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities." SFAS No. 146 requires
companies to recognize costs associated with exit or disposal activities
when they are incurred rather than at the date of commitment to an exit or
disposal plan. SFAS No. 146 replaces previous accounting guidance provided
by Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to
Exit an Activity (including Certain Costs Incurred in a Restructuring)"
and is effective for the company for exit or disposal activities initiated
after December 31, 2002. Adoption of this statement had no impact on the
company's consolidated financial position, consolidated results of
operations, or liquidity.
Effective January 1, 2003, the company adopted FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others, an Interpretation
of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation
No. 34" ("FIN No. 45"). The interpretation requires that upon issuance of a
guarantee, the entity must recognize a liability for the fair value of the
obligation it assumes under that guarantee. In addition, FIN No. 45
requires disclosures about the guarantees that an entity has issued,
including a roll forward of the entity's product warranty liabilities. This
interpretation is intended to improve the comparability of financial
reporting by requiring identical accounting for guarantees issued with
separately identified consideration and guarantees issued without separately
identified consideration. Adoption of this Interpretation had no impact on
the company's consolidated financial position, consolidated results of
operations, or liquidity.
In November 2002, the Financial Accounting Standards Board("FASB") issued
EITF Issue No. 00-21, "Accounting for Revenue Arrangements with Multiple
Deliverables." This issue addresses how to account for arrangements that
may involve the delivery or performance of multiple products, services,
and/or rights to use assets. The final consensus of this issue is
applicable to agreements entered into in fiscal periods beginning after June
15, 2003. Additionally, companies will be permitted to apply the consensus
guidance in this issue to all existing arrangements as the cumulative effect
of a change in accounting principle in accordance with APB Opinion No. 20,
"Accounting Changes." The company does not believe that adoption of this
issue will have a material impact on its consolidated financial position,
consolidated results of operations, or liquidity.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN No. 46"). This interpretation clarifies
the application of Accounting Research Bulletin No. 51, "Consolidated
Financial Statements," to certain entities in which equity investors do
not have the characteristics of a controlling financial interest or do not
have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties. FIN
No. 46 applies immediately to variable interest entities created after
January 31, 2003, and to variable interest entities in which an enterprise
obtains an interest after that date. The company has one such variable
interest entity under a facility lease that expires in March 2005. The
owner of the property is a special-purpose entity in which unrelated third
parties made and have maintained an equity capital investment. The company
has no debt or equity interest in this entity. At March 31, 2003, the
company did not consolidate this entity. Effective July 1, 2003, in
accordance with FIN No. 46, the company will be required to consolidate this
entity. Assets and debt are expected to increase by approximately $30
million; however, the change in the company's results of operations is
expected to be immaterial.
10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
- ---------------------
For the three months ended March 31, 2003, the company reported net income of
$38.5 million, or $.12 per share, compared to $32.7 million, or $.10 per
share, for the three months ended March 31, 2002.
Total revenue for the quarter ended March 31, 2003 was $1.40 billion, up 3%
from revenue of $1.36 billion for the quarter ended March 31, 2002. Foreign
currency translations had a 4% positive impact on revenue in the quarter when
compared to the year-ago period. In the current quarter, Services revenue
increased 6% and Technology revenue declined 7%.
U.S. revenue increased 17% in the first quarter compared to the year-ago period
driven principally by strength in the U.S. Federal government business, and
revenue in international markets decreased 7% driven by declines in Latin
America and Europe.
Total gross profit margin was 27.7% in the first quarter of 2003 compared to
28.6% in the year-ago period, principally reflecting a decline in pension
income.
For the three months ended March 31, 2003, selling, general and administrative
expenses were $243.7 million (17.4% of revenue) compared to $245.4 million
(18.0% of revenue) for the three months ended March 31, 2002.
Research and development ("R&D") expense was $66.8 million compared to $65.1
million a year ago. The company continues to invest in high-end Cellular
MultiProcessing server technology and in key programs within its industry
practices.
For the first quarter of 2003, the company reported an operating income percent
of 5.5% compared to 5.8% for the first quarter of 2002, principally reflecting
lower pension income.
Pension income for the three months ended March 31, 2003 was approximately $6
million compared to approximately $38 million for the three months ended March
31, 2002. At the beginning of each year, accounting rules require that the
company establish an expected long-term rate of return on its pension plan
assets. One of the reasons for the decline in pension income was that,
effective January 1, 2003, the company reduced its expected long-term rate of
return on plan assets for its U.S. pension plan to 8.75% from 9.50%. In
addition, the discount rate used for the U.S. pension plan declined to 6.75% at
December 31, 2002, from 7.50% at December 31, 2001. The remaining reasons for
the decline in pension income were lower expected returns on U.S. plan assets
due to asset declines, the company's recent change to a cash balance plan in
the U.S., and for international plans, declines in discount rates, lower
expected long-term rates of return on plan assets, and currency translation.
The company records pension income or expense, as well as other employee-related
costs such as FICA and medical insurance costs, in operating income in the
following income statement categories: cost of sales; selling, general and
administrative expenses; and research and development expenses. The amount
allocated to each income statement line is based on where the salaries of the
active employees are charged.
Interest expense for the three months ended March 31, 2003 was $15.7 million
compared to $17.5 million for the three months ended March 31, 2002 principally
due to lower average interest rates.
Other income (expense), net was an expense of $3.4 million in the current
quarter compared to an expense of $12.4 million in the year-ago quarter. The
decrease in expense was principally due to foreign exchange losses of $4.4
million in the current quarter compared to losses of $9.7 million in the prior-
year period (principally relating to Latin America).
Income before income taxes was $57.5 million in the first quarter of 2003
compared to $48.9 million last year. The provision for income taxes was $19.0
million in the current period compared to $16.2 million in the year-ago period.
The effective tax rate in both periods was 33%.
11
Segment results
- ---------------
The company has two business segments: Services and Technology. Revenue
classifications are as follows: Services - systems integration, outsourcing,
infrastructure services, and core maintenance; Technology - enterprise-class
servers and specialized technologies. 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 recognizes intersegment revenue
and manufacturing profit on hardware and software shipments to customers under
Services contracts. The Services segment, in turn, recognizes customer revenue
and marketing profit 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 March 31, 2003 and 2002,
was $3.1 million and $5.6 million, respectively. The profit on these
transactions is eliminated in Corporate. The company evaluates business
segment performance on operating income exclusive of 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.
Information by business segment is presented below (in millions of dollars):
Elimi-
Total nations Services Technology
------- ------- -------- ----------
Three Months Ended
March 31, 2003
- ------------------
Customer revenue $1,398.9 $1,107.0 $291.9
Intersegment $( 70.0) 5.6 64.4
-------- ------- -------- ------
Total revenue $1,398.9 $( 70.0) $1,112.6 $356.3
======== ======= ======== ======
Gross profit percent 27.7% 18.7% 50.0%
======== ======== ======
Operating income
percent 5.5% 3.1% 11.1%
======== ======== ======
Three Months Ended
March 31, 2002
- ------------------
Customer revenue $1,362.5 $1,049.2 $313.3
Intersegment $( 80.7) 11.5 69.2
-------- ------- -------- ------
Total revenue $1,362.5 $( 80.7) $1,060.7 $382.5
======== ======= ======== ======
Gross profit percent 28.6% 21.7% 42.5%
======== ======== ======
Operating income
percent 5.8% 4.9% 7.7%
======== ======== ======
Gross profit percent and operating income percent are as a percent of total
revenue.
12
In the Services segment, customer revenue was $1.1 billion for the three months
ended March 31, 2003, up 6% compared to $1.0 billion for the three months ended
March 31, 2002. The increase in Services revenue was due to a 20% increase in
outsourcing ($409 million in 2003 compared to $342 million in 2002) and a 1%
increase in core maintenance revenue ($141 million in 2003 compared to $139
million in 2002), offset in part by a 2% decrease in systems integration ($356
million in 2003 compared to $364 million in 2002) and a 2% decrease in
infrastructure services ($201 million in 2003 compared to $205 million in 2002).
Within the Services segment, the change in revenue in the first quarter of 2003
compared to the first quarter of 2002 reflects current market conditions.
Market demand in the Services segment varies by revenue classification. Demand
for services that drive short-term cost and process efficiencies (outsourcing)
remains strong, while market demand for project-based work (systems integration
and infrastructure services) remains weak. The growth in outsourcing revenue,
which was driven by growth in business process outsourcing, and the decline in
both systems integration and infrastructure services were reflective of these
market conditions. Services gross profit was 18.7% for the three months ended
March 31, 2003 compared to 21.7% in the year-ago period, and Services operating
income percent was 3.1% for the three months ended March 31, 2003 compared to
4.9% last year. The reason for these declines was principally lower pension
income in the current quarter compared to the year-ago period as well as a
lower content of higher- margin systems integration revenue.
In the Technology segment, customer revenue was $292 million for the three
months ended March 31, 2003 compared to $313 million for the three months ended
March 31, 2002. Demand in the Technology segment remained weak industry-wide
as customers continue to defer spending on new computer hardware and software.
The 7% decline in revenue was due to a 12% decrease in sales of specialized
technology products ($74 million in 2003 compared to $85 million in 2002) and a
5% decline in sales of enterprise-class servers ($218 million in 2003 compared
to $228 million in 2002). Technology gross profit percent was 50.0% for the
three months ended March 31, 2003 compared to 42.5% in the year-ago period, and
Technology operating income percent was 11.1% for the three months ended March
31, 2003 compared to 7.7% last year. The margin improvements primarily
reflected a higher proportion of high-end, higher-margin products within the
ClearPath product line and continued tight cost controls, offset in part by
lower pension income.
New Accounting Pronouncements
- -----------------------------
Effective January 1, 2003, the company adopted SFAS No. 145, "Rescission of
FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections." SFAS No. 145 rescinds SFAS No. 4, which required that
all gains and losses from extinguishment of debt be reported as an
extraordinary item. Previously recorded losses on the early extinguishment of
debt that were classified as an extraordinary item in prior periods have been
reclassified to other income (expense), net. The adoption of SFAS No. 145 had
no effect on the company's consolidated financial position, consolidated
results of operations, or liquidity.
Effective January 1, 2003, the company adopted SFAS No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities." SFAS No. 146 requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of commitment to an exit or disposal
plan. SFAS No. 146 replaces previous accounting guidance provided by Emerging
Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)" and is effective for the company
for exit or disposal activities initiated after December 31, 2002. Adoption of
this statement had no impact on the company's consolidated financial position,
consolidated results of operations, or liquidity.
Effective January 1, 2003, the company adopted FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, and Interpretation of FASB
Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34"
("FIN No. 45"). The interpretation requires that upon issuance of a guarantee,
the entity must recognize a liability for the fair value of the obligation it
assumes under that guarantee. In addition, FIN No. 45 requires disclosures
about the guarantees that an entity has issued, including a roll forward of the
entity's product warranty liabilities. This interpretation is intended to
13
improve the comparability of financial reporting by requiring identical
accounting for guarantees issued with separately identified consideration and
guarantees issued without separately identified consideration. Adoption of
this Interpretation had no impact on the company's consolidated financial
position, consolidated results of operations, or liquidity.
In November 2002, the FASB issued EITF Issue No. 00-21, "Accounting for Revenue
Arrangements with Multiple Deliverables." This issue addresses how to account
for arrangements that may involve the delivery or performance of multiple
products, services, and/or rights to use assets. The final consensus of this
issue is applicable to agreements entered into in fiscal periods beginning
after June 15, 2003. Additionally, companies will be permitted to apply the
consensus guidance in this issue to all existing arrangements as the cumulative
effect of a change in accounting principle in accordance with APB Opinion No.
20, "Accounting Changes." The company does not believe that adoption of this
issue will have a material impact on its consolidated financial position,
consolidated results of operations, or liquidity.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN No. 46"). This interpretation clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN No. 46 applies
immediately to variable interest entities created after January 31, 2003, and
to variable interest entities in which an enterprise obtains an interest after
that date. The company has one such variable interest entity under a facility
lease that expires in March 2005. The owner of the property is a special-
purpose entity in which unrelated third parties made and have maintained an
equity capital investment. The company has no debt or equity interest in this
entity. At March 31, 2003, the company did not consolidate this entity.
Effective July 1, 2003, in accordance with FIN No. 46, the company will be
required to consolidate this entity. Assets and debt are expected to increase
by approximately $33 million; however, the change in the company's results of
operations is expected to be immaterial.
Financial Condition
- -------------------
Cash and cash equivalents at March 31, 2003 were $433.1 million compared to
$301.8 million at December 31, 2002.
During the three months ended March 31, 2003, cash used for operations was $64.9
million compared to cash provided by operations of $9.6 million for the three
months ended March 31, 2002. The change in operating cash flow principally
reflected lower levels of customer prepayments in the current period compared
to the prior-year period and the payment in the first quarter of 2003 of 2002
incentive compensation compared to no payments of incentive compensation in the
prior-year period. Cash expenditures in the current quarter related to prior-
year restructuring charges (which are included in operating activities) were
approximately $31 million compared to $35 million for the prior-year quarter,
and are expected to be approximately $35 million for the remainder of 2003 and
$14 million in total for all subsequent years, principally for work-force
reductions and idle lease costs. Personnel reductions in the current quarter
related to these restructuring actions were approximately 400 and are expected
to be approximately 100 for the remainder of the year.
Cash used for investing activities for the three months ended March 31, 2003
was $103.8 million compared to $73.1 million during the three months ended
March 31, 2002. During 2003, both proceeds from investments and purchases of
investments, which represent derivative financial instruments used to manage
the company's exposure to market risks from changes in foreign currency
exchange rates, increased from the prior year as a result of an increase in the
company's exposures, principally related to intercompany accounts. The
increase in cash used was principally due to net purchases of investments of
$13.6 million in the current quarter compared to net proceeds of $2.6 million
in the prior-year period.
14
In addition, the current period investment in marketable software was $40.0
million compared to $36.3 million in the prior-year, and capital additions to
properties was $49.4 million for the three months ended March 31, 2003
compared to $39.4 million in the prior-year period.
Cash provided by financing activities during the current quarter was $298.5
million compared to $22.8 million in the prior year. The current period
includes net proceeds from issuance of long-term debt of $293.3 million, as
described below.
In March 2003, the company issued $300 million of 6 7/8% senior notes due 2010.
At March 31, 2003, total debt was $1.13 billion, an increase of $297.7 million
from December 31, 2002.
The company has a $450 million credit agreement that expires in March 2004.
As of March 31, 2003, there were no borrowings under this facility.
Borrowings under the agreement bear interest based on the then-current LIBOR
or prime rates and the company's credit rating. The credit agreement contains
financial and other covenants, including maintenance of certain financial
ratios, a minimum level of net worth and limitations on certain types of
transactions, which could reduce the amount the company is able to borrow.
Events of default under the credit agreement include failure to perform
covenants, material adverse change, change of control and default under other
debt aggregating at least $25 million. If an event of default were to occur
under the credit agreement, the lenders would be entitled to declare all
amounts borrowed under it immediately due and payable. The occurrence of an
event of default under the credit agreement could also cause the acceleration
of obligations under certain other agreements and the termination of the
company's U.S. trade accounts receivable facility described below.
In addition, the company and certain international subsidiaries have access to
certain uncommitted lines of credit from various banks. Other sources of
short-term funding are operational cash flows, including customer prepayments,
and the company's U.S. trade accounts receivable facility. Using this
facility, the company sells, on an on-going basis, up to $225 million of its
eligible U.S. trade accounts receivable through a wholly owned subsidiary,
Unisys Funding Corporation I. The facility expires in December 2003.
At March 31, 2003, the company has met all covenants and conditions under its
various lending and funding agreements. Since the company believes that it
will continue to meet these covenants and conditions, the company believes
that it has adequate sources and availability of short-term funding to meet
its expected cash requirements.
The company may, from time to time, redeem, tender for, or repurchase its
securities in the open market or in privately negotiated transactions
depending upon availability, market conditions and other factors.
The company has on file with the Securities and Exchange Commission a
registration statement covering $1.2 billion of debt or equity securities,
which enables the company to be prepared for future market opportunities.
At March 31, 2003, the company had deferred tax assets in excess of deferred
tax liabilities of $2,187 million. For the reasons cited below, management
determined that it is more likely than not that $1,727 million of such assets
will be realized, therefore resulting in a valuation allowance of $460 million.
The company evaluates quarterly the realizability of its deferred tax assets
and adjusts the amount of the related valuation allowance, if necessary. The
factors used to assess the likelihood of realization are the company's forecast
of future taxable income, and available tax planning strategies that could be
implemented to realize deferred tax assets. Approximately $5.2 billion of
future taxable income (predominantly U.S.) is needed to realize all of the net
deferred tax assets. Failure to achieve forecasted taxable income might
affect the ultimate realization of the net deferred tax assets. See "Factors
That May Affect Future Results" below.
15
Stockholders' equity increased $45.6 million during the three months ended
March 31, 2003, principally reflecting net income of $38.5 million, $11.4
million for issuance of stock under stock option and other plans, $1.3 million
of tax benefits related to employee stock plans offset in part by currency
translation of $7.7 million.
In March 2003, the company signed a lease commitment in Reston, VA. The
facility is to be used to consolidate the company's expanding U.S. Federal
government business. The initial lease period runs from April 2003 to
July 2018 and the lease provides for two five-year extensions. The rent over
the initial lease term is approximately $110 million.
At December 31st of each year, accounting rules require a company to recognize
a liability on its balance sheet for each pension plan if the fair value of
the assets of that pension plan is less than the present value of the pension
obligation (the accumulated benefit obligation, or "ABO"). This liability is
called a "minimum pension liability." Concurrently, any existing prepaid
pension asset for the pension plan must be removed. These adjustments are
recorded as a charge in "accumulated other comprehensive income (loss)" in
stockholders' equity. If at any future year-end, the fair value of the
pension plan assets exceeds the ABO, the charge to stockholders' equity would
be reversed for such plan. Alternatively, if the fair market value of pension
plan assets experiences further declines or the company reduces the discount
rate, additional charges to accumulated other comprehensive income (loss)
may be required at a future year-end.
At December 31, 2002, for all of the company's defined benefit pension plans,
as well as the defined benefit pension plan of Nihon Unisys, Ltd. (an equity
investment), the ABO exceeded the fair value of pension plan assets. As a
result, as previously disclosed, the company was required to do the following:
remove from its assets $1.4 billion of prepaid pension plan assets; increase
its accrued pension liabilities by approximately $700 million; reduce its
investments at equity by approximately $80 million relating to the company's
share of NUL's minimum pension liability; and offset these changes by a charge
to other comprehensive loss in stockholders' equity of $2.2 billion, or $1.5
billion net of tax.
This accounting had no effect on the company's net income, liquidity or cash
flows. Financial ratios and net worth covenants in the company's credit
agreements and debt securities are unaffected by the charge to stockholders'
equity caused by recording a minimum pension liability.
In accordance with regulations governing contributions to U.S. defined benefit
pension plans, the company is not required to fund its U.S. defined benefit
plan in 2003. The company expects to make cash contributions of approximately
$60 million to its other defined benefit pension plans during 2003.
Factors That May Affect Future Results
- --------------------------------------
From time to time, the company provides information containing "forward-looking"
statements, as defined in the Private Securities Litigation Reform Act of 1995.
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. These other
factors include, but are not limited to, those discussed below. 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.
The company's business is affected by changes in general economic and business
conditions. The company is facing a very challenging economic environment.
In this environment, many organizations are delaying planned purchases of
information technology products and services. If the level of demand for the
company's products and services declines in the future, the company's business
could be adversely affected. The company's business could also be affected by
acts of war, terrorism or natural disasters. Current world tensions could
16
escalate and this could have unpredictable consequences on the world economy
and on our business.
The information services and technology markets in which the company operates
include a large number of companies vying for customers and market share both
domestically and internationally. The company's competitors include computer
hardware manufacturers, software providers, systems integrators, consulting
and other professional services firms, outsourcing providers, and
infrastructure services providers. Some of the company's competitors may
develop competing products and services that offer better price-performance or
that reach the market in advance of the company's offerings. Some competitors
also have or may develop greater financial and other resources than the
company, with enhanced ability to compete for market share, in some instances
through significant economic incentives to secure contracts. Some may also be
better able to compete for skilled professionals. Any of this could have an
adverse effect on the company's business. Future results will depend on the
company's ability to mitigate the effects of aggressive competition on
revenues, pricing and margins and on the company's ability to attract and
retain talented people.
The company operates in a highly volatile industry characterized by rapid
technological change, evolving technology standards, short product life cycles
and continually changing customer demand patterns. Future success will depend
in part on the company's ability to anticipate and respond to these market
trends and to design, develop, introduce, deliver or obtain new and innovative
products and services on a timely and cost-effective basis. The company may
not be successful in anticipating or responding to changes in technology,
industry standards or customer preferences, and the market may not demand or
accept its services and product offerings. In addition, products and services
developed by competitors may make the company's offerings less competitive.
The company's future results will depend in part on its ability to continue to
accelerate growth in outsourcing and infrastructure services. The company's
outsourcing contracts are multiyear engagements under which the company takes
over management of a client's technology operations, business processes or
networks. The company will need to maintain a strong financial position in
order to grow its outsourcing business. In a number of these arrangements, the
company hires certain of its clients' employees and may become responsible for
the related employee obligations, such as pension and severance commitments.
In addition, system development activity on outsourcing contracts may require
the company to make significant upfront investments. As long-term
relationships, these outsourcing contracts provide a base of recurring revenue.
However, in the early phases of these contracts, gross margins may be lower
than in later years when the work force and facilities have been rationalized
for efficient operations, and an integrated systems solution has been
implemented. Future results will depend on the company's ability to
effectively complete these rationalizations and solution implementations.
Future results will also depend in part on the company's ability to drive
profitable growth in systems integration and consulting. The company's systems
integration and consulting business has been adversely affected by the current
economic slowdown. In this economic environment, customers have been delaying
systems integration projects. The company's ability to grow profitably in this
business will depend in part on an improvement in economic conditions and a
pick-up in demand for systems integration projects. It will also depend on the
success of the actions the company has taken to enhance the skills base and
management team in this business and to refocus the business on integrating
best-of-breed, standards-based solutions to solve client needs. In addition,
profit margins in this business are largely a function of the rates the company
is able to charge for services and the chargeability of its professionals. If
the company is unable to maintain the rates it charges, or appropriate
chargeability, for its professionals, profit margins will suffer. The rates
the company is able to charge for services are affected by a number of factors,
including clients' perception of the company's ability to add value through
its services; introduction of new services or products by the company or its
competitors; pricing policies of competitors; and general economic conditions.
Chargeability is also affected by a number of factors, including the company's
ability to transition employees from completed projects to new engagements;
and its ability to forecast demand for services and thereby maintain an
appropriate head count.
17
Future results will also depend in part on market acceptance of the company's
high-end enterprise servers. In its technology business, the company is
focusing its resources on high-end enterprise servers based on its Cellular
MultiProcessing (CMP) architecture. The company's CMP servers are designed to
provide mainframe-class capabilities with compelling price-performance by
making use of standards-based technologies such as Intel chips and Microsoft
operating system software. The company has transitioned both its legacy
ClearPath servers and its Intel-based ES7000s to the CMP platform, creating a
common platform for all the company's high-end server lines. Future results
will depend, in part, on customer acceptance of the new CMP-based ClearPath
Plus systems and the company's ability to maintain its installed base for
ClearPath. In addition, future results will depend, in part, on the company's
ability to generate new customers and increase sales of the Intel-based ES7000
line. The company believes there is significant growth potential in the
developing market for high-end, Intel-based servers running Microsoft operating
system software. However, competition in this new market is likely to
intensify in coming years, and the company's ability to succeed will depend on
its ability to compete effectively against enterprise server competitors with
more substantial resources and its ability to achieve market acceptance of the
ES7000 technology by clients, systems integrators, and independent software
vendors.
A number of the company's long-term contracts for infrastructure services,
outsourcing, help desk and similar services do not provide for minimum
transaction volumes. As a result, revenue levels are not guaranteed. In
addition, some of these contracts may permit termination or may impose other
penalties if the company does not meet the performance levels specified in the
contracts.
Some of the company's systems integration contracts are fixed-priced contracts
under which the company assumes the risk for delivery of the contracted
services and products at an agreed-upon fixed price. At times the company has
experienced problems in performing some of these fixed-price contracts on a
profitable basis and has provided periodically for adjustments to the
estimated cost to complete them. Future results will depend on the company's
ability to perform these services contracts profitably.
The company frequently enters into contracts with governmental entities.
Risks and uncertainties associated with these government contracts include the
availability of appropriated funds and contractual provisions that allow
governmental entities to terminate agreements at their discretion before the
end of their terms.
The success of the company's business is dependent on strong, long-term client
relationships and on its reputation for responsiveness and quality. As a
result, if a client is not satisfied with the company's services or products,
its reputation could be damaged and its business adversely affected. In
addition, if the company fails to meet its contractual obligations, it could be
subject to legal liability, which could adversely affect its business,
operating results and financial condition.
The company has commercial relationships with suppliers, channel partners and
other parties that have complementary products, services or skills. Future
results will depend in part on the performance and capabilities of these third
parties, on the ability of external suppliers to deliver components at
reasonable prices and in a timely manner, and on the financial condition of,
and the company's relationship with, distributors and other indirect channel
partners.
Approximately 52% of the company's total revenue derives from international
operations. The risks of doing business internationally include foreign
currency exchange rate fluctuations, changes in political or economic
conditions, trade protection measures, import or export licensing
requirements, multiple and possibly overlapping and conflicting tax laws, and
weaker intellectual property protections in some jurisdictions.
The company cannot be sure that its services and products do not infringe on
the intellectual property rights of third parties, and it may have
infringement claims asserted against it or against its clients. These claims
could cost the company money, prevent it from offering some services or
products, or damage its reputation.
18
Item 4. Controls and Procedures
Within 90 days prior to the date of filing of this report, the company
carried out an evaluation, under the supervision and with the participation of
the company's management, including the Chief Executive Officer and the Chief
Financial Officer, of the design and operation of the company's disclosure
controls and procedures. Based on this evaluation, the company's Chief
Executive Officer and Chief Financial Officer concluded that the company's
disclosure controls and procedures are effective for gathering, analyzing and
disclosing the information the company is required to disclose in the reports
it files under the Securities Exchange Act of 1934, within the time periods
specified in the SEC's rules and forms. There have been no significant
changes in the company's internal controls or in other factors that could
significantly affect internal controls subsequent to the date of this
evaluation.
Part II - OTHER INFORMATION
- ------- -----------------
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
See Exhibit Index
(b) Reports on Form 8-K
During the quarter ended March 31, 2003, the company filed
one Current Report on Form 8-K, dated March 12, 2003, to report under items 5
and 7 of such form.
19
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
UNISYS CORPORATION
Date: May 2, 2003 By: /s/ Janet M. Brutschea Haugen
-----------------------------
Janet M. Brutschea Haugen
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
By: /s/ Carol S. Sabochick
----------------------
Carol S. Sabochick
Vice President and
Corporate Controller
(Chief Accounting Officer)
CERTIFICATION
I, Lawrence A. Weinbach, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Unisys Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weakness in internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 2, 2003 /s/ Lawrence A. Weinbach
------------------------
Name: Lawrence A. Weinbach
Title: Chairman, President and
Chief Executive Officer
CERTIFICATION
I, Janet Brutschea Haugen, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Unisys Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weakness in internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 2, 2003 /s/ Janet Brutschea Haugen
--------------------------
Name: Janet Brutschea Haugen
Title: Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
12 Statement of Computation of Ratio of Earnings to Fixed Charges
99.1 Certification of Lawrence A. Weinbach pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
99.2 Certification of Janet B. Haugen pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350