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 June 30, 1999. [ ] 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 [ ] Number of shares of Common Stock outstanding as of June 30, 1999: 282,988,882.
2 Part I - FINANCIAL INFORMATION Item 1. Financial Statements. <TABLE> UNISYS CORPORATION CONSOLIDATED BALANCE SHEET (UNAUDITED) (Millions) <CAPTION> June 30, December 31, 1999 1998 ----------- ------------ <S> <C> <C> Assets - ------ Current assets Cash and cash equivalents $ 438.8 $ 604.3 Accounts and notes receivable, net 1,201.4 1,232.0 Inventories Parts and finished equipment 216.1 263.6 Work in process and materials 167.7 199.7 Deferred income taxes 459.8 428.8 Other current assets 103.1 88.3 --------- -------- Total 2,586.9 2,816.7 --------- -------- Properties 1,662.9 1,720.5 Less-Accumulated depreciation 1,110.5 1,139.6 --------- -------- Properties, net 552.4 580.9 --------- -------- Investments at equity 193.4 184.6 Software, net of accumulated amortization 237.9 246.6 Prepaid pension cost 888.1 833.8 Deferred income taxes 694.4 694.4 Other assets 298.3 220.7 --------- -------- Total $5,451.4 $5,577.7 ========= ======== Liabilities and stockholders' equity - ------------------------------------ Current liabilities Notes payable $ 62.0 $ 50.6 Current maturities of long-term debt 24.2 4.0 Accounts payable 895.1 922.7 Other accrued liabilities 1,119.8 1,301.9 Dividends payable 12.6 26.6 Estimated income taxes 314.3 276.7 --------- -------- Total 2,428.0 2,582.5 --------- -------- Long-term debt 1,088.8 1,105.2 Other liabilities 344.6 373.0 Stockholders' equity Preferred stock 670.8 1,420.0 Common stock, issued: 1999, 284.8; 1998, 257.9 2.8 2.6 Accumulated deficit (1,258.3) (1,456.3) Other capital 2,749.9 2,082.3 Accumulated other comprehensive loss (575.2) (531.6) --------- -------- Stockholders' equity 1,590.0 1,517.0 --------- -------- Total $5,451.4 $5,577.7 ========= ======== See notes to consolidated financial statements. </TABLE>
3 <TABLE> UNISYS CORPORATION CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (Millions, except per share data) <CAPTION> Three Months Six Months Ended June 30 Ended June 30 ----------------- ---------------- 1999 1998 1999 1998 -------- -------- -------- -------- <S> <C> <C> <C> <C> Revenue $1,886.4 $1,728.5 $3,698.8 $3,378.2 -------- -------- -------- -------- Cost and expenses Cost of revenue 1,227.9 1,145.6 2,377.7 2,236.1 Selling, general and administrative 341.5 328.6 672.5 658.8 Research and development expenses 81.2 70.0 158.4 142.9 -------- -------- -------- -------- 1,650.6 1,544.2 3,208.6 3,037.8 -------- -------- -------- -------- Operating income 235.8 184.3 490.2 340.4 Interest expense 34.7 42.6 68.9 89.1 Other income (expense), net (16.9) (.9) (66.1) (12.5) -------- -------- -------- -------- Income before income taxes 184.2 140.8 355.2 238.8 Estimated income taxes 64.5 50.7 124.3 86.0 -------- -------- -------- -------- Net income 119.7 90.1 230.9 152.8 Dividends on preferred shares 12.0 26.6 34.8 53.3 -------- -------- -------- -------- Earnings on common shares $ 107.7 $ 63.5 $ 196.1 $ 99.5 ======== ======== ======== ======== Earnings per common share Basic $ .40 $ .25 $ .73 $ .40 ======== ======== ======== ======== Diluted $ .38 $ .24 $ .70 $ .38 ======== ======== ======== ======== See notes to consolidated financial statements. </TABLE>
4 <TABLE> UNISYS CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (Millions) <CAPTION> Six Months Ended June 30 ------------------ 1999 1998 -------- -------- <S> <C> <C> Cash flows from operating activities Net income $ 230.9 $ 152.8 Add (deduct) items to reconcile net income to net cash provided by operating activities: Depreciation 72.4 70.2 Amortization: Marketable software 58.0 52.8 Goodwill 8.0 3.4 (Increase)in deferred income taxes, net (31.0) (2.8) (Increase) decrease in receivables, net (5.3) 36.9 Decrease in inventories 79.5 7.6 (Decrease) in accounts payable and other accrued liabilities (248.0) (126.2) Increase in estimated income taxes 37.6 35.6 (Decrease)increase in other liabilities (10.7) 1.2 (Increase) in other assets (74.6) (13.6) Other 19.8 8.7 ------- ------- Net cash provided by operating activities 136.6 226.6 ------- ------- Cash flows from investing activities Proceeds from investments 638.9 913.8 Purchases of investments (618.9) (906.7) Proceeds from sales of properties 11.0 Investment in marketable software (49.2) ( 58.5) Capital additions of properties (77.8) ( 63.3) Purchases of businesses (51.9) ------- ------- Net cash used for investing activities (147.9) (114.7) ------- ------- Cash flows from financing activities Redemption of preferred stock (181.9) Proceeds from issuance of debt 29.5 195.2 Payments of long-term debt (2.4) (408.2) Net proceeds from short-term borrowings 11.5 23.4 Dividends paid on preferred shares (47.0) ( 53.3) Proceeds from employee stock plans 46.0 52.6 ------- ------- Net cash used for financing activities (144.3) (190.3) ------- ------- Effect of exchange rate changes on cash and cash equivalents (9.9) ( 12.9) ------- ------- (Decrease) in cash and cash equivalents (165.5) ( 91.3) Cash and cash equivalents, beginning of period 604.3 803.0 -------- -------- Cash and cash equivalents, end of period $ 438.8 $ 711.7 ======== ======== See notes to consolidated financial statements. </TABLE>
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 shares used in the computations of earnings per share are as follows (in thousands): Three Months Ended Six Months Ended June 30 June 30 ------------------ ----------------- 1999 1998 1999 1998 ------- ------- ------- ------- Basic 272,558 251,134 266,850 249,704 Diluted 282,941 266,473 278,934 264,497 b. A summary of the company's operations by business segment for the three and six month periods ended June 30, 1999 and 1998 is presented below(in millions of dollars): Total Corporate Services Technology Three Months Ended ----- --------- -------- ---------- June 30, 1999 ------------------ Customer revenue $1,886.4 $1,370.0 $ 516.4 Intersegment $(154.8) 16.7 138.1 -------- -------- -------- -------- Total revenue $1,886.4 $(154.8) $1,386.7 $ 654.5 ======== ======== ======== ======== Operating income(loss) $ 235.8 $ (.2) $ 115.9 $ 120.1 ======== ======== ======== ======== Three Months Ended June 30, 1998 ------------------ Customer revenue $1,728.5 $1,226.3 $ 502.2 Intersegment $(123.3) 16.2 107.1 -------- -------- -------- -------- Total revenue $1,728.5 $(123.3) $1,242.5 $ 609.3 ======== ======== ======== ======== Operating income(loss) $ 184.3 $( 9.2) $ 90.3 $ 103.2 ======== ======= ======== ======== Six Months Ended June 30, 1999 ---------------- Customer revenue $3,698.8 $2,562.3 $1,136.5 Intersegment $(263.9) 31.3 232.6 -------- -------- -------- -------- Total revenue $3,698.8 $(263.9) $2,593.6 $1,369.1 ======== ======== ======== ======== Operating income(loss) $ 490.2 $ (8.2) $ 186.7 $ 311.7 ======== ======== ======== ======== Six Months Ended June 30, 1998 ------------------ Customer revenue $3,378.2 $2,277.5 $1,100.7 Intersegment $(248.4) 31.0 217.4 -------- -------- -------- -------- Total revenue $3,378.2 $(248.4) $2,308.5 $1,318.1 ======== ======== ======== ======== Operating income(loss) $ 340.4 $( 27.1) $ 138.5 $ 229.0 ======== ======= ======== ========
6 Presented below is a reconciliation of total business segment operating income to consolidated income before taxes (in millions of dollars): Three Months Six Months Ended June 30 Ended June 30 --------------- ------------- 1999 1998 1999 1998 ---- ---- ------ ------ Total segment operating income $236.0 $193.5 $498.4 $367.5 Interest expense (34.7) (42.6) (68.9) (89.1) Other income (expense), net (16.9) ( .9) (66.1) (12.5) Corporate and eliminations ( .2) ( 9.2) ( 8.2) (27.1) ------ ------ ------ ------ Total income before income taxes $184.2 $140.8 $355.2 $238.8 ====== ====== ====== ====== c. Comprehensive income for the three and six months ended June 30, 1999 and 1998 includes the following components (in millions of dollars): Three Months Six Months Ended June 30 Ended June 30 --------------- ------------- 1999 1998 1999 1998 ------ ------ ------ ------ Net income $119.7 $ 90.1 $230.9 $152.8 Other comprehensive income (loss) Foreign currency translation adjustment 15.8 (25.4) (43.1) (54.7) Related tax expense (benefit) .7 ( 1.7) .5 ( 2.2) ------ ------ ------ ------ Total other comprehensive income (loss) 15.1 (23.7) (43.6) (52.5) ------ ------ ------ ------ Comprehensive income (loss) $134.8 $ 66.4 $187.3 $100.3 ====== ====== ====== ====== Accumulated other comprehensive income (loss), (all of which relates to foreign currency translation adjustments) as of June 30,1999 and December 31, 1998 is as follows (in millions of dollars): June 30, December 31, 1999 1998 ---------------- ----------- Balance at beginning of period $(531.6) $(448.1) Translation adjustments ( 43.6) ( 83.5) ------- ------- Balance at end of period $(575.2) $(531.6) ======= =======
7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations - --------------------- For the three months ended June 30, 1999, the company reported net income of $119.7 million, compared to $90.1 million for the three months ended June 30, 1998. After payment of preferred dividends, the company earned $.38 per common share on a diluted basis compared to $.24 a year ago. Total revenue for the quarter ended June 30, 1999 was $1.89 billion, up 9% from revenue of $1.73 billion for the quarter ended June 30, 1998. Excluding the negative impact of foreign currency fluctuations, revenue in the quarter rose 12%. Total gross profit percent increased to 34.9% in the second quarter of 1999 from 33.7% in the year-ago period. For the three months ended June 30, 1999, selling, general and administrative expenses were $341.5 million (18.1% of revenue) compared to $328.6 million (19.0% of revenue) for the three months ended June 30, 1998. The decrease in these costs as a percent of revenue was largely due to the company's ongoing cost reduction programs, as well as stringent controls over discretionary expenditures. Research and development expenses were $81.2 million compared to $70.0 million a year earlier. For the second quarter of 1999, the company reported an operating income percent of 12.5% compared to 10.7% for the second quarter of 1998. Information by business segment is presented below (in millions): <TABLE> <CAPTION> Elimi- Total nations Services Technology ------- ------- -------- ---------- <S> <C> <C> <C> <C> Three Months Ended June 30, 1999 - ------------------ Customer revenue $1,886.4 $1,370.0 $516.4 Intersegment $(154.8) 16.7 138.1 -------- ------- -------- ------ Total revenue $1,886.4 $(154.8) $1,386.7 $654.5 ======== ======= ======== ====== Gross profit percent 34.9% 24.9% 46.8% ======== ======== ====== Operating income percent 12.5% 8.4% 18.4% ======== ======== ====== Three Months Ended June 30, 1998 - ------------------ Customer revenue $1,728.5 $1,226.3 $502.2 Intersegment $(123.3) 16.2 107.1 -------- ------- -------- ------ Total revenue $1,728.5 $(123.3) $1,242.5 $609.3 ======== ======= ======== ====== Gross profit percent 33.7% 24.4% 46.3% ======== ======== ====== Operating income percent 10.7% 7.3% 16.9% ======== ======== ====== </TABLE> In the Services segment, customer revenue increased by 12% to $1.37 billion in the second quarter of 1999 from $1.23 billion in the second quarter of 1998. Excluding proprietary maintenance revenue, which continues to decline industry- wide, revenue increased 15% in the quarter. The increase was led by growth in outsourcing as well as repeatable solutions and systems integration revenue. In the second quarter of 1999, gross profit increased to 24.9% from 24.4% in 1998, and operating profit was 8.4% compared to 7.3% in 1998. The increase in operating profit was largely due to ongoing cost reduction programs as well as stringent cost controls over discretionary expenditures.
8 In the Technology segment, customer revenue increased 3% to $516 million in the second quarter of 1999 from $502 million in the prior-year period primarily due to continued strong demand for ClearPath enterprise servers and software which more than offset the expected declines in personal computer revenue. The gross profit percent was 46.8% in 1999, compared to 46.3% in 1998. Operating profit in this segment was 18.4% in 1999 compared to 16.9% in 1998. The increase in operating profit was largely due to the ongoing cost reduction efforts. Interest expense for the three months ended June 30, 1999 declined to $34.7 million from $42.6 million for the three months ended June 30, 1998. The decline was principally due to the company's debt reduction program. Other income (expense), net, which can vary from quarter to quarter, was an expense of $16.9 million in the current quarter compared to an expense of $.9 million in the year-ago quarter. The change was mainly due to equity losses and less interest income. Income before income taxes was $184.2 million in the second quarter of 1999 compared to $140.8 million last year. The provision for income taxes was $64.5 million in the current period compared to $50.7 million in the year-ago period. For the six months ended June 30, 1999, net income increased to $230.9 million, or $.70 per diluted common share, from net income of $152.8 million, or $.38 per diluted common share, last year. Revenue was $3.70 billion compared to $3.38 billion for the first six months of 1998. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement, which is effective for the year beginning January 1, 2001, establishes accounting and reporting standards for derivative instruments and for hedging activities. SFAS No. 133 requires a company to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Management is evaluating the impact this statement may have on the company's financial statements. Financial Condition - ------------------- Cash and cash equivalents at June 30, 1999 were $438.8 million compared to $604.3 million at December 31, 1998. During the six months ended June 30, 1999 cash provided by operations was $136.6 million compared to $226.6 million a year ago principally reflecting an increase in working capital. Cash used for investing activities during the first six months of 1999 was $147.9 million compared to $114.7 million during the first half of 1998. The increase was principally due to the purchase of 88% of Datamec, a Brazilian application outsourcing company, in June of 1999. Cash used for financing activities during the first half of 1999 was $144.3 million compared to $190.3 million in the year-ago period. Included in the current period were payments of $181.9 million for redemptions of preferred stock. In the year-ago period $408.2 million of payments on long-term debt were offset by proceeds of $195.2 million for issuances of long-term debt. At June 30, 1999, total debt was $1.2 billion, an increase of $15.2 million from December 31, 1998. The increase was principally due to additional borrowings related to the purchase of Datamec, offset in large part by the March 15, 1999 conversion into common stock of the remaining $27 million of the company's 8 1/4% convertible subordinated notes due 2006, which were called during the first quarter. Approximately 3.9 million common shares were issued for this conversion. During the six months ended June 30, 1999, approximately 15.0 million shares of the company's Series A cumulative convertible preferred stock were either converted into the company's common stock or redeemed for cash in response to three calls by the company. Of the 15.0 million preferred shares, 11.4 million were converted into 19.0 million shares of common stock and 3.6 million preferred shares were redeemed for $181.9 million in cash. On June 30, 1999,
9 the company called the remaining 13.4 million shares of preferred stock for redemption on August 2, 1999. As a result of the call, approximately 13.1 million of such preferred shares were converted into 21.8 million shares of common stock and .3 million were redeemed for $15.1 million in cash. As of August 2, 1999, the company has eliminated all $1.4 billion of Series A preferred stock (28.4 million shares) and $106.5 million of annual dividend payments. Overall in 1999, of the 28.4 million shares of preferred stock that were outstanding at the beginning of the year, 24.5 million shares were converted into 40.8 million shares of common stock, increasing the number of common shares outstanding to approximately 306 million, and 3.9 million shares were redeemed for $197.0 million in cash. The company has a $400 million credit agreement which expires June 2001. As of June 30, 1999, there were no borrowings under the agreement. The company may, from time to time, redeem, tender for, or repurchase its debt 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 an effective registration statement covering $700 million of debt or equity securities, which enables the company to be prepared for future market opportunities. On July 2, 1999, Moody's Investors Service increased its rating on the company's senior long-term debt to Ba1 from Ba3, on August 2, 1999, Standard & Poor's Corporation increased its rating on the company's senior long-term debt to BB+ from BB-, and on August 10, 1999, Duff & Phelps Credit Rating Co. increased its rating on the company's senior long-term debt to BBB- from BB+. At June 30, 1999, the company had deferred tax assets in excess of deferred tax liabilities of $1,404 million. For the reasons cited below, management determined that it is more likely than not that $1,093 million of such assets will be realized, therefore resulting in a valuation allowance of $311 million. The company evaluates quarterly the realizability of its net deferred tax assets by assessing its valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization are the company's forecast of future taxable income, which is adjusted by applying probability factors, and available tax planning strategies that could be implemented to realize 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. The combination of these factors is expected to be sufficient to realize the entire amount of net deferred tax assets. Approximately $3.3 billion of future taxable income (predominantly U.S.) is needed to realize all of the net deferred tax assets. Stockholders' equity increased $73.0 million during the six months ended June 30, 1999, principally reflecting net income of $230.9 million, issuance of stock under stock option and other plans of $39.8 million, $33.8 million of tax benefits related to stock plans, and $26.4 million from conversion of the remaining 8 1/4% convertible notes, offset in part by the redemption of $181.9 million of preferred stock, translation adjustments of $43.6 million, and preferred stock dividends of $32.9 million. On June 14, 1999, the company signed an agreement to acquire PulsePoint Communications, a leading developer of carrier-class enhanced services solutions for the communications industry, in a tax-free, stock-for-stock merger. The Company expects to issue approximately 2.4 million shares of its common stock in the merger. The acquisition which will be accounted for as a pooling of interest is expected to close in the third quarter of 1999. The transaction is subject to approval by PulsePoint common and preferred shareholders, each class voting separately, and customary closing conditions. Year 2000 Readiness Disclosure - ------------------------------ Many computer systems and embedded technology may experience problems handling dates beyond the year 1999 and therefore may need to be modified prior to the year 2000.
10 As part of its development efforts, the company's current product offerings have been designed or are being redesigned to be year 2000 ready, as defined by the company. However, certain of the company's hardware and software products currently used by customers will require upgrades or other remediation to become year 2000 ready. Some of these products are used in critical applications where the impact of non-performance to these customers and other parties could be significant. The company has taken steps to notify customers of the year 2000 issue, provide information and resources on the company's year 2000 web site, emphasize the importance of customer testing of their own systems in their own unique business environments and offer consulting services to assist customers in assessing their year 2000 risk. The company continues to assess the year 2000 readiness of its key suppliers. The company's reliance on suppliers, and therefore, on the proper functioning of their products, information systems, and software, means that their failure to address year 2000 issues could affect the company's business. The potential impact and related costs are not known at this time. The company has inquired about the year 2000 readiness of its key suppliers and, whenever possible, has obtained year 2000 readiness warranties or statements as to their readiness. The company expects to identify alternate sources or strategies where necessary if significant exposure is identified. The company's year 2000 internal systems effort involves three stages: inventory and assessment of its hardware, software and embedded systems, remediation or replacement of those that are not year 2000 ready, and testing the systems. In 1997, the company completed an inventory and year 2000 assessment of its internal information technology ("IT") systems, and developed a work plan to remediate non-compliant systems or replace or consolidate these systems as part of the company's efforts to reduce and simplify, on a worldwide basis, its IT systems. The company initially focused on the IT systems that are critical to running its business. As of June 30, 1999, the company has completed the remediation, integrated testing and most of the replacements of its major mission critical IT applications. The company expects to complete the implementation of the remaining mission critical replacements/consolidations during the third quarter or early fourth quarter of 1999. Remediation and testing of other non-critical IT systems to be used after December 31, 1999 are expected to be completed in the second half of 1999. The company has completed an inventory and assessment of its key non-IT systems, such as data and voice communications, building management, and manufacturing systems. The company has completed remediation of those systems that were not year 2000 ready, with the exception of telecommunications equipment and voice mail systems in a few locations, which are expected to be completed in the second half of 1999. The company estimates that, as of June 30, 1999, the cost of remediating its internal systems has been approximately $14.5 million, and it expects to spend approximately $.5 million for the remainder of 1999. The company is funding this effort through normal working capital. This estimate does not include the cost of replacing or consolidating IT systems in connection with the company's worldwide IT simplification project, which was undertaken for reasons unrelated to year 2000 issues, potential costs related to any customer or other claims, the costs associated with making the company's product offerings year 2000 ready, and the costs of any disruptions caused by suppliers not being year 2000 ready. This estimate is based on a current assessment of the year 2000 projects and is subject to change as the projects progress. Although the company does not believe that it will incur material costs or experience material disruptions in its business associated with the year 2000, there can be no assurance that the company will not experience serious unanticipated negative consequences and/or material costs. The company may see increased customer satisfaction costs related to year 2000 over the next few years. In addition some commentators have stated that a significant amount of
11 litigation may arise out of year 2000 compliance issues, and the company is aware of a growing number of lawsuits against information technology and solutions providers. Although the company believes it has taken adequate measures to address year 2000 issues, because of the unprecedented nature of such litigation, it is uncertain to what extent the company may be affected by it. It is also unknown whether customer spending patterns may be impacted by the year 2000 issue. Efforts by customers to address year 2000 issues may absorb a substantial part of their IT budgets in the near term, and customers may either accelerate or delay the purchase of new applications and systems. While this behavior may increase demand for certain of the company's products and services, including year 2000 offerings, it could also soften demand. These events could affect the company's revenues or change its revenue patterns. In addition, there can be no assurance that the company's current product offerings do not contain undetected errors or defects associated with year 2000 date functions that may result in increased costs to the company. With respect to its internal systems, the worst case scenarios might include corruption of data contained in the company's internal IT systems, hardware failures, the failure of the company's significant suppliers, and the failure of infrastructure services provided by utilities and other third parties such as electricity, phone service, water transport and internet services. The company continues to assess and refine the contingency plans it is developing in the event it does not complete all phases of its year 2000 program and to respond to year 2000 related events outside its control. Conversion to the Euro Currency - ------------------------------- On January 1, 1999, certain member countries of the European Union established fixed conversion rates between their existing currencies and the European Union's common currency (the "euro"). The transition period for the introduction of the euro began on January 1, 1999. Beginning January 1, 2002, the participating countries will issue new euro-denominated bills and coins for use in cash transactions. No later than July 1, 2002, the participating countries will withdraw all bills and coins denominated in the legacy currencies, so that the legacy currencies no longer will be legal tender for any transactions, making the conversion to the euro complete. The company is addressing the issues involved with the introduction of the euro. The more important issues facing the company include converting information technology systems, reassessing currency risk, and negotiating and amending agreements. Based on progress to date, the company believes that the use of the euro will not have a significant impact on the manner in which it conducts its business. Accordingly, conversion to the euro is not expected to have a material effect on the company's consolidated financial position, consolidated results of operations, or liquidity. 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. 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. In addition to changes in general economic and business conditions and natural disasters, these include, but are not limited to, the factors discussed below. The company operates in an industry characterized by aggressive competition, rapid technological change, evolving technology standards, and short product life-cycles.
12 Certain of the company's systems integration contracts are fixed-price contracts under which the company assumes the risk for delivery of the contracted services at an agreed-upon price. Future results will depend on the company's ability to profitably perform these services contracts and bid and obtain new contracts. Approximately 56% of the company's total revenue derives from international operations. The risk of doing business internationally include foreign currency exchange rate fluctuations, changes in political or economic conditions, trade protection measures, and import or export licensing requirements. In the course of providing complex, integrated solutions to customers, the company frequently forms alliances with third parties that have complementary products, services, or skills. Future results will depend in part on the performance and capabilities of these third parties, including their ability to deal effectively with the year 2000 issue. Future results will also depend upon 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. Future results may also be adversely affected by a delay in, or increased costs associated with, the implementation of the year 2000 actions discussed above, or by the company's inability to implement them.
13 Part II - OTHER INFORMATION - ------- ----------------- Item 4. Submission of Matters to a Vote of Security Holders - ------- --------------------------------------------------- (a) The Company's 1999 Annual Meeting of Stockholders (the "Annual Meeting") was held on April 29, 1999 in Philadelphia, Pennsylvania. (b) The following matters were voted upon at the Annual Meeting and received the following votes: 1. Election of Directors as follows: J. P. Bolduc - 234,277,442 votes for; 2,858,530 votes withheld James J. Duderstadt - 234,339,107 votes for; 2,796,865 votes withheld Kenneth A. Macke - 234,212,882 votes for; 2,923,090 votes withheld 2. A proposal to ratify the selection of the Company's independent auditors - 235,947,649 votes for; 1,188,322 votes against; 681,936 abstentions Item 6. Exhibits and Reports on Form 8-K - ------- -------------------------------- (a) Exhibits See Exhibit Index (b) Reports on Form 8-K During the quarter ended June 30, 1999, the Company filed two Current Reports on Form 8-K dated April 1, 1999 and June 15, 1999, respectively, to report under Item 5 of such Form.
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: August 10, 1999 By: /s/ Robert H. Brust ---------------------------- Robert H. Brust Senior Vice President and Chief Financial Officer (Principal Financial Officer) By: /s/Janet M. Brutschea Haugen ---------------------------- Janet M. Brutschea Haugen Vice President and Controller (Chief Accounting Officer)
EXHIBIT INDEX Exhibit Number Description - ------- ----------- 10.1 Unisys Corporation Executive Life Insurance Program 10.2 Amendment, effective April 28, 1999, to the 1990 Unisys Long-Term Incentive Plan 11.1 Statement of Computation of Earnings Per Share for the six months ended June 30, 1999 and 1998 11.2 Statement of Computation of Earnings Per Share for the three months ended June 30, 1999 and 1998 12 Statement of Computation of Ratio of Earnings to Fixed Charges 27 Financial Data Schedule