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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
 
FORM 10-Q
 
 
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
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 of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
801 Lakeview Drive, Suite 100
Blue Bell, Pennsylvania 19422
(215986-4011 
(Address, zip code and telephone number, including area code, of principal executive offices)
 
 
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock, par value $.01
UIS
New York Stock Exchange
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      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
  
Accelerated filer
 
 
 
 
 
Non-accelerated filer
 
  
Smaller reporting company
 
 
 
 
 
 
 
 
 
 
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Number of shares of Common Stock outstanding as of September 30, 2019: 62,394,738.






UNISYS CORPORATION
TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
 
Page Number
Item 1.
Financial Statements (Unaudited)
 
 
 
Consolidated Statements of Income
 
 
Consolidated Statements of Comprehensive Income
 
 
Consolidated Balance Sheets
 
 
Consolidated Statements of Cash Flows
 
 
Consolidated Statements of Deficit
 
 
Notes to Consolidated Financial Statements
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
 
Item 4.
Controls and Procedures
 
PART II - OTHER INFORMATION
Item 1.
Legal Proceedings
 
Item 1A.
Risk Factors
 
Item 6.
Exhibits
 
 
 
 
 
Exhibit Index
 
Signatures
 






Part I - FINANCIAL INFORMATION
Item 1. Financial Statements

UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Millions, except per share data)
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2019
 
2018
 
2019
 
2018
Revenue
 
 
 
 
 
 
 
 
Services
 
$
654.1

 
$
605.6

 
$
1,919.6

 
$
1,760.8

Technology
 
103.5

 
82.7

 
287.6

 
303.3

 
 
757.6

 
688.3

 
2,207.2

 
2,064.1

Costs and expenses
 
 
 
 
 
 
 
 
Cost of revenue:
 
 
 
 
 
 
 
 
Services
 
536.1

 
504.9

 
1,582.8

 
1,460.0

Technology
 
49.1

 
29.6

 
108.2

 
96.2

 
 
585.2

 
534.5

 
1,691.0

 
1,556.2

Selling, general and administrative
 
95.6

 
90.9

 
293.3

 
274.5

Research and development
 
5.9

 
7.1

 
22.1

 
21.8

 
 
686.7

 
632.5

 
2,006.4

 
1,852.5

Operating income
 
70.9

 
55.8

 
200.8

 
211.6

Interest expense
 
15.2

 
15.9

 
46.9

 
48.2

Other income (expense), net
 
(49.2
)
 
(17.7
)
 
(108.5
)
 
(58.3
)
Income before income taxes
 
6.5

 
22.2

 
45.4

 
105.1

Provision for income taxes
 
15.9

 
15.2

 
41.8

 
50.4

Consolidated net income (loss)
 
(9.4
)
 
7.0

 
3.6

 
54.7

Net income attributable to noncontrolling interests
 
3.8

 
0.9

 
10.0

 
4.2

Net income (loss) attributable to Unisys Corporation
 
$
(13.2
)
 
$
6.1

 
$
(6.4
)
 
$
50.5

Earnings (loss) per share attributable to Unisys Corporation
 
 
 
 
 
 
 
 
Basic
 
$
(0.23
)
 
$
0.12

 
$
(0.12
)
 
$
0.99

Diluted
 
$
(0.23
)
 
$
0.12

 
$
(0.12
)
 
$
0.89

See notes to consolidated financial statements


2





UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(Millions)
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2019
 
2018
 
2019
 
2018
Consolidated net income (loss)
 
$
(9.4
)
 
$
7.0

 
$
3.6

 
$
54.7

Other comprehensive income:
 
 
 
 
 
 
 
 
Foreign currency translation
 
(51.7
)
 
(8.2
)
 
(99.7
)
 
(36.6
)
Postretirement adjustments, net of tax of $8.8 and $11.9 in 2019 and $1.4 and $4.3 in 2018
 
63.4

 
39.1

 
182.3

 
118.0

Total other comprehensive income
 
11.7

 
30.9

 
82.6

 
81.4

Comprehensive income
 
2.3

 
37.9

 
86.2

 
136.1

Less comprehensive income attributable to noncontrolling interests
 
2.6

 
0.8

 
5.8

 
4.0

Comprehensive income (loss) attributable to Unisys Corporation
 
$
(0.3
)
 
$
37.1

 
$
80.4

 
$
132.1

See notes to consolidated financial statements

3





UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
 
September 30, 2019
 
December 31, 2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
425.4

 
$
605.0

Accounts receivable, net
504.4

 
509.2

Contract assets
38.3

 
29.7

Inventories:
 
 
 
Parts and finished equipment
15.0

 
14.0

Work in process and materials
13.2

 
13.3

Prepaid expenses and other current assets
122.7

 
130.2

Total current assets
1,119.0

 
1,301.4

Properties
799.0

 
800.2

Less-Accumulated depreciation and amortization
676.6

 
678.9

Properties, net
122.4

 
121.3

Outsourcing assets, net
208.3

 
216.4

Marketable software, net
183.3

 
162.1

Operating lease right-of-use assets
126.8

 

Prepaid postretirement assets
150.4

 
147.6

Deferred income taxes
102.0

 
109.3

Goodwill
176.2

 
177.8

Restricted cash
7.9

 
19.1

Other long-term assets
209.5

 
202.6

Total assets
$
2,405.8

 
$
2,457.6

Liabilities and deficit
 
 
 
Current liabilities:
 
 
 
Current maturities of long-term debt
$
13.4

 
$
10.0

Accounts payable
240.6

 
268.9

Deferred revenue
236.0

 
294.4

Other accrued liabilities
362.9

 
350.0

Total current liabilities
852.9

 
923.3

Long-term debt
563.6

 
642.8

Long-term postretirement liabilities
1,830.5

 
1,956.5

Long-term deferred revenue
142.4

 
157.2

Long-term operating lease liabilities
83.8

 

Other long-term liabilities
50.0

 
77.4

Commitments and contingencies

 

Deficit:
 
 
 
Common stock, shares issued:
 
 
 
2019; 65.9, 2018; 54.2
0.7

 
0.5

Accumulated deficit
(1,700.4
)
 
(1,694.0
)
Treasury stock, shares at cost:
 
 
 
2019; 3.5, 2018; 3.1
(109.6
)
 
(105.0
)
Paid-in capital
4,640.2

 
4,539.8

Accumulated other comprehensive loss
(3,998.0
)
 
(4,084.8
)
Total Unisys stockholders’ deficit
(1,167.1
)
 
(1,343.5
)
Noncontrolling interests
49.7

 
43.9

Total deficit
(1,117.4
)
 
(1,299.6
)
Total liabilities and deficit
$
2,405.8

 
$
2,457.6

See notes to consolidated financial statements

4





UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Millions)
 
 
 
Nine Months Ended
September 30,
 
 
2019
 
2018
Cash flows from operating activities
 
 
 
 
Consolidated net income
 
$
3.6

 
$
54.7

Adjustments to reconcile consolidated net income to net cash used for operating activities:
 
 
 
 
Foreign currency transaction losses
 
7.2

 
1.1

Non-cash interest expense
 
7.5

 
7.8

Loss on debt exchange
 
20.2

 

Employee stock compensation
 
10.1

 
10.0

Depreciation and amortization of properties
 
26.7

 
31.2

Depreciation and amortization of outsourcing assets
 
47.3

 
48.7

Amortization of marketable software
 
35.0

 
42.8

Other non-cash operating activities
 
(0.8
)
 
(2.6
)
Loss on disposal of capital assets
 
1.3

 
0.6

Gain on sale of properties
 

 
(7.3
)
Postretirement contributions
 
(82.3
)
 
(124.5
)
Postretirement expense
 
71.5

 
58.2

Decrease in deferred income taxes, net
 
1.0

 
9.3

Changes in operating assets and liabilities:
 
 
 
 
Receivables, net
 
(17.4
)
 
(69.3
)
Inventories
 
(1.7
)
 
(1.3
)
Accounts payable and other accrued liabilities
 
(173.4
)
 
(144.1
)
Other liabilities
 
33.1

 
(1.5
)
Other assets
 
9.3

 
8.8

Net cash used for operating activities
 
(1.8
)
 
(77.4
)
Cash flows from investing activities
 
 
 
 
Proceeds from investments
 
2,824.9

 
2,889.3

Purchases of investments
 
(2,835.8
)
 
(2,892.4
)
Investment in marketable software
 
(56.2
)
 
(61.7
)
Capital additions of properties
 
(29.1
)
 
(25.0
)
Capital additions of outsourcing assets
 
(44.4
)
 
(54.4
)
Net proceeds from sale of properties
 
(0.2
)
 
19.2

Other
 
(0.9
)
 
(0.9
)
Net cash used for investing activities
 
(141.7
)
 
(125.9
)
Cash flows from financing activities
 
 
 
 
Cash paid in connection with debt exchange
 
(56.3
)
 

Proceeds from capped call transactions
 
7.2

 

Proceeds from issuance of long-term debt
 
28.6

 

Payments of long-term debt
 
(12.2
)
 
(2.0
)
Financing fees
 

 
(0.2
)
Other
 
(4.6
)
 
(2.2
)
Net cash used for financing activities
 
(37.3
)
 
(4.4
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
 
(10.0
)
 
(22.5
)
Decrease in cash, cash equivalents and restricted cash
 
(190.8
)
 
(230.2
)
Cash, cash equivalents and restricted cash, beginning of period
 
624.1

 
764.1

Cash, cash equivalents and restricted cash, end of period
 
$
433.3

 
$
533.9

See notes to consolidated financial statements


5





UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF DEFICIT (Unaudited)
(Millions)
  
 
 
 
Unisys Corporation
 
 
 
 
Total
 
Total Unisys Corporation
 
Common Stock Par Value
 
Accumu-lated Deficit
 
Treasury Stock At Cost
 
Paid-in Capital
 
Accumu-lated Other Compre-hensive Loss
 
Non-controlling Interests
Balance at January 1, 2019
 
$
(1,299.6
)
 
$
(1,343.5
)
 
$
0.5

 
$
(1,694.0
)
 
$
(105.0
)
 
$
4,539.8

 
$
(4,084.8
)
 
$
43.9

Consolidated net income (loss)
 
(16.8
)
 
(19.4
)
 
 
 
(19.4
)
 
 
 
 
 
 
 
2.6

Stock-based activity
 
(0.4
)
 
(0.4
)
 
0.1

 
 
 
(4.4
)
 
3.9

 
 
 
 
Translation adjustments
 
(34.2
)
 
(32.8
)
 
 
 
 
 
 
 
 
 
(32.8
)
 
(1.4
)
Postretirement plans
 
68.5

 
69.2

 
 
 
 
 
 
 
 
 
69.2

 
(0.7
)
Balance at March 31, 2019
 
$
(1,282.5
)
 
$
(1,326.9
)
 
$
0.6

 
$
(1,713.4
)
 
$
(109.4
)
 
$
4,543.7

 
$
(4,048.4
)
 
$
44.4

Consolidated net income
 
29.8

 
26.2

 
 
 
26.2

 
 
 
 
 
 
 
3.6

Stock-based activity
 
2.4

 
2.4

 
 
 
 
 
(0.1
)
 
2.5

 
 
 
 
Translation adjustments
 
(13.8
)
 
(11.6
)
 
 
 
 

 
 
 
 
 
(11.6
)
 
(2.2
)
Postretirement plans
 
50.4

 
49.1

 
 
 
 
 
 

 
 

 
49.1

 
1.3

Balance at June 30, 2019
 
$
(1,213.7
)
 
$
(1,260.8
)
 
$
0.6

 
$
(1,687.2
)
 
$
(109.5
)
 
$
4,546.2

 
$
(4,010.9
)
 
$
47.1

Consolidated net income (loss)
 
(9.4
)
 
(13.2
)
 
 
 
(13.2
)
 
 
 
 
 
 
 
3.8

Stock-based activity
 
2.9

 
2.9

 
 
 
 
 
(0.1
)
 
3.0

 
 
 
 
Debt exchange
 
83.9

 
83.9

 
0.1

 
 
 
 
 
83.8

 
 
 
 
Capped call on debt exchange
 
7.2

 
7.2

 
 
 
 
 
 
 
7.2

 
 
 
 
Translation adjustments
 
(51.7
)
 
(49.0
)
 
 
 
 
 
 
 
 
 
(49.0
)
 
(2.7
)
Postretirement plans
 
63.4

 
61.9

 
 
 
 
 
 
 
 
 
61.9

 
1.5

Balance at September 30, 2019
 
$
(1,117.4
)
 
$
(1,167.1
)
 
$
0.7

 
$
(1,700.4
)
 
$
(109.6
)
 
$
4,640.2

 
$
(3,998.0
)
 
$
49.7


  
 
 
 
Unisys Corporation
 
 
 
 
Total
 
Total Unisys Corporation
 
Common Stock Par Value
 
Accumu-lated Deficit
 
Treasury Stock At Cost
 
Paid-in Capital
 
Accumu-lated Other Compre-hensive Loss
 
Non-controlling Interests
Balance at January 1, 2018
 
$
(1,326.5
)
 
$
(1,354.7
)
 
$
0.5

 
$
(1,963.1
)
 
$
(102.7
)
 
$
4,526.4

 
$
(3,815.8
)
 
$
28.2

Cumulative effect adjustment - ASU No. 2014-09
 
(21.4
)
 
(21.4
)
 
 
 
(21.4
)
 
 
 
 
 
 
 
 
Consolidated net income
 
41.7

 
40.6

 
 
 
40.6

 
 
 
 
 
 
 
1.1

Stock-based activity
 
1.5

 
1.5

 
 
 
 
 
(2.1
)
 
3.6

 
 
 
 
Translation adjustments
 
(5.1
)
 
(5.9
)
 
 
 
 
 
 
 
 
 
(5.9
)
 
0.8

Postretirement plans
 
39.0

 
38.6

 
 
 
 
 
 
 
 
 
38.6

 
0.4

Balance at March 31, 2018
 
$
(1,270.8
)
 
$
(1,301.3
)
 
$
0.5

 
$
(1,943.9
)
 
$
(104.8
)
 
$
4,530.0

 
$
(3,783.1
)
 
$
30.5

Consolidated net income
 
6.0

 
3.8

 
 
 
3.8

 
 
 
 
 
 
 
2.2

Stock-based activity
 
4.1

 
4.1

 
 
 
 
 


 
4.1

 
 
 
 
Translation adjustments
 
(23.3
)
 
(21.6
)
 
 
 
 

 
 
 
 
 
(21.6
)
 
(1.7
)
Postretirement plans
 
39.9

 
39.5

 
 
 
 
 
 

 
 

 
39.5

 
0.4

Balance at June 30, 2018
 
$
(1,244.1
)
 
$
(1,275.5
)
 
$
0.5

 
$
(1,940.1
)
 
$
(104.8
)
 
$
4,534.1

 
$
(3,765.2
)
 
$
31.4

Reclassification pursuant to ASU No. 2018-02
 

 

 
 
 
208.7

 
 
 
 
 
(208.7
)
 
 
Consolidated net income
 
7.0

 
6.1

 
 
 
6.1

 
 
 
 
 
 
 
0.9

Stock-based activity
 
2.4

 
2.4

 
 
 
 
 
(0.1
)
 
2.5

 
 
 
 
Translation adjustments
 
(8.2
)
 
(7.8
)
 
 
 
 
 
 
 
 
 
(7.8
)
 
(0.4
)
Postretirement plans
 
39.1

 
38.8

 
 
 
 
 
 
 
 
 
38.8

 
0.3

Balance at September 30, 2018
 
$
(1,203.8
)
 
$
(1,236.0
)
 
$
0.5

 
$
(1,725.3
)
 
$
(104.9
)
 
$
4,536.6

 
$
(3,942.9
)
 
$
32.2

See notes to consolidated financial statements

6



UNISYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions, except share and per share amounts)

Note 1 - Basis of Presentation
The accompanying consolidated financial statements and footnotes of Unisys Corporation have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP). The financial statements and footnotes are unaudited. In the opinion of management, the financial information furnished herein reflects all adjustments necessary for a fair presentation of the results of operations, comprehensive income, financial position, cash flows and deficit for the interim periods specified. These adjustments consist only of normal recurring accruals except as disclosed herein. Because of seasonal and other factors, results for interim periods are not necessarily indicative of the results to be expected for the full year.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and the reported amounts of revenue and expenses. Such estimates include the valuation of accounts receivable, contract assets, inventories, operating lease right-of-use assets, outsourcing assets, marketable software, goodwill and other long-lived assets, legal contingencies, indemnifications, assumptions used in the calculation for systems integration projects, income taxes and retirement and other post-employment benefits, among others. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.
The company’s accounting policies are set forth in detail in Note 1 of the Notes to Consolidated Financial Statements in the company’s Annual Report on Form 10-K for the year ended December 31, 2018 (2018 Form 10-K) filed with the Securities and Exchange Commission. Such Annual Report also contains a discussion of the company’s critical accounting policies and estimates. The company believes that these critical accounting policies and estimates affect its more significant estimates and judgments used in the preparation of the company’s consolidated financial statements.
As described in Note 3, effective January 1, 2019 the company adopted the requirements of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) using the effective date transition method. The company’s updated accounting policy on leases is described in Note 2 of this Form 10-Q.
Note 2 - Summary of Significant Accounting Policies
Leases
The company determines if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the company the right to control the use of an explicitly or implicitly identified asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the company if the company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The company has lease agreements that include lease and non-lease components, which the company accounts for as a single lease component for all personal property leases. Lease expense for variable leases and short-term leases is recognized when the expense is incurred.
Operating leases are included in operating lease right-of-use (ROU) assets, other accrued liabilities and long-term operating lease liabilities on the consolidated balance sheets. Operating lease ROU assets and lease liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Operating lease payments are recognized as lease expense on a straight-line basis over the lease term.
Finance leases are included in outsourcing assets, net and long-term debt on the consolidated balance sheets. Finance lease ROU assets and lease liabilities are initially measured in the same manner as operating leases. Finance lease ROU assets are amortized using the straight-line method. Finance lease liabilities are measured at amortized cost using the effective interest method.
The company has not capitalized leases with terms of twelve months or less.

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As most of the company’s leases do not provide an implicit rate, the company uses its incremental borrowing rate, based on the information available at the lease commencement date, in determining the present value of lease payments.
The lease term for all of the company’s leases includes the non-cancelable period of the lease plus any additional periods covered by either a company option to extend (or not to terminate) the lease that the company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor.
Lease payments included in the measurement of the lease liability are comprised of fixed payments, variable payments that depend on index or rate, amounts expected to be payable under a residual value guarantee and the exercise of the company option to purchase the underlying asset, if reasonably certain.
Variable lease payments associated with the company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease payments are presented as an operating expense in the company’s consolidated results of operations in the same line item as expense arising from fixed lease payments (operating leases) or amortization of the ROU asset (finance leases).
The company uses the long-lived assets impairment guidance in ASC Subtopic 360-10 Property, Plant, and Equipment to determine whether a ROU asset is impaired, and if so, the amount of the impairment loss to recognize. If impaired, ROU assets for operating and finance leases are reduced for any impairment losses.
The company monitors for events or changes in circumstances that require a reassessment of its leases. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in the consolidated statement of income.
The company has commitments under operating leases for certain facilities and equipment used in its operations. The company also has finance leases for equipment. The company’s leases generally have initial lease terms ranging from 1 year to 8 years, most of which include options to extend or renew the leases for up to 5 years, and some of which may include options to terminate the leases within 1 year. Certain lease agreements contain provisions for future rent increases.
The components of lease expense for the three and nine months ended September 30, 2019 are as follows:
 
 
Three Months Ended
September 30, 2019
 
Nine Months Ended
September 30, 2019
Operating lease cost
 
$
19.0

 
$
52.2

Finance lease cost
 
 
 
 
Amortization of right-of-use assets
 
0.4

 
1.2

Interest on lease liabilities
 
0.2

 
0.2

Total finance lease cost
 
0.6

 
1.4

Short-term lease costs
 
0.2

 
0.4

Variable lease cost
 
5.1

 
11.8

Sublease income
 
(0.1
)
 
(0.7
)
Total lease cost
 
$
24.8

 
$
65.1



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Supplemental balance sheet information related to leases is as follows:
 
 
September 30, 2019
Operating Leases
 
 
Operating lease right-of-use assets
 
$
126.8

Other accrued liabilities
 
69.2

Long-term operating lease liabilities
 
83.8

Total operating lease liabilities
 
$
153.0

 
 
 
Finance Leases
 
 
Outsourcing assets, net
 
$
5.0

Current maturities of long-term debt
 
1.7

Long-term debt
 
4.0

Total finance lease liabilities
 
$
5.7

 
 
 
Weighted-Average Remaining Lease Term
 
 
Operating leases
 
3.2

Finance leases
 
3.2

 
 
 
Weighted-Average Discount Rate
 
 
Operating leases
 
6.3
%
Finance leases
 
4.9
%

Supplemental cash flow information related to leases is as follows:
 
 
Nine Months Ended
September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
Cash payments for operating leases included in operating activities
 
$
51.7

Cash payments for finance leases included in financing activities
 
1.3

Right-of-use assets obtained in exchange for lease obligations are as follows:
 
 
Three Months Ended
September 30, 2019
 
Nine Months Ended
September 30, 2019
Operating leases
 
$
8.2

 
$
51.1

Finance leases
 
1.1

 
1.5




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Maturities of lease liabilities as of September 30, 2019 are as follows:
Year
 
Finance Leases
 
Operating Leases
2019
 
$
0.5

 
$
20.6

2020
 
2.0

 
70.1

2021
 
2.0

 
31.5

2022
 
1.4

 
18.9

2023
 
0.2

 
11.6

Thereafter
 
0.1

 
16.1

Total lease payments
 
6.2

 
168.8

Less imputed interest
 
0.5

 
15.8

Total
 
$
5.7

 
$
153.0


Maturities of lease liabilities as of December 31, 2018, prior to the adoption of ASU No. 2016-02 as described in Note 3 of this Form 10-Q are as follows:
Year
 
Finance Leases
 
Operating Leases(i)
2019
 
$
1.6

 
$
48.5

2020
 
1.6

 
42.1

2021
 
1.6

 
30.0

2022
 
1.0

 
20.8

2023
 

 
14.3

Thereafter
 

 
24.4

Total
 
$
5.8

 
$
180.1

(i)Such rental commitments have been reduced by minimum sublease rentals of $2.7 million, due in the future under noncancelable leases.
For transactions where the company is considered the lessor, revenue for operating leases is recognized on a monthly basis over the term of the lease and for sales-type leases at the inception of the lease term. These amounts were immaterial for the three and nine months ended September 30, 2019.
As of September 30, 2019, receivables under sales-type leases before the allowance for unearned income were collectible as follows:
Year
 
2019
$
6.4

2020
18.2

2021
12.8

2022
12.3

2023
12.3

Thereafter
17.5

Total
$
79.5



Marketable software
The cost of development of computer software to be sold or leased, incurred subsequent to establishment of technological feasibility, is capitalized and amortized to cost of sales over the estimated revenue-producing lives of the products. In assessing the estimated revenue-producing lives and recoverability of the products, the company considers operating strategies, underlying technologies utilized, estimated economic life and external market factors, such as expected levels of competition, barriers to entry by potential competitors, stability in the market and governmental regulation. The company continually

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reassesses the estimated revenue-producing lives of the products and any change in the company’s estimate could result in the remaining amortization expense being accelerated or spread out over a longer period.
Previously, the estimated revenue-producing lives of the company’s proprietary enterprise software was three years. Due to the maturity of the company’s proprietary enterprise software product, the company increased the time between its major releases as its product has a longer useful life. In addition, the company modified its commitment to provide post-contract support from an average of three years to five years following each new proprietary enterprise software release. In the first quarter of 2019, the company validated that the revised extended timeline between major product releases and the revised post-contract support period has achieved market acceptance. The company’s historical experience is that its significant customers typically renew the software on average every five years. As a result, the company adjusted the remaining useful life of its proprietary enterprise software product, which represents approximately 65% of the company’s marketable software, to five years. This change in estimate was applied prospectively effective January 1, 2019. The adjustment resulted in a $5.8 million decrease to cost of revenue in the three months ended September 30, 2019, and accordingly increased consolidated net income by $5.8 million or $0.10 per diluted earnings per share. For the nine months ended September 30, 2019, this adjustment resulted in a $15.1 million decrease to cost of revenue, and accordingly increased consolidated net income by $15.1 million or $0.28 per diluted earnings per share. The useful lives of the remaining products classified as marketable software remain at three years, which is consistent with prior years. As of September 30, 2019, $60.5 million of marketable software was in process and the remaining $122.8 million has a weighted-average remaining life of 3.3 years. The company performs quarterly reviews to ensure that unamortized costs remain recoverable from future revenue. As of September 30, 2019, the company believes that all unamortized costs are fully recoverable.
Note 3 - Accounting Standards
Accounting Pronouncements Adopted
Effective January 1, 2019, the company adopted ASU No. 2016-02 Leases (Topic 842) issued by the Financial Accounting Standards Board (FASB) which is intended to improve financial reporting about leasing transactions. Topic 842 requires organizations that lease assets, referred to as lessees, to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The standard also requires disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. The company adopted the new standard using the effective date transition method by applying a cumulative-effect adjustment to the balance sheet through the addition of ROU assets and lease liabilities at January 1, 2019. Prior-period results were not restated.
The company applied certain practical expedients, including the package of practical expedients, permitted under the transition guidance within Topic 842 to leases that commenced before January 1, 2019. The election of the package of practical expedients resulted in the company not reassessing prior conclusions under FASB Topic 840 Leases related to lease identification, lease classification and initial direct costs for existing leases at January 1, 2019.
The adoption had a material impact on the consolidated financial position and did not have a material impact on the consolidated results of operations or cash flows as of and for the three and nine months ended September 30, 2019. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while the company’s accounting for finance leases remained substantially unchanged.
Accounting Pronouncements Not Yet Adopted
In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract which clarifies the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. This update is effective for fiscal years ending after December 15, 2019, with earlier adoption permitted, including adoption in any interim period. The new guidance can be applied retrospectively or prospectively to all implementation costs incurred after the date of adoption. The company will adopt the new guidance on January 1, 2020, on a prospective basis, and does not expect the adoption to have a material impact on its consolidated results of operations and financial position.
In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected losses. This includes trade and other receivables, loans and other financial instruments. This update is effective for annual periods beginning after December 15, 2019, with earlier adoption permitted. The company will adopt the new guidance on January 1, 2020 through a cumulative-effect adjustment to retained earnings, and does not expect the adoption to have a material impact on its consolidated results of operations and financial position.

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Note 4 - Cost-Reduction Actions
During the three months ended September 30, 2019, the company recognized cost-reduction charges and other costs of $0.2 million. Charges were comprised of $0.7 million for lease abandonment costs and $(0.5) million for changes in estimates principally related to work-force reductions. The charges were recorded in the following statement of income classifications: cost of revenue – services, $(1.9) million and selling, general and administrative expenses, $2.1 million.
During the nine months ended September 30, 2019, the company recognized cost-reduction charges and other costs of $5.4 million. Charges were comprised of $5.0 million for lease abandonment costs and asset write-offs and $0.4 million for changes in estimates principally related to work-force reductions. The charges were recorded in the following statement of income classifications: cost of revenue – services, $(6.6) million; selling, general and administrative expenses, $10.7 million; and research and development expenses, $1.3 million.
No provisions for cost-reduction actions were recorded during the nine months ended September 30, 2018; however, a benefit of $0.9 million and $3.1 million, respectively, was recorded for changes in estimates during the three and nine months ended September 30, 2018. For the three months ended September 30, 2018, the charge was recorded in the following statement of income classifications: cost of revenue - services, $0.7 million and selling, general and administrative expenses, $0.2 million. For the nine months ended September 30, 2018, the benefit was recorded in the following statement of income classifications: cost of revenue - services, $4.2 million and selling, general and administrative expenses, $(1.1) million.
Liabilities and expected future payments related to the company’s work-force reduction actions are as follows:
 
 
Total
 
U.S.
 
International
Balance at December 31, 2018
 
$
86.2

 
$
6.1

 
$
80.1

Payments
 
(40.9
)
 
(3.0
)
 
(37.9
)
Changes in estimates
 
0.2

 
(1.1
)
 
1.3

Translation adjustments
 
(2.5
)
 

 
(2.5
)
Balance at September 30, 2019
 
$
43.0

 
$
2.0

 
$
41.0

Expected future utilization on balance at September 30, 2019:
 
 
 
 
 
 
2019 remaining three months
 
$
29.2

 
$
1.5

 
$
27.7

Beyond 2019
 
$
13.8

 
$
0.5

 
$
13.3



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Note 5 - Pension and Postretirement Benefits
Net periodic pension expense for the three and nine months ended September 30, 2019 and 2018 is presented below:
 
 
Three Months Ended
September 30, 2019
 
Three Months Ended
September 30, 2018
 
 
Total
 
U.S.
Plans
 
International