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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 June 30, 2020
|
| |
☐ | 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
(215) 986-4011
(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 June 30, 2020: 63,017,239.
UNISYS CORPORATION
TABLE OF CONTENTS
|
| | | |
PART I - FINANCIAL INFORMATION | | Page Number |
Item 1. | Consolidated Financial Statements (Unaudited) | | |
| Consolidated Statements of Income (Loss) | | |
| Consolidated Statements of Comprehensive Income (Loss) | | |
| 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 | | |
Item 5. | Other Information | | |
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 (LOSS) (Unaudited)
(Millions, except per share data)
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 |
Revenue | | | | | | | | |
Services | | $ | 396.0 |
| | $ | 481.0 |
| | $ | 821.9 |
| | $ | 955.0 |
|
Technology | | 42.8 |
| | 88.4 |
| | 132.3 |
| | 168.9 |
|
| | 438.8 |
| | 569.4 |
| | 954.2 |
| | 1,123.9 |
|
Costs and expenses | | | | | | | | |
Cost of revenue: | | | | | | | | |
Services | | 340.0 |
| | 399.1 |
| | 715.7 |
| | 795.9 |
|
Technology | | 23.9 |
| | 17.7 |
| | 50.5 |
| | 50.3 |
|
| | 363.9 |
| | 416.8 |
| | 766.2 |
| | 846.2 |
|
Selling, general and administrative | | 80.2 |
| | 92.4 |
| | 167.0 |
| | 183.3 |
|
Research and development | | 3.2 |
| | 7.2 |
| | 9.4 |
| | 16.2 |
|
| | 447.3 |
| | 516.4 |
| | 942.6 |
| | 1,045.7 |
|
Operating income (loss) | | (8.5 | ) | | 53.0 |
| | 11.6 |
| | 78.2 |
|
Interest expense | | 4.6 |
| | 16.2 |
| | 18.5 |
| | 31.7 |
|
Other expense, net | | (53.7 | ) | | (28.9 | ) | | (101.8 | ) | | (59.3 | ) |
Income (loss) from continuing operations before income taxes | | (66.8 | ) | | 7.9 |
| | (108.7 | ) | | (12.8 | ) |
Provision for income taxes | | 9.7 |
| | 3.6 |
| | 20.5 |
| | 13.0 |
|
Consolidated net income (loss) from continuing operations | | (76.5 | ) | | 4.3 |
| | (129.2 | ) | | (25.8 | ) |
Net income attributable to noncontrolling interests | | — |
| | 3.6 |
| | 0.5 |
| | 6.2 |
|
Net income (loss) from continuing operations attributable to Unisys Corporation | | (76.5 | ) | | 0.7 |
| | (129.7 | ) | | (32.0 | ) |
Income (loss) from discontinued operations, net of tax | | (2.1 | ) | | 25.5 |
| | 1,066.4 |
| | 38.8 |
|
Net income (loss) attributable to Unisys Corporation | | $ | (78.6 | ) | | $ | 26.2 |
| | $ | 936.7 |
| | $ | 6.8 |
|
Earnings (loss) per share attributable to Unisys Corporation | | | | | | | | |
Basic | | | | | | | | |
Continuing operations | | $ | (1.21 | ) | | $ | 0.01 |
| | $ | (2.06 | ) | | $ | (0.62 | ) |
Discontinued operations | | (0.04 | ) | | 0.50 |
| | 16.97 |
| | 0.75 |
|
Total | | $ | (1.25 | ) | | $ | 0.51 |
| | $ | 14.91 |
| | $ | 0.13 |
|
Diluted | | | | | | | | |
Continuing operations | | $ | (1.21 | ) | | $ | 0.01 |
| | $ | (2.06 | ) | | $ | (0.62 | ) |
Discontinued operations | | (0.04 | ) | | 0.49 |
| | 16.97 |
| | 0.75 |
|
Total | | $ | (1.25 | ) | | $ | 0.50 |
| | $ | 14.91 |
| | $ | 0.13 |
|
See notes to consolidated financial statements
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(Millions)
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 |
Consolidated net income (loss) from continuing operations | | $ | (76.5 | ) | | $ | 4.3 |
| | $ | (129.2 | ) | | $ | (25.8 | ) |
Income (loss) from discontinued operations, net of tax | | (2.1 | ) | | 25.5 |
| | 1,066.4 |
| | 38.8 |
|
Total | | (78.6 | ) | | 29.8 |
| | 937.2 |
| | 13.0 |
|
Other comprehensive income: | | | |
| | | | |
Foreign currency translation | | 6.4 |
| | (13.8 | ) | | (81.2 | ) | | (48.0 | ) |
Postretirement adjustments, net of tax of $0.4 and $14.3 in 2020 and $4.2 and $3.1 in 2019 | | 40.0 |
| | 50.4 |
| | 131.2 |
| | 118.9 |
|
Total other comprehensive income | | 46.4 |
| | 36.6 |
| | 50.0 |
| | 70.9 |
|
Comprehensive income (loss) | | (32.2 | ) | | 66.4 |
| | 987.2 |
| | 83.9 |
|
Less comprehensive income (loss) attributable to noncontrolling interests | | 0.3 |
| | 2.7 |
| | (1.5 | ) | | 3.2 |
|
Comprehensive income (loss) attributable to Unisys Corporation | | $ | (32.5 | ) | | $ | 63.7 |
| | $ | 988.7 |
| | $ | 80.7 |
|
See notes to consolidated financial statements
UNISYS CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
|
| | | | | | | |
| June 30, 2020 | | December 31, 2019 |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 782.2 |
| | $ | 538.8 |
|
Accounts receivable, net | 364.5 |
| | 417.7 |
|
Contract assets | 39.0 |
| | 38.4 |
|
Inventories | 14.8 |
| | 16.4 |
|
Prepaid expenses and other current assets | 119.6 |
| | 100.7 |
|
Current assets of discontinued operations | — |
| | 109.3 |
|
Total current assets | 1,320.1 |
| | 1,221.3 |
|
Properties | 761.2 |
| | 784.0 |
|
Less-accumulated depreciation and amortization | 652.7 |
| | 668.0 |
|
Properties, net | 108.5 |
| | 116.0 |
|
Outsourcing assets, net | 182.1 |
| | 202.1 |
|
Marketable software, net | 187.5 |
| | 186.8 |
|
Operating lease right-of-use assets | 66.3 |
| | 71.4 |
|
Prepaid postretirement assets | 136.1 |
| | 136.2 |
|
Deferred income taxes | 109.0 |
| | 114.0 |
|
Goodwill | 108.6 |
| | 110.4 |
|
Restricted cash | 10.2 |
| | 13.0 |
|
Other long-term assets | 170.9 |
| | 198.9 |
|
Long-term assets of discontinued operations | — |
| | 133.9 |
|
Total assets | $ | 2,399.3 |
| | $ | 2,504.0 |
|
Liabilities and deficit | | | |
Current liabilities: | | | |
Notes payable | $ | 60.3 |
| | $ | — |
|
Current maturities of long-term debt | 97.5 |
| | 13.5 |
|
Accounts payable | 161.6 |
| | 204.3 |
|
Deferred revenue | 217.8 |
| | 246.4 |
|
Other accrued liabilities | 255.6 |
| | 316.7 |
|
Current liabilities of discontinued operations | — |
| | 146.4 |
|
Total current liabilities | 792.8 |
| | 927.3 |
|
Long-term debt | 47.3 |
| | 565.9 |
|
Long-term postretirement liabilities | 1,574.4 |
| | 1,960.2 |
|
Long-term deferred revenue | 130.4 |
| | 147.0 |
|
Long-term operating lease liabilities | 47.9 |
| | 56.0 |
|
Other long-term liabilities | 45.2 |
| | 47.6 |
|
Long-term liabilities of discontinued operations | — |
| | 28.3 |
|
Commitments and contingencies (see note 14) |
| |
|
Deficit: | | | |
Common stock, shares issued: 2020; 66.8, 2019; 65.9 | 0.7 |
| | 0.7 |
|
Accumulated deficit | (774.5 | ) | | (1,711.2 | ) |
Treasury stock, shares at cost: 2020; 3.8, 2019; 3.5 | (114.3 | ) | | (109.6 | ) |
Paid-in capital | 4,650.4 |
| | 4,643.3 |
|
Accumulated other comprehensive loss | (4,036.6 | ) | | (4,088.6 | ) |
Total Unisys Corporation stockholders’ deficit | (274.3 | ) | | (1,265.4 | ) |
Noncontrolling interests | 35.6 |
| | 37.1 |
|
Total deficit | (238.7 | ) | | (1,228.3 | ) |
Total liabilities and deficit | $ | 2,399.3 |
| | $ | 2,504.0 |
|
See notes to consolidated financial statements
UNISYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Millions)
|
| | | | | | | | |
| | Six Months Ended June 30, |
| | 2020 | | 2019 |
Cash flows from operating activities | | | | |
Consolidated net loss from continuing operations | | $ | (129.2 | ) | | $ | (25.8 | ) |
Income from discontinued operations, net of tax | | 1,066.4 |
| | 38.8 |
|
Adjustments to reconcile consolidated net loss to net cash used for operating activities: | | | | |
Gain on sale of U. S. Federal business | | (1,057.4 | ) | | — |
|
Loss on debt extinguishment | | 28.5 |
| | — |
|
Foreign currency translation losses | | 15.3 |
| | 5.3 |
|
Non-cash interest expense | | 2.7 |
| | 5.4 |
|
Employee stock compensation | | 8.0 |
| | 7.3 |
|
Depreciation and amortization of properties | | 15.6 |
| | 17.8 |
|
Depreciation and amortization of outsourcing assets | | 32.7 |
| | 31.7 |
|
Amortization of marketable software | | 36.0 |
| | 21.6 |
|
Other non-cash operating activities | | 1.3 |
| | (0.2 | ) |
Loss on disposal of capital assets | | 0.5 |
| | 1.3 |
|
Postretirement contributions | | (333.0 | ) | | (47.7 | ) |
Postretirement expense | | 48.4 |
| | 47.1 |
|
Deferred income taxes, net | | (7.0 | ) | | 2.7 |
|
Changes in operating assets and liabilities: | | | | |
Receivables, net | | 39.6 |
| | 10.1 |
|
Inventories | | 1.4 |
| | (0.3 | ) |
Accounts payable and other current liabilities | | (161.5 | ) | | (140.3 | ) |
Other liabilities | | 2.6 |
| | 16.9 |
|
Other assets | | (3.0 | ) | | (11.2 | ) |
Net cash used for operating activities | | (392.1 | ) | | (19.5 | ) |
Cash flows from investing activities | | | | |
Net proceeds from sale of U.S. Federal business | | 1,159.4 |
| | — |
|
Proceeds from investments | | 1,735.3 |
| | 1,704.1 |
|
Purchases of investments | | (1,755.9 | ) | | (1,706.9 | ) |
Investment in marketable software | | (36.7 | ) | | (37.2 | ) |
Capital additions of properties | | (10.6 | ) | | (20.8 | ) |
Capital additions of outsourcing assets | | (15.8 | ) | | (39.7 | ) |
Net proceeds from sale of properties | | — |
| | (0.2 | ) |
Other | | (0.2 | ) | | (0.4 | ) |
Net cash provided by (used for) investing activities | | 1,075.5 |
| | (101.1 | ) |
Cash flows from financing activities | | | | |
Proceeds from notes payable | | 60.3 |
| | — |
|
Proceeds from issuance of long-term debt | | 4.0 |
| | 28.1 |
|
Payments of long-term debt | | (448.4 | ) | | (10.5 | ) |
Cash paid for debt extinguishment | | (23.7 | ) | | — |
|
Other | | (4.7 | ) | | (4.5 | ) |
Net cash (used for) provided by financing activities | | (412.5 | ) | | 13.1 |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash | | (30.3 | ) | | 0.9 |
|
Increase (decrease) in cash, cash equivalents and restricted cash | | 240.6 |
| | (106.6 | ) |
Cash, cash equivalents and restricted cash, beginning of period | | 551.8 |
| | 624.1 |
|
Cash, cash equivalents and restricted cash, end of period | | $ | 792.4 |
| | $ | 517.5 |
|
See notes to consolidated financial statements
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, 2020 | | $ | (1,228.3 | ) | | $ | (1,265.4 | ) | | $ | 0.7 |
| | $ | (1,711.2 | ) | | $ | (109.6 | ) | | $ | 4,643.3 |
| | $ | (4,088.6 | ) | | $ | 37.1 |
|
Consolidated net income | | 1,015.8 |
| | 1,015.3 |
| | | | 1,015.3 |
| | | | | | | | 0.5 |
|
Stock-based activity | | (0.5 | ) | | (0.5 | ) | |
| | | | (4.6 | ) | | 4.1 |
| | | | |
Translation adjustments | | (87.6 | ) | | (81.6 | ) | | | | | | | | | | (81.6 | ) | | (6.0 | ) |
Postretirement plans | | 91.2 |
| | 87.5 |
| | | | | | | | | | 87.5 |
| | 3.7 |
|
Balance at March 31, 2020 | | $ | (209.4 | ) | | $ | (244.7 | ) | | $ | 0.7 |
| | $ | (695.9 | ) | | $ | (114.2 | ) | | $ | 4,647.4 |
| | $ | (4,082.7 | ) | | $ | 35.3 |
|
Consolidated net loss | | (78.6 | ) | | (78.6 | ) | | | | (78.6 | ) | | | | | | | |
|
|
Stock-based activity | | 2.9 |
| | 2.9 |
| | | | | | (0.1 | ) | | 3.0 |
| | | | |
Translation adjustments | | 6.4 |
| | 6.5 |
| | | | |
| | | | | | 6.5 |
| | (0.1 | ) |
Postretirement plans | | 40.0 |
| | 39.6 |
| | | | | | |
| | |
| | 39.6 |
| | 0.4 |
|
Balance at June 30, 2020 | | $ | (238.7 | ) | | $ | (274.3 | ) | | $ | 0.7 |
| | $ | (774.5 | ) | | $ | (114.3 | ) | | $ | 4,650.4 |
| | $ | (4,036.6 | ) | | $ | 35.6 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 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 |
|
See notes to consolidated financial statements
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 statement 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 estimated credit losses, 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 materially 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.
We assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts of COVID-19 as of June 30, 2020 and through the date of this report. The accounting matters assessed included, but were not limited to the valuation of estimated credit losses, contract assets, outsourcing assets, marketable software, goodwill and other long-lived assets, and retirement and other post-employment benefits. While there was not a material impact to our consolidated financial position as of June 30, 2020 resulting from our assessments, our future assessment of our current expectations at that time of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to our consolidated financial position in future reporting 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, 2019 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.
Note 2 - Discontinued Operations
On March 13, 2020, the company completed the sale of its U.S. Federal business to Science Applications International Corporation for cash of $1.2 billion. The company’s financial statements have been retroactively reclassified to report the U.S. Federal business as discontinued operations. As a result, all items relating to the business within the consolidated statements of income (loss) have been reported as income from discontinued operations, net of tax, and all items relating to the business within the consolidated balance sheets have been reported as either assets or liabilities of discontinued operations. Depreciation, amortization, capital expenditures, and significant noncash operating and investing activities related to the U.S. Federal business were immaterial for all periods presented.
The results of the U.S. Federal business discontinued operations for the three and six months ended June 30, 2020 and 2019 were as follows:
|
| | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | 2019 | | 2020* | 2019 |
Revenue | | $ | — |
| $ | 184.4 |
| | $ | 149.5 |
| $ | 325.7 |
|
Income (loss): | | | | | | |
Operations | | 0.1 |
| 34.0 |
| | 9.1 |
| 51.7 |
|
Gain on sale | | (0.9 | ) | — |
| | 1,060.8 |
| — |
|
| | (0.8 | ) | 34.0 |
| | 1,069.9 |
| 51.7 |
|
Income tax provision | | 1.3 |
| 8.5 |
| | 3.5 |
| 12.9 |
|
Income (loss) from discontinued operations, net of tax | | $ | (2.1 | ) | $ | 25.5 |
| | $ | 1,066.4 |
| $ | 38.8 |
|
* Includes results of operations through the March 13, 2020 closing date.
Note 3 - Accounting Standards
Effective January 1, 2020, the company adopted 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. The company adopted the new guidance on a prospective basis and the adoption did not have a material impact on its consolidated results of operations and financial position.
Effective January 1, 2020, the company adopted 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, contract assets, loans and other financial instruments. The adoption did not have a material impact on the company’s consolidated results of operations and financial position.
Effective January 1, 2020, the company adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which removed certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new standard was applied to the presentation of the company’s U.S. Federal business, which is reflected in discontinued operations.
Note 4 - Cost-Reduction Actions
During the three months ended June 30, 2020, the company recognized cost-reduction charges and other costs of $7.9 million. The charges (credits) related to work-force reductions were $(3.0) million, principally related to severance costs, and were comprised of: (a) a charge of $1.6 million for 19 employees and (b) a credit of $4.6 million for changes in estimates. In addition, the company recorded a credit of $0.6 million for net foreign currency gains related to exiting foreign countries and a charge of $11.5 million for asset impairments. The charges (credits) were recorded in the following statement of income classifications: cost of revenue - services, $6.9 million; selling, general and administrative expenses, $1.5 million; research and development expenses, $0.1 million; and other expense, net, $(0.6) million.
During the three months ended June 30, 2019, the company recognized cost-reduction charges and other costs of $2.6 million. Charges (credits) were comprised of $0.8 million for lease abandonment costs and $1.8 million for changes in estimates principally related to work-force reductions. The charges were recorded in the following statement of income classifications: cost of revenue - services, $(1.0) million and selling, general and administrative expenses, $3.6 million.
During the six months ended June 30, 2020, the company recognized cost-reduction charges and other costs of $35.4 million. The charges related to work-force reductions were $5.5 million, principally related to severance costs, and were comprised of: (a) a charge of $11.3 million for 309 employees and (b) a credit of $5.8 million for changes in estimates. In addition, the company recorded charges of $18.4 million for net foreign currency losses related to exiting foreign countries and $11.5 million for asset impairments. The charges were recorded in the following statement of income classifications: cost of revenue - services, $12.8 million; selling, general and administrative expenses, $4.0 million; research and development expenses, $0.2 million; and other expense, net, $18.4 million.
During the six months ended June 30, 2019, the company recognized cost-reduction charges and other costs of $5.2 million. Charges were comprised of $4.3 million for lease abandonment costs and asset write-offs and $0.9 million for changes in estimates principally related to work-force reductions. The charges were recorded in the following statement of income
classifications: cost of revenue - services, $(4.7) million; selling, general and administrative expenses, $8.6 million; and research and development expenses, $1.3 million.
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, 2019 | | $ | 49.8 |
| | $ | 5.2 |
| | $ | 44.6 |
|
Additional provisions | | 11.3 |
| | 3.0 |
| | 8.3 |
|
Payments | | (14.3 | ) | | (1.4 | ) | | (12.9 | ) |
Changes in estimates | | (5.8 | ) | | 0.1 |
| | (5.9 | ) |
Translation adjustments | | (0.7 | ) | | — |
| | (0.7 | ) |
Balance at June 30, 2020 | | $ | 40.3 |
| | $ | 6.9 |
| | $ | 33.4 |
|
Expected future utilization on balance at June 30, 2020: | | | | | | |
2020 remaining six months | | $ | 32.3 |
| | $ | 6.4 |
| | $ | 25.9 |
|
Beyond 2020 | | $ | 8.0 |
| | $ | 0.5 |
| | $ | 7.5 |
|
Note 5 - Pension and Postretirement Benefits
Net periodic pension expense for the three and six months ended June 30, 2020 and 2019 is presented below: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2020 | | Three Months Ended June 30, 2019 |
| | Total | | U.S. Plans | | International Plans | | Total | | U.S. Plans | | International Plans |
Service cost(i) | | $ | 0.7 |
| | $ | — |
| | $ | 0.7 |
| | $ | 0.7 |
| | $ | — |
| | $ | 0.7 |
|
Interest cost | | 53.8 |
| | 40.8 |
| | 13.0 |
| | 66.5 |
| | 49.3 |
| | 17.2 |
|
Expected return on plan assets | | (73.9 | ) | | (52.0 | ) | | (21.9 | ) | | (80.9 | ) | | (54.5 | ) | | (26.4 | ) |
Amortization of prior service benefit | | (1.3 | ) | | (0.7 | ) | | (0.6 | ) | | (1.3 | ) | | (0.7 | ) | | (0.6 | ) |
Recognized net actuarial loss | | 44.7 |
| | 34.3 |
| | 10.4 |
| | 37.6 |
| | 29.0 |
| | 8.6 |
|
Net periodic pension expense (benefit) | | $ | 24.0 |
| | $ | 22.4 |
| | $ | 1.6 |
| | $ | 22.6 |
| | $ | 23.1 |
| | $ | (0.5 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2020 | | Six Months Ended June 30, 2019 |
| | Total | | U.S. Plans | | International Plans | | Total | | U.S. Plans | | International Plans |
Service cost(i) | | $ | 1.4 |
| | $ | — |
| | $ | 1.4 |
| | $ | 1.4 |
| | $ | — |
| | $ | 1.4 |
|
Interest cost | | 107.6 |
| | 81.2 |
| | 26.4 |
| | 133.2 |
| | 98.5 |
| | 34.7 |
|
Expected return on plan assets | | (149.0 | ) | | (104.3 | ) | | (44.7 | ) | | (162.1 | ) | | (109.0 | ) | | (53.1 | ) |
Amortization of prior service benefit | | (2.5 | ) | | (1.3 | ) | | (1.2 | ) | | (2.5 | ) | | (1.3 | ) | | (1.2 | ) |
Recognized net actuarial loss | | 89.0 |
| | 67.8 |
| | 21.2 |
| | 75.2 |
| | 57.9 |
| | 17.3 |
|
Net periodic pension expense (benefit) | | $ | 46.5 |
| | $ | 43.4 |
| | $ | 3.1 |
| | $ | 45.2 |
| | $ | 46.1 |
| | $ | (0.9 | ) |
|
|
(i)Service cost is reported in selling, general and administrative expense. All other components of net periodic pension expense are reported in other expense, net in the consolidated statements of income (loss). |
In 2020, the company expects to make cash contributions of approximately $634 million to its worldwide defined benefit pension plans, which are comprised of $600 million for the company’s U.S. qualified defined benefit pension plans and $34 million primarily for the company’s international defined benefit pension plans. In 2019, the company made cash contributions of $103.9 million to its worldwide defined benefit pension plans. For the six months ended June 30, 2020 and 2019, the company made cash contributions of $329.9 million and $45.9 million, respectively.
Net periodic postretirement benefit expense for the three and six months ended June 30, 2020 and 2019 is presented below: |
| | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 |
Service cost(i) | | $ | 0.1 |
| | $ | 0.1 |
| | $ | 0.2 |
| | $ | 0.2 |
|
Interest cost | | 1.1 |
| | 1.2 |
| | 2.2 |
| | 2.4 |
|
Expected return on assets | | (0.1 | ) | | (0.1 | ) | | (0.2 | ) | | (0.2 | ) |
Recognized net actuarial loss | |