UNISYS CORP annual report, FY2010

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Unisys Corporation — 2010 Form 10-K

Reporting period: Fiscal year ended December 31, 2010; filed February 22, 2011. The filing describes Unisys as a global IT services and technology company serving commercial clients and government agencies. Its two segments are Services and Technology. The financial statements and MD&A are incorporated by reference from the 2010 Annual Report to Stockholders, which is not included in the supplied filing text.

Business context and key metrics

  • Services include outsourcing, systems integration and consulting, infrastructure services, and maintenance. Technology includes enterprise servers, operating system software, and middleware.
  • Unisys identified security, data-center transformation, end-user outsourcing, and applications modernization as targeted investment areas.
  • Services firm backlog was $5.8 billion at year-end 2010, versus $5.9 billion at year-end 2009. Approximately $2.2 billion, or 39%, of 2010 backlog was expected to be filled in 2011.
  • U.S. government agency sales represented approximately 21% of consolidated 2010 revenue. No single customer accounted for more than 10% of revenue.
  • Company-sponsored research and development expense was $78.9 million in 2010, $101.9 million in 2009, and $129.0 million in 2008.
  • Unisys employed approximately 22,900 people at December 31, 2010. Approximately 42.6 million common shares were outstanding.

Financial results, liquidity, and capital

The supplied text does not provide clear values for revenue, net income or loss, operating margins, cash flow, cash and equivalents, total debt, or liquidity. Those results are incorporated by reference and cannot be summarized from this text. The exhibit index identifies secured notes due 2014 bearing 12.75% interest and secured notes due 2015 bearing 14.25%; principal balances and year-end liquidity are not stated here.

Unisys had not paid a common-stock cash dividend since 1990 and did not anticipate paying one in the foreseeable future. The filing reports Services backlog declined by $0.1 billion year over year and R&D expense fell in each of the three years shown.

Outlook, risks, and other notable disclosures

  • No company-wide revenue, earnings, cash-flow, or margin guidance is provided in the supplied text. The only forward-looking backlog detail is the expected 2011 fulfillment of approximately $2.2 billion of Services backlog.
  • Backlog may be cancelled for commercial reasons. Government contracts may be terminated, in whole or part, for convenience or lack of funding; the company generally expects payment for completed work and allowable termination or cancellation costs.
  • Key disclosed business exposures include intense competition, rapid technological change, dependence on certain single or limited-source suppliers, international operations, and government contracting. Seasonal purchasing patterns have generally made fourth-quarter revenue higher than other quarters.
  • The filing lists secured debt instruments with high stated coupons. The supplied text does not provide balances, covenant detail, or a full discussion of debt and liquidity risks.
  • Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2010; KPMG audited internal control over financial reporting.
  • Litigation and contingencies, market risk, and detailed risk factors are incorporated by reference; their substance is not included in the supplied text.

Important facts for investors to verify

  1. Review the incorporated financial statements and MD&A for 2010 revenue, profitability, cash flow, cash, debt balances, liquidity, and segment performance.
  2. Verify debt principal, interest expense, maturities, collateral, covenants, and refinancing or repayment requirements for the secured notes.
  3. Assess backlog conversion, cancellation exposure, and the concentration of revenue in U.S. government contracts.
  4. Read the incorporated risk-factor and litigation disclosures, including market-risk and contingency details.
  5. Check whether the company’s stated investment priorities and expected 2011 backlog fulfillment translated into subsequent operating results.