0000746838-14-000022.txt : 20141017
0000746838-14-000022.hdr.sgml : 20141017
20140822120226
ACCESSION NUMBER: 0000746838-14-000022
CONFORMED SUBMISSION TYPE: CORRESP
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 20140822
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: UNISYS CORP
CENTRAL INDEX KEY: 0000746838
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373]
IRS NUMBER: 380387840
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: CORRESP
BUSINESS ADDRESS:
STREET 1: 801 LAKEVIEW DRIVE, SUITE 100
CITY: BLUE BELL
STATE: PA
ZIP: 19422
BUSINESS PHONE: 2159864011
MAIL ADDRESS:
STREET 1: 801 LAKEVIEW DRIVE, SUITE 100
CITY: BLUE BELL
STATE: PA
ZIP: 19422
FORMER COMPANY:
FORMER CONFORMED NAME: BURROUGHS CORP /DE/
DATE OF NAME CHANGE: 19861204
CORRESP
1
filename1.txt
August 22, 2014
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549
Attention: Patrick Gilmore, Accounting Branch Chief
Re: Unisys Corporation
Form 10-K for the Fiscal Year Ended December 31, 2013
Filed February 24, 2014
File No. 001-08729
Dear Mr. Gilmore:
On behalf of Unisys Corporation (the "Company"), set forth below is the
Company's response to the comment of the Staff of the Securities and Exchange
Commission regarding the above referenced filing set forth in the Staff's
letter dated August 15, 2014. For your convenience, we have repeated the
comment set forth in the Staff's letter and followed with the Company's
response.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (INCORPORATED BY
REFERENCE FROM THE UNISYS 2013 ANNUAL REPORT TO STOCKHOLDERS, EXHIBIT 13)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. GOODWILL, PAGE 25
COMMENT 1
We note your response to prior comment 2. Please provide us with your
evaluation of ASC 350-20-35-3F through 35-3G as well as your consideration of
the factors in ASC 350-20-35-3C (a) through (g).
RESPONSE TO COMMENT 1
As mentioned in the Company's response to the Staff's prior comment 2, the
Company determined that the carrying amount of its reporting units did not
exceed their estimated fair value. Since the carrying amount of both of the
Company's reporting units was negative, the Company then considered
ASC 350-20-35-8A in determining whether it was necessary to perform a Step 2
impairment analysis. This consideration included an evaluation, using the
process described in ASC 350-20-35-3F through 35-3G, including the events and
circumstances provided in ASC 350-20-35-3C (a) through (g).
An overview of the Company's consideration of the factors in ASC 350-20-35-3C
follows:
a) Macroeconomic conditions such as a deterioration in general economic
conditions, limitations on accessing capital, fluctuations in foreign
exchange rates, or other developments in equity or credit markets.
Consideration: In management's opinion, long-term macroeconomic
conditions did not deteriorate materially during 2013. During 2013,
the Company faced no limitations on accessing capital. During the
three years ended December 31, 2013, the Company made payments to
reduce long-term debt by approximately $945 million through the
issuance of $250 million 6.25% mandatory convertible preferred stock,
$210 million of 6.25% senior notes due 2017 and cash on hand. In
addition during 2011, the Company entered into a five-year secured
revolving credit facility which provides for loans and letters of
credit up to an aggregate amount of $150 million. At December 31,
2013, the Company reported a cash balance of approximately $640 million
and debt of $210 million. Foreign currency negatively impacted revenue
by approximately one-percentage point during 2013.
b) Industry and market considerations such as a deterioration in the
environment in which an entity operates, an increased competitive
environment, a decline in market-dependent multiples or metrics
(considered in both absolute terms and relative to peers), a change in
the market for an entity's products or services, or a regulatory or
political development.
Consideration: The Company participates in the information technology
industry which was and is expected to continue to be highly
competitive. The Company did not see nor does it expect to see a
material deterioration in either this environment or a material change
in the market for its products or services. In its 2013 goodwill
evaluation, the Company examined industry market multiples and these
multiples were as good as or better than the multiples used during the
preceding evaluation in 2012. The Company's business was not and is
not expected to be materially impacted by regulatory or political
developments.
c) Cost factors such as increases in raw materials, labor, or other costs
that have a negative effect on earnings and cash flows.
Consideration: During 2013, the Company was very diligent in reducing
its cost structure as the combination of selling, general and
administrative expense and research and development expense decreased
by 4%. Also, due to the Company's debt reduction activities, interest
expense was reduced by 64%. Overall, the Company has reduced its
interest expense from $102 million in 2010 to $10 million in 2013. As
part of its cost savings initiatives, the Company has increased the
percentage of its workforce operating in lower-cost offshore and
onshore delivery models from approximately 30% at December 31, 2011 to
35% at December 31, 2013. In addition, the Company continues to plan
to increase this percentage.
d) Overall financial performance such as negative or declining cash flows
or a decline in actual or planned revenue or earnings compared with
actual and projected results of relevant prior periods.
Consideration: For the Company and many of its competitors, 2013 was
a challenging year. Lower demand for IT services projects and high-
end enterprise servers resulted in a decline, when compared to 2012,
in the Company's revenue, net income and cash flows from operating
activities. However, the Company delivered its fifth consecutive year
of profitability with 2013 diluted earnings per share of $2.08, and
generated net cash from operating activities of approximately $187
million (approximately $335 million before defined benefit pension
plan contributions). The Company ended 2013 with approximately $640
million of cash compared with approximately $656 million at the end
of 2012.
The Company's underfunded defined benefit pension plan obligations
improved by approximately $900 million to $1.5 billion at December 31,
2013 from $2.4 billion at December 31, 2012, principally due to an
increase in discount rates, as well as higher pension plan assets.
This improvement and the Company's 2013 net income were the principal
reasons the Company's deficit improved by approximately $925 million
from $1.6 billion at December 31, 2012 to $664 million at December 31,
2013.
During 2013, the Company brought to market a range of products and
services that position it to capitalize on large, growing markets,
including its Stealth cybersecurity software and its Forward! by
Unisys Intel-based computing platform.
e) Other relevant entity-specific events such as changes in management,
key personnel, strategy, or customers; contemplation of bankruptcy;
or litigation.
Consideration: No such events occurred during 2013.
f) Events affecting a reporting unit such as a change in the composition
or carrying amount of its net assets, a more-likely-than-not
expectation of selling or disposing all, or a portion, of a reporting
unit, the testing for recoverability of a significant asset group
within a reporting unit, or recognition of a goodwill impairment loss
in the financial statements of a subsidiary that is a component of a
reporting unit.
Consideration: No such events occurred during 2013.
g) If applicable, a sustained decrease in share price (considered in both
absolute terms and relative to peers).
Consideration: During 2013, the Company did not experience a sustained
decrease in its share price. The Company's common share price
increased during 2013 by approximately 94% from $17.30 on December 31,
2012 to $33.57 on December 31, 2013.
The Company also took into consideration whether there were significant
differences between the carrying amount and the estimated fair value of its
assets and liabilities, and the existence of significant unrecognized
intangible assets. While the Company has a valuable portfolio of
intellectual property which is carried on its books at a zero value, the
excess of the Company's market capitalization (approximately $1.5 billion)
over its deficit was approximately $2.2 billion at December 31, 2013. The
Company does not expect that a step two goodwill analysis, if it were required,
would result in an impairment of the approximately $189 million in goodwill
recorded at December 31, 2013.
Application of the goodwill impairment analysis requires significant judgment.
Based on consideration of the weight of evidence of the factors described
above, the Company concluded that it was not more likely than not that goodwill
was impaired as of October 1, 2013.
* * *
In addition, the Company acknowledges that:
* the Company is responsible for the adequacy and accuracy of the disclosure
in the filing;
* Staff comments or changes to disclosure in response to Staff comments do not
foreclose the Commission from taking any action with respect to the filings;
and
* the Company may not assert Staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities laws
of the United States.
The Company hopes that the above is responsive to the Staff's comments.
Very truly yours,
UNISYS CORPORATION
/s/ Janet Brutschea Haugen
Janet Brutschea Haugen
Senior Vice President and Chief Financial Officer