company presentation - unisys · agile & devops transformation services s cloud and...
TRANSCRIPT
Company Presentation
June 2017
© 2017 Unisys Corporation. All rights reserved. 2
Disclaimer
• This presentation includes certain financial measures not presented in accordance with U.S. generally accepted accounting principles (“GAAP”), including, but not limited to, EBITDA, Adjusted EBITDA, Free Cash Flow, Adjusted Free Cash Flow, and constant currency, and certain ratios and other metrics derived therefrom. These non-GAAP financial measures are not measures of financial performance in accordance with GAAP and may exclude items that are significant in understanding and assessing the Company’s financial results.
• Therefore, these measures should not be considered in isolation or as an alternative to cash flows from operations or other measures of profitability, liquidity or performance under GAAP. You should be aware that the Company’s presentation of these measures may not be comparable to similarly-titled measures used by other companies. Reconciliations of all non-GAAP financial measures are available in this presentation.
© 2017 Unisys Corporation. All rights reserved. 3
Presenters
Courtney HolbenVP, Investor Relations
Inder SinghSVP and Chief Financial Officer
© 2017 Unisys Corporation. All rights reserved. 4
Agenda
II. Financial Overview 13
I. Business Overview 5
© 2017 Unisys Corporation. All rights reserved.
I. Business Overview
© 2017 Unisys Corporation. All rights reserved. 6
Our Value Proposition
• Enhancing peoples’ lives through digital security
• Security in everything we do
• Software and Domain expertise-leveragedsolutions
• Vertical industry integrated solutions
• Best-in-class capabilities with a global footprint
© 2017 Unisys Corporation | All rights reserved. 7
Unisys Today
Revenue
Profile1
Technology12%
Technology12%
Services88%
BPO 7%
Segment Segment Detail Geography Regional Detail Sector Sector Detail Revenue Type
Application Services 30%
Cloud & Infrastructure
Services51%
Enterprise Solutions
78%
Recurring Services
68%
Non-Recurring Services
20%
Commercial30%
Financial23%
U.S. & Canada
51%
International49%
EMEA27%
U.S. & Canada
51%
Asia Pacific12%
Latin America10%
U.S. Federal22%
Public Sector25%
U.S. Federal22% Technology
12%
More than 100 of the Fortune Global 500 companies
7 out of the top 10 Life Science firms
>100 million air cargo transactions per month
Over half of the top 50 global banks and
9 of the world’s top insurance companies
>300 government agencies worldwide
18 of the top 25global airlines
1 As of 1Q 2017
© 2017 Unisys Corporation. All rights reserved. 8
Unisys – Who We Are
Cloud & Infrastructure Services (CIS) Application Services (AS) Business Process Outsourcing (BPO)
51% of total revenue
• End user and workspace services
(33% of total revenue)
- Provides help desk and workplace support
services
• Data center & infrastructure management
(18% of total revenue)
- Provides cloud migration and related
advisory services
30% of total revenue
• Software application development and
integration services
- Provides full lifecycle of application
services, including advisory,
implementation and management
services
7% of total revenue
• Industry-specific business
process outsourcing services
- Check processing for a
group of large U.K. banks
- Mortgage origination in
Australia
• Main driver of historical Technology revenue
• New software-only architecture
Technology (12% of total revenue)
Services (88% of total revenue)
Server systems and operating system software Innovative software-based security solution
• Conceals and protects endpoints from
unauthorized parties
• Protects sensitive data from potential
compromise via microsegmentation and
data encryptionNote: Based on 1Q 2017 revenue
Application SoftwareProprietary, vertical-specific applications
• Air Core®
• Digistics™
• Digital Investigator™
• LineSight®
• ActiveInsights™
MedDevice and
PharmaTrack
• Elevate™
© 2017 Unisys Corporation | All rights reserved. 9
Industry-Specific, and Leveraged SolutionsA
reas o
f F
ocu
sIn
du
str
y
So
luti
on
s
Government Commercial Financial Services
Justice, Law Enforcement & Border Security
Social Services Solutions
Digital Government Solutions
• Digital Investigator™
• LineSight®
• FamilyNow™
• ENFORCE™
Travel & Transportation
Life Sciences & Healthcare
Manufacturing
Retail
• AirCore®
• Digistics™
• ActiveInsights™ MedDevice and PharmaTrack
• Elevate™
• Core Banking Solutions: (CSF, URBIS™, and SFB)
• Mortgage Processing - UFSS™
• Appointment Manager
Retail Banking
Mortgage/Lending
Insurance
Commercial Banking
Communications
Energy & Utilities
Le
ve
rag
ed
S
olu
tio
ns
Cloud and Infrastructure
• Infrastructure Transformation
• Hybrid Cloud Enablement
• Empowering the Digital Worker
• Next Generation Service Support
• Service Integration & Management
• Infrastructure Managed Services
• VantagePoint™
• InfoImage™
Application Services
• Application Digital Modernization
• Agile & DevOps Transformation Services
• Application Managed Services
Security
• Security Consulting Services
• Managed Security Services
• Stealth™ Security Solutions
Business Process Outsourcing
• Unisys Mortgage Origination Solutions
• Payment Solutions
• Imaging Workflow & Archiving Solutions
Analytics
• Analytics Consulting
• Machine Learning as a Service
© 2017 Unisys Corporation. All rights reserved. 10
Progress with Key Focus Industries
Overall IT $3.56T1 $3.752T 2%• Digital Transformation
• Security First
• Smarter Analytics
• Stealth by Unisys®
• ClearPath Forward Systems™
• InfoImage™
Travel &
Transportation$130B1 $151B 3.7%
• Passenger
• Cargo
• Airports
• AirCore™
• Digistics™
• Airport Operations™
Commercial &
Retail Banking$50B2 $68B 6.4%
• Multichannel Banking
• Security & Risk
Mitigation
• Core Banking in Cloud
• Elevate™
• USFF™
• Core Banking™
Justice, Law
Enforcement
and Border
Security
$24B2 $49B 5.6%• Border Protection
• Law Enforcement
• Immigration
• Digital Investigator™
• LineSight™
• Jail Management Systems
Life Sciences &
Healthcare$15B2 $24B 10.7%
• Personalized Medicine
• Integrated, Secure
Patient Info
• Decentralized Clinical
Locations
• ActiveInsights™ MedDevice
and PharmaTrack
Client Needs
✓
✓
✓
✓
CAGR2020
1 Gartner Group2 Everest Group
2014 Key Unisys Solutions
Revenue from Unisys’ focus industries comprised 43% of 1Q17 revenue.
© 2017 Unisys Corporation. All rights reserved. 11
Security In Everything We Do
Differentiation in Security Begins with StealthTM
• Unisys Stealth® won approval from NSA’s commercial solutions for classified program
• Stealth is available on Microsoft Azure cloud and Amazon Web Services, the two market leaders in the space
Cloud
Mobile
Identity
Analytics
Core
Stealth for Omnichannel threats
MSS(holistic security)
USP Digital BankingPlatform (embedded security)
Fraud/Risk Analytics
OmnichannelBanking Solution (application level security)
Identity Solutions Stealth(identity)
Law Enforcement Agency Framework (U-LEAFTM)
ClearPath ForwardTM
Unisys Se Family Net (USFN)
Secure Image Management (SIMS)
Stealth for Government
Logistics Management Solutions
AirCore® and PassengerSolutions
Secure Airport Operations
Stealth-Protected Software-Defined Data Center
Secure Mobile Management
Application Security
End User Services
Business Processes
Cloud Infrastructure• Cloud Management Platform
with On Premise and Public (off premise) Security
• Stealth to protect existing servers
• Hosted Workspace Services with End User Security
• DMZ and Intrusion Detection• PKI enabled QR• OS and anti-virus
patching/updates
• Host Intrusion Prevention System (HIPS)
• Secure Persona Services• Data Loss Prevention (DLP) • Anti-Virus & Personal Firewall• Hard Drive Encryption• BYOD Security Strategy
• Secure Mobile Services (Email, Asset Tracking, Wipe, Encryption)
• Secure Browser Management
• Embedded security (Stealth(identity), MFA, Crypto)
• Architecture layer security• Hybrid mobile apps with native
security• Stealth for platform invisibility• Data obfuscation• Identify Provider (IdP) integration• Multi-factor authentication• Security assessment and testing• Firewall and proxy revert
© 2017 Unisys Corporation. All rights reserved.
II. Financial Overview
© 2017 Unisys Corporation. All rights reserved. 13
$346
$381
11.5%
13.5%
2015 2016
Adj. EBITDA % Adj. EBITDA Margin
($6)
2015 2016
Summary Financial Performance
Revenue Non-GAAP Operating Profit and Margins*
Adjusted FCF***
($ in millions)
$3,015$2,821
2015 2016
See Schedule *A, **B and ***C: GAAP to non-GAAP Reconciliation
($ in millions)
Growth in CC: (2%) (4%)
Adjusted EBITDA and Margins**
($ in millions) ($ in millions)
$278
$176
$217
5.8%
7.7%
2015 2016
Non-GAAP Operating Profit % Margin
© 2017 Unisys Corporation. All rights reserved. 14
Debt Capitalization Table
As of 3/31/17 Pro Forma For Sr. Secured Notes Offering
1Q 17 PF (1)
x 1Q 17 LTM Adj. EBITDA
Senior Secured Revolving Credit Facility (ABL) $0.0 0.0 x
10.75% Senior Secured Notes due 2022 $440.0 1.1 x
Capital Leases $9.5
Other Debt $16.3
5.50% Senior Unsecured Convertible Notes due 2021 $213.5 (2) 1.7 x
Total Debt $679.3 1.7 x
PF Cash $635.0
Net Debt $44.3 0.1 x
1Q 17 LTM Adj. EBITDA $405.4
(1) Pro forma for Sr. Secured Notes offering that closed in April 2017(2) Convertible is in the money as of 6/15/17
© 2017 Unisys Corporation. All rights reserved. 15
Services Trends and Profitability
Key Highlights / Commentary
Source: Company information
Cloud & Infrastructure Services• Declines due to select large scale contracts
• Continue to rationalize the business, expand margin and capitalize on
verticalized approach
Application Services• Continued momentum in win rates from our verticalized approach - key
differentiator vs Indian based firms
• Lever the success of US Federal across our other businesses
Business Process Outsourcing• Recent declines associated with our check processing business for
Financial Services
• Increasing digital opportunities should help stabilize the business
• Diversifying the business beyond check processing and Financial
Services; recent example includes the Philippines Statistics Authority
Services Gross Margin• Key restructuring initiatives in ’15 and ’16 led to solid gains in ’16 margin
% which are anticipated to continue
Cloud & Infrastructure Services Revenue
$1,513 $1,353
2015 2016Growth in CC:
(4%) (9%)
Application Services Revenue
$869 $859
2015 2016Growth in CC:
15% 2%
Business Process Outsourcing Revenue
$224$194
2015 2016Growth in CC: (6%) (5%)
Services Gross Profit and Margins
$412
$390
15.8% 16.2%
2015 2016
Gross Profit % Margin
($ in millions)
($ in millions)
($ in millions) ($ in millions)
© 2017 Unisys Corporation. All rights reserved. 16
Technology Trends and Profitability
Source: Company information
Key Highlights / CommentaryTechnology Revenue1
$410 $414
2015 2016
Growth in CC:
(22%) 2%
Technology Gross Profit and Margins
Technology Revenue
• Disciplined approach away from lower margin 3rd party products
• Large lumpy contracts can skew trend line
Technology Gross Margin
• Increasing stabilization of ClearPath Forward
• Reduction in lower margin products and increasing higher margin
software contribution from Stealth
2016 Segment Contribution
85%
15%
Revenue
61%
39%
Gross Profit
Services Technology
$254
$262
55.3%
59.9%
2015 2016
Gross Profit % Margin
($ in millions)
($ in millions)
1 Technology revenue excludes intercompany sales
© 2017 Unisys Corporation. All rights reserved. 17
1Q17 Financial Results
Diluted Earningsper Share
GAAP and Non-GAAP***
Net Loss Attributable to Unisys ($M)
(GAAP)/
Adjusted EBITDA ($M)(Non-GAAP**)
Revenue ($M)GAAP
Adjusted EBITDA Margin (%)
Non-GAAP **
1Q16 1Q17
$667 $665
(4.1)%GAAP
(0.4)%GAAP
Non-GAAP2.9%
Non-GAAP6.3%
$(0.80)GAAP
$(0.65)GAAP
Non-GAAP†
$0.11
Non-GAAP†
$0.30
See Schedule *A, **B and ***D: GAAP to non-GAAP Reconciliation† Non-GAAP adjusted weighted average shares were 72,511 in 1Q17 versus 50,138 in 1Q16 due to issuance of convertible notes and associated accounting treatment
Operating Profit Margin (%)
GAAP and Non-GAAP*
1Q17 saw increased margins and relatively flat revenue, marking progress against the company’s strategy
1Q16 1Q171Q16 1Q17
$(40)GAAP
$(33)GAAP
1Q16 1Q17
Non-GAAP$60
Non-GAAP$84
1Q16 1Q17
9.0%
12.7%
© 2017 Unisys Corporation. All rights reserved. 18
$6.26 $5.88
$8.22 $8.05
($1.96) ($2.17)
December 31, 2015 December 31, 2016 Assets
PBO
Deficit
Defined Benefit Pension Plans Funded Status
In accordance with U.S. GAAP, discount rates are set annually at December 31.
($B)
© 2017 Unisys Corporation. All rights reserved. 19
Estimated Future Pension Cash Contributions
$80 $59 $52 $54
$86
$159
$249
$212 $241
$226
$181
$129
$104
$89 $80 $74
$64
$65
$64
$54
$54 $54
$54
$34
$20 $19
$183
$148 $132
$128
$150
$224
$313
$266
$295 $280
$235
$163
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
U.S. Defined Benefit Plan All Other Plans$M
The funding estimates for our U.S. qualified defined benefit pension plan are based on current estimated asset returns and the funding discount rates used for the U.S.
qualified defined benefit plan which have been updated to reflect the year end 2016 discount rates. The future funding requirements are likely to change based on, among
other items, market conditions and changes in discount rates. Our UK pension obligations are negotiated every three years.
Current estimates for future contributions to international plans are based on local funding regulations and agreements and are likely to change in 2018 and beyond
based on a number of factors including market conditions, changes in funding agreements, changes in discount rates and changes in currency rates.
Assumes adoption of updated mortality table for funding purposes on January 1, 2018.
© 2017 Unisys Corporation. All rights reserved. 20
Potential Economic Benefit of Unisys Tax Assets
Description Unisys Net
Deferred Tax Assets(1)
Future Available Reductions in
Taxable Income
U.S.
NOLs and Tax Credits
Net Operating Loss – Federal & State $656 $1,302
Tax Credits 408 1,166
Pension and OtherPension 631 1,657
Other Deferred Tax Assets 152 400
Total available U.S. $1,847 $4,525
Non-U.S.
Foreign Tax Attributes
Net Operating Loss – Non-U.S. $234 $924
Pension and other – Non-U.S. 143 650
Total available non-U.S. $377 $1,574
Total available $2,224 $6,099
Valuation Allowance (1) (2,084)
Total Net Deferred Tax Asset (1) $140
(1) The elements listed above are for informational purposes only and are based on expectations and assumptions defined in the Form 10-K filed for December 31, 2016. See Critical Accounting Policies – Income Taxes for the assessment of the realization of company’s deferred tax assets and liabilities and Footnote 7 in 2016 Form 10-K.
Net Deferred Tax Assets represent the tax effected difference between the book and tax basis of assets and liabilities. Deferred tax assets represent future deductions against taxable income or a credit against a future income tax liability. Deferred tax liabilities represent taxable amounts in future years when the related asset or liability is recovered.
Valuation Allowance - US GAAP requires net deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or the entire deferred tax asset will not be realized. The factors used to assess the likelihood of realization are the company’s historical profitability, forecast of future taxable income and available tax-planning strategies that could be implemented to realize the net deferred tax assets. The company considers tax-planning strategies to realize or renew net deferred tax assets to avoid the potential loss of future tax benefits.
$M as of Dec. 31, 2016
© 2017 Unisys Corporation. All rights reserved.
Appendix
© 2017 Unisys Corporation. All rights reserved. 22
Competitive Landscape
Cloud & Infrastructure Services (CIS) Application Services (AS) Business Process Outsourcing (BPO)
51% of total revenue
• End user and workspace services
(33% of total revenue)
- Key competitors: Atos, Cognizant,
Compucom, Dell/EMC, HCL, HPE, CSC, IBM,
Pomeroy, Stefanini, TCS, Wipro
• Data center & infrastructure management
(18% of total revenue)
- Key competitors: Atos, Booz Allen, CACI,
Capgemini, Cognizant, CSC, CSRA, Dell, HCL,
IBM, Infosys, Leidos, TCS, Wipro
30% of total revenue
• Key competitors: Accenture, Atos, CapGemini,
CGI, Cognizant, CSC, CSRA, Deloitte, E&Y,
IBM, Infosys, Janeiro Digital, KPMG, Leidos,
Mindtree, TCS, Wipro
7% of total revenue
• Key competitors: Cognizant, FIS,
Infosys, Sutherland Global, Syntel,
TCS, Tech Mahindra, Wipro, WNS
• Key competitors: IBM, Oracle, SAP
Technology (12% of total revenue)
Services (88% of total revenue)
Server systems and operating system software Innovative software-based security solution
• Key competitors: Cisco, Illumio, vArmor
Vidder, VMWare
Note: Based on 1Q 2017 revenue
Application SoftwareProprietary, vertical-specific applications
• Key competitors: Various depending on
solution
© 2017 Unisys Corporation. All rights reserved. 23
Cost-Reduction Plan Update
• Unisys previously announced a plan to create a more competitive cost structure and rebalance the global skill set
– The original announced plan was to achieve $200M of annualized cost savings exiting YE2016
• Possible additional $30M of annualized cost savings exiting 2017
• As of the end of 2016, the company has realized $205M in annualized cost savings
– The company is still targeting $230M in annualized cost savings exiting 2017
– The anticipated charges to achieve these savings as announced in our original plan is still expected to be $300M
• $201M have been incurred as of 12/31/16, inception to date
• Majority of remaining additional charge expected in 2017
• The cost reduction plan was originally estimated to require $280M cash usage
– Through 12/31/2016, we have used $133M
– We anticipate $80-90M of cash to be used in 2017
– We anticipate $30-35M to be used in 2018 and $15-20M to be used in 2019
© 2017 Unisys Corporation. All rights reserved. 24
Update on Defined Benefit Pension Plans
Worldwide P&L Impact ($M) 2016 2017E
Total Pension Expense* $82.7 $98.0
U.S. Qualified Defined Benefit Pension Plan
Expected Return on Assets 6.80% 6.80%
Actual Return 7.32%
U.S. GAAP Discount Rate at 12/31/15
4.56%
at 12/31/16
4.38%
International Qualified Defined Benefit Pension Plans
Expected Return on Assets 5.99% 5.30%
Weighted Average GAAP Discount Rate at 12/31/15
3.30%
at 12/31/16
2.34%
*All estimates are based on expected asset returns and discount rate assumptions as calculated at December 31, 2016.
© 2017 Unisys Corporation. All rights reserved. 25
Non-GAAP and Other Information
Although appropriate under generally accepted accounting principles (GAAP), the company’s results reflect charges that the company believes are not
indicative of its ongoing operations and that can make its profitability and liquidity results difficult to compare to prior periods, anticipated future periods, or to its
competitors’ results. These items consist of pension and cost-reduction and other expense. Management believes each of these items can distort the visibility of
trends associated with the company’s ongoing performance. Management also believes that the evaluation of the company’s financial performance can be
enhanced by use of supplemental presentation of its results that exclude the impact of these items in order to enhance consistency and comparativeness with
prior or future period results. The following measures are often provided and utilized by the company’s management, analysts, and investors to enhance
comparability of year-over-year results, as well as to compare results to other companies in our industry.
Total Contract Value – TCV is the estimated total contractual revenue related to signed contracts including option years and without regard for cancellation.
Constant currency – The company refers to growth rates in constant currency or on a constant currency basis so that the business results can be viewed
without the impact of fluctuations in foreign currency exchange rates to facilitate comparisons of the company’s business performance from one period to
another. Constant currency is calculated by retranslating current and prior period results at a consistent rate.
Non-GAAP operating profit – The company recorded pretax pension expense and pretax charges in connection with cost-reduction activities and other
expenses. For the company, non-GAAP operating profit excluded these items. The company believes that this profitability measure is more indicative of the
company’s operating results and aligns those results to the company’s external guidance which is used by the company’s management to allocate resources
and may be used by analysts and investors to gauge the company’s ongoing performance.
Non-GAAP diluted earnings per share – The company has recorded pension expense and charges in connection with cost-reduction activities and other
expenses. Management believes that investors may have a better understanding of the company’s performance and return to shareholders by excluding these
charges from the GAAP diluted earnings/loss per share calculations. The tax amounts presented for these items for the calculation of non-GAAP diluted
earnings per share include the current and deferred tax expense and benefits recognized under GAAP for these amounts.
Free cash flow – The company defines free cash flow as cash flow from operations less capital expenditures. Management believes this liquidity measure
gives investors an additional perspective on cash flow from on-going operating activities in excess of amounts required for reinvestment.
Adjusted free cash flow – Because inclusion of the company’s pension contributions and cost-reduction payments in free cash flow may distort the visibility of
the company’s ability to generate cash flow from its operations without the impact of these non-operational costs, management believes that investors may be
interested in adjusted free cash flow, which provides free cash flow before these payments and is more indicative of its on-going operations. This liquidity
measure was provided to analysts and investors in the form of external guidance and is used by management to measure operating liquidity.
EBITDA & adjusted EBITDA – For the company, earnings before interest, taxes, depreciation and amortization (EBITDA) is calculated by starting with net income (loss) attributable to Unisys Corporation common shareholders and adding or subtracting the following items: net income attributable to noncontrollinginterests, interest expense (net of interest income), provision for income taxes, depreciation and amortization. Adjusted EBITDA further excludes pension expense, cost-reduction and other expenses, non-cash share-based expense, and adjusted other (income) expense. In order to provide investors with additional understanding of the company's operating results, these charges are excluded from the adjusted EBITDA calculation. The company has also provided external guidance to investors and analysts that it thinks will aid any interested party in understanding and measuring the company’s ongoing operations and profitability.
© 2017 Unisys Corporation. All rights reserved. 26
Schedule A: GAAP to Non-GAAP Reconciliation
Operating Profit
$M 2014 2015 2016 1Q16 1Q17
Operating profit (loss) $154.9 $(55.1) $47.6 $(27.6) $(2.7)
Cost-reduction charges and other
expense0.0 122.5 86.4 26.9 20.1
Pension expense 73.8 108.7 82.7 20.3 24.5
Non-GAAP operating profit (loss) $228.7 $176.1 $216.7 $19.6 $41.9
Customer revenue $3,356.4 $3,015.1 $2,820.7 $666.8 $664.5
GAAP operating profit (loss) % 4.6% (1.8)% 1.7% (4.1)% (0.4)%
Non-GAAP operating profit (loss) % 6.8% 5.8% 7.7% 2.9% 6.3%
© 2017 Unisys Corporation. All rights reserved. 27
Schedule B: GAAP to Non-GAAP Reconciliation
EBITDA and Adjusted EBITDA
$M6 2014 2015 2016 1Q16 1Q17
Net income (loss) attributable to Unisys $44.0 $(109.9) $(47.7) $(39.9) $(32.7)
Net income (loss) attributable to noncontrolling interests 12.6 6.7 11.0 1.2 3.0
Interest expense, net of interest income of $13.6, $11.2, $9.2, $2.4, $2.5,
respectively*(4.4) 2.7 16.2 1.9 3.3
Income tax provision 86.2 44.4 57.2 5.5 12.9
Depreciation (1) 110.1 113.2 90.8 20.7 23.0
Amortization 58.5 66.9 64.8 16.4 15.7
EBITDA $307.0 $124.0 $192.3 $5.8 $25.2
Pension expense 73.8 108.7 82.7 20.3 24.5
Cost-reduction and other expense**(1) 0.0 102.6 89.2 26.9 25.4
Non-cash share-based expense 10.4 9.4 9.5 3.2 3.7
Preferred stock dividend 2.7 0.0 0.0 0.0 0.0
Other (income) expense adjustment***(1) 13.8 1.0 6.9 3.7 5.5
Adjusted EBITDA(1) $407.7 $345.7 $380.6 $59.9 $84.3
Customer Revenue $3,356.4 $3,015.1 $2,820.7 $666.8 $664.5
Adjusted EBITDA Margin % 12.1% 11.5% 13.5% 9.0% 12.7%
Earnings Before Interest, Taxes, Depreciation and Amortization
* Included in Other (income) expense, net on the Consolidated Statements of Income** Adjusted to exclude duplication of D&A*** Other (income) expense, net as reported on the Consolidated Statements of Income less interest income (1) During the quarter ended March 31, 2017, the company recognized cost reduction and other expense of $25.4 million of pretax charges which includes $5.3 million of foreign currency translation losses related to exiting a foreign country impacted by the cost reduction plan that reduces the Other (income) expense adjustment. In connection with our previously announced cost reduction and other expense, we recognized $122.5 million of pretax charges (which includes $19.9 million of asset write-offs which are reflected in Depreciation & Amortization) impacting Adjusted EBITDA by $102.6 million for the year ended December 31, 2015. The 2016 cost reduction and other expense is $90.4 million of pretax charges (which includes $1.2 million of asset writeoffs which are reflected in Depreciation & Amortization and includes loss on debt extinguishment of $4.0M reducing the Other (income) expense adjustment) impacting Adjusted EBITDA by $89.2 million for the year ended December 31, 2016. There were no cost reduction and other expense impact for the year ended December 31, 2014.
© 2017 Unisys Corporation. All rights reserved. 28
Schedule C: GAAP to Non-GAAP Reconciliation
Free Cash Flow
$M 2014 2015 2016
Cash provided by (used for) operations $121.4 $1.2 $218.2
Capital expenditures (212.8) (213.7) (147.1)
Free cash flow $(91.4) $(212.5) $71.1
Pension funding 183.4 148.3 132.5
Cost-reduction funding 0.0 58.5 74.0
Adjusted free cash flow $92.0 $(5.7) $277.6
© 2017 Unisys Corporation. All rights reserved. 29
Schedule D: GAAP to Non-GAAP Reconciliation
Earnings per Diluted Share
$M except share and per share data 1Q16 1Q17
Net income (loss) attributable to Unisys Corporation common shareholders $(39.9) $(32.7)
Cost-reduction and other expense: Pretax 26.9 25.4
tax provision (benefit) (2.2) (0.5)
net of tax 24.7 24.9
Pension expense: pretax 20.3 24.5
tax provision (benefit) 0.3 0.2
net of tax 20.6 24.7
Non-GAAP net income (loss) attributable to Unisys Corporation common shareholders $5.4 $16.9
Add interest expense on convertible notes 0.0 4.7
Non-GAAP net income (loss) attributable to Unisys Corporation for diluted earnings per share $5.4 $21.6
Weighted average shares (thousands) 50,004 50,256
Plus incremental shares from assumed conversion of employee stock plans & convertible notes 134 22,256
GAAP adjusted weighted average shares 50,138 72,511
Diluted earnings (loss) per share
GAAP basis
GAAP net income (loss) attributable to Unisys Corporation for diluted earnings per share $(39.9) $(32.7)
Divided by adjusted weighted average shares 50,004 50,256
GAAP earnings (loss) per diluted share $(0.80) $(0.65)
Non-GAAP basis
Non-GAAP net income (loss) attributable to Unisys Corporation for diluted earnings per share $5.4 $21.6
Divided by non-GAAP adjusted weighted average shares 50,138 72,511
Non-GAAP earnings (loss) per diluted share $0.11 $0.30