Unisys(UIS)2024-02-26 21:53Financial Performance - The company recorded a net loss of $430.7 million in 2023, compared to a loss of $106.0 million in 2022, primarily due to $348.9 million in pension plan settlement losses[170] - Revenue for 2023 increased by 1.8% to $2.02 billion, with U.S. operations revenue growing 4.0% to $889.0 million[173][174] - Gross profit margin improved to 27.4% in 2023 from 26.7% in 2022, driven by lower cost reduction charges and CA&I segment performance[177] - Cash provided by operating activities increased to $74.2 million in 2023 from $12.7 million in 2022, primarily due to working capital improvements[195] - The company's total debt decreased to $504.2 million at December 31, 2023, compared to $513.1 million at December 31, 2022[201] - Cash used for financing activities in 2023 was $17.3 million, down from $21.6 million in 2022[197] Pension and Retirement Plans - The company reduced global defined benefit pension obligations by approximately $2.0 billion since December 2020, including $1.3 billion in the U.S.[199] - The company estimates future cash contributions to its U.S. and non-U.S. defined benefit pension plans to be approximately $110 million in 2025 and $770 million from 2026 through 2033[200] - The company's U.S. qualified defined benefit pension plans had a calculated value of plan assets of $2.08 billion and a fair value of $1.82 billion at December 31, 2023[226] - The company determined the discount rate for its U.S. defined benefit pension plans to be 5.70% at December 31, 2023, a decrease of 34 basis points from 2022, and 4.24% for non-U.S. plans, a decrease of 56 basis points[225] - A 25 basis point change in the U.S. and non-U.S. discount rates would cause a change in 2024 pension expense of approximately $500 thousand and $800 thousand, respectively, and a change of approximately $42 million and $48 million in the benefit obligation[225] - The company recognized consolidated pension expense of $391.3 million for the year ended December 31, 2023, compared to $47.1 million in 2022, and expects pension expense of approximately $57.7 million for 2024[229] - The company's expected long-term rate of return on U.S. plan assets is 7.00%, and on non-U.S. plan assets is 4.82% for 2024[226] Segment Performance - Cloud, Applications & Infrastructure Solutions (CA&I) segment revenue grew to $531.0 million in 2023, with gross profit margin increasing to 15.4% from 9.1% in 2022[189] - The company's CA&I and DWS reporting units had fair values in excess of book value by 10% and 16%, respectively, as of the 2023 annual impairment analysis[238] - The company's consolidated goodwill balance related to the Digital Workspace Solutions (DWS) reporting unit was $140.8 million as of December 31, 2023[261] Cash and Liquidity - The company has $232.2 million in cash and cash equivalents held by foreign subsidiaries, with approximately one-third subject to transfer restrictions[194] - The company's secured revolving credit facility provides up to $145.0 million, with $88.6 million available as of December 31, 2023[205] - The company's operating lease liabilities were $44.7 million as of December 31, 2023[202] - The company had outstanding standby letters of credit and surety bonds totaling approximately $232 million at December 31, 2023[211] Foreign Exchange and Market Risks - A hypothetical 10% adverse movement in foreign currency exchange rates would have reduced the estimated fair value of the company's derivative financial instruments by approximately $49 million as of December 31, 2023[245] - The company uses foreign exchange forward contracts to reduce exposure to market risks from changes in foreign currency exchange rates on intercompany balances[244] - The company is exposed to foreign currency exchange rate risks, particularly from a strengthening U.S. dollar relative to the euro and British pound sterling, which may adversely affect consolidated revenue and operating margins[243] Goodwill and Impairment - The company's income approach for estimating fair value relies on internal forecasts, including projected net cash flows, long-term growth rate, and a reporting unit-specific discount rate[234] - The company continuously monitors events and circumstances that could impact key assumptions used in estimating the fair value of reporting units, including changes to U.S. treasury rates, equity risk premiums, and tax rates[239] - The company's determination of the fair value of the DWS reporting unit was identified as a critical audit matter in the annual goodwill impairment test[261] Workforce and Restructuring - The company expects to make $9.4 million in payments in 2024 related to workforce reduction actions[203] Cybersecurity - Cybersecurity remains a top priority, with significant improvements made to the security technical stack and processes in 2023[146][149] Tax and Deferred Assets - Deferred tax assets exceeded deferred tax liabilities by $1,263.2 million at December 31, 2023, with a valuation allowance of $1,150.1 million[217] Debt and Financial Instruments - The company's 6.875% senior secured notes due 2027 had a fair value of $437.5 million at December 31, 2023[242]