Unisys Corp (UIS) 2009 Q1 法說會逐字稿

Good day, and welcome to the Unisys first quarter 2009 results conference call.

At this time I'd like to turn the conference over to Mr.

Jack McHale, Vice President of Investor Relations at Unisys Corporation.

Please go ahead, sir.

Well thank you, operator.

Good morning everyone and thank you for joining us.

About an hour ago Unisys released its first quarter 2009 financial results and with us this morning to discuss our results are Ed Coleman, our CEO; and our Chief Financial Officer, Janet Haugen.

Before we begin I want to cover just a few housekeeping details.

First, today's conference call and the Q&A session are being webcast by the Unisys investor website.

Second, you can find on our investor website the earnings release and the presentation slides that we will be using this morning to guide our discussion.

These materials are available for viewing as well as for downloading and printing.

Finally, I'd like to remind you that all forward-looking statements made in this conference call are subject to various risks and uncertainties that could actually result -- cause actual results to differ materially from the expectations.

These factors are discussed more fully in the earnings release and in the Company's SEC filings.

Copies of the SEC reports are available from the SEC and also from the investor website.

Now let me turn the call over to Ed.

Thanks, Jack.

Hello, everybody.

Thank you for joining us this morning.

As we begin our call today, please turn to slide one of the presentation for highlights of the first quarter.

We made progress in the quarter in a challenging economic environment in driving our turnaround program at Unisys.

I was encouraged by the progress we've made in reducing expenses and improving cash from operations.

We've put out a strong message internally about the importance of reducing expenses and driving cash as we work through this economic period, and our people rose to the challenge.

Operating expenses declined 24% year-over-year.

Some of that improvement came from currency but the bulk of this improvement was driven by the actions we've been taking and continue to take to simplify the organization and reduce SG&A.

Progress on expenses in this quarter helped us to offset some of the pressure on our gross margins due to lower revenue.

In fact, we were able to slightly improve operating margins in our services business over the year ago quarter.

We also did a good job managing working capital and driving cash.

We generated $39 million of operating cash flow compared with a cash usage of $49 million a year ago.

That's an $88 million improvement and it came in what is seasonally a weak cash quarter for us.

Another highlight was our U.S.

Federal Government business which grew revenue and orders in the quarter, and hopefully you've seen some of the orders we've announced in this business in recent months.

Turning to slide two, unfortunately, we are not able to fully leverage our expense improvement and bring it to the bottom line because of lower volume at the topline.

The demand environment remains highly uncertain.

While our U.S.

Federal Government business did well in the quarter, we saw continued weakness in the commercial side of the business as clients delayed spending on IT projects.

Our first quarter revenue declined 15%, 5% if you exclude the impact of foreign currency which had a 10 point negative impact on revenue.

As you'll see when Janet takes you through the numbers, the revenue decline impacted our gross margins in the quarter.

We saw the most significant impact in our technology business where a number of expected high margin mainframe deals were deferred during the quarter particularly in Japan.

Gross margins and services were also impacted.

Some of this was due to currency so we clearly need to drive greater volume and get some help from a better demand environment to fully leverage the improvements we're making in our expense structure.

In the meantime, we aren't waiting for economic conditions to improve to drive bottom line improvements.

We continue to take aggressive actions to tighten our strategic focus, build brand differentiation, reduce costs and expenses, and drive profit and cash flow.

In doing so, we feel we'll be positioned to benefit the bottom line when business conditions improve and demand comes back.

You'll remember from our last call in February that there are four priorities in our turnaround program.

You can see those listed on slide three.

To concentrate our resources on fewer, high potential markets with a portfolio of value-added offerings, to offer clear compelling value propositions that differentiates Unisys in the marketplace, to drive expansion in our gross profit margin by enhancing the cost efficiency of our labor model, and finally, to simplify the organization and significantly reduce our expense structure.

The first two priorities are about driving profitable revenue by being more focused in the markets we serve and providing solutions that clients recognize as being differentiated and adding value.

The third and fourth priorities are about bringing more of this revenue to the bottom line by being extremely efficient in how we deliver services and operate our business.

Turning to slide four, in the first two priorities of business concentration and market differentiation, we've worked in recent months to tighten our strategic focus in terms of how and where we invest our resources.

As I discussed in our last call, we focused our resources on pursuing growth opportunities in four primary market areas: Security, data center transformation and outsourcing, end-user outsourcing and support services, and application modernization.

We chose these four areas because they match growing areas of market need with strengths that are core to Unisys, such as our decades of experience in the data center, our expertise in security, industry recognized capabilities and outsourcing and end-user support, and our skills in building, managing and modernizing enterprise mission critical applications.

Throughout 2009, we'll be strengthening our portfolio of offerings in each of these targeted markets.

We'll be introducing differentiated solutions that help clients cut costs, improve security and efficiency, and achieve greater return on investments which is what every client I've talked to is looking for right now.

As part of narrowing our strategic focus, we're also working to identify and explore potential divestitures of non-core assets and to rationalize our geographic presence.

To put this effort in perspective, the four areas of strength that I just noted, security, data center transformation including our mainframe business, end-user outsourcing and application modernization, represent about 75 to 80% of today's business as measured by revenue.

Moving to slide 5, as I mentioned on our last earnings call in February, we need to improve our service margins and reduce our overhead to be more in line with our competitors and with industry benchmarks.

We're currently taking specific actions to reduce our cost base on an annualized basis by about $310 million which is up from the $225 million we discussed on our last call.

We're on plan to get about $275 million of these savings out in 2009.

We're taking a multi-pronged approach to reducing our cost base and enhancing margins.

First, we're working on changing the mix of the services and solutions we provide.

Our expectation is that increased applications work and security projects, in particular, have the potential to improve our overall service gross margins.

Second, we're working to enhance gross margins by becoming more efficient in how we deliver services.

As part of this we're making use of sophisticated knowledge management and IT tools to handle a greater percentage of support requests through automated and self-service channels which cost significantly less than sending a technician.

And third, we also continue to enhance the cost efficiency of our labor model by increasing our use of lower cost labor, both offshore and onshore as part of a balanced services delivery pool.

Over the past six months, we've grown our pool of lower cost labor to about 18% of our workforce from 15%.

Regarding overhead, we continue to be aggressive and acting to simplify our business model and reduce expenses.

You can see the results today in 25% year-over-year reduction in SG&A reflected in this quarters results.

Since the fourth quarter of last year, we've taken actions to reduce our annual SG&A expenses by about $175 million.

This is up from the $150 million we talked about at our last call.

We expect about $160 million of these savings to flow in 2009 and we continue working to identify additional SG&A savings opportunities.

To further support the strategy I've outlined since joining Unisys, we've been successful over recent weeks in attracting a number of terrific experienced executives.

[Luesane Smith] has joined us to lead our evaluation of non-core assets and geographic rationalization.

Frank Boyer, formerly the leader of procurement at EDS has joined Unisys with the goal of better leveraging our procurement spend.

Sharesh Matthews has joined as the new CIO with the goal of reducing our IT spend and simplifying our systems and work flow to capture the full benefits of what is now a simpler organization and management structure.

Before I conclude this morning, I'd like to make a comment about the balance sheet.

We're fully aware of the needs to strengthen our balance sheet and we're approaching this with a sense of urgency.

As we previously stated we continue to explore alternatives to address the debt situation, including asset sales, improving our operations, and evaluating options for secured financing.

As you saw in the press release, there were two specific alternatives we are currently evaluating.

Moving to slide six, we're taking broad based actions in support of our turnaround program to drive improvement in our financial results.

The difficult economic environment is muting some of our progress right now but we're beginning to see results in terms of reducing expenses and improving cash flow.

I'm also seeing a great deal of pride and enthusiasm internally about the progress we're making and the new direction of the Company.

This is without question the most challenging economic environment I've seen in my 30 plus years in the industry.

This Company has a great deal going for it.

I continue to be impressed by the capabilities and talent that I uncover as I travel to our operations and our locations to speak with our people.

I believe we're taking the right actions to reinvigorate Unisys in the marketplace and that we'll come out stronger on the other side of this global downturn.

Let me thank you again for joining us this morning and turn it over to Janet to take you through the quarters results in more detail.

Thanks, Ed, and hello, everyone.

As Ed discussed, the tough economic environment in the first quarter along with the impact of currency impacted our topline, but we significantly reduced SG&A expenses, improved working capital management, and drove improvement in the cash requirements of our business model.

Our cash flow from operations improved significantly year-over-year in the quarter.

This morning I will take you through our financial results for the quarter and the key drivers behind the expense reduction and the improved cash performance in the quarter.

I will also update you on our revised outlook for cash funding to our U.S.

pension plan in 2010.

To start, please turn to slide seven for an overview of order trends in the quarter.

As Ed mentioned, we continue to see organizations pulling back on discretionary spending in this uncertain economy and deferring decisions on IT projects.

We saw order declines in the U.S.

and all international regions with the exception of Latin America where orders grew.

We closed the quarter with $5.7 billion in services backlog which was down 6% from the services backlog at December 31, 2008.

Moving to slide eight which summarizes our financial results in the first quarter.

At the topline, we reported revenue of $1.1 billion, a decline of 15% year-over-year.

Foreign currency exchange had a 10 point negative impact on revenue this quarter.

This is the highest we've seen in many years.

On a constant currency basis, revenue was down 5%.

Based on today's rates, we anticipate a 9 to 10 percentage point negative impact on revenue in the second quarter of 2009.

As you can see in our results, our gross margin was impacted in the quarter by lower revenue and the negative impact of foreign currency fluctuations.

More than half of the impact on the gross margin percentage was due to the foreign currency exchange.

Operating expenses came down 24% year-over-year driven by the cost reduction actions we've taken as well as the favorable impact from currency.

Currency was about 9 points of the 24 percentage point decline.

The reduction in operating expenses helped mitigate some of the impact of lower revenue in the quarter.

In fact, we were able to slightly improve operating profit margins in our services business on lower revenue.

Operating profit declined primarily due to the loss of royalty income from Mihan Unisys Limited and weak sales of high margin servers, particularly in Japan.

Other expense increased to $6.7 million of expense in the quarter.

The year-over-year increase was largely driven by foreign currency losses in 2009.

At the tax line, we had a $15.6 million tax provision in the quarter versus a tax provision of $23.9 million in the year ago quarter.

At the bottom line after-taxes, we reported a $24.4 million net loss in the quarter compared with a $23.4 million net loss a year ago.

Slide 9 shows our first quarter revenue by geography.

Our U.S.

revenue was flat in the quarter and represented 49% of our revenue in the quarter.

Within the U.S.

growth in our U.S.

Federal Government revenue was offset by revenue declines in commercial markets.

We sold double digit growth in our federal systems revenue in the first quarter.

International revenue declined 27% and represented 51% of our revenue in the quarter.

On a constant currency basis, international revenue declined 10%.

In a constant currency basis, revenue grew in Latin America but declined in Europe and Pacific Asia.

Slide 10 provides more detail on our first quarter revenue by business offering.

Outsourcing, our largest business offering, declined 14% in the quarter while systems integration continued to show stabilization declining 1%.

We continue to see significant declines in infrastructure services as we deemphasize lower margin aspects of this business.

Enterprise server revenue declined 38% in the quarter.

Lower sales in Japan, including the loss of revenue -- of royalty revenue income from NUL accounted for a large portion of this decline.

Core maintenance declined 21% while specialized technology increased slightly.

Moving on, slide 11 highlights our margin trends in the quarter.

As you can see, gross margins in both our services and technology businesses were impacted in the quarter by lower revenue and negative currency translation.

This impact was greater in our technology business because of the higher fixed cost in this business.

On the operating line, we were able to improve operating profit in our services business by 40 basis points by reducing expenses; however, our technology business reported an operating loss in the quarter on lower volume of enterprise server sales primarily in Japan.

Slide 12 shows the progress we've made in the quarter in our ongoing program to reduce operating expenses.

Operating expenses came down 24% to approximately $200 million in the first quarter.

Operating expenses has also declined as a percentage of revenue, and given the weak revenue environment, we are proactively working on additional opportunities to further reduce expenses.

Now, please turn to slide 13 for an overview of our cash flow performance in the first quarter.

We generated $39 million of cash from operations in the quarter, an improvement of $88 million year-over-year compared to the $49 million of cash used for the operations in the year ago quarter.

Our cash performance was driven by strong working capital management, in particular a 12 day year-over-year improvement in day sales outstanding.

We used $27 million of cash in the quarter for restructuring payments compared with $21 million a year ago.

We continue to tightly manage capital expenditures as we work through the economic downturn.

CapEx for the first quarter was $47 million, down from $65 million in the first quarter of 2008.

After capital expenditures, we used $8 million of free cash in the quarter compared with $114 million of free cash usage a year ago, an improvement of over $100 million.

Depreciation and amortization was $84 million in the quarter down from $100 million last year reflecting a lower CapEx base and currency translation.

We ended the quarter with $460 million of cash on hand, down from the $544 million at December 31, 2008, due primarily to the $61 million of cash that was used to collateralize letters of credit previously issued under our Company's revolving credit facility.

Since the cash is restricted, the $61 million is not reported in cash, it is reported in other assets.

For the full year of 2009, we look for capital expenditures in the 200 million to $225 million range compared with $295 million in 2008.

We look for depreciation and amortization in the 325 million to $350 million range in 2009.

Now, moving on to slide 14, I'd like to update you on cash requirements for our worldwide pension plan.

In the first quarter, we made $14 million of cash contributions to our international pension plan.

We made no cash contribution to our U.S.

qualified pension plan in the first quarter and we are not required to make any contributions -- cash contributions to this plan for 2009.

For the full year of 2009, we expect to make cash contributions of approximately 90 million to $95 million to our international pension plan.

Looking ahead to 2010, we have revised our expectations for the funding requirements of our U.S.

qualified pension plan.

As I had mentioned in our last call in February that based upon our underfunded position at year-end 2008, at that time, we expected that we would have to contribute up to a maximum of $90 million to the U.S.

qualified pension plan in 2010.

Under recently clarified IRS regulations, we now do not expect to be required to make a cash contribution in 2010 to fund our U.S.

qualified pension plan.

Turning to slide 15.

In summary, I am pleased by the work we're doing and the progress we're showing in reducing expenses across the organization and driving improved cash flow.

This expense improvement is helping us weather a very difficult demand environment and offsetting some of the pressure that we are seeing at the topline.

We will be aggressive in looking for further opportunities to reduce our cost base, operate more efficiently, and improve the cash flow of the business.

Thank you for your time and now I'd like to turn the call over to Ed.

Great.

Thanks, Janet very much.

At this time, we would like to open the lines up for your questions and Operator, if you could do so, I'd appreciate it.

Thank you.

(Operator Instructions) We'll take our first question from Jason Kupferberg with UBS.

Hi, good morning guys.

Good morning, Jason.

Wanted to ask a question, kind of about the topline efforts here.

I can certainly appreciate how the approach to costs and the execution there is differing from some of the Company's past efforts, but can we talk a little bit about the part of the turnaround program that's more topline oriented?

It seems like the whole notion of tightening the strategic focus and narrowing the focus on a smaller number of service lines and using more offshore delivery is something that Unisys has talked about for quite a while and wanted to get a sense of what aspects of that strategy might be different this time around that might make you guys feel like there's a better chance of success in that regard, despite the macro environment.

Yes, thanks, Jason very much.

I think it comes down to what we're calling out as the four key growth opportunities for us as we've defined them around data center transformation, security, end-user outsourcing, and application modernization, and what's going on inside the Company is allocating more of our resources and focusing resources across the Company on those four areas.

So while we're organized by business unit, from technology to integration to outsourcing in our federal unit, what we're doing is pulling together representatives from all those business units around these four initiatives and building I think a strong platform of capability and offerings that we believe will be differentiated in the marketplace across all four of those.

I can't speak really to the history of the Company in the sense of what's been done in the past but I can tell you that I'm really gratified to see how strongly the geographies and the business units are all rallying around these four opportunity areas.

We've also taken each one of our business unit leaders and assigned them one of these four to be the lead person to drive this so data center transformation, Rich Marcello who runs our technology business, has the lead on that but is working with representatives from all of the business units.

Tony Doye has the lead from our outsourcing business from end-user outsourcing.

Dominick Cavuoto has the lead for application modernization from our GI business.

And Ted Davies has the lead for security, but these are truly cross business unit teams.

Doing some exciting work.

You're beginning to see some of it announced with our converged remote infrastructure management offering that was announced a couple months ago.

We've got some very interesting work going on in Cloud, particularly in secure Cloud.

Application modernization we think is a real opportunity for us, particularly within our ClearPath install base, and on the security side, we continue to make real strides where physical and logical security come together.

Not only in business world but also in key government agencies around the world.

So I'm excited about what we're doing but again, it's a tough demand environment to be doing this in but we've got to differentiate ourselves in the marketplace with a set of rich offerings that people believe are leading edge, that are providing real value.

But I think we're making good progress there, Jason.

Okay, and can you talk a little bit about how customers are reacting to your current financial situation?

I mean, you mentioned I think in the press release that large outsourcing orders were down significantly year-over-year in the quarter.

Any sense of how much of that is more Unisys specific versus the general market conditions because it would be, I guess not illogical to think that some customers might be a little gun shy about entering into a large long term outsourcing deal with a vendor who is under some degree of financial pressure relative to some of their competitors?

Jason, I think you're characterizing it correctly, for transaction oriented business or shorter term projects, I think the impact that we're seeing is really the economic, the broader economic impact but for longer term multi-year outsourcing engagements, there's the economic impact but there's definitely a concern on the part of customers about the balance sheet and that's why I've said it, Janet has said it as well that this is something that we understand, that we're attacking with a sense of urgency, a multi-pronged approach to it but we need to give the customers comfort that not only will they get great service and that we're going to continue to provide the service that we have a terrific reputation for, but they can count on us to be a long term partner.

Okay, and just last question on the cash flow, obviously you've made some cutbacks in CapEx and there were the notable working capital improvements in the quarter so you were barely free cash flow negative in the quarter which by seasonal standards is a pretty good accomplishment.

Should we read into that as we think about the balance of the year that Unisys is in a good position to generate positive free cash flow for the full year?

Jason, it's Janet.

We've said all along that moving our business model to the point of generating free cash flow is part of the goal and addressing the customer concerns that you articulated in your earlier comment, but also what we believe the operating model should look like, and so we're very pleased with the first quarter performance.

We think that's a very strong step towards reaching the goal of getting to free cash flow positive, and as we said that remains a goal for us for 2009.

One just quick housekeeping item.

Any pension income in the quarter?

Yes, it's a minor amount.

It's about $4 million.

Okay, thanks, guys.

Thank you, Jason.

We'll take our next question from Sundar Varadarajan with Deutsche Bank.

Thanks.

Just to follow-up on the pension question.

What was it last year in the same quarter?

Was it an expense or a credit?

I know you kind of discontinued contributions on your stock, from a stock perspective on the employee 401K plan so could you give a year-over-year comp on how the pension impacted your P&L in the first quarter?

Sure.

The pension expense or the retirement related expense for the three months ended 2009 in total was $2.9 million.

Okay.

Last year that number was, I'm sorry, they're both income.

$2.9 million of income, let me be clear, and that compares to $11.5 million in 2008 first quarter.

Great.

And was there any restructuring expenses that you charged this quarter or you can't call out anything in the press release, in the P&L.

Was there any charge taken for any restructuring activities?

No.

From a restructuring standpoint, the actions that we're continuing to work, we are looking towards making sure they are the type of actions that self-fund within a quarter, so we have not called out a restructuring charge, a major program.

That is not how we're reducing the cost base right now.

We are doing these through self-funded actions primarily with the three-month or less return.

Great.

And on the targeted savings of more than $300 million, how much would you say was realized out of the first quarter on an annualized basis?

Well, we have a little bit of seasonality in our business right now and so we remain, our comments in giving you a sense of where we are, of that $300 million how much we expect to realize in 2009 is the most important measure for us, particularly on some of our seasonal businesses like the technology business.

Our teams around the world are executing to get it done as quickly as possible, so we've made significant move forward against those goals in the first quarter but we have actions continuing to remain in the second and the third quarter.

But the first quarter does reflect savings realized against that?

Absolutely.

And just moving on to the balance sheet issues, number one, you decided to cash collateralize your credit facility, these LCs you had under your credit facility.

Does that pretty much mean that you will not be renewing that credit facility or this is just an interim step?

Well as we've said in our 10-K filing in the beginning of March, based upon the current credit environment, we do not expect to renew that revolving credit facility at this time.

The credit markets are very different than the markets that we entered that existed at the time we entered that agreement, so as part of that agreement, as that unwinds in May, we did need to cash collateralize the letters of credit that had been issued against that and we did $61 million of that in the first quarter.

Okay, and then on your 2010 maturities, you talked about pursuing a couple alternatives.

Any kind of timeline you've set for yourself in terms of when this would be completed?

All I will mention is what we said in the press release.

We expect to announce something shortly.

All right, thank you.

Thank you.

We'll take our next question from Joseph Vafi with Jefferies.

Hi, good morning, and thanks for taking my questions.

Number one, Janet, I know you said your OpEx was down 24% driven by some of the actions and FX.

Could you break that down between those two categories of reductions?

Sure.

The OpEx was the current in the OpEx it was down 24 percentage points, currency was about 9 percentage percentage points of that.

So 15% of the reduction in SG&A is coming from the actions that we've been embarking on.

Okay, great.

And that's great news to see that, but I guess the next question is obviously as you're reducing cost, you're having to make some trade offs between potentially some service provisions and maybe layers of management.

I was wondering if you could talk a little bit more qualitatively about how you're approaching that process and what it means for customer service and just your ability to deliver the services for your customers.

Yes, thanks for the question, Joe.

On the SG&A side, it's really not a customer service impact.

Predominantly what's been driving our reductions in SG&A are twofold.

First, I would say it's unwinding the matrix management structure that the Company has historically had and we've talked about this a bit in the past, but the Company historically has had management by business unit, management by geography, management by industry, and then a series of strategic program offices and change management offices.

In addition to that, which I think has created a lot of excess overhead for the Company, so we've been clear that we're running the Company by business unit.

We've disbanded the strategic program offices and the change management offices.

Geographic management is typically now dual role as also one of the business unit leaders in that geography and it's really from a geographic standpoint it's more of a landlord management and support management role as opposed to treating it as a line management, so same thing with the industry.

So, unwinding the matrix has generated a lot of reductions in higher level management as well as in the supporting staffs that have surrounded those management teams.

And then in other cases we've looked at really taking the view of what is necessary versus what's desirable from a staff standpoint around all those staff areas that do not have direct contact and support requirements with customers and that's where we've aimed our reduction activities on the SG&A front.

On the total cost side there have been cost reductions associated with declining volumes but that's really about just managing the productivity of the service delivery people relative to the revenue opportunity.

Okay, that's helpful and I guess on that last point on the cost relative to the service provision capability which is basically in the growth line, do you feel that that right now is optimized and more of the cost is still coming out of the SG&A line or is there other efficiency improvements in the cost of services?

No, I think there's definitely other efficiency improvement opportunities in the cost of service.

I mentioned a couple of them in my comments.

One, moving more to remote infrastructure management capability as opposed to on site technical support so moving to more remote and self-service technologies that are good for both cost efficiencies and for customer satisfaction.

The other is on the labor management side where again, we're continuing to drive towards higher use of lower cost labor pools so as I mentioned over the last six months, our low cost labor has an increase as a percentage of our population from 15% of the population to 18% and we want to keep driving that.

Okay, very good.

Thank you very much.

You bet.

Thank you, Joe.

We'll take our next question from John Moore with KDP Investment Advisors.

Hi.

I just have two questions.

The first is just on the technology environment, when you're dealing with deferrals here.

Do you have any sense for how long that might be, what customers are saying, how long they can hold their breath on server buying in particular?

Yes, let me take that one if I may.

The biggest impact that we've had in the technology business in the quarter which is typically a fairly weak quarter for us to begin with has been in Japan, and the business in Japan has just been very soft.

Obviously, you've seen that their economy is are having some very rough goes as well, so I'm reluctant to predict when those customers are going to feel confident enough to execute on new purchases.

Okay.

And then just a housekeeping one on the proposed debt plans here.

In terms of the security collateral if you go down that route, what might that be and how does that pair up with the receivable facility that's outstanding right now?

John, since we have not announced a transaction, I don't want to speculate as to what the transaction may look like.

We did say that we intend to do a, to look at alternatives are involved security and that we will expect to announce something shortly.

I just have to -- stay tuned for that but I don't want to speculate on the potential collateral package right now.

Okay, thank you.

Thanks, John.

We'll take our next question from Sunny Sekhon with JPMorgan.

Yes, hi.

Just regarding your balance sheet.

How much capital raise do you think you need to be well positioned going forward, and how much secured debt do you think you can issue in this environment?

Unfortunately, it's the same answer as the previous caller as we have announced that we are considering two alternatives.

We expect to issue something on that shortly, and it's a function of the market conditions at the time with regard to the amount of demand that exists, the type of transaction, and you'll just have to stay tuned.

We expect to issue something shortly.

Is the equity issuance, could equity issuance be a part of any capital raise?

I would refer you to the comments that we made in the press release talking about the secured offering or an exchange.

Okay, and could you remind me how much minimum cash do you need on the balance sheet to operate the Company?

What we have said is that we are currently running with more cash than what we need to run the Company globally, that we are working on improving the efficiency of our operating model to reduce the cash requirements on that but we have not commented on what the minimum amount of cash is to run the business.

Okay, thank you.

Thank you.

We'll take our next question from [Mark Kauffman] with Source Capital.

Good morning.

My question I guess pertains to COD income, and that might be raised if you were to do some type of a tender for these notes, and I guess specifically have you explored the opportunity for some of your foreign subsidiaries to actually make the purchases or tender offers for the U.S.

debt?

I understand underneath the stimulus package that that would be allowed as well.

Mark, thank you for the question, but once again, given the fact that we have said that we are considering two alternatives and expect to issue something shortly, I don't want to comment on other potential alternatives at this time.

Thank you very much.

Okay, thank you.

Okay, and we have no further questions at this time.

I'd like to turn it back over to our presenters for any additional or closing remarks.

Great.

Well let me just thank everyone for attending the call.

I appreciate your participation very much and would also just like to take the opportunity to thank all of the Unisys employees that are listening in as well for their hard work and their efforts and let's keep going.

Thanks, all.

Bye-bye.

That concludes today's conference.

Thank you for your participation.