Unisys Corp (UIS) 2010 Q1 法說會逐字稿

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  • Operator

  • Good morning, everyone, and welcome to the Unisys first quarter 2010 results conference cull.

  • At this time I'd like to turn the conference over to Niels Christensen, Vice President of Investor Relations at Unisys Corporation.

  • Please go ahead, sir.

  • Niels Christensen - VP IR

  • Thank you, Operator.

  • Good morning, everyone, and thank you for joining us.

  • About an hour ago, Unisys released its first quarter 2010 financial results.

  • With us this morning to discuss our results are Ed Coleman, our CEO, and Janet Haugen, our CFO.

  • 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 via the Unisys investor web site.

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

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

  • Third, today's presentation, which is complementary to the earnings press release, includes some non-GAAP financial measures.

  • Certain comparisons made in this call will be between periods on a constant currency basis, or excluding the impact of foreign exchange.

  • In the presentation we have provided an explanation of the basis for the constant currency calculation.

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

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

  • Copies of these SEC reports are available from the SEC and from the Unisys investor web site.

  • Now here's Ed.

  • Ed Coleman - Chairman, CEO

  • Thanks, Niels.

  • Hello, everyone, and thank you for joining us today to discuss our first quarter 2010 results.

  • We continued to make good progress in the quarter in our ongoing turnaround program at Unisys.

  • If you've been following our progress you know that we're focused on our four priorities in our turnaround program.

  • Those priorities, which you can see on slide one, are to drive profitable revenue by better focusing our resources and enhancing our portfolio and to drive cost efficiency and margin expansion by enhancing our service delivery model and simplifying the organization.

  • In 2009 we succeeded in improving the profitability and cash flow of the business, while addressing the debt situation in a very challenging economic environment.

  • In 2010 our goal is to continue to deliver improved profitability and cash flow, and do so consistently and predictably.

  • While we continue this work, we're also focused in 2010 on stabilizing our revenue, which has been I impacted by the economic downturn last year, and our own work to better focus our resources.

  • Our first quarter performance had a number of positive indicators of progress against our goals for 2010.

  • I'd like to highlight three in particular, which you can see on slide two.

  • First, our year-over-year operating results improved in the quarter despite lower revenue as we continue to simplify, reduce expenses, and improve the cost efficiency across the business.

  • While we reported a net loss in the quarter driven by foreign currency losses, our operating profit nearly quadrupled over the year-ago period to $59 million.

  • In our services business we more than doubled our operating profit margin to 4.6%.

  • Our goal is to get our business services to a consistent 8% to 10% operating margin.

  • So we still have a lot of work to do, but we are moving in the right direction.

  • One of the key drivers of our service margin improvement is enhanced profitably of our IT outsourcing businesses.

  • Outsourcing is our largest services business, at about $1.7 billion in annual revenue.

  • About 75% of this revenue comes from IT outsourcing with the remainder in business process outsourcing.

  • We've been working to enhance margins by shifting our outsourcing business mix more toward IT outsourcing, and also making greater use of automation and lower-cost labor.

  • While it takes some time to make this transition, we're beginning to see results in terms of improved outsourcing service margins.

  • Operating results also improved significantly in our technology business.

  • Our technology operating margin improved to 13.7% in the quarter reversing a year-ago operating loss as we benefited from higher ClearPath sales and lower costs.

  • This is the second consecutive quarter of year-over-year growth in ClearPath sales.

  • Over the past year we're refreshed our ClearPath product line with contemporary features and functionality, including support for i-phones and mobile devices.

  • Today we believe we have the most modern open mainframe platform in the market, and we've been working to communicate these benefits to our client base.

  • We're pleased to see the recent improved results in this business.

  • Tight cost management will continue to be a key focus for us in the year ahead as we look to build on our operating improvement.

  • Through the cost actions we've taken already, we've met our previously disclosed target for $500 million of annualized cost reductions across cost of service delivery and SG&A expenses.

  • But particularly given the pressure on revenue, it's critical that we continue to look for ways to operate more cost efficiently.

  • We're focused on identifying and implementing additional cost reduction opportunities.

  • As one example we now have 23% of our employee population residing in lower cost labor pools, either offshore or onshore.

  • This is up from 20% at the start of the year, but we realize we still have much more to do to match competition in this area.

  • The second key area of progress in the quarter that I'd like to highlight is our balance sheet.

  • Over the past year we've reduced our long term debt by about $200 million.

  • During the quarter we repaid the remaining $65 million of our original $300 million of senior notes that were due in March 2010.

  • You'll recall a year ago this debt maturity was a major concern for the market.

  • And we're happy that this issue is now behind us.

  • In addition, as Janet will discuss in her remarks, we effectively eliminated another $100 million of debt during the quarter by reducing the utilization of our US accounts receivable securitization facility.

  • We have less need now to use this facility as a source of operating cash because of the improved profitability in cash flow of our operation.

  • We also continue to explore potential selected divestitures to sharpen our operating focus.

  • We're working to close the sale of our health information management business, as previously announced, for about $135 million of cash.

  • Strengthening the balance sheet will continue to be a key area of focus for us.

  • The third key highlight in the quarter from my perspective was services orders.

  • Our services orders grew double digits in the quarter, a positive indicator as we work to stabilize our revenue and build a foundation for profitable growth.

  • We've done good work over the past year to refresh our portfolio of services and solutions and our focus growth markets.

  • These markets, as you may recall, are security, data center transformation, including our server business, end user outsourcing, and applications modernization.

  • With the global economy showing signs of improvement, we're seeing some encouraging signs of traction in these areas of strength for Unisys.

  • In particular, this is the third consecutive quarter of significant year-over-year order growth in outsourcing, which we think speaks to the value clients see in the new solutions we've announced, as well as their increased comfort level with our improving financial picture.

  • So to summarize, turning to slide three, this is the quarter of continued progress for Unisys in our turnaround program.

  • We saw further improvement in profitability and reducing expenses and debt.

  • We want to keep that progress going and are focused on building a track record of delivering consistent, predictable profitability and cash flow.

  • We're also focused on stabilizing the top line.

  • While we still have pruning left to do in the business, we feel that the work we've done and continue to do with the portfolio, the balance sheet, and the organization, Unisys is better positioned today to take advantage of the growth opportunities that we're seeing in the market.

  • Thank you again for joining us this morning.

  • Now here's Janet to take you through our results in more detail, and then we'll be happy to take your questions.

  • Janet Haugen - CFO

  • Thanks, Ed, and hello, everyone.

  • The Company shoed continued good cost discipline in the first quarter, and we made further progress in enhancing our operating profitability.

  • However, our quarterly results were significantly impacted by foreign currency losses, and we reported a first quarter net loss.

  • This morning I'll provide more details on our first quarter 2010 financial results, expenses and margin trends.

  • I will also provide detail around our cash flow performance and update you on our continuing progress in reducing debt.

  • Lastly, please note that our results include the health information management business as a discontinued operation reflecting our decision to sell this business in a transaction that is expected to close this quarter.

  • To start the financial review, please turn to slide four for an overview of order trends in the quarter.

  • After a very difficult business environment in 2009, we saw positive indicators of improved demand in the first quarter.

  • Our service orders showed double digits growth in the quarter reflecting order gains across all areas of our services portfolio with the exception of infrastructure services.

  • Information technology outsourcing, or ITO, orders showed double-digit gain, and this was our third consecutive quarter of double-digit outsourcing growth.

  • We recognized mid single-digit order growth within our system's integration and consulting projects.

  • Orders for infrastructure services declined double digits as we continued to de-emphasize lower margin areas and shift business towards longer-term outsourcing engagements.

  • Geographically, services orders growth was driven by our international businesses where we saw substantial order gains Europe and Latin America.

  • Order gains in these regions were partially offset by order declines in Asia Pacific.

  • Excluding the impact of our divested specialized technology checks order equipment and related US maintenance business, US orders were up slightly.

  • We closed the quarter with $5.9 billion in services backlog, which was up from the March 31, 2009 services backlog of $5.3 billion.

  • Approximately half of that increase was due to favorable currency translation.

  • The $5.9 billion in services backlog at the end of the quarter was down from year-end backlog of $6.1 billion due primarily to unfavorable currency translation.

  • Slide five shows a comparison of our financial results in the quarter.

  • At the top line we reported revenue of $998 million, which was down 7% year over year.

  • Approximately 2 points of this decline was due to divested businesses.

  • Currency had a 5 percentage point positive impact on our revenue in the quarter, and based on today's rate, we anticipate a 2 to 3 percentage point positive impact on revenue in the second quarter of 2010.

  • We reported operating income of $59 million in the quarter compared to operating income of $15 million in the first quarter of 2009.

  • Our operating profit margin improved to 5.9% from 1.4% a year ago.

  • This quarter's results include approximately $9 million in charges related to the exit of the divested business and the cost of a country exit.

  • We reported $37 million of expense in the other income expense line.

  • This reflects approximately $35 million of pretax foreign exchange losses, which included the $20 million related to the January 2010 Venezuela currency devaluation, which I mentioned on our last earnings call in early February .

  • The remaining $15 million of first quarter 2010 foreign exchange losses compares to approximately $7 million of foreign exchange losses in the first quarter of 2009.

  • At the tax line we had an $11 million tax provision in the quarter compared with a $13 million tax provision in the year-ago quarter.

  • As a reminder, our tax provision continues to be highly variable from quarter to quarter, depending upon the geographic distribution of our income.

  • At the bottom line we reported a net loss of $11.6 million in the quarter, which compared with a net loss of $24.4 million in the first quarter of 2009.

  • Now, moving on to slide six, which shows our first quarter revenue by geography, our US revenue declined 16% and represented 43% of our revenue in the quarter.

  • Within the US we saw similar revenue declines in both our federal government and commercial businesses.

  • International revenue grew 1% in the quarter as gains in Latin America and Asia Pacific were partially offset by declines in Europe.

  • On a constant currency basis international revenue declined 9%.

  • Slide seven shows more details on our first quarter revenue on a portfolio basis.

  • Outsourcing revenue, our largest business, declined 2% in the quarter.

  • Within outsourcing growth in our strategic focus area of IT outsourcing was offset by double-digit declines in business process outsourcing.

  • System integrations and consulting revenue declined 13% in the quarter.

  • As I mentioned earlier, however, we did see single-digit order growth for these services in the quarter.

  • Enterprise server revenue grew 29% in the quarter driven by ClearPath sales, which were up by more than 30% over the year-ago period.

  • Infrastructure services and core maintenance declined by double digits in the quarter.

  • Turning now to expenses and margins, slide eight shows a comparison of our segment margins in the first quarter compared to the prior year-end period.

  • Despite lower first quarter services revenue, we significantly improved services growth and operating profit margins for the quarter based on the actions we've taken to enhance the cost efficiency of services delivery and reducing SG&A expenses.

  • First quarter 2010 SG&A expenses were 9% lower than a year-ago quarter.

  • And on a constant currency basis, our SG&A expenses were actually 18% lower year over year.

  • Services growth margin improved 240 basis points year over year to 18.2%.

  • Services operating margins more than doubled year over year improving 260 basis points to 4.6%.

  • Margins in our technology business can vary substantially from quarter to quarter depending upon specific deal closure.

  • And, as you can see, driven primarily by the strong ClearPath sales as well as progress in reducing costs, technology margins increased substantially in the quarter.

  • We reported a technology gross margin of 52.2%, up from 33.3% a year ago.

  • And our technology operating margin improved to 13.7% compared with a negative operating margin of 11.6% in the first quarter of 2009.

  • Please turn to slide nine for an overview of our cash flow performance in the quarter.

  • Please note that our cash flow comparisons in the quarter versus a year-ago quarter were impacted by the reduced utilization of our US $150 million accounts receivable securitization facility.

  • Because of our improved cash flow and cash position, we had less immediate need for cash for selling receivables under this US accounts receivables securitization facility.

  • As a result, we sold no accounts receivable under this facility in the first quarter of 2010, and we had sold $100 million of receivables as of December 31, 2009.

  • Including the impact of reducing our utilization of the accounts receivable securitization facility, we use $28 million of cash from operations in the current quarter compared with $39 million of cash generated from operations in the year-ago quarter.

  • Capital expenditures increased year over year in the quarter driven primarily by investments in deal-specific outsourcing assets, and, to a lesser extent, capital expenditures related to new facilities as part of our multi-year plan to reduce our leased-ware footage space.

  • Capex increased to $69 million compared with $47 million in the first quarter of 2009.

  • After capital expenditures we used $97 million of free cash in the first quarter compared with an $8 million usage of free cash in the year-ago period.

  • Looking ahead we anticipate capital expenditures of $200 million to $225 million for the full year of 2010.

  • Depreciation and amortization with $67 million in the quarter.

  • For the full year 2010 we now expect D&A of around $280 million.

  • As Ed mentioned, during the quarter we repaid the remaining $65 million of principal due on our March 2010 senior note.

  • We ended the quarter with $469 million of cash on hand.

  • Our current cash balance is down from $648 million of cash on hand as of year end 2009.

  • This $179 million decrease in cash on hand from December reflected the reduction of $100 million in the receivables sold under our accounts receivable securitization facility, and $65 million of debt repayment in the quarter.

  • Finally just a quick update on our previously announced agreement to sell our health information management business to Molina Healthcare.

  • We continue to expect the transaction to close in the second quarter of 2010 with cash proceeds of approximately $135 million subject to a working capital adjustment at the time of close.

  • As Ed mentioned, we continue to explore potential selected divestitures to focus the business on our areas of strength.

  • We expect to use the proceeds from divestitures to help strengthen our capital structure.

  • In closing, we continue to make good progress during the quarter in reducing expenses and enhancing our profitability.

  • We will continue to maintain tight cost discipline and emphasis on driving cash as we move throughout the year.

  • Thank you for your time this morning, and now I would like to turn the call back over

  • Ed Coleman - Chairman, CEO

  • Thanks, Janet.

  • Operator, we'd like to open the call up to questions.

  • Operator

  • (Operator Instructions).

  • We'll take our first question from Joseph Vafi Jefferies & Company.

  • Joseph Vafi - Analyst

  • High, Ed and Janet.

  • Good morning and congratulations on paying the debt down and the operating profit.

  • I was wondering if we could focus a little bit on the top line and dig down into it a little bit.

  • Obviously we've seen continued declines on the top line in the services business, and I was wondering if you could maybe give us a little more detail within ongoing customers and ongoing accounts.

  • What's continuing to drive the kind of contraction in volumes you're seeing within the account base, so we can understand a little bit better how we might stem that moving forward.

  • Ed Coleman - Chairman, CEO

  • Thanks, Joe, very much.

  • Appreciate the question.

  • I think there are a number of things going on there.

  • Let me start by repeating what we've said earlier.

  • We certainly see the importance of stabilizing that top line revenue number.

  • Compared to what's going on, I'd start with something that we talked a fair amount about last year, that with the debt situation we had during the first seven months of the year, I think we lost a fair amount of momentum in selling and winning new outsourcing business due to the first couple of quarters of last year.

  • But, as you've seen since the restructuring, the debt restructuring occurred, we now have three consecutive quarters of new-order growth in the IT outsourcing business, which is very exciting to us.

  • So most recently the Microsoft win, going back a few months, we've had Unilever is a big win, Henkel is a big win, Siemens.

  • A number of really significant wins for us since we've got the debt situation resolved.

  • So we think taking that debt issue off the table has allowed us to start gaining traction again in our selling efforts.

  • That's a good thing for us.

  • The second thing we commented on earlier today was the shift within our outsourcing business from BPO to ITO.

  • And that certainly puts a drag as we emphasize ITO versus our BPO business, it puts a drag on the top line.

  • But, as you can see in the bottom line results and the operating margin results, it's improving our profitability.

  • So those are two significant issues that are going on that are in process.

  • We're pleased by the orders growth that we're seeing, but we do recognize that orders aren't necessarily revenue until we make them revenue.

  • So we need to accelerate the transitions, make sure the transitions go smoothly so we begin to capture that new win order growth as revenue for the business.

  • But I think we're getting there, but I think it takes some time, and I think we put a little bit of a delay in our growth in the first seven months of last year.

  • Does that help at all?

  • Joseph Vafi - Analyst

  • That is helpful.

  • Maybe just a little more followup on, are you happy with the volumes that you're seeing within your existing customers in your areas that you continue to be focused on versus maybe the areas that are de-emphasized or excluding the new-order growth that helps drive volume.

  • I'm just trying to get to a view of the stability of the account and the areas that I think are going to remain your core areas of service delivery.

  • Ed Coleman - Chairman, CEO

  • Yes, I feel very good about that.

  • I think we're making good progress in improving the quality of the services that we're providing to our existing clients.

  • I think you're seeing the benefits of the new portfolio, in the expanded portfolio, particularly in the outsourcing world as well as in data center transformation services and security services that are allowing us to expand relationships with existing clients.

  • I think also, if I look at our sales pipeline within those four areas of strength, over the first quarter of this year, we're seeing substantial growth in that pipeline, which, again, is also encouraging.

  • But, again, pipeline is good, but it's not revenue until you make it revenue.

  • Orders is good, but it's not revenue until we make it revenue.

  • So we're still a bit behind on that side of things in terms of turning it into revenue, but I think we're beginning to build momentum there.

  • On the technology side, we're real pleased by the year-over-year growth that we're seeing in ClearPath.

  • Technology continues to be an important part of our business.

  • I think the year-over-year growth there is really a reflection, one, of enhanced offerings, making ClearPath more of an open environment.

  • At the same time reminding our customers that it's an important part of our business.

  • So I'm happy with the technology growth, happy with the orders growth on the services side, but we need to turn those orders into revenue.

  • Joseph Vafi - Analyst

  • Okay.

  • And then maybe just one more on the orders.

  • Obviously it's great you had some double-digit order growth here in the quarter, but probably coming off a pretty really easy compare in Q1 of '09.

  • Does double-digit order growth overall for the year, would that get you to a place sometime in the next few quarters where you believe you could have maybe some constant currency stability in the top line?

  • Or, what's the metric that we should be thinking about in order growth combined with ongoing volumes at existing accounts and maybe some decline in de-emphasized areas that would get us to, or when you think we might get to some top-line stabilization.

  • Janet Haugen - CFO

  • Joe, it's Janet.

  • And you're right that in the order areas that can vary.

  • That's why we're looking at not the absolute number, but more the trend, the fact that the services were up double digits within that, that the ITO orders and outsourcing orders were double digits for three consecutive quarters.

  • And we saw mid single digit growth in the system's integration portion, which reflects some pickup in the project business.

  • We think that that's all encouraging for us as we move forward in our goal for 2010 to stabilize the revenue.

  • We're going to look at the pipeline, as Ed mentioned.

  • We're encouraged by what we see in the pipeline.

  • We look at what we saw convert into orders in the quarter.

  • We're encouraged by that as a step towards getting to the stabilization of the revenue.

  • And we now have to concert those orders into revenue and then continue the work that we're doing in the non areas of focus.

  • We've got the HIM transaction that's expected to close in the second quarter, as we said.

  • That's going to be a change for us in the BPO area.

  • And we're going to move through quarter by quarter so that by the time we exit 2010, we're seeing some stability in that revenue line.

  • Ed Coleman - Chairman, CEO

  • I think the operative word there is stability.

  • I don't want to give anybody the impression that we're viewing top line as more important than bottom line.

  • We're still in an environment where our number one priority is to drive bottom-line performance.

  • We recognize that in order for the cost savings that we've achieved to give maximum benefit from those savings, we need to stabilize the top line.

  • Joseph Vafi - Analyst

  • Thanks very much.

  • Operator

  • Moving on we'll take our next question from Jeff Harlib, Barclays Capital.

  • Jeff Harlib - Analyst

  • Hi, good morning.

  • You talked about meeting your $500 million cost-savings target, but there will be additional actions, offshoring, et cetera.

  • Can you quantify the additional savings and the key areas and the time frame?

  • .

  • Ed Coleman - Chairman, CEO

  • At this point haven't set a new goal out there, but if you step back to what we were originally trying to achieve when we put the goals of a $250 million improvement in cost of service delivery and a $250 million improvement for a reduction in SG&A, the purpose of that was to drive our SG&A as a percent of revenue improvement by 5 points and to improve our cost of service delivery by 5 points.

  • So we've made progress against both of those.

  • But in a declining revenue environment we've yet to achieve the full 5% on each side of that.

  • So we're going to continue to work and look for opportunities in a number of areas across the business to keep moving towards what we consider to be the right benchmark for us in terms of SG&A as a percent of revenue and cost of service delivery.

  • Jeff Harlib - Analyst

  • Okay.

  • And can you comment on just corporate IT, corporate and government spending trends as you look at where your customers are at in terms of maybe loosening up and catching up on some IT spending, US and international?

  • Ed Coleman - Chairman, CEO

  • I think we're seeing some improvement in the economic environment, some willingness to take on new projects that wasn't there a year ago.

  • Equally important for us is our improved financials are giving customers greater confidence in us as a company, which is helping our selling effort.

  • So between a better economy and I think better confidence, greater confidence in us as a company, to us it's a better demand environment than it was a year ago.

  • But it's still a tricky environment.

  • It's not a straight path to glory.

  • I think you have to scrap for everything that you win.

  • And I don't think what we're seeing is customers just opening their wallets freely for new work.

  • I think they're being very discrete about where they spend, but it's certainly better than a year ago.

  • Jeff Harlib - Analyst

  • Okay.

  • And, Janet, the $9 million of charges you mentioned, where are they on the income statement?

  • And what was the country exit you referred to?

  • Janet Haugen - CFO

  • The $9 million is between the cost of revenue and SG&A.

  • It's roughly split half and half.

  • The country exit is our exit of Korea where we are moving from having a subsidiary with feet on the street in Korea to more of a model where we service our multi-national customers through distributor agreements and service support agreements with local Korean vendors.

  • Jeff Harlib - Analyst

  • Okay.

  • And just update on cash pension funding for the quarter, and if you're still looking at $115 million for the year.

  • Janet Haugen - CFO

  • Yes.

  • There's no change to our estimate on cash funding.

  • Jeff Harlib - Analyst

  • Okay.

  • And what was it in Q1?

  • .

  • Janet Haugen - CFO

  • In Q1 roughly $20 million of the $115 million went out.

  • We still expect that to be skewed towards the second half of the year.

  • Jeff Harlib - Analyst

  • Okay.

  • Thank you.

  • Operator

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

  • John Moore - Analyst

  • Hi, good morning.

  • On the orders versus revenue trends here, for outsourcing and systems integration, just refresh my memory.

  • For the last couple of quarters it seems like there have been less order growth and perhaps some order declines, at least maybe in SI.

  • And so that's, I guess, what's supporting your hope here now for having the top line stabilize a little bit.

  • Janet Haugen - CFO

  • John, that cut off a little bit.

  • What I heard you say is that -- and if I don't have this question correct, please correct me before we answer -- that in the systems integration business we talked about the growth in orders, which is an improvement over what we were seeing in 2009.

  • And so we need to get the orders first before that translates into revenue growth in the systems integration business.

  • And in the outsourcing area we've had three consecutive quarters of good growth and outsourcing, but yet it does take time from when you sign those orders to work through the transition to get them up into revenue contributing to the base.

  • Does that answer your question or is there anything further you'd like us to comment on, John?

  • .

  • John Moore - Analyst

  • It does.

  • In terms of order cancellations, what trend are you seeing particularly within SI on cancellation rates?

  • Janet Haugen - CFO

  • In the systems integration business we've not had any type of major cancellation in the SI business.

  • That's been more of a reflection of the project-based IT services business being really soft as people can make that discretionary decision to delay the project, make the projects be shorter as people work through the current economic environment and work through their own institutional issues, whether they be in the commercial sector or in the public sector.

  • On the outsourcing side we've had a few cancellations that have be related to either M&A or institution issues, have not been anything that is systemic across the base, have not been anything that's been related to customer satisfaction, more institutional issues.

  • John Moore - Analyst

  • Great.

  • And then just on the appointment of Ron Frankenfield, what is his background?

  • What, in particular, does he bring to outsourcing as the new president there?

  • .

  • Ed Coleman - Chairman, CEO

  • Ron brings a great background.

  • In his many years with Unisys he's lead lots of different organizations, including at one time our Asia Pacific region where he had full responsibility for all of our offerings in that region, including our outsourcing business.

  • Most recently prior to his employment as president of our outsourcing business, he was head of worldwide sales for outsourcing.

  • He has brought a lot of the renewed energy, discipline and focus to that function, which has yielded the wins over the recent months that I just mentioned, Unilever, Henkel, Siemens, and most recently Microsoft that we won a significant deal there in conjunction with InfoSys.

  • So he brings a broad background of the outsourcing business, a strong general management background as well as a very strong sales background.

  • So we were delighted that Ron was able to step up into that role and expect big things.

  • John Moore - Analyst

  • Okay.

  • Thank you.

  • Operator

  • And we'll take our final question from Sundar Varadarajan from Citadel Securities.

  • Sundar Varadarajan - Analyst

  • Yes, hi, thanks.

  • Janet, when you talked about the potential use of proceeds from asset dispositions, you said strengthening the capital structure would be one of your priorities.

  • Could you elaborate on that a little bit more?

  • You have a lot of coupon debt but none of that's really callable any time in the near future.

  • What exactly did you mean by that?

  • Is there a target level you have for total debt?

  • Any color you can provide to what exactly you meant by "strengthening the capital structure" would be helpful.

  • Janet Haugen - CFO

  • Sure, Sundar.

  • As Ed had stated in his goals when he first joined the Company, we have been on a path to deleverage our balance sheet based upon the business and the capital structure.

  • We do think we're carrying more debt than we would like to carry from a long-term perspective.

  • I'm not going to speculate on how we do that, but I think you would expect to see us use those proceeds from the divestitures to reduce our debt.

  • We will look at the environment, the market, at the time we have the proceeds, and we will do what is the most economically advantageous to the Company to reach the goal of reducing the debt and deleveraging the balance sheet.

  • But I don't have any specifics to comment on right now.

  • Sundar Varadarajan - Analyst

  • I can understand you don't want to talk about specifics of the house, but could you talk about what would be the right kind of leverage that you're targeting, whether it's a total debt number or a debt-to-EBITDA number, how are you looking at it and what would you like to be seeing longer term?

  • .

  • Janet Haugen - CFO

  • Longer term we have talked about our goal of getting to 25% to 30% debt-to-capital ratio.

  • Now our capital GAAP accounting has a couple of unusual items in there with pension and debt.

  • But we think that that 25% to 30% debt-to-capital ratio is something that we can operate in longer term.

  • But, Ed would prefer a debt-free balance sheet, but, as we all know, the most efficient use of our capital structure is a combination of both debt and equity.

  • And we think at 25% to 30% debt-to-capital ratio is more in line with what we'd like to do over the long term.

  • Obviously we look at the efficiency of that capital.

  • You're right in pointing out the high coupon debt, particularly what came out of the debt exchange last year and a very difficult time to do refinancing.

  • We know we've got some time to deal with it after the $68 million of maturities in 2012, we don't have debt maturities occurring until 2014.

  • So we do have a nice window to accomplish an improved capital structure.

  • Sundar Varadarajan - Analyst

  • Okay.

  • Thank you.

  • Operator

  • And at this time I'd like to turn the conference back over to Ed Coleman for any additional or closing remarks.

  • Ed Coleman - Chairman, CEO

  • Thank you very much to everyone for participating on the call today.

  • For all of the Unisys folks that are listening in on the call, I'd like to thank you for all of your hard work and for your commitment to our continued progress.

  • Thanks, everyone.

  • Operator

  • Thank you.

  • That will conclude today's call.

  • We thank you for your participation.

  • At this time the phone lines may now disconnect.