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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(For a discussion of 2020 compared with 2019, refer to Part II, Item 7 contained in the company’s Form 10-K for the fiscal year ended December 31, 2020.)

Overview

During 2021, the company continued to execute its key strategies including revenue growth and gross profit margin improvement by expanding its solution portfolio organically and through strategic investments/acquisitions while managing the company’s workforce to attract and retain talent in this competitive market. In 2021, revenue increased 1.4% and gross profit improved to 27.8%. Refer to Results of Operations for more information on the company’s financial results.

In January 2021, to simplify and streamline the company’s operations and more effectively address evolving client needs, the company changed its organizational structure. Refer to the Segment Results section for more information on the company’s reportable segments.

One of the key elements of the company’s strategy is to pursue acquisitions. During 2021, the company completed three acquisitions to accelerate its pace of innovation and capitalize on growing and emerging markets. In June and November, the company acquired Unify Square, Inc. (Unify Square) and the Mobinergy group of companies (Mobinergy), respectively, to advance the company’s experience-focused Digital Workplace Solutions set and to deliver higher-value solutions to its clients. In December, the company acquired CompuGain LLC (CompuGain) to enhance the company’s delivery of rapid and agile cloud migration, application modernization and data value realization to its clients. The company funded the cash consideration and acquisition-related costs for all the acquisitions with cash on hand, see Note 4, “Acquisitions,” of the Notes to Consolidated Financial Statements for more information on each acquisition. As disclosed in Note 3, “Recent accounting pronouncements,” of the Notes to Consolidated Financial Statements, the company expects to adopt Accounting Standards Update (ASU) No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, effective January 1, 2022. This guidance requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers, as if it originated the contracts. Had the company decided to retrospectively adopt this ASU on January 1, 2021, the difference in the value applied to contract assets and contract liabilities would have been immaterial.

Additionally, as the company continues its efforts to further de-risk its balance sheet, during 2021 the company, through a combination of transfers, annuity purchase arrangements and lump sum payments, settled gross defined benefit pension plan liabilities of approximately $1.2 billion. These actions resulted in pre-tax settlement losses of $499.4 million for the year ended December 31, 2021 related to the company’s plans in the Netherlands, the United States and Switzerland.

•In January 2021, the company purchased a group annuity contract for $279 million to transfer projected benefit obligations related to approximately 11,600 retirees of the company’s U.S. defined benefit pension plans. This action resulted in a pre-tax settlement loss of $158.0 million.

•Effective May 1, 2021, the company’s primary pension plan related to its Dutch subsidiary was transferred to a multi-client circle within a multi-employer fund. This resulted in removing all of the plan’s projected benefit obligations, valued at approximately $553 million, from the company’s balance sheet. This action resulted in a pre-tax settlement loss of $182.5 million.

•In the second quarter of 2021, the company’s Swiss subsidiary transferred its defined benefit pension plan to a multiple-employer collective foundation. This resulted in removing the projected benefit obligations related to retirees under the Swiss plan, valued at approximately $100 million, from the company’s balance sheet. The transfer required a one-time additional contribution of approximately $10 million to the Swiss plan in 2021. This action resulted in a pre-tax settlement loss of $28.8 million.

•On October 14, 2021, the company purchased a group annuity contract for $235 million to transfer projected benefit obligations related to approximately 6,900 retirees of the company’s U.S. defined benefit pension plans. This action resulted in a pre-tax settlement loss of $130.1 million.

On March 3, 2021, the company completed the conversion of $84.2 million aggregate principal amount of Convertible Senior Notes due 2021 (the 2021 Notes) that remained outstanding for a combination of cash and shares of the company’s common stock. See Note 16, “Debt,” of the Notes to Consolidated Financial Statements for details on the conversion.

Results of operations

Company results

Revenue for 2021 was $2.05 billion compared with $2.03 billion for 2020, an increase of 1.4%. Foreign currency fluctuations had a 2-percentage-point positive impact on revenue in the current year compared with the year-ago period.

Revenue from international operations for 2021 was $1.20 billion compared with $1.24 billion for 2020, a decrease of 3.7% principally due to decreases in Latin America and Asia/Pacific. Foreign currency had a 3-percentage-point positive impact on international revenue in 2021 compared with 2020. Revenue from U.S. operations was $856.2 million for 2021 compared with $781.5 million for 2020, an increase of 9.6%.

During 2021, the company recognized cost-reduction charges and other costs of $23.2 million. The net charges related to work-force reductions were $0.4 million, principally related to severance costs, and were comprised of: (a) a charge of $12.3 million and (b) a credit of $11.9 million for changes in estimates. In addition, the company recorded charges of $22.8 million comprised of $4.0 million for net foreign currency losses related to exiting foreign countries, $12.6 million for asset impairments and $6.2 million for other expenses related to cost-reduction efforts.

During 2020, the company recognized cost-reduction charges and other costs of $95.5 million. The net charges related to work-force reductions were $25.5 million principally, related to severance costs, and were comprised of: (a) a charge of $39.0 million and (b) a credit of $13.5 million for changes in estimates. In addition, the company recorded charges of $70.0 million comprised of $32.3 million for net foreign currency losses related to exiting foreign countries, $24.0 million for asset impairments and $13.7 million for other expenses related to cost-reduction efforts.

The cost reduction charges (credits) were recorded in the following statement of income (loss) classifications:

Cost of revenue

Technology 7.6 —

Selling, general and administrative 11.1 38.5

Research and development 3.0 2.5

Other (expenses), net 4.0 32.3

Gross profit margin was 27.8% in 2021 and 23.8% in 2020. The increase in gross profit margin in 2021 was due in part to improvements in all the company’s segments driven by higher sales of the company’s enterprise software and improvements to efficiency.

Selling, general and administrative expenses were $389.5 million in 2021 (19.0% of revenue) and $369.4 million in 2020 (18.2% of revenue). The increase was primarily due to increased investments in the company’s go-to-market efforts, primarily related to direct sales support and increases to non-cash-based compensation.

Research and development (R&D) expenses in 2021 were $28.5 million compared with $26.6 million in 2020.

In 2021, the company reported an operating profit of $154.0 million compared with an operating profit of $87.0 million in 2020. The increase in 2021 was due in part by improvements in all the company’s segments driven by higher sales of the company’s enterprise software and improvements to efficiency.

Interest expense was $35.4 million in 2021 compared with $29.2 million in 2020. The increase was principally due to the issuance of the 6.875% senior secured notes due 2027 in October 2020.

Other (expense), net was expense of $580.3 million in 2021 compared with expense of $329.6 million in 2020. Other (expense), net in 2021 includes $499.4 million of pension settlement losses compared with $142.1 million in 2020. See Note 7, “Other (expense), net,” of the Notes to Consolidated Financial Statements for details of other (expense), net.

Pension expense for 2021 was $553.9 million compared with $235.3 million in 2020. The increase in 2021 was principally due to $499.4 million of settlement losses in 2021 related to defined benefits plans in the Netherlands, the United States and Switzerland compared to a $142.1 million settlement loss in 2020 related to U.S. defined benefit pension plans. See Note 18, “Employee plans,” of the Notes to Consolidated Financial Statements for details of the settlement losses.

The loss from continuing operations before income taxes in 2021 was $461.7 million compared with a loss of $271.8 million in 2020. Included in the loss in 2021 and 2020 was $499.4 million and $142.1 million, respectively, of settlement losses related to

the company’s defined benefit pension plans as well as $23.2 million and $95.5 million of cost reduction charges in 2021 and 2020, respectively.

The benefit for income taxes in 2021 was $11.9 million compared with a provision of $45.4 million in 2020. The current period includes income tax benefits of $51.5 million related to the pension plan settlement losses in the Netherlands and Switzerland. In addition, in June 2021 the UK enacted an income tax rate increase from 19% to 25% for the fiscal year beginning April 1, 2023. The UK rate increase resulted in a deferred tax benefit of $17.7 million in 2021.

The company evaluates quarterly the realizability of its deferred tax assets by assessing its valuation allowance and by adjusting such amount, if necessary. The company records a tax provision or benefit for those international subsidiaries that do not have a full valuation allowance against their deferred tax assets. Any profit or loss recorded for the company’s U.S. operations will have no provision or benefit associated with it due to the company’s valuation allowance, except with respect to refundable tax credits and withholding taxes not creditable against future taxable income. As a result, the company’s provision or benefit for taxes may vary significantly period to period depending on the geographic distribution of income.

The realization of the company’s net deferred tax assets as of December 31, 2021 is primarily dependent on the ability to generate sustained taxable income in various jurisdictions. Judgment is required to estimate forecasted future taxable income, which may be impacted by future business developments, actual results, strategic operational and tax initiatives, legislative, and other economic factors and developments. It is at least reasonably possible that the company’s judgment about the need for, and level of, existing valuation allowances could change in the near term based on changes in objective evidence such as further sustained income or loss in certain jurisdictions, as well as the other factors discussed above, primarily in certain jurisdictions outside of the United States. As such, the company will continue to monitor income levels and mix among jurisdictions, potential changes to the company’s operating and tax model, and other legislative or global developments in its determination. It is reasonably possible that such changes could result in a material impact to the company’s valuation allowance within the next 12 months. Any increase or decrease in the valuation allowance would result in additional or lower income tax expense in such period and could have a significant impact on that period’s earnings.

Net loss from continuing operations attributable to Unisys Corporation for 2021 was $448.5 million, or $6.75 per diluted share, compared with $317.7 million, or $5.05 per diluted share in 2020. Included in the loss in 2021 and 2020 was $447.9 million and $142.1 million, respectively, of after tax settlement losses related to the company’s defined benefit pension plans.

Segment results

The company’s reportable segments are as follows:

•Digital Workplace Solutions (DWS), which provides solutions that transform digital workplaces securely and create exceptional end-user experiences;

•Cloud and Infrastructure Solutions (C&I), which provides solutions that drive modern IT service platforms, cloud applications development, intelligent services, and cybersecurity services; and

•Enterprise Computing Solutions (ECS), which provides solutions that harness secure, continuous high-intensity computing and enable digital services through software-defined operating environments.

The accounting policies of each segment are the same as those followed by the company as a whole. Intersegment sales and transfers are priced as if the sales or transfers were to third parties. Accordingly, the ECS segment records intersegment revenue and manufacturing profit on software and hardware shipments to customers under contracts of other segments. These segments, in turn, record customer revenue and marketing profits on such shipments of company hardware and software to customers. In the company’s consolidated statements of income (loss), the manufacturing costs of products sourced from the ECS segment and sold to other segments’ customers are reported in cost of revenue for these other segments.

Also included in the ECS segment’s sales and gross profit are sales of software and hardware sold to other segments for internal use in their engagements. The amount of such profit included in gross profit of the ECS segment for the years ended December 31, 2021 and 2020 was $1.4 million and $7.8 million, respectively. The sale and profit on these transactions is eliminated in Corporate.

The company evaluates segment performance based on gross profit exclusive of the service costs component of postretirement income or expense, restructuring charges, amortization of purchased intangible and unusual and nonrecurring items, which are included in Corporate. Effective for the first quarter of 2021, the company also changed its internal measurement of segment profitability. Prior period amounts have therefore been reclassified to be comparable to the current period’s presentation.

Corporate assets are principally cash and cash equivalents, prepaid postretirement assets and deferred income taxes. The expense or income related to corporate assets and centrally incurred costs are allocated to the business segments. See Note 21, “Segment information,” of the Notes to Consolidated Financial Statements.

Information by reportable segment is presented below:

(millions) Total Segments DWS C&I ECS

Intersegment 1.4 — — 1.4

Intersegment 0.1 — — 0.1

Gross profit percent is as a percent of total revenue.

DWS revenue was $567.0 million in 2021 and $588.3 million in 2020. Revenue in 2021 was negatively impacted as the company exited certain non-strategic contracts that were not aligned to its targeted margin profile. Foreign currency fluctuations had a 2-percentage-point positive impact on DWS revenue in 2021 compared with 2020. Gross profit percent was 13.5% in 2021 and 9.4% in 2020. The increase in gross profit in 2021 compared with 2020 was due in part to improvements in efficiency as well as the company’s focus on higher margin solutions.

C&I revenue was $496.5 million in 2021 and $465.2 million in 2020. The increase in revenue in 2021 compared with 2020 was driven by continued momentum with public sector clients as well as other highly-regulated industries. Foreign currency fluctuations had a 2-percentage-point positive impact on C&I revenue in 2021 compared with 2020. Gross profit percent was 11.4% in 2021 and 5.0% in 2020. The increase in gross profit in 2021 compared with 2020 was due in part to improvements in efficiency.

ECS revenue was $677.5 million in 2021 and $659.7 million in 2020. Foreign currency fluctuations had a 2 percentage-point positive impact on ECS revenue in 2021 compared with 2020. Gross profit percent was 63.1% in 2021 and 56.9% in 2020. The increase in revenue and gross profit in 2021 compared with 2020 was due to higher sales of the company’s enterprise software.

New accounting pronouncements

See Note 3, “Recent accounting pronouncements and accounting changes,” of the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on the company’s consolidated financial statements.

Financial condition

The company’s principal sources of liquidity are cash on hand, cash from operations and its revolving credit facility, discussed below. The company and certain international subsidiaries have access to uncommitted lines of credit from various banks. The company believes that it will have adequate sources of liquidity to meet its expected cash requirements through at least the next twelve months.

Cash and cash equivalents at December 31, 2021 were $552.9 million compared with $898.5 million at December 31, 2020.

As of December 31, 2021, $326.6 million of cash and cash equivalents were held by the company’s foreign subsidiaries and branches operating outside of the U.S. The company may not be able to readily transfer up to one-third of these funds out of the country in which they are located as a result of local restrictions, contractual or other legal arrangements or commercial considerations. Additionally, any transfers of these funds to the U.S. in the future may require the company to accrue or pay withholding or other taxes on a portion of the amount transferred. See Note 8, “Income taxes,” of the Notes to Consolidated Financial Statements regarding the company’s intention to indefinitely reinvest earnings of foreign subsidiaries.

During 2021, cash provided by operating activities was $132.5 million compared with cash used for operations of $681.2 million during 2020. The operating cash improvement in 2021 was principally due to lower cash contributions to the company’s postretirement plans of $56.4 million in 2021 compared to $832.2 million in 2020.

Cash used for investing activities during 2021 was $360.3 million compared with cash provided by investing activities of $1,041.6 million during 2020. During 2021, the company purchased Unify Square, Mobinergy and CompuGain for cash of $239.3 million. See Note 4,“Acquisitions,”of the Notes to Consolidated Financial Statements for further information on each acquisition. On March 13, 2020, the company sold its U.S. Federal business and received net cash proceeds of $1,162.9 million. Net purchases of investments were $19.9 million in 2021 compared with net proceeds of $9.3 million in 2020. Proceeds from investments and purchases of investments represent derivative financial instruments used to manage the company’s currency exposure to market risks from changes in foreign currency exchange rates. In addition, capital additions of properties were $27.3 million in 2021 compared with $27.7 million in 2020, capital additions of outsourcing assets were $18.5 million in 2021 compared with $30.1 million in 2020 and the investment in marketable software was $54.4 million in 2021 compared with $72.3 million in 2020.

Cash used for financing activities during 2021 was $105.5 million compared with cash provided by financing activities of $5.1 million during 2020. The cash used in 2021 was principally due to the convertible notes exchange.

The American Rescue Plan Act, which was signed into law in the U.S. on March 11, 2021, includes a provision for pension relief that extends the amortization period for required contributions from 7 to 15 years and provides for the stabilization of interest rates used to calculate future required contributions. As a result, the company was not required to make cash contributions in 2021 to its U.S. qualified defined benefit pension plans and did not make the previously-contemplated voluntary $200 million contribution to its U.S. pension plans in 2021. Based on year-end 2021 pension data and actuarial assumptions, which are likely to change in the future, the company is not expected to be required to make future cash contributions to its U.S. qualified defined benefit pension plans for at least the next 10 years.

Any future material deterioration in the value of the company’s U.S. qualified defined benefit pension plan assets, as well as changes in pension legislation, discount rate changes, asset return changes, or changes in economic or demographic trends, could require the company to make cash contributions to its U.S. defined benefit pension plans that are not currently expected.

As described in Note 18, “Employee plans,” of the Notes to Consolidated Financial Statements, the company expects to make cash contributions of approximately $40.2 million in 2022, primarily for its international defined benefit pension plans compared with cash contributions of $52.4 million in 2021.

At December 31, 2021, total debt was $529.4 million compared with $629.9 million at December 31, 2020. The reduction is primarily due to the conversion of the company’s 2021 Notes, which is described below. See Note 16, “Debt,”of the Notes to Consolidated Financial Statements for more detailed discussion of the company’s debt financing agreements including maturities by fiscal year.

The company has commitments under operating leases for certain facilities and equipment used in its operations. As of December 31, 2021, the company’s operating lease liabilities were $81.5 million. The company also have a number of finance leases for equipment, with lease liabilities totaling $2.7 million as of December 31, 2021. See Note 6, “Leases and commitments,” of the Notes to Consolidated Financial Statements for more information pertaining to future minimum lease payments relating to the company’s operating and finance lease obligations.

Additionally as described in Note 5, “Cost-reduction actions,” of the Notes to Consolidated Financial Statements, the company expects to make payments of approximately $14.9 million in 2022 related to the company’s work-force reduction actions and the company expects to make payments of approximately $1.4 million beyond 2022.

On March 3, 2021, the company completed the conversion of $84.2 million aggregate principal amount of the 2021 Notes that remained outstanding for a combination of cash and shares of the company’s common stock. As a result of the conversion of the outstanding 2021 Notes, the company delivered to the holders of such notes (i) aggregate cash payments totaling approximately $86.5 million, which included an aggregate cash payment for outstanding principal of approximately $84.2 million, an aggregate cash payment for accrued interest of approximately $2.3 million and a nominal cash payment in lieu of fractional shares, and (ii) 4,537,123 shares of the company’s common stock in the aggregate. The issuance of the common stock was made in exchange for the 2021 Notes pursuant to an exemption from the registration requirements provided by Section 3(a)(9) of the Securities Act of 1933, as amended.

The company has a secured revolving credit facility (the Amended and Restated ABL Credit Facility) that expires on October 29, 2025 that provides for revolving loans and letters of credit up to an aggregate amount of $145.0 million (with a limit on letters of credit of $40.0 million), with an accordion feature provision allowing for the aggregate amount available under the credit facility to be increased up to $175.0 million upon the satisfaction of certain conditions specified in the Amended and Restated ABL Credit Facility. Availability under the credit facility is subject to a borrowing base calculated by reference to the

company’s receivables. At December 31, 2021, the company had no borrowings and $5.7 million of letters of credit outstanding, and availability under the facility was $80.4 million net of letters of credit issued.

The Amended and Restated ABL Credit Facility is subject to a springing maturity, under which the Amended and Restated ABL Credit Facility will immediately mature 91 days prior to any date on which contributions to pension funds in the United States in an amount in excess of $100.0 million are required to be paid unless the company is able to meet certain conditions, including that the company has the liquidity (as defined in the Amended and Restarted ABL Credit Facility) to cash settle the amount of such pension payments, no default or event of default has occurred under the Amended and Restated ABL Credit Facility, the company’s liquidity is above $130.0 million and the company is in compliance with the then applicable fixed charge coverage ratio on a pro forma basis.

The Amended and Restated ABL Credit Facility is guaranteed by Unisys Holding Corporation, Unisys NPL, Inc., Unisys AP Investment Company I, CompuGain LLC and CompuGain Public Services, LLC, each of which is a U.S. corporation or limited liability company that is directly or indirectly owned by the company (the subsidiary guarantors). The facility is secured by the assets of the company and the subsidiary guarantors, other than certain excluded assets, under a security agreement entered into by the company and the subsidiary guarantors in favor of JPMorgan Chase Bank, N.A., as agent for the lenders under the credit facility.

The company is required to maintain a minimum fixed charge coverage ratio if the availability under the Amended and Restated ABL Credit Facility falls below the greater of 10% of the lenders’ commitments under the facility and $14.5 million.

The Amended and Restated ABL Credit Facility contains customary representations and warranties, including, but not limited to, that there has been no material adverse change in the company’s business, properties, operations or financial condition. The Amended and Restated ABL Credit Facility includes restrictions on the ability of the company and its subsidiaries to, among other things, incur other debt or liens, dispose of assets and make acquisitions, loans and investments, repurchase its equity, and prepay other debt. These restrictions are subject to several important limitations and exceptions. Events of default include non-payment, failure to comply with covenants, materially incorrect representations and warranties, change of control and default under other debt aggregating at least $50.0 million, subject to relevant cure periods, as applicable.

At December 31, 2021, the company has met all covenants and conditions under its various lending and funding agreements. The company expects to continue to meet these covenants and conditions through at least the next twelve months.

The company maintains a shelf registration statement with the Securities and Exchange Commission that covers the offer and sale of debt or equity securities. Subject to the company’s ongoing compliance with securities laws, the company may offer and sell debt and equity securities from time to time under the shelf registration statement. In addition, from time to time the company has explored, and expects to continue to explore, a variety of debt and equity sources to fund its liquidity and capital needs.

The company may, from time to time, redeem, tender for, or repurchase its securities in the open market or in privately negotiated transactions depending upon availability, market conditions and other factors.

Critical accounting policies and estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. Certain accounting policies, methods and estimates are particularly important because of their significance to the financial statements and because of the possibility that future events affecting them may differ from management’s current judgments. The company bases its estimates and judgments on historical experience and on other assumptions that it believes are reasonable under the circumstances; however, to the extent there are material differences between these estimates, judgments and assumptions and actual results, the financial statements will be affected. Although there are a number of accounting policies, methods and estimates affecting the company’s financial statements as described in Note 1, “Summary of significant accounting policies,” of the Notes to Consolidated Financial Statements, the following critical accounting policies reflect the significant estimates, judgments and assumptions. The development and selection of these critical accounting policies have been determined by management of the company and the related disclosures have been reviewed with the Audit and Finance Committee of the Board of Directors.

Revenue recognition

Many of the company’s sales agreements contain standard business terms and conditions; however, some agreements contain multiple performance obligations or non-standard terms and conditions. As discussed in Note 1, “Summary of significant accounting policies,” of the Notes to Consolidated Financial Statements, the company enters into arrangements that may include any combination of hardware, software or services. As a result, significant contract interpretation is sometimes required to determine the appropriate accounting, including how many performance obligations are present in an arrangement, whether they should be treated as separate performance obligations and when to recognize revenue and under what method for each performance obligation.

Income Taxes

Accounting rules governing income taxes require that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. These rules also require that 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.

At December 31, 2021 and 2020, the company had deferred tax assets in excess of deferred tax liabilities of $1,332.3 million and $1,380.8 million, respectively. For the reasons cited below, at December 31, 2021 and 2020, management determined that it is more likely than not that $106.1 million and $109.3 million, respectively, of such assets will be realized, resulting in a valuation allowance of $1,226.2 million and $1,271.5 million, respectively.

The company evaluates the realizability of its deferred tax assets by assessing its valuation allowance and by adjusting such amount, if necessary. The realization of the company’s deferred tax assets is dependent on the ability to generate sustained taxable income in various jurisdictions. Judgment is required to estimate forecasted future taxable income, which may be impacted by future business developments, actual results, strategic operational and tax initiatives, legislative, and other economic factors and developments. See “Item 1A. Risk Factors.” It is at least reasonably possible that the company’s judgment about the need for, and level of, existing valuation allowances could change in the near term based on changes in objective evidence such as further sustained income or loss in certain jurisdictions, as well as the other factors discussed above, primarily in certain jurisdictions outside of the United States. As such, the company will continue to monitor income levels and mix among jurisdictions, potential changes to the company’s operating and tax model, and other legislative or global developments in its determination. It is reasonably possible that such changes could result in a material impact to the Company’s valuation allowance within the next 12 months.

Internal Revenue Code Sections 382 and 383 provide annual limitations with respect to the ability of a corporation to utilize its net operating loss (as well as certain built-in losses) and tax credit carryforwards, respectively (Tax Attributes), against future U.S. taxable income, if the corporation experiences an “ownership change.” In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. The company regularly monitors ownership changes (as calculated for purposes of Section 382). The company has determined that, for purposes of the rules of Section 382 described above, an ownership change occurred in February 2011. Any future transaction or transactions and the timing of such transaction or transactions could trigger additional ownership changes under Section 382.

As a result of the February 2011 ownership change, utilization for certain of the company’s Tax Attributes, U.S. net operating losses and tax credits, is subject to an overall annual limitation of $70.6 million. The cumulative limitation as of December 31, 2021 is approximately $462.4 million. This limitation will be applied to any net operating losses and then to any other Tax Attributes. Any unused limitation may be carried over to later years. Based on presently available information and the existence of tax planning strategies, the company does not expect to incur a U.S. cash tax liability in the near term. The company maintains a full valuation allowance against the realization of all U.S. deferred tax assets as well as certain foreign deferred tax assets in excess of deferred tax liabilities. See Note 8, “Income taxes,” of the Notes to Consolidated Financial Statements.

The company’s provision for income taxes and the determination of the resulting deferred tax assets and liabilities involve a significant amount of management judgment and are based on the best information available at the time. The company operates within federal, state and international taxing jurisdictions and is subject to audit in these jurisdictions. These audits can involve complex issues, which may require an extended period of time to resolve. As a result, the actual income tax liabilities in the jurisdictions with respect to any fiscal year are ultimately determined long after the financial statements have been published.

Pensions

Accounting rules governing defined benefit pension plans require that amounts recognized in financial statements be determined on an actuarial basis. The measurement of the company’s pension obligations, costs and liabilities is dependent on a variety of assumptions selected by the company and used by the company’s actuaries. These assumptions include estimates of the present value of projected future pension payments to plan participants, taking into consideration the likelihood of potential

future events such as demographic experience. The assumptions used in developing the required estimates include the following key factors: discount rates, retirement rates, inflation, expected return on plan assets and mortality rates.

As permitted for purposes of computing pension expense, the company uses a calculated value of plan assets (which is further described below). This allows the effects of the performance of the pension plan’s assets on the company’s computation of pension income or expense to be amortized over future periods. A substantial portion of the company’s pension plan assets relates to its qualified defined benefit plans in the United States.

Funding requirements for its U.S. qualified pension plans are calculated by the plan’s actuaries based on certain assumptions as permitted under current regulations. Changes to the benefit obligation caused by a 25 basis point change noted below are related to the balance sheet obligation and are not necessarily indicative of the impact on the funding liability.

At the end of each year, the company determines the discount rate to be used to calculate the present value of plan liabilities. Inherent in deriving the discount rate are significant assumptions with respect to the timing and magnitude of expected benefit payment obligations. The discount rate is an estimate of the current interest rate at which the pension liabilities could be effectively settled at the end of the year. In estimating this rate, the company looks to rates of return on high-quality, fixed-income investments that (a) receive one of the two highest ratings given by a recognized ratings agency and (b) are currently available and expected to be available during the period to maturity of the pension benefits. At December 31, 2021, the company determined this rate to be 3.18% for its U.S. defined benefit pension plans, an increase of 33 basis points from the rate used at December 31, 2020, and 1.73% for the company’s non-U.S. defined benefit pension plans, an increase of 50 basis points from the rate used at December 31, 2020. A change of 25 basis points in the U.S. and non-U.S. discount rates causes a change in 2022 pension expense of approximately $1 million and $200 thousand, respectively, and a change of approximately $83 million and $102 million, respectively, in the benefit obligation. These estimates are intended to be illustrative based on a single 25 basis point change. The sensitivity to rate changes is not linear and additional changes in rates may result in a different impact on the pension liability. The net effect of changes in the discount rate, as well as the net effect of other changes in actuarial assumptions and experience, has been deferred, as permitted.

A significant element in determining the company’s pension income or expense is the expected long-term rate of return on plan assets. The company sets the expected long-term rate of return based on the expected long-term return of the various asset categories in which it invests. The company considers the current expectations for future returns and the actual historical returns of each asset class. Also, because the company’s investment policy is to actively manage certain asset classes where the potential exists to outperform the broader market, the expected returns for those asset classes are adjusted to reflect the expected additional returns. For 2022, the company has assumed that the expected long-term rate of return on U.S. plan assets will be 6.50%, and on the company’s non-U.S. plan assets will be 3.88%. A change of 25 basis points in the expected long-term rate of return for the company’s U.S. and non-U.S. pension plans causes a change of approximately $7 million and $5 million, respectively, in 2022 pension expense. The assumed long-term rate of return on assets is applied to a calculated value of plan assets, which recognizes changes in the fair value of plan assets in a systematic manner over four years. This produces the expected return on plan assets that is included in pension income or expense. The difference between this expected return and the actual return on plan assets is deferred. The net deferral of past asset gains or losses affects the calculated value of plan assets and, ultimately, future pension income or expense. At December 31, 2021, for the company’s U.S. qualified defined benefit pension plans, the calculated value of plan assets was $3.14 billion and the fair value was $3.07 billion.

Gains and losses are defined as changes in the amount of either the projected benefit obligation or plan assets resulting from experience different from that assumed and from changes in assumptions. Because gains and losses may reflect refinements in estimates as well as real changes in economic values and because some gains in one period may be offset by losses in another and vice versa, the accounting rules do not require recognition of gains and losses as components of net pension cost of the period in which they arise.

At a minimum, amortization of an unrecognized net gain or loss must be included as a component of net pension cost for a year if, as of the beginning of the year, that unrecognized net gain or loss exceeds 10 percent of the greater of the projected benefit obligation or the calculated value of plan assets. If amortization is required, the minimum amortization is that excess above the 10 percent divided by the average remaining life expectancy of the plan participants. For the company’s U.S. qualified defined benefit pension plans and the company’s non-U.S. pension plans, that period is approximately 14 and 23 years, respectively. At December 31, 2021, the estimated unrecognized loss for the company’s U.S. qualified defined benefit pension plans and the company’s non-U.S. pension plans was $2.10 billion and $850 million, respectively.

For the year ended December 31, 2021, the company recognized consolidated pension expense of $553.9 million (which includes $499.4 million settlement losses), compared with $235.3 million for the year ended December 31, 2020 (which includes a $142.1 million settlement loss). For 2022, the company expects to recognize pension expense of approximately $42.3 million. See Note 18, “Employee plans,” of the Notes to Consolidated Financial Statements.

Goodwill

The company initially assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. This qualitative assessment considers all relevant factors specific to the reporting units, including macroeconomic conditions, industry and market considerations, overall financial performance, and relevant entity-specific events.

If, after completing the qualitative assessment, the company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the company proceeds to perform a subsequent quantitative goodwill impairment test. Alternatively, the company may elect to bypass the qualitative assessment and perform the quantitative impairment test. The quantitative goodwill impairment test compares each reporting unit’s fair value to its carrying value. If the reporting unit’s fair value exceeds its carrying value, no further procedures are required. However, if a reporting unit’s fair value is less than its carrying value, then an impairment charge is recorded in the amount of the excess.

When the company performs the quantitative goodwill impairment test for a reporting unit, it estimates the fair value of the reporting unit using both the income approach and the market approach. The methodology used to determine the fair values using the income and market approaches, as described below, are weighted to determine the fair value for each reporting unit.

The income approach is a forward-looking approach to estimating fair value and relies primarily on internal forecasts. Within the income approach, the method used is the discounted cash flow method. The company starts with a forecast of all expected net cash flows associated with the reporting unit, which includes the application of a terminal value, and then a reporting unit-specific discount rate is applied to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include the amount and timing of projected net cash flows, long-term growth rate and the discount rate. Cash flow projections are based on management’s estimates of economic and market conditions, which drive key assumptions of revenue growth rates and operating margins. The discount rate in turn is based on various market factors and specific risk characteristics of each reporting unit.

The market approach relies primarily on external information for estimating the fair value. Some of the more significant estimates and assumptions inherent in this approach include the selection of appropriate guideline companies and the selected performance metric used in this approach.

Estimating the fair value of reporting units requires the use of estimates and significant judgments about key assumptions. There are a number of factors including potential events and changes in circumstances that could change in future periods, including: projected operating results; valuation multiples exhibited by the company and by companies considered comparable to the reporting units; and other macro-economic factors that could impact the discount rate. It is reasonably possible that the judgments and estimates described above could change in future periods.

In January 2021, the company changed its organizational structure to more effectively address evolving client needs. With these changes, the company changed its reportable segments, operating segments and reporting units. The realignment and change was deemed a triggering event, resulting in the company performing an interim quantitative goodwill impairment test on the reporting units impacted by this segment change as of immediately before and immediately after the change. There were no impairment charges resulting from this analysis. As a result of the realignment, goodwill totaling $108.6 million was reallocated as follows: ECS, $98.3 million and Other, $10.3 million.

Goodwill by reporting unit at December 31, 2021, was as follows (dollars in millions):

Reporting unit Carrying Amount

After performing the annual goodwill impairment qualitative analysis during the fourth quarter of 2021, the company determined it was not necessary to perform the quantitative goodwill impairment test.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk

The company has exposure to interest rate risk from its debt. In general, the company’s long-term debt is fixed rate and, to the extent it has any, its short-term debt is variable rate. See Note 16, “Debt,” of the Notes to Consolidated Financial Statements. The company believes that the market risk assuming a hypothetical 10% increase in interest rates would not be material to the fair value of these financial instruments, or the related cash flows, or future results of operations.

Market risk

As of December 31, 2021, the company had outstanding $478.1 million ($485.0 million face value) of senior secured notes due 2027. The interest rates on the notes are fixed and therefore do not expose the company to risk related to rising interest rates. As of December 31, 2021, the fair value of the senior secured notes due 2027 was $527.0 million.

Foreign currency exchange rate risk

The company is also exposed to foreign currency exchange rate risks. The company is a net receiver of currencies other than the U.S. dollar and, as such, can benefit from a weaker dollar, and can be adversely affected by a stronger dollar relative to currencies worldwide. Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, may adversely affect consolidated revenue and operating margins as expressed in U.S. dollars. Currency exposure gains and losses are mitigated by purchasing components and incurring expenses in local currencies.

In addition, the company uses derivative financial instruments, primarily foreign exchange forward contracts, to reduce its exposure to market risks from changes in foreign currency exchange rates on intercompany balances. See Note 13, “Financial instruments and concentration of credit risks,” of the Notes to Consolidated Financial Statements for additional information on the company’s derivative financial instruments.

The company has performed a sensitivity analysis assuming a hypothetical 10% adverse movement in foreign currency exchange rates applied to these derivative financial instruments described above. As of December 31, 2021 and 2020, the analysis indicated that such market movements would have reduced the estimated fair value of these derivative financial instruments by approximately $55 million and $50 million, respectively. Based on changes in the timing and amount of interest rate and foreign currency exchange rate movements and the company’s actual exposures and hedges, actual gains and losses in the future may differ from the above analysis.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index Page Number

Report of Management 31

Reports of Independent Registered Public Accounting Firms 32

Consolidated Statements of Income (Loss) 35

Consolidated Statements of Comprehensive Income (Loss) 36

Consolidated Balance Sheets 37

Consolidated Statements of Cash Flows 38

Consolidated Statements of Deficit 39

Notes to Consolidated Financial Statements 40

Report of Management

Management’s Report on the Financial Statements

The management of the company is responsible for the integrity of its financial statements. These statements have been prepared in conformity with U.S. generally accepted accounting principles and include amounts based on the best estimates and judgments of management. Financial information included elsewhere in this report is consistent with that in the financial statements.

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the company’s 2021 consolidated financial statements. Its accompanying report is based on an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States).

The Board of Directors, through its Audit and Finance Committee, which is composed entirely of independent directors, oversees management’s responsibilities in the preparation of the financial statements and selects the independent registered public accounting firm, subject to stockholder ratification. The Audit and Finance Committee meets regularly with the independent registered public accounting firm, representatives of management, and the internal auditors to review the activities of each and to assure that each is properly discharging its responsibilities. To ensure complete independence, the internal auditors and representatives of PricewaterhouseCoopers LLP have full access to meet with the Audit and Finance Committee, with or without management representatives present, to discuss the results of their audits and their observations on the adequacy of internal controls and the quality of financial reporting.

Management’s Report on Internal Control Over Financial Reporting

The management of the company is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, we concluded that the company maintained effective internal control over financial reporting as of December 31, 2021, based on the specified criteria.

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the company’s internal control over financial reporting as of December 31, 2021, as stated in its report that appears herein.

/s/ Peter A. Altabef /s/ Michael M. Thomson

Peter A. Altabef Michael M. Thomson

(Principal Financial Officer)

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Unisys Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheet of Unisys Corporation and its subsidiaries(the “Company”) as of December 31, 2021 and 2020,and the related consolidated statements of income (loss), of comprehensive income (loss), of deficit and of cash flows for each of the two years in the period ended December 31, 2021, including the related notes and schedule of valuation and qualifying accounts for each of the two years in the period ended December 31, 2021 listed under Item 15(1) (collectively referred to as the “consolidated financial statements”).We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidatedfinancial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of itsoperations and itscash flows for each of the two years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework(2013)issued by the COSO.

Change in Accounting Principle

As discussed in Note 3 of the consolidated financial statements, the Company changed the manner in which it accounts for income taxes in 2020.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidatedfinancial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidatedfinancial statements included performing procedures to assess the risks of material misstatement of the consolidatedfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidatedfinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of the U.S. and Certain International Defined Benefit Pension Plan Obligations

As described in Notes 1 and 18 to the consolidated financial statements, the Company’s consolidated defined benefit pension plan obligation was $6,324 million as of December 31, 2021. Additionally, the Company recorded settlement losses associated with its pension plans of $499 million for the year ended December 31, 2021. Management develops the actuarial assumptions used by its U.S. and international defined benefit pension plan obligations based upon the circumstances of each particular plan. The determination of the defined benefit pension plan obligations requires the use of estimates. Management’s significant assumption used in the determination of the defined benefit pension plan obligations, and settlement losses associated with respect to the U.S. pension plans, is the discount rate.

The principal considerations for our determination that performing procedures relating to the valuation of the U.S. and certain international defined benefit pension plan obligations is a critical audit matter are the (i) significant judgment by management to determine the defined benefit pension plan obligations; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s significant assumption related to the discount rates; (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of the U.S. and certain international defined benefit pension plan obligations, including controls over the Company’s methods, significant assumption, and data. These procedures also included, among others, testing the completeness, accuracy and relevance of the underlying data used in developing the estimate, and the involvement of professionals with specialized skill and knowledge to assist in (i) evaluating the appropriateness of the actuarial methods used to estimate the defined benefit pension plan obligations, and (ii) evaluating the reasonableness of management’s significant assumption related to the discount rate. Evaluating the reasonableness of management’s significant assumption related to the discount rate included (i) developing an independent range of discount rates for each U.S. and certain international defined benefit pension plan obligations based on publicly available market data for high-quality, fixed income investments, and (ii) comparing management’s discount rate to the independently developed range to evaluate the reasonableness of the discount rate assumption.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

February 22, 2022

We have served as the Company’s auditor since 2020.

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Unisys Corporation:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of income (loss), comprehensive income (loss), cash flows, and deficit for the year ended December 31, 2019, and the related notes and financial statement schedule II (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ KPMG LLP

We served as the Company’s auditor from 2008 to 2020.

Philadelphia, Pennsylvania

UNISYS CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Millions, except per share data)

Revenue

Costs and expenses

Cost of revenue:

Loss from continuing operations before income taxes (461.7) (271.8) (60.6)

(Benefit) provision for income taxes (11.9) 45.4 27.7

Consolidated net loss from continuing operations (449.8) (317.2) (88.3)

Net (loss) income attributable to noncontrolling interests (1.3) 0.5 3.9

Income from discontinued operations, net of tax — 1,068.4 75.0

Net (loss) income attributable to Unisys Corporation $ (448.5) $ 750.7 $ (17.2)

Earnings (loss) per common share attributable to Unisys Corporation

Basic

Continuing operations $ (6.75) $ (5.05) $ (1.65)

Discontinued operations — 16.98 1.34

Diluted

Continuing operations $ (6.75) $ (5.05) $ (1.65)

Discontinued operations — 16.98 1.34

See notes to consolidated financial statements.

UNISYS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Millions)

Consolidated net loss from continuing operations $ (449.8) $ (317.2) $ (88.3)

Income from discontinued operations, net of tax — 1,068.4 75.0

Other comprehensive income (loss)

Total other comprehensive income (loss) 681.3 156.2 (14.5)

See notes to consolidated financial statements.

UNISYS CORPORATION

CONSOLIDATED BALANCE SHEETS

(Millions)

Assets

Current assets

Cash and cash equivalents $ 552.9 $ 898.5

Prepaid expenses and other current assets 78.8 89.3

Less – Accumulated depreciation and amortization 381.5 616.5

Operating lease right-of-use assets 62.7 79.3

Prepaid postretirement assets 159.7 187.5

Intangible assets, net 34.9 —

Restricted cash 7.7 8.2

Assets held-for-sale 20.0 —

Liabilities and deficit

Current liabilities:

Current maturities of long-term debt $ 18.2 $ 102.8

Long-term postretirement liabilities 976.2 1,286.1

Long-term operating lease liabilities 46.1 62.4

Other long-term liabilities 47.2 71.4

Commitments and contingencies (see Note 19)

Deficit:

Accumulated other comprehensive loss (3,264.1) (3,939.5)

Total Unisys Corporation stockholders’ deficit (113.7) (356.8)

Noncontrolling interests 49.3 44.7

See notes to consolidated financial statements.

UNISYS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Millions)

Cash flows from operating activities

Consolidated net loss from continuing operations $ (449.8) $ (317.2) $ (88.3)

Income from discontinued operations, net of tax — 1,068.4 75.0

Gain on sale of U.S. Federal business — (1,060.0) —

Non-cash interest expense 1.8 4.6 9.2

Debt extinguishment charge — 28.5 20.1

Depreciation and amortization of properties 30.5 29.7 35.3

Depreciation and amortization of outsourcing assets 68.0 65.8 63.8

Amortization of marketable software 71.9 65.5 48.3

Amortization of intangible assets 3.0 — —

Other non-cash operating activities (0.6) (0.3) (1.6)

Loss on disposal of capital assets 2.2 4.5 1.5

Deferred income taxes, net (59.2) (13.4) 4.4

Receivables, net and contract assets 47.4 (74.8) (8.3)

Accounts payable and current liabilities (149.4) 3.4 (114.4)

Net cash provided by (used for) operating activities 132.5 (681.2) 123.9

Cash flows from investing activities

Purchases of businesses, net of cash acquired (239.3) — —

Net proceeds from sale of U.S. Federal business — 1,162.9 —

Capital additions of properties (27.3) (27.7) (38.0)

Capital additions of outsourcing assets (18.5) (30.1) (48.8)

Investment in marketable software (54.4) (72.3) (73.0)

Net proceeds from sale of properties — — (0.3)

Net cash (used for) provided by investing activities (360.3) 1,041.6 (158.2)

Cash flows from financing activities

Proceeds from issuance of long-term debt 1.5 497.3 30.5

Cash paid for debt extinguishment — (23.7) (56.7)

Issuance costs relating to long-term debt — (7.9) —

Proceeds from exercise of stock options 4.5 — —

Proceeds from capped call transactions — — 7.2

Net cash (used for) provided by financing activities (105.5) 5.1 (38.0)

Cash, cash equivalents and restricted cash, beginning of year 906.7 551.8 624.1

Cash, cash equivalents and restricted cash, end of year $ 560.6 $ 906.7 $ 551.8

See notes to consolidated financial statements.

UNISYS CORPORATION

CONSOLIDATED STATEMENTS OF DEFICIT

(Millions)

Unisys Corporation

Capped call on debt exchange 7.2 7.2 7.2

Capped call on conversion of debt — — (30.8) 30.8

See notes to consolidated financial statements.

UNISYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except share and per share amounts)

Note 1 — Summary of significant accounting policies

Principles of consolidation The consolidated financial statements include the accounts of all majority-owned subsidiaries.

Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (GAAP) requires management to make estimates and assumptions about future events. These estimates and assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and the reported amounts of revenue and expenses. Such estimates include the valuation of estimated credit losses, contract assets, operating lease right-of-use assets, outsourcing assets, marketable software, goodwill, purchased intangibles and other long-lived assets, legal contingencies, assumptions used in the calculation for systems integration projects, income taxes and retirement and other post-employment benefits, among others. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ materially from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

The company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts of COVID-19 as of December 31, 2021 and through the date of this report. The accounting matters assessed included, but were not limited to the valuation of estimated credit losses, contract assets, outsourcing assets, marketable software, deferred tax assets, goodwill, purchased intangibles and other long-lived assets, and retirement and other post-employment benefits. While there was not a material impact to our consolidated financial position as of December 31, 2021 resulting from our assessments, our future assessment of our current expectations at that time of the future impacts and duration of COVID-19, as well as other factors, could result in material impacts to our consolidated financial position in future reporting periods.

Cash and Cash equivalents Cash and cash equivalents consist of cash on hand, short-term investments purchased with an original maturity of three months or less and certificates of deposit which may be withdrawn at any time at the discretion of the company without penalty. Cash and cash equivalents subject to contractual restrictions and not readily available are classified as restricted cash.

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the total of the amounts shown in the consolidated statements of cash flows.

Cash and cash equivalents $ 552.9 $ 898.5

Restricted cash 7.7 8.2

Inventories Inventories are valued at the lower of cost and net realizable value. Cost is determined on the first-in, first-out method.

Properties Properties are carried at cost and are depreciated over the estimated lives of such assets using the straight-line method. The estimated lives used, in years, are as follows: buildings, 20 – 50; machinery and office equipment, 4 – 7; rental equipment, 4; and internal-use software, 3 – 10.

Outsourcing assets Costs of outsourcing contracts are generally expensed as incurred. However, certain costs incurred upon initiation of an outsourcing contract (principally initial customer setup) are deferred and expensed over the initial contract life. Fixed assets and software used in connection with outsourcing contracts are capitalized and depreciated over the shorter of the initial contract life or in accordance with the fixed asset policy described above.

Recoverability of these costs is subject to various business risks. Quarterly, the company compares the carrying value of these assets with the undiscounted future cash flows expected to be generated by them to determine if there is impairment. If impaired, these assets are reduced to an estimated fair value on a discounted cash flow basis. The company prepares its cash flow estimates based on assumptions that it believes to be reasonable but are also inherently uncertain. Actual future cash flows could differ from these estimates. The gross amount of outsourcing assets totaled $568.3 million and $692.1 million as of

December 31, 2021 and 2020, respectively, and related accumulated amortization totaled $443.7 million and $518.2 million as of December 31, 2021 and 2020, respectively.

Marketable software The cost of development of computer software to be sold or leased, incurred subsequent to establishment of technological feasibility, is capitalized and amortized to cost of sales over the estimated revenue-producing lives of the products. For the company’s proprietary enterprise software products, the amortization period is five years following product release, and for the remaining products, the amortization period is three years following product release. In assessing the estimated revenue-producing lives and recoverability of the products, the company considers operating strategies, underlying technologies utilized, estimated economic life and external market factors, such as expected levels of competition, barriers to entry by potential competitors, stability in the market and governmental regulation. The company continually reassesses the estimated revenue-producing lives of the products and any change in the company’s estimate could result in the remaining amortization expense being accelerated or spread out over a longer period. As of December 31, 2021, the company believes that all unamortized costs are fully recoverable. The gross amount of marketable software totaled $2,266.1 million and $2,219.4 million as of December 31, 2021 and 2020, respectively, and related accumulated amortization totaled $2,089.9 million and $2,025.8 million as of December 31, 2021 and 2020, respectively.

Internal-use software The company capitalizes certain internal and external costs incurred to acquire or create internal-use software, principally related to software coding, designing system interfaces, and installation and testing of the software. These costs are amortized in accordance with the fixed asset policy described above.

Goodwill and Purchased Intangible Assets Goodwill arising from the acquisition of an entity represents the excess of the purchase price consideration over the fair value of the underlying identifiable intangible assets and net assets or liabilities assumed. Goodwill is initially recognized as an asset and is subsequently measured at cost less any accumulated impairment losses.

The company tests goodwill for impairment annually in the fourth quarter using data as of September 30 of that year, as well as whenever there are events or changes in circumstances (triggering events) that would more likely than not reduce the fair value of one or more reporting units below its respective carrying amount. The company initially assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. This qualitative assessment considers all relevant factors specific to the reporting units, including macroeconomic conditions, industry and market considerations, overall financial performance, and relevant entity-specific events.

If the company determines that it is not more likely that the carrying amount for a reporting unit is less than its fair value, then subsequent quantitative goodwill impairment testing is not required. If the company determines that it is more likely than not that the carrying amount for a reporting unit is greater than its fair value, then it proceeds with a subsequent quantitative goodwill impairment test. Under the quantitative test, the company compares the fair value of each of its reporting units to their respective carrying value. If the carrying value exceeds fair value, an impairment charge is recognized for the difference. Impaired goodwill is written down to its fair value through a charge to the consolidated statement of income (loss) in the period the impairment is identified.

In January 2021, the company changed its organizational structure to more effectively address evolving client needs. With these changes, the company changed its reportable segments, operating segments and reporting units. The realignment and change was deemed a triggering event, resulting in the company performing an interim quantitative goodwill impairment test on the reporting units impacted by this segment change as of immediately before and immediately after the change. There were no impairment charges resulting from this analysis. See Note 21, “Segment information” for additional information on the company’s operating and reportable segments.

During the fourth quarter of 2021, the company performed its annual qualitative goodwill assessment and determined it was not necessary to perform the quantitative goodwill impairment test.

When the company performs the quantitative goodwill impairment test for a reporting unit, it estimates the fair value of the reporting unit using both the income approach and the market approach.

The income approach incorporates the use of a discounted cash flow method in which the estimated future cash flows and terminal values for each reporting unit are discounted to present value. Cash flow projections are based on management’s estimates of economic and market conditions, which drive key assumptions of revenue growth rates, operating margins, capital expenditures and working capital requirements. The discount rate in turn is based on various market factors and specific risk characteristics of each reporting unit.

The market approach estimates fair value by applying performance metric multiples to the reporting unit’s prior and expected operating performance. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit.

If the fair value of the reporting unit derived using the income approach is significantly different from the fair value estimate using the market approach, the company reevaluates its assumptions used in the two models. When considering the weighting between the market approach and income approach, the company gives more weighting to the income approach. The higher weighting assigned to the income approach takes into consideration that the guideline companies used in the market approach generally represent larger diversified companies relative to the reporting units and may have different long-term growth prospects, among other factors.

In order to assess the reasonableness of the calculated reporting unit fair values, the company also compares the sum of the reporting units’ fair values to its market capitalization (per share stock price multiplied by shares outstanding) and calculates an implied control premium (the excess of the sum of the reporting units’ fair values over the market capitalization).

Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. It is reasonably possible that the judgments and estimates described above could change in future periods.

Finite-lived intangible assets purchased in a business combination are recorded at fair value and amortized to selling, general and administrative expense over their estimated useful lives. Finite-lived intangible assets are tested for impairment whenever events or changes in circumstances would indicate that the carrying value may not be recoverable. An impairment charge would be recognized if the carrying value exceeds fair value in the consolidated statement of income (loss) in the period the impairment is identified.

Retirement benefits Accounting rules covering defined benefit pension plans and other postretirement benefits require that amounts recognized in financial statements be determined on an actuarial basis. Management develops the actuarial assumptions used by its U.S. and international defined benefit pension plan obligations based upon the circumstances of each particular plan. The determination of the defined benefit pension plan obligations requires the use of estimates. A significant element in determining the company’s retirement benefits expense or income is the expected long-term rate of return on plan assets. This expected return is an assumption as to the average rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the projected pension benefit obligation. The company applies this assumed long-term rate of return to a calculated value of plan assets, which recognizes changes in the fair value of plan assets in a systematic manner over four years. This produces the expected return on plan assets that is included in retirement benefits expense or income. The difference between this expected return and the actual return on plan assets is deferred. The net deferral of past asset losses or gains affects the calculated value of plan assets and, ultimately, future retirement benefits expense or income.

At December 31 of each year, the company determines the fair value of its retirement benefits plan assets as well as the discount rate to be used to calculate the present value of plan liabilities. Management’s significant assumption used in the determination of the defined benefit pension plan obligations, and settlement losses associated with respect to the U.S. pension plans, is the discount rate. Inherent in deriving the discount rate are significant assumptions with respect to the timing and magnitude of expected benefit payment obligations. The discount rate is an estimate of the interest rate at which the retirement benefits could be effectively settled. In estimating the discount rate, the company looks to rates of return on high-quality, fixed-income investments currently available and expected to be available during the period to maturity of the retirement benefits. The company uses a portfolio of fixed-income securities, which receive at least the second-highest rating given by a recognized ratings agency.

Noncontrolling interest The company owns a fifty-one percent interest in Intelligent Processing Solutions Ltd. (iPSL), a U.K. business process outsourcing joint venture. The remaining interests, which are reflected as a noncontrolling interest in the company’s financial statements, are owned by three financial institutions for which iPSL performs services.

Revenue recognition Revenue is recognized at an amount that reflects the consideration to which the company expects to be entitled in exchange for transferring goods and services to a customer. The company determines revenue recognition using the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the company satisfies a performance obligation.

At contract inception, the company assesses the goods and services promised in a contract with a customer and identifies as a performance obligation each promise to transfer to the customer either: (1) a good or service (or a bundle of goods or services) that is distinct or (2) a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. The company recognizes revenue only when it satisfies a performance obligation by transferring a promised good or service to a customer.

The company must apply its judgment to determine the timing of the satisfaction of performance obligations as well as the transaction price and the amounts allocated to performance obligations including estimating variable consideration, adjusting the consideration for the effects of the time value of money and assessing whether an estimate of variable consideration is constrained.

Revenue from hardware sales is recognized upon the transfer of control to a customer, which is defined as an entity’s ability to direct the use of and obtain substantially all of the remaining benefits of an asset.

Revenue from software licenses is recognized at the inception of either the initial license term or the inception of an extension or renewal to the license term.

Revenue for operating leases is recognized on a monthly basis over the term of the lease and for sales-type leases at the inception of the lease term. Such revenue is not material to the company’s consolidated results of operations.

Revenue from equipment and software maintenance and post-contract support is recognized on a straight-line basis as earned over the terms of the respective contracts. Cost related to such contracts is recognized as incurred.

Revenue and profit under systems integration contracts are recognized over time as the company transfers control of goods or services. The company measures its progress toward satisfaction of its performance obligations using the cost-to-cost method, or when services have been performed, depending on the nature of the project. For contracts accounted for using the cost-to-cost method, revenue and profit recognized in any given accounting period are based on estimates of total projected contract costs. The estimates are continually reevaluated and revised, when necessary, throughout the life of a contract. Any adjustments to revenue and profit resulting from changes in estimates are accounted for in the period of the change in estimate. When estimates indicate that a loss will be incurred on a contract upon completion, a provision for the expected loss is recorded in the period in which the loss becomes evident. Revenue from such contracts is not material to the company’s consolidated results of operations.

In services arrangements, the company typically satisfies the performance obligation and recognizes revenue over time, because the client simultaneously receives and consumes the benefits provided as the company performs the services. The company’s services are provided on a time-and-materials basis, as a fixed-price contract or as a fixed-price per measure of output contract.

Revenue from time-and-material contracts is recognized on an output basis as labor hours are delivered.

In managed services, application management, business process outsourcing and other cloud-based services arrangements, the arrangement generally consists of a single performance obligation comprised of services that are substantially the same and that have the same pattern of transfer. The promise to transfer the individual services is not separately identifiable from other promises in the contracts and, therefore, is not distinct. The company applies a measure of progress (typically time-based) to any fixed consideration and allocates variable consideration to the periods of service, which are typically monthly or quarterly, based on usage. As a result, revenue is recognized over the period the services are provided either on a straight-line basis or on a usage basis, depending on the terms of the arrangement (such as whether the company is standing ready to perform or whether the contract has usage-based metrics). This results in revenue recognition that corresponds with the value to the client of the services transferred to date relative to the remaining services promised.

The company also enters into arrangements that may include any combination of hardware, software or services. For example, a client may purchase an enterprise server that includes operating system software. In addition, the arrangement may include post-contract support for the software and a contract for post-warranty maintenance for service of the hardware. These arrangements consist of multiple performance obligations, with control over hardware and software transferred in one reporting period and the software support and hardware maintenance services performed across multiple reporting periods. In another example, the company may provide desktop managed services to a client on a long-term multiple-year basis and periodically sell hardware and license software products to the client. The services are provided on a continuous basis across multiple reporting periods and control over the hardware and software products occurs in one reporting period.

The company allocates the total transaction price to be earned under an arrangement among the various performance obligations in proportion to their relative standalone selling prices. The standalone selling price for a performance obligation is the price at which the company would sell a promised good or service separately to a customer.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For contracts with multiple performance obligations, the company allocates the contract’s transaction price to each performance obligation using its best estimate of the standalone selling price of each distinct good or service in the contract. The primary methods used to estimate standalone selling price are as follows: (1) the expected cost plus margin approach, under which the company forecasts its expected costs of satisfying a performance obligation and then adds an appropriate margin for that distinct good or service and (2) the percent discount off of list price approach.

In the Digital Workplace Solutions (DWS) and the Cloud and Infrastructure Solutions (C&I) segments, substantially all of the company’s performance obligations are satisfied over time as work progresses and therefore substantially all of the revenue in this segment is recognized over time. The company generally receives payment for these contracts over time as the performance obligations are satisfied.

In the Enterprise Computing Solutions (ECS) segment, substantially all of the company’s sales of software and hardware are transferred to customers at a single point in time. Revenue on these contracts is recognized when control over the product is transferred to the customer or a software license term begins. The company generally receives payment for these contracts upon signature or within 30 to 60 days.

The company discloses disaggregation of its customer revenue by geographic areas by segment (see Note 21, “Segment information”).

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables, contract assets and deferred revenue (contract liabilities).

Revenue excludes taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue producing transaction and collected by the company from a customer (e.g., sales, use and value-added taxes). Revenue includes payments for shipping and handling activities.

Advertising costs All advertising costs are expensed as incurred.

Shipping and handling Costs related to shipping and handling are included in cost of revenue.

Stock-based compensation plans Stock-based compensation represents the cost related to stock-based awards granted to employees and directors. Compensation expense for performance-based restricted stock and restricted stock unit awards is recognized as expense ratably for each installment from the date of the grant until the date the restrictions lapse and is based on the fair market value at the date of grant and the probability of achievement of the specific performance-related goals. Compensation expense for market-based awards is recognized as expense ratably over the measurement period, regardless of the actual level of achievement, provided the service requirement is met. The fair value of restricted stock and restricted stock units with time and performance conditions is determined based on the trading price of the company’s common shares on the date of grant. The fair value of awards with market conditions is estimated using a Monte Carlo simulation. The company recognizes compensation expense for the fair value of stock options, which have graded vesting, on a straight-line basis over the requisite service period. The expense is recorded in selling, general and administrative expenses.

Income taxes Income taxes are based on income before taxes for financial reporting purposes and reflect a current tax liability for the estimated taxes payable in the current-year tax returns and changes in deferred taxes. Deferred tax assets or liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax laws and rates. A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that the asset will not be realized. The company releases the income tax effects of deferred tax balances that have a valuation allowance from accumulated other comprehensive income once the reason the tax effects were established ceases to exist (e.g., a postretirement plan is liquidated). The company recognizes penalties and interest accrued related to income tax liabilities in provision for income taxes in its consolidated statements of income (loss).

The company treats the global intangible low-tax income tax, or GILTI, as a period cost when included in U.S. taxable income, and the base erosion and anti-abuse tax, or BEAT, as a period cost when incurred.

Translation of foreign currency The local currency is the functional currency for most of the company’s international subsidiaries, and as such, assets and liabilities are translated into U.S. dollars at year-end exchange rates. Income and expense items are translated at average exchange rates during the year. Translation adjustments resulting from changes in exchange rates are reported in other comprehensive income (loss). Exchange gains and losses are reported in other (expense), net.

For those international subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency, and as such, nonmonetary assets and liabilities are translated at historical exchange rates, and monetary assets and liabilities are translated at current exchange rates. Exchange gains and losses arising from remeasurement are included in other (expense), net.

Fair value measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value measurements for assets and liabilities required to be recorded at fair value, the company assumes that the transaction is an orderly transaction that assumes exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction (for example, a forced liquidation or distress sale). The fair value hierarchy has three levels of inputs that may be used to measure fair value: Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the company can access at the measurement date; Level 2 – Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 – Unobservable inputs for the asset or liability. The company has applied fair value measurements to its derivatives (see Note 13, “Financial instruments and concentration of credit risks”), long-term debt (see Note 16, “Debt”), and to its postretirement plan assets (see Note 18, “Employee plans”).

Note 2 — Discontinued operations

On March 13, 2020, the company completed the sale of its U.S. Federal business to Science Applications International Corporation for cash of $1.2 billion. Net cash proceeds of the sale was $1,162.9 million (net of working capital adjustments and transaction costs).

The results of the U.S. Federal business discontinued operations were as follows:

Income (loss)

Income tax provision 0.7 25.3

Income from discontinued operations, net of tax $ 1,068.4 $ 75.0

* Includes results of operations through the March 13, 2020 closing date.

Note 3 — Recent accounting pronouncements and accounting changes

Effective January 1, 2020, the company adopted Accounting Standards Update (ASU) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removed certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new standard was applied to the presentation of the company’s U.S. Federal business, which is reflected in discontinued operations.

In October 2021, the Financial Accounting Standards Board issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This guidance requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. Deferred revenue acquired in a business combination is no longer required to be measured at its fair value, which had historically resulted in a deferred revenue impairment at the date of acquisition. The amendment is effective January 1, 2023 and early adoption is permitted. The company expects to adopt this new guidance effective January 1, 2022.

Note 4 — Acquisitions

Unify Square, Inc.

On June 3, 2021, the company acquired 100% of Unify Square, Inc. (Unify Square) for a purchase price consideration of $150.4 million on a cash-free, debt-free basis. The company funded the cash consideration and acquisition-related costs with cash on hand.

Headquartered in Bellevue, Washington, and with offices in the United Kingdom, Germany, Switzerland, India, Australia and Lithuania, Unify Square is a leading experience management provider for secure collaboration and communication platforms. The acquisition is expected to enhance the company’s digital workplace solutions and enable the company to deliver higher value solutions to its clients.

The fair values of the total net assets acquired was as follows:

Receivables $ 3.4

Prepaid expenses and other current assets 0.6

Properties and other long-term assets 0.4

Operating lease right-of-use assets 1.7

Accounts payable and accruals (3.8)

Deferred revenue (2.7)

Long-term operating lease liabilities (1.7)

Intangible assets 19.6

The company has finalized the purchase accounting related to Unify Square and the above amounts represent final fair values.

The goodwill represents expected synergies, intellectual capital and the acquired assembled workforce, none of which qualify for recognition as a separate intangible asset. Goodwill determined by the allocation of the purchase price has been recorded in the company’s DWS segment and is not deductible for tax purposes.

The following table summarizes the fair value of the intangible assets acquired and the related weighted average amortization period:

Weighted Average Amortization Period in Years

Customer Relationships - Software and Software Solutions 3.0 6.6

Customer Relationships - Consulting 10.0 3.0

During 2021, the company incurred and expensed acquisition-related costs of $2.4 million, included within selling, general and administrative expense on the consolidated statements of income (loss).

During 2021, the company finalized its valuation of assets acquired and liabilities assumed resulting in measurement period adjustments that increased goodwill by $16.7 million primarily related to a decrease of $16.3 million in the fair value of the acquired intangible assets.

The company’s consolidated financial statements include the results of Unify Square commencing as of the acquisition date.

Pro forma information and revenue and operating results of Unify Square have not been presented as the impact is not material to the company’s consolidated financial statements.

CompuGain

On December 14, 2021, the company acquired 100% of CompuGain LLC (CompuGain), a leading cloud solutions provider, for a purchase price consideration of $87.0 million on a cash-free, debt-free basis. The purchase price is subject to customary adjustments based on closing cash, indebtedness and working capital. The company funded the cash consideration and acquisition-related costs with cash on hand.

The acquisition is expected to enhance the company’s delivery of rapid and agile cloud migration, application modernization and data value realization to our clients.

The preliminary fair values of the total net assets acquired was a follows:

Receivables $ 7.8

Prepaid expenses and other current assets 0.7

Properties and other long-term assets 0.2

Operating lease right-of-use assets 0.2

Accounts payable and accruals (5.6)

Long-term operating lease liabilities (0.1)

Intangible assets 18.3

At December 31, 2021, the company has not finalized the purchase accounting related to CompuGain and the above amounts represent preliminary estimated values. The preliminary purchase price allocation is subject to change as the company completes its determination of the final working capital and the fair values of the acquired assets and liabilities assumed, the impact of which could be material.

The goodwill represents expected synergies, intellectual capital and the acquired assembled workforce, none of which qualify for recognition as a separate intangible asset. Goodwill determined by the allocation of the purchase price will be recorded in the company’s C&I segment and is expected to be deductible for tax purposes.

The following table summarizes the preliminary fair value of the intangible assets acquired and the related weighted average amortization period:

Weighted Average Amortization Period in Years

Customer Relationships 8.5 $ 17.4

During 2021, the company incurred and expensed acquisition-related costs of $1.1 million, included within selling, general and administrative expense on the consolidated statements of income (loss).

The company’s consolidated financial statements include the results of CompuGain commencing as of the acquisition date.

Pro forma information and revenue and operating results of CompuGain have not been presented as the impact is not material to the company’s consolidated financial statements.

Mobinergy

On November 18, 2021, the company acquired 100% of the Mobinergy group of companies (Mobinergy), a leader in unified endpoint management. The purchase price consideration was not material. The acquisition is expected to enhance the company’s digital workplace solutions and enable the company to deliver higher value solutions to its clients.

The company’s consolidated financial statements include the results of Mobinergy commencing as of the acquisition date.

Pro forma information and revenue and operating results of Mobinergy have not been presented as the impact is not material to the company’s consolidated financial statements.

Note 5 — Cost-reduction actions

comprised of $32.3 million for net foreign currency losses related to exiting foreign countries, $24.0 million for asset impairments and $13.7 million for other expenses related to cost-reduction efforts.

During 2019, the company recognized cost-reduction charges and other costs of $28.7 million. The net charges related to work-force reductions were $22.1 million, principally related to severance costs, and were comprised of: (a) a charge of $25.7 million and (b) a credit of $3.6 million for changes in estimates. In addition, the company recorded charges of $6.6 million comprised of $4.6 million for lease abandonment costs, $1.1 million for asset write-offs and $0.9 million for other expenses related to cost-reduction efforts.

The charges (credits) were recorded in the following statement of income (loss) classifications:

Cost of revenue

Selling, general and administrative 11.1 38.5 15.5

Research and development 3.0 2.5 2.2

Other (expenses), net 4.0 32.3 —

Liabilities and expected future payments related to the company’s work-force reduction actions are as follows:

Total U.S. International

Changes in estimates (3.6) (1.5) (2.1)

Translation adjustments (0.8) — (0.8)

Translation adjustments 2.1 — 2.1

Changes in estimates (11.9) (2.1) (9.8)

Translation adjustments (1.5) — (1.5)

Expected future payments on balance at December 31, 2021:

Note 6 — Leases and commitments

Leases

The company determines if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the company the right to control the use of an explicitly or implicitly identified asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the company if the company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The company is the lessee in lease agreements that include lease and non-lease components, which the company accounts for as a single lease component for all personal property leases. The company also has lease agreements in which it is the lessor that include lease and non-lease components. For these agreements, the company accounts for these components as a single lease component. Lease expense for variable leases and short-term leases is recognized when the expense is incurred.

Operating leases are included in operating lease right-of-use (ROU) assets, other accrued liabilities and long-term operating lease liabilities on the consolidated balance sheets. Operating lease ROU assets and lease liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Operating lease payments are recognized as lease expense on a straight-line basis over the lease term.

Finance leases are included in outsourcing assets, net and long-term debt on the consolidated balance sheets. Finance lease ROU assets and lease liabilities are initially measured in the same manner as operating leases. Finance lease ROU assets are amortized using the straight-line method. Finance lease liabilities are measured at amortized cost using the effective interest method.

The company has not capitalized leases with terms of twelve months or less.

As most of the company’s leases do not provide an implicit rate, the company uses its incremental borrowing rate, based on the information available at the lease commencement date, in determining the present value of lease payments. The company determines the incremental borrowing rate using the portfolio approach considering lease term and lease currency.

The lease term for all of the company’s leases includes the non-cancelable period of the lease plus any additional periods covered by either a company option to extend (or not to terminate) the lease that the company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor.

Lease payments included in the measurement of the lease liability are comprised of fixed payments, variable payments that depend on index or rate, amounts expected to be payable under a residual value guarantee and the exercise of the company option to purchase the underlying asset, if reasonably certain.

Variable lease payments associated with the company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease payments are presented as an operating expense in the company’s consolidated results of operations in the same line item as expense arising from fixed lease payments (operating leases) or amortization of the ROU asset (finance leases).

The company uses the long-lived assets impairment guidance in ASC Subtopic 360-10 Property, Plant, and Equipment to determine whether a ROU asset is impaired, and if so, the amount of the impairment loss to recognize. If impaired, ROU assets for operating and finance leases are reduced for any impairment losses.

The company monitors for events or changes in circumstances that require a reassessment of its leases. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in the consolidated statement of income (loss).

The company has commitments under operating leases for certain facilities and equipment used in its operations. The company also has finance leases for equipment. The company’s leases generally have initial lease terms ranging from 1 year to 8 years, most of which include options to extend or renew the leases for up to 5 years, and some of which may include options to terminate the leases within 1 year. Certain lease agreements contain provisions for future rent increases.

The components of lease expense are as follows:

Finance lease cost

Amortization of right-of-use assets 1.8 1.7 1.6

Interest on lease liabilities 0.1 0.2 0.3

Total finance lease cost 1.9 1.9 1.9

Short-term lease costs 0.9 1.4 0.6

Supplemental balance sheet information related to leases is as follows:

Operating Leases

Operating lease right-of-use assets $ 62.7 $ 79.3

Other accrued liabilities 35.4 37.1

Long-term operating lease liabilities 46.1 62.4

Total operating lease liabilities $ 81.5 $ 99.5

Finance Leases

Outsourcing assets, net $ 1.2 $ 2.9

Current maturities of long-term debt 1.6 2.4

Long-term debt 1.1 3.1

Total finance lease liabilities $ 2.7 $ 5.5

Weighted-Average Remaining Lease Term (in years)

Operating leases 2.7 2.3

Finance leases 1.2 2.0

Weighted-Average Discount Rate

Operating leases 6.1 % 6.4 %

Finance leases 5.5 % 5.2 %

Supplemental cash flow information related to leases is as follows:

Cash paid for amounts included in the measurement of lease liabilities:

Cash payments for finance leases included in financing activities 1.9 1.8

Cash payments for finance lease included in operating activities 0.1 0.2

ROU assets obtained in exchange for lease obligations are as follows:

Maturities of lease liabilities as of December 31, 2021 are as follows:

Year Finance Leases Operating Leases

Thereafter — —

Total lease payments 2.8 88.7

Less imputed interest 0.1 7.2

For transactions where the company is considered the lessor, revenue for operating leases is recognized on a monthly basis over the term of the lease and for sales-type leases at the inception of the lease term. These amounts were immaterial for all periods presented. As of December 31, 2021, receivables under sales-type leases before the allowance for unearned income were collectible as follows:

Year

Thereafter 0.5

Other Commitments

At December 31, 2021, the company had outstanding standby letters of credit and surety bonds totaling approximately $198 million related to performance and payment guarantees. On the basis of experience with these arrangements, the company believes that any obligations that may arise will not be material. In addition, at December 31, 2021, the company had deposits and collateral of approximately $8 million in other long-term assets, principally related to tax contingencies in Brazil.

Note 7 — Other (expense), net

Other (expense), net is comprised of the following:

Debt extinguishment charge — (28.5) (20.1)

Foreign exchange losses** (2.5) (36.2) (10.4)

Environmental costs and other, net (29.2) (29.0) (12.6)

*Includes $499.4 million of settlement losses in 2021 related to the company’s defined benefit pension plans and $142.1 million settlement loss in 2020 related to the U.S. defined benefit pension plans. See Note 18, “Employee plans.”

**Includes charges of $4.0 million and $32.3 million, respectively, in 2021 and 2020 for net foreign currency losses related to substantial completion of liquidation of foreign subsidiaries.

Note 8 — Income taxes

Following is the total loss from continuing operations before income taxes and the provision (benefit) for income taxes.

Income (loss) from continuing operations before income taxes

Provision (benefit) for income taxes

Current

Deferred

Total (benefit) provision for income taxes $ (11.9) $ 45.4 $ 27.7

Following is a reconciliation of the provision (benefit) for income taxes at the United States statutory tax rate to the provision (benefit) for income taxes as reported:

Foreign rate differential and other foreign tax expense 0.4 5.9 3.2

Permanent items (1.8) 0.8 (2.5)

Enacted rate changes (17.1) (4.0) 0.5

Change in uncertain tax positions (0.3) 3.6 0.2

Change in valuation allowances due to changes in judgment (0.8) 2.9 (2.3)

Income tax credits, U.S. — (2.1) (0.2)

(Benefit) provision for income taxes $ (11.9) $ 45.4 $ 27.7

The tax effects of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities were as follows:

Deferred tax assets

Foreign tax credit carryforwards 145.9 201.3

Other tax credit carryforwards 31.9 29.2

Employee benefits and compensation 25.8 25.3

Purchased capitalized software 24.2 24.1

Warranty, bad debts and other reserves 7.5 10.5

Capitalized costs 3.9 8.1

Total deferred tax assets $ 178.7 $ 186.5

Deferred tax liabilities

Capitalized research and development $ 43.1 $ 47.4

Total deferred tax liabilities $ 72.6 $ 77.2

During 2021, the company’s valuation allowance declined by $45.3 million principally due to the recognition of a net income tax expense of $(102.1) million including net tax benefit of $0.8 million, expired net operating losses/tax credits of $50.0 million, translation adjustments of $18.4 million and other activity of $79.0 million.

During 2020, the company’s valuation allowance declined by $253.2 million principally due to the recognition of a net income tax benefit of $189.0 million including net tax expense of $2.9 million, expired net operating losses/tax credits of $28.9 million, translation adjustments of $(20.9) million and other activity of $56.2 million.

At December 31, 2021, the company has tax effected tax loss carryforwards as follows:

State and local 203.4

Total tax loss carryforwards $ 840.4

These carryforwards will expire as follows:

Year

The company also has available tax credit carryforwards, which will expire as follows:

Year

Under U.S. tax law, distributions from foreign subsidiaries to U.S. shareholders are generally exempt from taxation. Consequently, the deferred income tax liability on undistributed earnings is generally limited to any foreign withholding or other foreign taxes that will be imposed on such distributions. As the company currently intends to indefinitely reinvest the earnings of certain foreign subsidiaries, no provision has been made for income taxes that may become payable upon distribution of the earnings of such subsidiaries. The unrecognized deferred income tax liability at December 31, 2021 approximated $28.0 million.

Cash paid for income taxes, net of refunds was as follows:

Cash paid for income taxes, net of refunds $ 53.7 $ 24.7 $ 37.6

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Additions based on tax positions related to the current year 3.5 8.5 11.1

Changes for tax positions of prior years (8.8) (0.7) (0.6)

Changes due to foreign currency (1.1) 1.6 (0.4)

The company recognizes penalties and interest accrued related to income tax liabilities in the provision for income taxes in its consolidated statements of income (loss). At December 31, 2021 and 2020, the company had an accrual of $3.8 million and $3.9 million, respectively, for the payment of penalties and interest.

At December 31, 2021, all of the company’s liability for unrecognized tax benefits, if recognized, would affect the company’s effective tax rate. Within the next 12 months, the company believes that it is reasonably possible that the amount of unrecognized tax benefits may decrease by $1.9 million related to a statute of limitation expiration; however, various events could cause this belief to change in the future.

The company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Several U.S. state and foreign income tax audits are in process. The company is under an audit in India, for which years prior to 2007 are closed. For the most significant jurisdictions outside the U.S., the audit periods through 2016 are closed

for Brazil, and the audit periods through 2017 are closed for the United Kingdom. All of the various ongoing income tax audits throughout the world are not expected to have a material impact on the company’s financial position.

Note 9 — Earnings (loss) per common share

The following table shows how earnings (loss) per common share attributable to Unisys Corporation was computed for the three years ended December 31, 2021 (shares in thousands).

Basic earnings (loss) per common share computation:

Income from discontinued operations, net of tax — 1,068.4 75.0

Net (loss) income attributable to Unisys Corporation $ (448.5) $ 750.7 $ (17.2)

Basic earnings (loss) per share attributable to Unisys Corporation

Continuing operations $ (6.75) $ (5.05) $ (1.65)

Discontinued operations — 16.98 1.34

Diluted earnings (loss) per common share computation:

Add interest expense on convertible senior notes, net of tax of zero — — —

Income from discontinued operations, net of tax — 1,068.4 75.0

Plus incremental shares from assumed conversions:

Employee stock plans — — —

Convertible senior notes — — —

Diluted earnings (loss) per common share attributable to Unisys Corporation

Continuing operations $ (6.75) $ (5.05) $ (1.65)

Discontinued operations — 16.98 1.34

(i)Amounts represent shares excluded from the computation of diluted earnings per share, as their effect, if included, would have been anti-dilutive for the periods presented.

Note 10 — Accounts receivable

Accounts receivable consist principally of trade accounts receivable from customers and are generally unsecured and due within 30 to 90 days. Credit losses relating to these receivables consistently have been within management’s expectations. Expected credit losses are recorded as an allowance for doubtful accounts in the consolidated balance sheets. Estimates of expected credit losses are based primarily on the aging of the accounts receivable balances. The company records a specific reserve for individual accounts when it becomes aware of a customer’s inability to meet its financial obligations, such as in the case of

bankruptcy filings or deterioration in the customer’s operating results or financial position. The collection policies and procedures of the company vary by credit class and prior payment history of customers.

Revenue recognized in excess of billings on services contracts, or unbilled accounts receivable, was $73.1 million and $63.3 million at December 31, 2021 and 2020, respectively.

The allowance for doubtful accounts, which is reported as a deduction from accounts receivable, was $8.0 million and $9.2 million at December 31, 2021 and 2020, respectively. The provision for doubtful accounts, which is reported in selling, general and administrative expenses in the consolidated statements of income (loss), was (income) expense of $(0.6) million, $(0.3) million and $(1.6) million, in 2021, 2020 and 2019, respectively.

Additionally, long-term receivables were $49.1 million and $84.4 million at December 31, 2021 and 2020, respectively, and are reported in other long-term assets on the company’s consolidated balance sheets.

Note 11 — Contract assets and deferred revenue

Contract assets represent rights to consideration in exchange for goods or services transferred to a customer when that right is conditional on something other than the passage of time. Deferred revenue represents contract liabilities.

Net contract assets (liabilities) are as follows:

Contract assets - current $ 42.0 $ 44.3

Contract assets - long-term(i) 17.4 20.7

Deferred revenue - current (253.2) (257.1)

Deferred revenue - long-term (150.7) (137.9)

(i)Reported in other long-term assets on the company’s consolidated balance sheets

Significant changes in the above contract liability balances were as follows:

Note 12 — Capitalized contract costs

The company’s incremental direct costs of obtaining a contract consist of sales commissions which are deferred and amortized ratably over the initial contract life. These costs are classified as current or noncurrent based on the timing of when the company expects to recognize the expense. The current and noncurrent portions of deferred commissions are included in prepaid expenses and other current assets and in other long-term assets, respectively, in the company’s consolidated balance sheets.

Deferred commissions were as follows:

Deferred commissions $ 6.7 $ 8.7

Amortization expense related to deferred commissions was as follows:

Deferred commissions - amortization expense(i) $ 2.9 $ 3.2 $ 3.1

(i)Reported in selling, general and administrative expense in the company’s consolidated statements of income (loss)

Costs on outsourcing contracts are generally expensed as incurred. However, certain costs incurred upon initiation of an outsourcing contract (costs to fulfill a contract), principally initial customer setup, are capitalized and expensed over the initial contract life. These costs are included in outsourcing assets, net in the company’s consolidated balance sheets, and are amortized over the initial contract life and reported in cost of revenue.

Costs to fulfill a contract were as follows:

UIS US Equity

UIS · 10-K · period ended 2021-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

UIS US Equity☆

UIS · 10-K · period ended 2021-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

UIS US Equity