Good day, everyone, and welcome to the Unisys Fourth Quarter and Full Year 2011 Results Conference Call. At this time, I'd like to turn the conference over to Mr. Niels Christensen, Vice President, Investor Relations. Please go ahead, sir.

Thank you, operator. Good afternoon, everyone, and thank you for joining us. Earlier today, Unisys released its fourth quarter and full year 2011 financial results. With us this afternoon to discuss our results are Ed Coleman, our CEO; and Janet Haugen, our CFO. Before we begin, I want to cover a few housekeeping details. First, today's conference call and the Q&A session are being webcast via the Unisys investor website. Second, you can find the earnings press release and the presentation slides that we will be using this afternoon to guide our discussion on our investor website. These materials are available for viewing, as well as downloading and printing. Third, today's presentation, which is complementary to the earnings press release, includes non-GAAP financial measures. These have been provided in an effort to give investors additional information. The non-GAAP measures have been reconciled to the related GAAP measures, and we've provided reconciliation charts at the end of the presentation. Finally, I'd like to remind you that all forward-looking statements made during this conference call are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. These factors are discussed more fully in the earnings release and in the company's SEC filings. Copies of these SEC reports are available from the SEC and from the Unisys investor website. And now I'd like to turn the call over to Ed.

Thanks, Niels. Hello, everyone. Thank you for joining us today to discuss our fourth quarter and full year 2011 financial results. We made continued progress towards our financial and strategic goals during the year despite softness in our U.S. Federal business. I'm pleased with the work we're doing and the progress we're making in enhancing the company's financial profile. In 2011, we completed our third consecutive year of profitability and positive free cash flow, an important milestone for the company. Turning to Page 4. A little over a year ago, we outlined our 3-year financial goals for Unisys, building on the company's more streamlined, cost-competitive business foundation. Our overall financial objective is to be a company that is consistently and predictably profitable and known for our financial strength. Specifically, we want to: grow our IT outsourcing and systems integration revenue at market rates, adjusted for the loss of the TSA business, while maintaining stable revenue in our Technology business, particularly within our flagship ClearPath business; consistently achieve an 8% to 10% services operating profit margin;, improve our annual pretax profit to $350 million in 2013, excluding any change in pension income or expense from 2010 levels; and reduce our outstanding debt by 75% or $625 million from September 30, 2010 levels. In the first year of executing on this plan, we've made tangible progress towards these financial objectives. In terms of our top line goals, while the decline in our important U.S. Federal business had a negative impact on our overall revenue growth in 2011, we were encouraged by growth in other revenue focus areas. Outside the U.S. Federal market, we grew our IT outsourcing revenue by 9% in 2011, our second consecutive year of growth in this business. Our non-Federal systems integration revenue, while essentially flat in 2011 following…

Thanks, Ed, and hello, everyone. We closed out 2011 with good services orders, continued progress against our top line goals led by revenue growth from IT outsourcing and systems integration outside of our U.S. Federal business, stable ClearPath revenues and a solid cash flow performance. We made continued progress in reducing our debt and are extending that progress into 2012. This afternoon, I will provide more details on our fourth quarter results, as well as more details on our full year 2011 results. I will also update you on capital and pension funding expectations for 2012. To start our financial review, please turn to Page 9 for an overview of the services orders trends in the quarter. Services orders rose by low double digits year-over-year and represented our highest quarterly orders in 2 years. This increase was primarily attributable to higher orders in ITO and systems integration. In terms of geographic trends, we saw services order growth in North America and Latin America. And within North America, we saw order growth in our U.S. Federal business. Orders were flat in Europe and down in Asia-Pacific. Internationally, our service orders were flat on a constant-currency basis. Services orders grew by low double digits in all of our industry verticals. We closed 2011 with $5.5 billion in services backlog, which was up about 4% sequentially from September 30, and down 4% from December 31, 2010. Currency had about 1% negative impact on the year-over-year comparison. Approximately $680 million of the December 31, 2011 services backlog is anticipated to convert into first quarter 2012 services revenue. Over the past 12 quarters, we have typically had between 86% to 93% of our quarterly services revenue in our opening backlog. The balance of our services revenue comes from sell and bill business during the quarter.…

Thanks, Janet, very much. Operator, we'd like to open the call up to questions if we may.

[Operator Instructions] We'll take our first question from Eric Boyer with Wells Fargo.

For your 2013 pretax profit goal, I know you talked about -- excluded any change in the pension expense, but if we were to include that, would that be around $280 million now, am I thinking about that right?

I'm sorry, Eric, I was on mute. So for the $350 million target. You're right, it's without the pension expense difference from 2010. So that's roughly -- you would need to adjust that for the fourth quarter 2012 -- I'm sorry, you would need to adjust it for the 2012 pension expense, which I discussed earlier in the call.

Which will be $70 million difference, right? From what you were expecting before?

Right.

Okay. And then just -- at -- on a high level, can you talk about how we should be thinking about services revenue in 2012? Specifically the Federal piece of business? Because that seems like it's the wildcard as far as whether or not it's going to bottom or not?

Yes. Eric, again, we think overall, our objective is to continue to grow the IT outsourcing part of our business at market rates, which we think is for better, which we think is in the mid- to single-digits, same thing with systems integration. And our goal is to offset any uncertainty or challenges in the Federal business on the commercial side of the house. So we're not coming off of our overall goals.

Okay. And then, Janet, did you say -- what did you say as for the backlog is expected to convert into services revenue for 2012? $2 billion or...?

Eric, I'm sorry, that broke up. Did you ask the question about what the conversion rate is on the services backlog for the full year?

Yes, for the full year, what you were expecting.

We haven't given any particular guidance on that, other than if you look historically, that's been anywhere between 60% to 70%. It does have a wild swing on that. A lot of that's driven by how the federal government is funding projects. What I said on the call earlier was that we have $2.25 billion of backlog that we expect to convert into 2012 services revenue and that does represent about 41% of our overall backlog. But if you look historically, we've been between the 60% and 70% conversion rate.

And next we'll move on to James Friedman with Susquehanna Financial.

With regard to the public sector. I was wondering, Ed, if you have might have a Plan B at this point. In the instance that public sector doesn't come back, what can you do in terms of, say, utilization rates or other defensive measures that you can take to protect the business?

Yes. Since -- a couple of comments. One, I think you're talking specifically about U.S. Federal, because the public sector business worldwide is a different story. So I don't want to color all our public sector with the challenges in U.S. Federal business. I think we recognize that we need to be agile and adept at looking at opportunities in Federal and taking the necessary actions on the cost side and expense side to keep that in balance with what we see as the opportunities in the Federal business. That being said, we're not being defensive about the Federal business. Since we think that there's still a lot of opportunity there. We've had some good successes there in 2011 in spite of some of the overall challenges. And we're working hard to build that pipeline and go after those opportunities. But again, to your point, we're being careful about making sure that we have plans in place to share resources across all of the business in order to protect utilization rates and billability rates and the like.

Okay. And then with regards to the 26% refresh in the sales force. If you could share with us, what is the profile of the people that you're recruiting? Where are you getting them from, and how do you measure their effectiveness relative to their corporate goals?

So the second part of the question is pretty straightforward. They get quotas like everybody else and we measure them against their success in achieving those quotas and bringing in business. In terms of what we're looking for, are people that are experienced in selling complex solutions to clients across the whole bandwidth of IT services and solutions. People that understand the disruptive trends in IT. People that have good consultative selling skills. People that have strong beliefs and opinions about where the industry is going. And people that have a strong curiosity, not only about our industry, but also about the customers that they're dealing with. So I think you find those in lots of the IT services companies, as well as technology and software companies.

Last thing. I think you said in the public forum you had recently that some of the technology innovation in ClearPath has made the sales cycles less episodic or regular. What are some of the innovations you've referred to for 2012 that can keep ClearPath steady?

I think there's been a lot that we've announced of late in terms of how we make that a more open platform capable of operating in a service-oriented architecture environment more effectively than it could in the past. The ability to support Java, the ability to support Microsoft, things like secure partitioning, which is the enterprise virtualization that I was referring to, which allows it to become a more open platform but without jeopardizing any of the reliability and security attributes, which have been at the core of ClearPath appeal to our customers for running mission-critical workloads. So that's a continuing effort. We have a program underway now that we call ClearPath Forward, which is about how we're taking that technology into the future and continuing to make it ever more open so that it can be more attractive for additional workloads and additional environments. So we're very excited about where we're headed with that.

And we'll move next to Ned Davis with William Smith & Company. Ned Davis - Wm Smith & Co.: I wanted to drill down a little bit on the pension fund situation -- I mean, the pension liability situation. Have you changed your performance targets that are implicit in the evaluation formula or the viability formula?

Yes. As you can see on the chart, Ned, we have reduced the anticipated earnings assumption from 8.75% to 8%. That does reflect -- during the course of the 2011, we shifted about 5% of the pension assets from equity into fixed income. And that is one of the drivers for the change in the assumption rate change from 8.75% to 8%. Ned Davis - Wm Smith & Co.: Supposing, hypothetically, that the discount rate stays the same for the next 2 years, and the fed has guided for not too much of an increase in the U.S. interest rate. So let's make that assumption for the moment in taking your new performance guidance. Will you be funding well over $100 million for the next -- beyond 2012 if that assumption were told true? Would you actually hit your performance objectives, but the discount rate remains where it is today, will you -- because you're on a 15-year, I believe, sort of funding cycle?

That's for the U.S. Ned Davis - Wm Smith & Co.: Right.

And so given that, that we are on that amortization cycle, assuming that the discount rate would remain at this level and that asset returns are at the 8% range, we would be expecting to fund at this level going forward, at least in the near term. Ned Davis - Wm Smith & Co.: For the domestic. And then what about the international?

The international has historically stayed in the kind of $85 million to $100 million range over the past number of years. Currency may swing that up or down. We would expect that the funding levels to be about that same going forward. Included in the estimate is an increase from $83 million for those plans in 2011, to about $100 million in 2012. Ned Davis - Wm Smith & Co.: And then, finally, kind of relating to the overall capital situation, can you give us any kind of sense of when the company might start buying back common stock given your liquidity situation?

We have no current plans to buy back stock and we will continue to evaluate that as market and other conditions change over time.

And we'll move next to David Smith with Citi.

I guess I'll ask something different on the capital structure. You are replacing a bunch of your high-cost debt and I'm just curious how you consider the debt markets this time, and potentially doing a refinancing to get down to the target level that you would like to be at?

David, we -- I don't want to speculate as to what our future plans would be. We obviously, want to continue to make the progress to reduce our goal to hit our 2013 target. As I've said previously, all of our debt is callable in 2012. And we do believe that it's at a higher coupon rate than what we might experience if we went to the market now. But market is not investment grade, it can be fickle over time and change. And so we don't want to leave out any option. We will look -- continue to look at ways to reduce the outstanding debt to hit the target and as well reduce the interest expense on that. And if over time, that includes refinancing based upon market opportunities, we will consider that.

Next we'll move to Arvin Malik [ph] with KMS Investments [ph] .

Yes. As shareholders, we're very heartened to see the operational turnaround progressing so well. First I want to applaud the management team for that. It's clear that the market simply has not grasped what you've accomplished here. Unisys stock is still extremely undervalued at just 3x pretax profit and even quite cheap given the pension overhang, which of course is artificially affected by interest rate factors of -- that you've already discussed. And on top, the assets as through the NOLs that you guys have. So a couple of questions. When will your discussions with the investment community finally focus more on valuation? It seems that much of the discussion that takes place is about the product offerings and so it seems that you're not well understood by the investors who follow you and so it seems that it's high time to focus much more on valuation of the moving parts given the wonderful progress that has been made on the operational turnaround, that's one question. The second one is, given how undervalued Unisys shares are, it can -- there be something that you would do to exploit this cheapness, the allusion was made earlier to share buybacks and I wish there was going to be a bit more buyer response, given the strengthened balance sheet and simply how undervalued the shares may be, given the benefit that could provide shareholders. I wish you could -- probably more on [indiscernible]

Arvin, thank you for your comments and management does appreciate the recognition that you have given with regard to the turnaround. We do believe that our investor community message has been addressing one of the top remaining questions is about when are we going to be able to be at consistent revenue growth. That has been a very key question that we get from investors and potential investors on a regular basis. And we want to make sure that we are commenting on the improvements that we are making that all around strengthening the financial condition of the company. As we go forward, we obviously will adjust the message based upon the type of questions and other items we get from investors, as well as making sure that we are communicating as clearly as possible the methods and ways we are working towards enhancing shareholder value. With regard to the comment whether I would expand on the comment that I made earlier that we have no current plans for share -- buyback of shares. I will comment that we were seeing as we turn through -- into 2012 a significant change in the funding into our pension plan. You mentioned earlier that, that is an overhang and that is something that we want to see how that plays out. That has been a significant change for us from a cash expenditure as we look at 2012 compared to where we would have been looking at 2012 entering into 2011. So we do appreciate the comments and support. We appreciate your suggestions and advice. And rest assured that the focus of the management team is about enhancing shareholder value. We will continue to work on doing that and we will continue to expand and adjust the investor message to address the issues to have a greater understanding of the value that we are creating.

[Operator Instructions] We'll move to Jeff Dancey with Cutler Capital Management.

Just have a question for some clarification on the continued funding requirements for the pension plans. I believe you said it was going to be about this level. So potentially $240 million for the next few years, is that about right?

Jeff, what I said was the question that Ned had asked me is that if the discount rate remained the same, and given the fact in the U.S. based upon the regulations and the funding levels, given that we're in a 15-year amortization approach to have the funding level determined, I said we would expect to see the significant funding into those plans as we've seen in the change from '11 to '12. Obviously, cannot give the exact amount of funding levels because it does have a lot of variables in it. It depends upon where market returns are as we go forward in 2012 and beyond. It depends upon where interest rates are. And it also depends upon whether there's any type of regulatory change with regard to funding. But with the comments that I did make was in relation to Ned's comment with this funding level, we expect it to continue going forward. It may not be the exact funding level, but it is funding that's more in line with the significant change we see in 2012 than compared to the funding levels we saw in 2011 and earlier.

Sure. And so assuming that plan assets do grow at this expected rate, I'm trying to gain a sense how many years it may take at these elevated levels before we see a decrease in that -- in the contribution. Can you give me any more clarification on that?

Jeff, we do not want to speculate as to what the future funding levels are going to be, because of the significance that change in assumptions and changing the returns can make to those funding levels.

We'll take our final question from Bill Smith with William Smith & Company.

Ed and Janet, just a couple of things. One, congratulations on the significant improvement that you've made operationally. And also, just thinking about where you were 3 years ago on the balance sheet and to come today where you have over $7 or something close to that in net cash per share, I think is a pretty significant accomplishment. And also, looking at your free cash flow number, which is almost $4 a share in free cash flow. So I think just operationally and from a balance sheet perspective, those are pretty significant accomplishments over a 3-year period. My question, Ed, is could you comment on the double-digit order growth that you had in the fourth quarter on the services side. And I think on both the systems integration and on the ITO business, could you comment on that on what's driving the business, and if you think that has sustainability going forward?

So, thanks, Bill, very much. It is a good quarter for orders, and a lot of these projects that we work on, both on the SI side and the IT outsourcing side, are relatively long sale cycles. So sometimes, they we move from quarter-to-quarter in ways that you don't necessarily predict. But, yes, it was a very good quarter. I think that's probably the best services order quarter growth we've seen in a couple of years. So we're very pleased with it. Again, I think, we've got good momentum with our offerings in the solutions that we're bringing to the marketplace, and I think we saw it in terms of those orders in Q4. Our job is to keep it going. And again, our goal is to be more consistent and predictable and I appreciate the comments about the progress that we've made, and we're pleased and proud of it as well, to recognize that we have more to do.

That does conclude our question-and-answer session. At this time, I'll turn the call back over to our speakers for any final or additional comments.

Well, great. Let me just say thank you to each and every one of you for joining the call today, for your active participation. We are well into 2012 and look forward to speaking with you again at our next earnings call. Thank you very much.

That does conclude our conference call for today, everyone. We do thank you for your participation.