DXC Technology Earnings 2020-09-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

dxc-20200930

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to ____________

Commission File No.: 001-38033


			DXC TECHNOLOGY COMPANY
			(Exact name of registrant as specified in its charter)

Nevada

61-1800317

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1775 Tysons Boulevard

Tysons

Virginia

22102

(Address of principal executive offices)

(Zip Code)

Registrant's telephone number, including area code: (703) 245-9675

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

DXC

New York Stock Exchange

2.750% Senior Notes Due 2025

DXC 25

New York Stock Exchange

1.750% Senior Notes Due 2026

DXC 26

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)

of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes x No

254,412,158 shares of common stock, par value $0.01 per share, were outstanding on October 30, 2020.

TABLE OF CONTENTS

PART I

ITEM 1. FINANCIAL STATEMENTS

Index to Condensed Consolidated Financial Statements



			Page
Condensed Consolidated Statements of Operations for the Three and Si x Months Ended September 30, 2020 and September 30, 2019 (unaudited)			2

Condensed Consolidated Statements of Comprehensive Loss for the Three and Si x Months Ended September 30, 2020 and September 30, 2019 (unaudited)			3

Condensed Consolidated Balance Sheets as of September 30, 2020 and March 31, 2020 (unaudited)			4

Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2020 and September 30, 2019 (unaudited)			5

Condensed Consolidated Statements of Changes in Equity for the Three and Si x Months Ended Sept ember 30, 2020 and September 30, 2019 (unaudited)			6

Notes to Condensed Consolidated Financial Statements (unaudited)
Note 1–Summary of Significant Accounting Policies			8
Note 2–Recent Accounting Pronouncements			10
Note 3–Acquisitions			11
Note 4–Assets Held for Sale			13
Note 5–Loss Per Share			14
Note 6–Receivables			14
Note 7 –Leases			17
Note 8 –Fair Value			21
Note 9 –Derivative and Hedging Activities			22
Note 10 –Intangible Assets			26
Note 1 1 –Goodwill			27
Note 1 2 –Debt			28
Note 1 3 –Revenue			29
Note 1 4 –Restructuring Costs			31
Note 1 5 –Pension and Other Benefit Plans			33
Note 1 6 –Income Taxes			34
Note 17–Stockholders' Equity			35
Note 1 8 –Stock Incentive Plans			36
Note 1 9 –Cash Flows			38
Note 20 –Segment Information			39
Note 2 1 –Commitments and Contingencies			41
Note 2 2 –Subsequent Events			47

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)


	Three Months Ended				Six Months Ended
(in millions, except per-share amounts)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019

Revenues	$	4,554	$	4,851	$	9,056	$	9,741

Costs of services (excludes depreciation and amortization and restructuring costs)	3,563		3,679		7,192		7,301
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)	539		489		1,078		996
Depreciation and amortization	525		467		1,017		937
Goodwill impairment losses	—		2,887		—		2,887
Restructuring costs	265		32		337		174
Interest expense	96		104		202		195
Interest income	(25)		(67)		(48)		(97)
Gain on arbitration award	—		(632)		—		(632)
Other income, net	(103)		(109)		(191)		(227)
Total costs and expenses	4,860		6,850		9,587		11,534

Loss before income taxes	(306)		(1,999)		(531)		(1,793)
Income tax (benefit) expense	(60)		116		(86)		154


Net loss	(246)		(2,115)		(445)		(1,947)
Less: net (loss) income attributable to non-controlling interest, net of tax	(2)		4		4		9
Net loss attributable to DXC common stockholders	$	(244)	$	(2,119)	$	(449)	$	(1,956)

Loss per common share:
Basic	$	(0.96)	$	(8.19)	$	(1.77)	$	(7.44)
Diluted	$	(0.96)	$	(8.19)	$	(1.77)	$	(7.44)

The accompanying notes are an integral part of these condensed consolidated financial statements.

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited)


			Three Months Ended				Six Months Ended
(in millions)			September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019

Net loss			$	(246)	$	(2,115)	$	(445)	$	(1,947)

Other comprehensive loss, net of taxes:
	Foreign currency translation adjustments, net of tax (1)		33		(71)		30		(206)

	Cash flow hedges adjustments, net of tax (2)		7		(2)		18		2
	Available-for-sale securities, net of tax (3)		1		1		5		2
	Pension and other post-retirement benefit plans, net of tax:


		Amortization of prior service cost, net of tax (4)	(1)		(3)		(10)		(4)

	Pension and other post-retirement benefit plans, net of tax		(1)		(3)		(10)		(4)
Other comprehensive income (loss), net of taxes			40		(75)		43		(206)
Comprehensive loss			(206)		(2,190)		(402)		(2,153)
	Less: comprehensive income (loss) attributable to non-controlling interest		1		6		6		(13)
Comprehensive loss attributable to DXC common stockholders			$	(207)	$	(2,196)	$	(408)	$	(2,140)

(1) Tax (benefit) expense related to foreign currency translation adjustments was $(15) and $(22) for the three and six months ended September 30, 2020, respectively, and $25 and $13 for the three and six months ended September 30, 2019, respectively.

(2) Tax expense related to cash flow hedge adjustments was $3 and $6 for the three and six months ended September 30, 2020, respectively. There was no tax expense related to cash flow hedge adjustments during the three and six months ended September 30, 2019.

(3) There was no tax expense related to available-for-sale securities during the three and six months ended September 30, 2020. Tax expense related to available-for-sale securities was $0 and $1 for the three and six months ended September 30, 2019, respectively.

(4) Tax benefit related to amortization of prior service costs was $1 and $2 for the three and six months ended September 30, 2020, respectively, and $1 and $1 for the three and six months ended September 30, 2019, respectively.

The accompanying notes are an integral part of these condensed consolidated financial statements.

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)


	As of
(in millions, except per-share and share amounts)	September 30, 2020		March 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	3,079	$	3,679
Receivables and contract assets, net of allowance of $162 and $74	4,194		4,392
Prepaid expenses	604		646
Other current assets	335		270
Assets held for sale	125		—
Total current assets	8,337		8,987

Intangible assets, net of accumulated amortization of $4,364 and $4,347	4,146		5,731
Operating right-of-use assets, net	1,555		1,428
Goodwill	725		2,017
Deferred income taxes, net	292		265
Property and equipment, net of accumulated depreciation of $4,198 and $3,818	3,417		3,547
Other assets	4,360		4,031
Assets held for sale - non-current	2,838		—
Total Assets	$	25,670	$	26,006

LIABILITIES and EQUITY
Current liabilities:
Short-term debt and current maturities of long-term debt	$	1,622	$	1,276
Accounts payable	1,345		1,598
Accrued payroll and related costs	756		630
Current operating lease liabilities	461		482
Accrued expenses and other current liabilities	3,203		2,801
Deferred revenue and advance contract payments	974		1,021
Income taxes payable	111		87
Liabilities related to assets held for sale	184		—
Total current liabilities	8,656		7,895

Long-term debt, net of current maturities	8,046		8,672
Non-current deferred revenue	697		735
Non-current operating lease liabilities	1,192		1,063
Non-current income tax liabilities and deferred tax liabilities	917		1,157
Other long-term liabilities	1,325		1,355
Liabilities related to assets held for sale - non-current	86		—
Total Liabilities	20,919		20,877

Commitments and contingencies

DXC stockholders’ equity:
Preferred stock, par value $.01 per share, 1,000,000 shares authorized, none issued as of September 30, 2020 and March 31, 2020	—		—
Common stock, par value $.01 per share, 750,000,000 shares authorized, 256,521,547 issued as of September 30, 2020 and 255,674,040 issued as of March 31, 2020	3		3
Additional paid-in capital	10,746		10,714
Accumulated deficit	(5,631)		(5,177)
Accumulated other comprehensive loss	(562)		(603)
Treasury stock, at cost, 2,327,868 and 2,148,708 shares as of September 30, 2020 and March 31, 2020	(155)		(152)
Total DXC stockholders’ equity	4,401		4,785
Non-controlling interest in subsidiaries	350		344
Total Equity	4,751		5,129
Total Liabilities and Equity	$	25,670	$	26,006

The accompanying notes are an integral part of these condensed consolidated financial statements.

DXC TECHNOLOGY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)


	Six Months Ended
(in millions)	September 30, 2020		September 30, 2019
Cash flows from operating activities:
Net loss	$	(445)	$	(1,947)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	1,025		946
Goodwill impairment losses	—		2,887
Operating right-of-use expense	307		340
Pension & other post-employment benefits, actuarial & settlement losses	2		—
Share-based compensation	36		48

Loss (gain) on dispositions	14		(4)
Provision for losses on accounts receivable	45		—
Unrealized foreign currency exchange gain	(43)		(50)
Impairment losses and contract write-offs	42		11



Other non-cash charges, net	(5)		(9)
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Decrease in assets	57		167


Decrease in operating lease liability	(307)		(340)
Decrease in other liabilities	(137)		(464)



Net cash provided by operating activities	591		1,585

Cash flows from investing activities:
Purchases of property and equipment	(156)		(192)
Payments for transition and transformation contract costs	(136)		(158)
Software purchased and developed	(102)		(126)

Payments for acquisitions, net of cash acquired	(10)		(1,921)

Cash collections related to deferred purchase price receivable	159		371
Proceeds from sale of assets	8		40
Short-term investing	—		(75)
Other investing activities, net	3		14
Net cash used in investing activities	(234)		(2,047)

Cash flows from financing activities:
Borrowings of commercial paper	830		2,879
Repayments of commercial paper	(508)		(2,866)
Borrowings under lines of credit	2,500		—
Repayment of borrowings under lines of credit	(2,750)		—
Borrowings on long-term debt, net of discount	993		2,198
Principal payments on long-term debt	(1,476)		(519)
Payments on finance leases and borrowings for asset financing	(487)		(421)



Proceeds from stock options and other common stock transactions	—		10
Taxes paid related to net share settlements of share-based compensation awards	(3)		(12)

Repurchase of common stock and advance payment for accelerated share repurchase	—		(650)
Dividend payments	(53)		(107)

Other financing activities, net	(9)		(32)
Net cash (used in) provided by financing activities	(963)		480
Effect of exchange rate changes on cash and cash equivalents	9		(37)
Net decrease in cash and cash equivalents including cash classified within current assets held for sale	(597)		(19)
Less: cash classified within current assets held for sale	(3)		—
Net decrease in cash and cash equivalents	(600)		(19)
Cash and cash equivalents at beginning of year	3,679		2,899
Cash and cash equivalents at end of period	$	3,079	$	2,880

The accompanying notes are an integral part of these condensed consolidated financial statements.

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)


	Three Months Ended September 30, 2020
(in millions, except shares in thousands)	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Treasury Stock (1)		Total DXC Equity		Non- Controlling Interest		Total Equity
	Shares	Amount
Balance at June 30, 2020	256,383	$	3	$	10,729	$	(5,386)	$	(599)	$	(154)	$	4,593	$	349	$	4,942

Net loss						(244)						(244)		(2)		(246)
Other comprehensive income								37				37		3		40
Share-based compensation expense				17								17				17
Acquisition of treasury stock										(1)		(1)				(1)

Stock option exercises and other common stock transactions	139											—				—

Non-controlling interest distributions and other						(1)						(1)				(1)

Balance at September 30, 2020	256,522	$	3	$	10,746	$	(5,631)	$	(562)	$	(155)	$	4,401	$	350	$	4,751

	Three Months Ended September 30, 2019
(in millions, except shares in thousands)	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total DXC Equity		Non- Controlling Interest		Total Equity
	Shares	Amount
Balance at June 30, 2019	263,709	$	3	$	10,916	$	494	$	(351)	$	(149)	$	10,913	$	304	$	11,217
Net loss						(2,119)						(2,119)		4		(2,115)
Other comprehensive loss								(77)				(77)		2		(75)
Share-based compensation expense				31								31				31
Acquisition of treasury stock										(1)		(1)				(1)
Share repurchase program	(6,220)			(161)		11						(150)				(150)
Stock option exercises and other common stock transactions	137			7								7				7
Dividends declared ($0.21 per share)						(54)						(54)				(54)
Non-controlling interest distributions and other												—		10		10

Balance at September 30, 2019	257,626	$	3	$	10,793	$	(1,668)	$	(428)	$	(150)	$	8,550	$	320	$	8,870

The accompanying notes are an integral part of these condensed consolidated financial statements.

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)


	Six Months Ended September 30, 2020
(in millions, except shares in thousands)	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Treasury Stock (1)		Total DXC Equity		Non- Controlling Interest		Total Equity
	Shares	Amount
Balance at March 31, 2020	255,674	$	3	$	10,714	$	(5,177)	$	(603)	$	(152)	$	4,785	$	344	$	5,129
Cumulative effect of adopting ASU 2016-13						(4)						(4)				(4)
Net loss						(449)						(449)		4		(445)
Other comprehensive income								41				41		2		43
Share-based compensation expense				32								32				32
Acquisition of treasury stock										(3)		(3)				(3)

Stock option exercises and other common stock transactions	848											—				—

Non-controlling interest distributions and other						(1)						(1)				(1)

Balance at September 30, 2020	256,522	$	3	$	10,746	$	(5,631)	$	(562)	$	(155)	$	4,401	$	350	$	4,751

	Six Months Ended September 30, 2019
(in millions, except shares in thousands)	Common Stock			Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Loss		Treasury Stock		Total DXC Equity		Non- Controlling Interest		Total Equity
	Shares	Amount
Balance at March 31, 2019	270,214	$	3	$	11,301

Price	32.04	EPS	-5
Shares	263	P/E	-7
MCap	8,421	P/FCF	4
Net Debt	5,602	EBIT	-607
TEV	14,023	TEV/EBIT	-23
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-09-30	Filed 2020-11-06
10-Q	2020-06-30	Filed 2020-08-07
10-K	2020-03-31	Filed 2020-06-01
10-Q	2019-12-31	Filed 2020-02-07
10-Q	2019-09-30	Filed 2019-11-12
10-Q	2019-06-30	Filed 2019-08-09
10-K	2019-03-31	Filed 2019-06-13
10-Q	2018-12-31	Filed 2019-02-08
10-Q	2018-09-30	Filed 2018-11-08
10-Q	2018-06-30	Filed 2018-08-08
10-K	2018-03-31	Filed 2018-05-29
10-Q	2017-12-31	Filed 2018-02-09
10-Q	2017-09-30	Filed 2017-11-08
10-Q	2017-06-30	Filed 2017-08-09
10-Q	2017-01-31	Filed 2017-03-31

8-K	2020-11-07
8-K	2020-11-05
8-K	2020-10-01
8-K	2020-09-24
8-K	2020-09-16
8-K	2020-08-13
8-K	2020-08-06
8-K	2020-07-20
8-K	2020-07-05
8-K	2020-05-28
8-K	2020-04-21
8-K	2020-04-14
8-K	2020-04-01
8-K	2020-03-24
8-K	2020-03-09
8-K	2020-02-06
8-K	2020-02-05
8-K	2019-12-18
8-K	2019-11-11
8-K	2019-09-11
8-K	2019-08-15
8-K	2019-08-15
8-K	2019-08-08
8-K	2019-06-14
8-K	2019-06-14
8-K	2019-05-23
8-K	2019-05-23
8-K	2019-03-15
8-K	2019-02-07
8-K	2019-01-06
8-K	2018-11-27
8-K	2018-11-08
8-K	2018-11-06
8-K	2018-10-24
8-K	2018-10-24
8-K	2018-10-12
8-K	2018-09-26
8-K	2018-09-24
8-K	2018-09-19
8-K	2018-08-22
8-K	2018-08-16
8-K	2018-08-15
8-K	2018-08-07
8-K	2018-07-17
8-K	2018-05-31
8-K	2018-05-24
8-K	2018-05-11
8-K	2018-03-15
8-K	2018-03-15
8-K	2018-03-07
8-K	2018-02-08
8-K	2018-01-22

EX-10.1	dxc930202010qex101.htm
EX-10.2	dxc930202010-qex102.htm
EX-10.3	dxc930202010-qex103.htm
EX-31.1	dxc930202010-qex311.htm
EX-31.2	dxc930202010-qex312.htm
EX-32.1	dxc930202010-qex321.htm
EX-32.,2	dxc930202010-qex322.htm


Item		Page
	PART I - FINANCIAL INFORMATION

1.	Financial Statements (unaudited)	1
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	50
3.	Quantitative and Qualitative Disclosures About Market Risk	69
4.	Controls and Procedures	69

	PART II - OTHER INFORMATION

1.	Legal Proceedings	72
1A.	Risk Factors	72
2.	Unregistered Sales of Equity Securities and Use of Proceeds	73
3.	Defaults Upon Senior Securities	74
4.	Mine Safety Disclosure	74
5.	Other Information	74
6.	Exhibits	74

DXC 10Q Quarterly Report

DXC Technology Earnings 2020-09-30