DXC Technology Earnings 2020-12-31

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

dxc-20201231

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 December 31, 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

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

254,593,993 shares of common stock, par value $0.01 per share, were outstanding on January 29, 2021.

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 Nine Months Ended December 31, 2020 and December 31, 2019 (unaudited)			2

Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended December 31, 2020 and December 31, 2020 (unaudited)			3

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

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2020 and December 31, 2019 (unaudited)			5

Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended December 31, 2020 and December 31, 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–Divestitures			12

Note 5–Earnings (Loss) Per Share			14
Note 6–Receivables			14
Note 7–Leases			17
Note 8–Fair Value			20
Note 9–Derivative and Hedging Activities			22
Note 10–Intangible Assets			25
Note 11–Goodwill			26
Note 12–Debt			27
Note 13–Revenue			28
Note 14–Restructuring Costs			30
Note 15–Pension and Other Benefit Plans			32
Note 16–Income Taxes			34
Note 17–Stockholders' Equity			35
Note 18–Stock Incentive Plans			36
Note 19–Cash Flows			38
Note 20–Segment Information			39
Note 21–Commitments and Contingencies			42

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)


	Three Months Ended				Nine Months Ended
(in millions, except per-share amounts)	December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019

Revenues	$	4,288	$	5,021	$	13,344	$	14,762

Costs of services (excludes depreciation and amortization and restructuring costs)	3,333		3,827		10,525		11,128
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)	517		518		1,595		1,514
Depreciation and amortization	475		479		1,492		1,416
Goodwill impairment losses	—		53		—		2,940
Restructuring costs	104		74		441		248
Interest expense	82		93		284		288
Interest income	(28)		(33)		(76)		(130)
Gain on disposition of businesses	(2,046)		—		(2,046)		—
Gain on arbitration award	—		—		—		(632)
Other income, net	(127)		(117)		(318)		(344)
Total costs and expenses	2,310		4,894		11,897		16,428

Income (loss) before income taxes	1,978		127		1,447		(1,666)
Income tax expense	875		37		789		191


Net income (loss)	1,103		90		658		(1,857)
Less: net income attributable to non-controlling interest, net of tax	5		8		9		17
Net income (loss) attributable to DXC common stockholders	$	1,098	$	82	$	649	$	(1,874)

Earnings (loss) per common share:
Basic	$	4.32	$	0.32	$	2.55	$	(7.20)
Diluted	$	4.29	$	0.32	$	2.54	$	(7.20)

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

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


			Three Months Ended				Nine Months Ended
(in millions)			December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019

Net income (loss)			$	1,103	$	90	$	658	$	(1,857)

Other comprehensive income, net of taxes:
	Foreign currency translation adjustments, net of tax (1)		170		293		200		87

	Cash flow hedges adjustments, net of tax (2)		—		(8)		18		(6)
	Available-for-sale securities, net of tax (3)		(11)		—		(6)		2
	Pension and other post-retirement benefit plans, net of tax:
		Prior service cost, net of tax (4)	(1)		—		(1)		—

		Amortization of prior service cost, net of tax (5)	(2)		(2)		(12)		(6)

	Pension and other post-retirement benefit plans, net of tax		(3)		(2)		(13)		(6)
Other comprehensive income, net of taxes			156		283		199		77
Comprehensive income (loss)			1,259		373		857		(1,780)
	Less: comprehensive income attributable to non-controlling interest		6		39		12		26
Comprehensive income (loss) attributable to DXC common stockholders			$	1,253	$	334	$	845	$	(1,806)

(1) Tax benefit related to foreign currency translation adjustments was $9 and $31 for the three and nine months ended December 31, 2020, respectively, and $15 and $2 for the three and nine months ended December 31, 2019, respectively.

(2) Tax expense related to cash flow hedge adjustments was $0 and $6 for the three and nine months ended December 31, 2020, respectively. Tax benefit related to cash flow hedge adjustments was $1 and $1 for the three and nine months ended December 31, 2019, respectively.

(3) Tax benefit related to available-for-sale securities was $4 for the three and nine months ended December 31, 2020. Tax expense related to available-for-sale securities was $0 and $1 for the three and nine months ended December 31, 2019, respectively.

(4) There was no tax benefit related to prior service costs during the three and nine months ended December 31, 2020 and December 31, 2019, respectively.

(5) Tax benefit related to amortization of prior service costs was $1 and $3 for the three and nine months ended December 31, 2020, respectively, and $0 and $1 for the three and nine months ended December 31, 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)	December 31, 2020		March 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	3,919	$	3,679
Receivables and contract assets, net of allowance of $199 and $74	4,130		4,392
Prepaid expenses	586		646
Other current assets	470		270

Total current assets	9,105		8,987

Intangible assets, net of accumulated amortization of $4,545 and $4,347	4,019		5,731
Operating right-of-use assets, net	1,459		1,428
Goodwill	736		2,017
Deferred income taxes, net	315		265
Property and equipment, net of accumulated depreciation of $4,295 and $3,818	3,321		3,547
Other assets	4,679		4,031

Total Assets	$	23,634	$	26,006

LIABILITIES and EQUITY
Current liabilities:
Short-term debt and current maturities of long-term debt	$	795	$	1,276
Accounts payable	852		1,598
Accrued payroll and related costs	741		630
Current operating lease liabilities	450		482
Accrued expenses and other current liabilities	3,285		2,801
Deferred revenue and advance contract payments	1,102		1,021
Income taxes payable	1,045		87

Total current liabilities	8,270		7,895

Long-term debt, net of current maturities	5,444		8,672
Non-current deferred revenue	666		735
Non-current operating lease liabilities	1,113		1,063
Non-current income tax liabilities and deferred tax liabilities	792		1,157
Other long-term liabilities	1,354		1,355

Total Liabilities	17,639		20,877

Commitments and contingencies

DXC stockholders’ equity:
Preferred stock, par value $.01 per share, 1,000,000 shares authorized, none issued as of December 31, 2020 and March 31, 2020	—		—
Common stock, par value $.01 per share, 750,000,000 shares authorized, 256,800,719 issued as of December 31, 2020 and 255,674,040 issued as of March 31, 2020	3		3
Additional paid-in capital	10,748		10,714
Accumulated deficit	(4,533)		(5,177)
Accumulated other comprehensive loss	(407)		(603)
Treasury stock, at cost, 2,410,917 and 2,148,708 shares as of December 31, 2020 and March 31, 2020	(156)		(152)
Total DXC stockholders’ equity	5,655		4,785
Non-controlling interest in subsidiaries	340		344
Total Equity	5,995		5,129
Total Liabilities and Equity	$	23,634	$	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)


	Nine Months Ended
(in millions)	December 31, 2020		December 31, 2019
Cash flows from operating activities:
Net income (loss)	$	658	$	(1,857)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	1,506		1,429
Goodwill impairment losses	—		2,940
Operating right-of-use expense	463		506
Pension and other post-employment benefits, actuarial and settlement losses	2		—
Share-based compensation	42		57
Deferred taxes	(319)		(28)
(Gain) loss on dispositions	(2,023)		6
Provision for losses on accounts receivable	52		—
Unrealized foreign currency exchange (gain) loss	(60)		14
Impairment losses and contract write-offs	68		20



Other non-cash charges, net	(2)		(13)
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Decrease in assets	88		141


Decrease in operating lease liability	(463)		(506)
Increase (decrease) in other liabilities	392		(647)



Net cash provided by operating activities	404		2,062

Cash flows from investing activities:
Purchases of property and equipment	(215)		(240)
Payments for transition and transformation contract costs	(189)		(220)
Software purchased and developed	(209)		(178)

Payments for acquisitions, net of cash acquired	(10)		(1,997)
Business dispositions	4,942		—
Cash collections related to deferred purchase price receivable	159		513
Proceeds from sale of assets	27		55
Short-term investing	—		(75)
Other investing activities, net	(5)		20
Net cash provided by (used in) investing activities	4,500		(2,122)

Cash flows from financing activities:
Borrowings of commercial paper	854		4,010
Repayments of commercial paper	(1,327)		(3,893)
Borrowings under lines of credit	2,500		—
Repayment of borrowings under lines of credit	(4,000)		—
Borrowings on long-term debt, net of discount	993		2,198
Principal payments on long-term debt	(2,926)		(1,029)
Payments on finance leases and borrowings for asset financing	(694)		(646)



Proceeds from stock options and other common stock transactions	1		11
Taxes paid related to net share settlements of share-based compensation awards	(5)		(15)

Repurchase of common stock and advance payment for accelerated share repurchase	—		(736)
Dividend payments	(53)		(161)

Other financing activities, net	(14)		(44)
Net cash used in financing activities	(4,671)		(305)
Effect of exchange rate changes on cash and cash equivalents	20		26
Net increase (decrease) in cash and cash equivalents including cash classified within current assets held for sale	253		(339)
Less: cash classified within current assets held for sale	(13)		—
Net increase (decrease) in cash and cash equivalents	240		(339)
Cash and cash equivalents at beginning of year	3,679		2,899
Cash and cash equivalents at end of period	$	3,919	$	2,560

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 December 31, 2020
(in millions, except shares in thousands)	Common Stock			Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Loss		Treasury Stock (1)		Total DXC Equity		Non- Controlling Interest		Total Equity
	Shares	Amount
Balance at September 30, 2020	256,522	$	3	$	10,746	$	(5,631)	$	(562)	$	(155)	$	4,401	$	350	$	4,751

Net income						1,098						1,098		5		1,103
Other comprehensive income								155				155		1		156
Share-based compensation expense				1								1				1
Acquisition of treasury stock										(1)		(1)				(1)

Stock option exercises and other common stock transactions	279			1								1				1

Non-controlling interest distributions and other												—		(16)		(16)

Balance at December 31, 2020	256,801	$	3	$	10,748	$	(4,533)	$	(407)	$	(156)	$	5,655	$	340	$	5,995

	Three Months Ended December 31, 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 September 30, 2019	257,626	$	3	$	10,793	$	(1,668)	$	(428)	$	(150)	$	8,550	$	320	$	8,870
Net income						82						82		8		90
Other comprehensive income								252				252		31		283
Share-based compensation expense				6								6				6
Acquisition of treasury stock										(1)		(1)				(1)
Share repurchase program	(2,354)			(98)		12						(86)				(86)
Stock option exercises and other common stock transactions	334											—				—
Dividends declared ($0.21 per share)						(54)						(54)				(54)
Non-controlling interest distributions and other												—		(7)		(7)

Balance at December 31, 2019	255,606	$	3	$	10,701	$	(1,628)	$	(176)	$	(151)	$	8,749	$	352	$	9,101

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

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


	Nine Months Ended December 31, 2020
(in millions, except shares in thousands)	Common Stock			Additional Paid-in Capital		Retained Earnings (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 income						649						649		9		658
Other comprehensive income								196				196		3		199
Share-based compensation expense				33								33				33
Acquisition of treasury stock										(4)		(4)				(4)

Stock option exercises and other common stock transactions	1,127			1								1				1

Non-controlling interest distributions and other						(1)						(1)		(16)		(17)

Balance at December 31, 2020	256,801	$	3	$	10,748	$	(4,533)	$	(407)	$	(156)	$	5,655	$	340	$	5,995

	Nine Months Ended December 31, 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	$

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	2020-12-31	Filed 2021-02-05
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	2021-02-04	Earnings, Exhibits
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-31.1	dxc1231202010-qex311.htm
EX-31.2	dxc1231202010-qex312.htm
EX-32.1	dxc1231202010-qex321.htm
EX-32.2	dxc1231202010-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	72
3.	Defaults Upon Senior Securities	73
4.	Mine Safety Disclosure	73
5.	Other Information	73
6.	Exhibits	73

DXC 10Q Quarterly Report

DXC Technology Earnings 2020-12-31