DXC Technology Earnings 2019-12-31

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

Document

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, 2019



☐	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 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	x	Accelerated Filer	o

Non-accelerated Filer	o	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

253,720,624 shares of common stock, par value $0.01 per share, were outstanding on January 31, 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 Nine Months Ended December 31, 2019 and December 31, 2018 (unaudited)	2

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended December 31, 2019 and December 31, 2018 (unaudited)	3

Condensed Consolidated Balance Sheets as of December 31, 2019 and March 31, 2019 (unaudited)	4

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2019 and December 31, 2018 (unaudited)	5

Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended December 31, 2019 and December 31, 2018 (unaudited)	6

Notes to Consolidated Financial Statements (unaudited)
Note 1–Summary of Significant Accounting Policies	8
Note 2–Recent Accounting Pronouncements	12
Note 3–Acquisitions	14
Note 4–Divestitures	17
Note 5–Earnings Per Share	19
Note 6–Sale of Receivables	20
Note 7–Leases	22
Note 8–Fair Value	25
Note 9–Derivative and Hedging Activities	27
Note 10–Intangible Assets	30
Note 11–Goodwill	31
Note 12–Debt	32
Note 13–Revenue	33
Note 14–Restructuring Costs	34
Note 15–Pension and Other Benefit Plans	37
Note 16–Income Taxes	38
Note 17–Stockholders' Equity	39
Note 18–Stock Incentive Plans	41
Note 19–Cash Flows	43
Note 20–Segment Information	44
Note 21–Commitments and Contingencies	47

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)



	Three Months Ended						Nine Months Ended
(in millions, except per-share amounts)	December 31, 2019			December 31, 2018			December 31, 2019			December 31, 2018

Revenues	$	5,021		$	5,178		$	14,762		$	15,473

Costs of services (excludes depreciation and amortization and restructuring costs)	3,827			3,725			11,128			11,110
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)	518			491			1,514			1,500
Depreciation and amortization	479			508			1,416			1,463
Goodwill impairment losses	53			—			2,940			—
Restructuring costs	74			76			248			418
Interest expense	93			81			288			249
Interest income	(33		)	(27		)	(130		)	(92		)
Gain on arbitration award	—			—			(632		)	—
Other income, net	(117		)	(145		)	(344		)	(336		)
Total costs and expenses	4,894			4,709			16,428			14,312

Income (loss) from continuing operations before income taxes	127			469			(1,666		)	1,161
Income tax expense	37			3			191			205
Income (loss) from continuing operations	90			466			(1,857		)	956
Income from discontinued operations, net of taxes	—			—			—			35
Net income (loss)	90			466			(1,857		)	991
Less: net income attributable to non-controlling interest, net of tax	8			4			17			8
Net income (loss) attributable to DXC common stockholders	$	82		$	462		$	(1,874	)	$	983

Income (loss) per common share:
Basic:
Continuing operations	$	0.32		$	1.68		$	(7.20	)	$	3.38
Discontinued operations	—			—			—			0.12
	$	0.32		$	1.68		$	(7.20	)	$	3.50
Diluted:
Continuing operations	$	0.32		$	1.66		$	(7.20	)	$	3.33
Discontinued operations	—			—			—			0.12
	$	0.32		$	1.66		$	(7.20	)	$	3.45

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, 2019			December 31, 2018			December 31, 2019			December 31, 2018

Net income (loss)			$	90		$	466		$	(1,857	)	$	991
Other comprehensive income (loss), net of taxes:
	Foreign currency translation adjustments, net of tax ⁽¹⁾		293			(64		)	87			(472		)
	Cash flow hedges adjustments, net of tax ⁽²⁾		(8		)	14			(6		)	(16		)
	Available-for-sale securities, net of tax ⁽³⁾		—			—			2			(1		)
	Pension and other post-retirement benefit plans, net of tax:
		Prior service cost, net of tax ⁽⁴⁾	—			(23		)	—			(23		)
		Amortization of prior service cost, net of tax ⁽⁵⁾	(2		)	(4		)	(6		)	(10		)
	Pension and other post-retirement benefit plans, net of tax		(2		)	(27		)	(6		)	(33		)
Other comprehensive income (loss), net of taxes			283			(77		)	77			(522		)
Comprehensive income (loss)			373			389			(1,780		)	469
	Less: comprehensive income attributable to non-controlling interest		39			9			26			8
Comprehensive income (loss) attributable to DXC common stockholders			$	334		$	380		$	(1,806	)	$	461

⁽¹⁾ Tax benefit related to foreign currency translation adjustments was $15 and $2 for the three and nine months ended December 31, 2019, respectively. There was no tax expense related to foreign currency translation adjustments during the three and nine months ended December 31, 2018.

⁽²⁾ Tax (benefit) expense related to cash flow hedge adjustments was $(1) and $(1) for the three and nine months ended December 31, 2019, respectively, and $5 and $(5) for the three and nine months ended December 31, 2018, respectively.

⁽³⁾ Tax expense related to available-for-sale securities was $0 and $1 for the three and nine months ended December 31, 2019, respectively. There was no tax expense related to available-for-sale securities during the three and nine months ended December 31, 2018.

⁽⁴⁾There was no tax benefit related to prior service costs during the three and nine months ended December 31, 2019. Tax benefit related to prior service costs was $5 and $5 for the three and nine months ended December 31, 2018, respectively.

⁽⁵⁾ Tax benefit related to amortization of prior service costs was $0 and $1 for the three and nine months ended December 31, 2019, respectively, and $0 and $1 for the three and nine months ended December 31, 2018, 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, 2019			March 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	2,560		$	2,899
Receivables and contract assets, net of allowance for doubtful accounts of $76 and $60	4,619			5,181
Prepaid expenses	660			627
Other current assets	344			359
Total current assets	8,183			9,066

Intangible assets, net of accumulated amortization of $4,262 and $3,399	6,140			5,939
Operating right-of-use assets, net	1,484			—
Goodwill	6,003			7,606
Deferred income taxes, net	372			355
Property and equipment, net of accumulated depreciation of $4,317 and $3,958	3,631			3,179
Other assets	3,786			3,429
Total Assets	$	29,599		$	29,574

LIABILITIES and EQUITY
Current liabilities:
Short-term debt and current maturities of long-term debt	1,581			1,942
Accounts payable	1,576			1,666
Accrued payroll and related costs	678			652
Current operating lease liabilities	498			—
Accrued expenses and other current liabilities	3,139			3,355
Deferred revenue and advance contract payments	1,069			1,630
Income taxes payable	243			208
Total current liabilities	8,784			9,453

Long-term debt, net of current maturities	7,315			5,470
Non-current deferred revenue	747			256
Non-current operating lease liabilities	1,097			—
Non-current income tax liabilities and deferred tax liabilities	1,189			1,184
Other long-term liabilities	1,366			1,486
Total Liabilities	20,498			17,849

Commitments and contingencies

DXC stockholders’ equity:
Preferred stock, par value $.01 per share, 1,000,000 shares authorized, none issued as of December 31, 2019 and March 31, 2019	—			—
Common stock, par value $.01 per share, 750,000,000 shares authorized, 255,605,750 issued as of December 31, 2019 and 270,213,891 issued as of March 31, 2019	3			3
Additional paid-in capital	10,701			11,301
(Accumulated deficit) retained earnings	(1,628		)	478
Accumulated other comprehensive loss	(176		)	(244		)
Treasury stock, at cost, 2,132,967 and 1,788,658 shares as of December 31, 2019 and March 31, 2019	(151		)	(136		)
Total DXC stockholders’ equity	8,749			11,402
Non-controlling interest in subsidiaries	352			323
Total Equity	9,101			11,725
Total Liabilities and Equity	$	29,599		$	29,574

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, 2019			December 31, 2018
Cash flows from operating activities:
Net (loss) income	$	(1,857	)	$	991
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,429			1,514
Goodwill impairment losses	2,940			—
Operating right-of-use expense	506			—
Share-based compensation	57			57
Loss (gain) on dispositions	6			(137		)
Unrealized foreign currency exchange loss (gain)	14			(32		)
Other non-cash charges, net	7			(21		)
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Decrease (increase) in assets	141			(1,012		)
Decrease in operating lease liability	(506		)	—
Decrease in other liabilities	(675		)	(325		)
Net cash provided by operating activities	2,062			1,035

Cash flows from investing activities:
Purchases of property and equipment	(240		)	(219		)
Payments for transition and transformation contract costs	(220		)	(294		)
Software purchased and developed	(178		)	(183		)
Payments for acquisitions, net of cash acquired	(1,997		)	(332		)
Business dispositions	—			(65		)
Cash collections related to deferred purchase price receivable	513			761
Proceeds from sale of assets	55			283
Short-term investing	(75		)	—
Other investing activities, net	20			9
Net cash used in investing activities	(2,122		)	(40		)

Cash flows from financing activities:
Borrowings of commercial paper	4,010			1,853
Repayments of commercial paper	(3,893		)	(1,853		)
Borrowings on long-term debt, net of discount	2,198			1,646
Principal payments on long-term debt	(1,029		)	(2,619		)
Payments on finance leases and borrowings for asset financing	(646		)	(710		)
Borrowings for USPS spin transaction	—			1,114
Proceeds from bond issuance	—			753
Proceeds from stock options and other common stock transactions	11			40
Taxes paid related to net share settlements of share-based compensation awards	(15		)	(52		)
Repurchase of common stock and advance payment for accelerated share repurchase	(736		)	(1,253		)
Dividend payments	(161		)	(159		)
Other financing activities, net	(44		)	57
Net cash used in financing activities	(305		)	(1,183		)
Effect of exchange rate changes on cash and cash equivalents	26			(66		)
Net decrease in cash and cash equivalents	(339		)	(254		)
Cash and cash equivalents at beginning of year	2,899			2,729
Cash and cash equivalents at end of period	$	2,560		$	2,475

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, 2019
(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, 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

	Three Months Ended December 31, 2018
(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 September 30, 2018	282,519		$	3	$	11,848		$	136		$	(382	)	$	(105	)	$	11,500		$	337		$	11,837
Net income								462									462			4			466
Other comprehensive loss

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	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	2020-04-21	Other Events, Exhibits
8-K	2020-04-14	Other Events, Exhibits
8-K	2020-04-01	Off-BS Arrangement
8-K	2020-03-24	Off-BS Arrangement
8-K	2020-03-09	Enter Agreement, Regulation FD, Exhibits
8-K	2020-02-06	Earnings, Exhibits
8-K	2020-02-05	Officers, Exhibits
8-K	2019-12-18	Other Events
8-K	2019-11-11	Earnings, Exhibits
8-K	2019-09-11	Officers, Exhibits
8-K	2019-08-15	Other Events
8-K	2019-08-15	Shareholder Vote
8-K	2019-08-08	Earnings, Exhibits
8-K	2019-06-14	Other Events
8-K	2019-06-14	Other Events, Exhibits
8-K	2019-05-23	Officers, Exhibits
8-K	2019-05-23	Earnings, Exhibits
8-K	2019-03-15	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2019-02-07	Earnings, Exhibits
8-K	2019-01-06	Enter Agreement, Other Events, Exhibits
8-K	2018-11-27	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2018-11-08	Other Events, Exhibits
8-K	2018-11-06	Earnings, Exhibits
8-K	2018-10-24	Regulation FD
8-K	2018-10-24	Regulation FD
8-K	2018-10-12	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2018-09-26	Other Events, Exhibits
8-K	2018-09-24	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2018-09-19	Other Events, Exhibits
8-K	2018-08-22	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2018-08-16	Other Events, Exhibits
8-K	2018-08-15	Officers, Shareholder Vote, Other Events, Exhibits
8-K	2018-08-07	Earnings, Exhibits
8-K	2018-07-17	Officers
8-K	2018-05-31	Enter Agreement, M&A, Exhibits
8-K	2018-05-24	Earnings, Exhibits
8-K	2018-05-11	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2018-03-15	Other Events, Exhibits
8-K	2018-03-15	Officers, Amend Bylaw, Exhibits
8-K	2018-03-07	Other Events, Exhibits
8-K	2018-02-08	Earnings, Exhibits
8-K	2018-01-22	Enter Agreement, Shareholder Rights, Other Events, Exhibits

EX-10.1	a101fourthamendmenttop.htm
EX-10.2	a102seventhamendmentto.htm
EX-10.3	a103thirdarpeformanceg.htm
EX-31.1	dxc1231201910-qex311.htm
EX-31.2	dxc1231201910-qex312.htm
EX-32.1	dxc1231201910-qex321.htm
EX-32.2	dxc1231201910-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	55
3.	Quantitative and Qualitative Disclosures About Market Risk	74
4.	Controls and Procedures	74

	PART II - OTHER INFORMATION

1.	Legal Proceedings	76
1A.	Risk Factors	76
2.	Unregistered Sales of Equity Securities and Use of Proceeds	77
3.	Defaults Upon Senior Securities	77
4.	Mine Safety Disclosure	77
5.	Other Information	78
6.	Exhibits	78

DXC 10Q Quarterly Report

DXC Technology Earnings 2019-12-31