UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended ~~December 31, 2017~~September 30, 2019



o☐	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~~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)~~Zip Code)

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

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~~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.xYeso No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). xYeso 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. ~~(Check one).~~

~~Large Accelerated Filer~~ x ~~Accelerated Filer~~ o



Large Accelerated Filer	x	Accelerated Filer	o

Non-accelerated Filer	o	Smaller reporting company		☐
		Emerging growth company		☐

~~Non-accelerated Filer~~ o ~~(do not check if a smaller reporting company) Smaller reporting company~~ o

~~Emerging growth company~~ o

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).o

☐ Yes x No

~~285,687,865~~255,997,527 shares of common stock, par value $0.01 per share, were outstanding ~~as of January 22, 2018.~~on October 31, 2019.

TABLE OF CONTENTS


Item		Page		Page
	PART I - FINANCIAL INFORMATION		PART I - FINANCIAL INFORMATION

1.	Financial Statements (unaudited)	1	Financial Statements (unaudited)	1
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46	Management’s Discussion and Analysis of Financial Condition and Results of Operations	54
3.	Quantitative and Qualitative Disclosures About Market Risk	70	Quantitative and Qualitative Disclosures About Market Risk	73
4.	Controls and Procedures	71	Controls and Procedures	73

	PART II - OTHER INFORMATION		PART II - OTHER INFORMATION

1.	Legal Proceedings	72	Legal Proceedings	73
1A.	Risk Factors	72	Risk Factors	74
2.	Unregistered Sales of Equity Securities and Use of Proceeds	73	Unregistered Sales of Equity Securities and Use of Proceeds	78
3.	Defaults Upon Senior Securities	74	Defaults Upon Senior Securities	78
4.	Mine Safety Disclosures	74	Mine Safety Disclosure	78
5.	Other Information	75	Other Information	79
6.	Exhibits	75	Exhibits	79

PART I

ITEM 1. FINANCIAL STATEMENTS

Index to Condensed Consolidated Financial Statements




	Page
Condensed Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~December 31, 2017~~September 30, 2019 and ~~December~~September 30, ~~2016~~2018 (unaudited)	2

Condensed Consolidated Statements of Comprehensive (Loss) Income ~~(Loss)~~ for the Three and ~~Nine~~Six Months Ended ~~December 31, 2017~~September 30, 2019 and ~~December~~September 30, ~~2016~~2018 (unaudited)	3

Condensed Consolidated Balance Sheets as of ~~December 31, 2017~~September 30, 2019 and March 31, ~~2017~~2019 (unaudited)	4

Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~December 31, 2017~~September 30, 2019 and ~~December~~September 30, ~~2016~~2018 (unaudited)	5

Condensed Consolidated Statements of Changes in Equity for the ~~Nine~~Three and Six Months Ended ~~December 31, 2017~~September 30, 2019 and ~~December~~September 30, ~~2016~~2018 (unaudited)	6

Notes to Consolidated Financial Statements (unaudited)
Note 1–Summary of Significant Accounting Policies	7
~~Note 2–Recent Accounting Pronouncements~~	8
Note ~~3–Acquisitions~~2–Recent Accounting Pronouncements	912
Note ~~4–Earnings Per Share~~3–Acquisitions	1613
Note ~~5–Sale of Receivables~~4–Divestitures	1617
Note ~~6–Fair Value~~	18
~~Note 7–Derivative Instruments~~5–Earnings Per Share	19
Note ~~8–Intangible Assets~~6–Sale of Receivables	2220
Note ~~9–Goodwill~~7–Leases	2321
Note ~~10–Debt~~8–Fair Value	24
Note ~~11–Restructuring Costs~~9–Derivative and Hedging Activities	26
Note ~~12–Pension and Other Benefit Plans~~	27
~~Note 13–Income Taxes~~10–Intangible Assets	29
Note ~~14–Stockholders' Equity~~11–Goodwill	30
Note 12–Debt	31
Note 13–Revenue	32
Note ~~15–Stock Incentive Plans~~14–Restructuring Costs	33
Note ~~16–Cash Flows~~15–Pension and Other Benefit Plans	36
Note ~~17–Segment Information~~16–Income Taxes	37
Note ~~18–Commitments and Contingencies~~17–Stockholders' Equity	3938
Note 18–Stock Incentive Plans	40
Note 19–Cash Flows	42
Note 20–Segment Information	43
Note 21–Commitments and Contingencies	46

DXC TECHNOLOGY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)



	Three Months Ended						Six Months Ended
(in millions, except per-share amounts)	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018

Revenues	$	4,851		$	5,013		$	9,741		$	10,295

Costs of services (excludes depreciation and amortization and restructuring costs)	3,679			3,518			7,301			7,385
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)	489			569			996			1,009
Depreciation and amortization	467			484			937			955
Goodwill impairment losses	2,887			—			2,887			—
Restructuring costs	32			157			174			342
Interest expense	104			83			195			168
Interest income	(67		)	(33		)	(97		)	(65		)
Gain on arbitration award	(632		)	—			(632		)	—
Other income, net	(109		)	(97		)	(227		)	(191		)
Total costs and expenses	6,850			4,681			11,534			9,603

(Loss) income from continuing operations before income taxes	(1,999		)	332			(1,793		)	692
Income tax expense	116			73			154			202
(Loss) income from continuing operations	(2,115		)	259			(1,947		)	490
Income from discontinued operations, net of taxes	—			—			—			35
Net (loss) income	(2,115		)	259			(1,947		)	525
Less: net income (loss) attributable to non-controlling interest, net of tax	4			(3		)	9			4
Net (loss) income attributable to DXC common stockholders	$	(2,119	)	$	262		$	(1,956	)	$	521

(Loss) income per common share:
Basic:
Continuing operations	$	(8.19	)	$	0.93		$	(7.44	)	$	1.72
Discontinued operations	—			—			—			0.12
	$	(8.19	)	$	0.93		$	(7.44	)	$	1.84
Diluted:
Continuing operations	$	(8.19	)	$	0.92		$	(7.44	)	$	1.69
Discontinued operations	—			—			—			0.12
	$	(8.19	)	$	0.92		$	(7.44	)	$	1.81

Three Months Ended Nine Months Ended
(in millions, except per-share amounts) December 31, 2017 December 30, 2016 December 31, 2017 December 30, 2016

Revenues $ 6,186
$ 1,917
$ 18,262
$ 5,718

Costs of services (excludes depreciation and amortization and restructuring costs) 4,521
1,347
13,621
4,131
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs) 475
333
1,557
931
Depreciation and amortization 481
161
1,379
494
Restructuring costs 213
3
595
85
Interest expense 77
33
231
87
Interest income (27 ) (8 ) (59 ) (26 )
Other expense (income), net 8
(2 ) (72 ) 3
Total costs and expenses 5,748
1,867
17,252
5,705

Income before income taxes 438
50
1,010
13
Income tax (benefit) expense (341 ) 13
(207 ) (25 )
Net income 779
37
1,217
38
Less: net income attributable to non-controlling interest, net of tax 3
6
26
13
Net income attributable to DXC common stockholders $ 776
$ 31
$ 1,191
$ 25

Income per common share:
Basic $ 2.72
$ 0.22
$ 4.18
$ 0.18
Diluted $ 2.68
$ 0.21
$ 4.11
$ 0.17

Cash dividend per common share $ 0.18
$ 0.14
$ 0.54
$ 0.42

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

DXC TECHNOLOGY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME ~~(LOSS)~~ (unaudited)

Three Months Ended Nine Months Ended
(in millions) December 31, 2017 December 30, 2016 December 31, 2017 December 30, 2016

Net income $ 779
$ 37
$ 1,217
$ 38
Other comprehensive income, net of taxes:

Foreign currency translation adjustments, net of tax ⁽¹⁾
(47 ) (174 ) 62
(180 )

Cash flow hedges adjustments, net of tax ⁽²⁾
5
6
—
15
Pension and other post-retirement benefit plans, net of tax:

Amortization of prior service cost, net of tax ⁽³⁾
(3 ) (3 ) (10 ) (10 )
Pension and other post-retirement benefit plans, net of tax (3 ) (3 ) (10 ) (10 )
Other comprehensive income (loss), net of taxes (45 ) (171 ) 52
(175 )
Comprehensive income (loss) 734
(134 ) 1,269
(137 )
Less: comprehensive income attributable to non-controlling interest 6
6
34
13
Comprehensive income (loss) attributable to DXC common stockholders $ 728
$ (140 ) $ 1,235
$ (150 )



			Three Months Ended						Six Months Ended
(in millions)			September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018

Net (loss) income			$	(2,115	)	$	259		$	(1,947	)	$	525
Other comprehensive (loss) income, net of taxes:
	Foreign currency translation adjustments, net of tax ⁽¹⁾		(71		)	(66		)	(206		)	(408		)
	Cash flow hedges adjustments, net of tax ⁽²⁾		(2		)	2			2			(30		)
	Available-for-sale securities, net of tax ⁽³⁾		1			—			2			(1		)
	Pension and other post-retirement benefit plans, net of tax:
		Amortization of prior service cost, net of tax ⁽⁴⁾	(3		)	(5		)	(4		)	(6		)
	Pension and other post-retirement benefit plans, net of tax		(3		)	(5		)	(4		)	(6		)
Other comprehensive loss, net of taxes			(75		)	(69		)	(206		)	(445		)
Comprehensive (loss) income			(2,190		)	190			(2,153		)	80
	Less: comprehensive income (loss) attributable to non-controlling interest		6			(2		)	(13		)	(1		)
Comprehensive (loss) income attributable to DXC common stockholders			$	(2,196	)	$	192		$	(2,140	)	$	81


⁽¹⁾	Tax expense related to foreign currency translation adjustments was $14 and $77, respectively, for the three and nine months ended December 31, 2017, and $0 and $1 for the three and nine months ended December 30, 2016, respectively.


⁽²⁾	~~Tax expense related to cash flow hedge adjustments was $3 and $0, respectively, for the three and nine months ended December 31, 2017.~~


⁽³⁾	Tax benefit related to amortization of prior service costs was $2 and $3, respectively, for the three and nine months ended December 31, 2017, and $2 and $5 for the three and nine months ended December 30, 2016.

⁽¹⁾ Tax expense related to foreign currency translation adjustments was $25 and $13 for the three and six months ended September 30, 2019, respectively. There was 0 tax expense related to foreign currency translation adjustments during the three and six months ended September 30, 2018.

⁽²⁾ There was 0 tax benefit related to cash flow hedge adjustments during the three and six months ended September 30, 2019. Tax benefit related to cash flow hedge adjustments was $17 and $10 for the three and six months ended September 30, 2018, respectively.

⁽³⁾ Tax expense related to available-for-sale securities was $0 and $1 for the three and six months ended September 30, 2019, respectively. There was 0 tax expense related to available-for-sale securities during the three and six months ended September 30, 2018.

⁽⁴⁾ Tax benefit related to amortization of prior service costs was $1 and $1 for the three and six months ended September 30, 2019, respectively, and $1 and $1 for the three and six months ended September 30, 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						As of
(in millions, except per-share and share amounts)	December 31, 2017			March 31, 2017 ⁽¹⁾			September 30, 2019			March 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	2,926		$	1,263		$	2,880		$	2,899
Receivables, net of allowance for doubtful accounts of $39 and $26	5,611			1,643
Receivables and contract assets, net of allowance for doubtful accounts of $60 and $60							4,611			5,181
Prepaid expenses	540			223			671			627
Other current assets	444			118			328			359
Total current assets	9,521			3,247			8,490			9,066

Intangible assets, net of accumulated amortization of $3,005 and $2,293	7,927			1,794
Intangible assets, net of accumulated amortization of $3,916 and $3,399							6,293			5,939
Operating right-of-use assets, net							1,482			—
Goodwill	9,320			1,855			5,784			7,606
Deferred income taxes, net	458			381			330			355
Property and equipment, net of accumulated depreciation of $3,659 and $2,816	3,812			903
Property and equipment, net of accumulated depreciation of $4,182 and $3,958							3,555			3,179
Other assets	2,544			483			3,582			3,429
Total Assets	$	33,582		$	8,663		$	29,516		$	29,574

LIABILITIES and EQUITY
Current liabilities:
Short-term debt and current maturities of long-term debt	2,173			738			1,471			1,942
Accounts payable	1,510			410			1,603			1,666
Accrued payroll and related costs	813			248			684			652
Current operating lease liabilities							489			—
Accrued expenses and other current liabilities	3,403			998			2,943			3,355
Deferred revenue and advance contract payments	1,524			518			1,571			1,630
Income taxes payable	215			38			213			208
Total current liabilities	9,638			2,950			8,974			9,453

Long-term debt, net of current maturities	6,367			2,225			7,698			5,470
Non-current deferred revenue	856			286			234			256
Non-current operating lease liabilities							1,139			—
Non-current income tax liabilities and deferred tax liabilities	1,523			423			1,269			1,184
Other long-term liabilities	1,996			613			1,332			1,486
Total Liabilities	20,380			6,497			20,646			17,849

Commitments and contingencies

DXC stockholders’ equity:
Preferred stock, par value $.01 per share, authorized 1,000,000 shares, none issued as of December 31, 2017 and March 31, 2017	—			—
Common stock, par value $.01 per share, authorized 750,000,000 shares, issued 286,553,833 as of December 31, 2017 and 141,298,797 as of March 31, 2017	3			1
Preferred stock, par value $.01 per share, 1,000,000 shares authorized, none issued as of September 30, 2019 and March 31, 2019							—			—
Common stock, par value $.01 per share, 750,000,000 shares authorized, 257,626,331 issued as of September 30, 2019 and 270,213,891 issued as of March 31, 2019							3			3
Additional paid-in capital	12,201			2,219			10,793			11,301
Retained earnings (accumulated deficit)	834			(170		)
(Accumulated deficit) retained earnings							(1,668		)	478
Accumulated other comprehensive loss	(118		)	(162		)	(428		)	(244		)
Treasury stock, at cost, 1,000,856 and 0 shares as of December 31, 2017 and March 31, 2017	(83		)	—
Treasury stock, at cost, 2,018,148 and 1,788,658 shares as of September 30, 2019 and March 31, 2019							(150		)	(136		)
Total DXC stockholders’ equity	12,837			1,888			8,550			11,402
Non-controlling interest in subsidiaries	365			278			320			323
Total Equity	13,202			2,166			8,870			11,725
Total Liabilities and Equity	$	33,582		$	8,663		$	29,516		$	29,574


⁽¹⁾	~~Certain prior year amounts were adjusted to retroactively reflect the legal capital of DXC.~~

~~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, 2017 December 30, 2016
Cash flows from operating activities:
Net income $ 1,217
$ 38
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,387
503
Share-based compensation 76
56
(Gain) on dispositions —
(1 )
Unrealized foreign currency exchange losses 44
20
Other non-cash charges, net 23
16
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Increase in assets 167
296
Decrease in liabilities (372 ) (123 )
Net cash provided by operating activities 2,542
805

Cash flows from investing activities:
Purchases of property and equipment (175 ) (199 )
Payments for outsourcing contract costs (259 ) (59 )
Software purchased and developed (157 ) (124 )
Cash acquired through Merger 974
—
Payments for acquisitions, net of cash acquired (193 ) (434 )
Proceeds from sale of assets 29
26
Other investing activities, net (6 ) (35 )
Net cash provided by (used in) investing activities 213
(825 )

Cash flows from financing activities:
Borrowings of commercial paper 1,822
1,667
Repayments of commercial paper (1,706 ) (1,562 )
Borrowings under lines of credit —
920
Repayment of borrowings under lines of credit (335 ) (773 )
Borrowings on long-term debt, net of discount 621
157
Principal payments on long-term debt (2,023 ) (282 )
Proceeds from bond issuance 647
—
Proceeds from stock options and other common stock transactions 107
47
Taxes paid related to net share settlements of share-based compensation awards (75 ) (12 )
Repurchase of common stock (66 ) —
Dividend payments (123 ) (59 )
Other financing activities, net (5 ) (31 )
Net cash (used in) provided by financing activities (1,136 ) 72
Effect of exchange rate changes on cash and cash equivalents 44
(119 )
Net increase (decrease) in cash and cash equivalents 1,663
(67 )
Cash and cash equivalents at beginning of year 1,263
1,178
Cash and cash equivalents at end of period $ 2,926
$ 1,111

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

DXC TECHNOLOGY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF ~~CHANGES IN EQUITY~~CASH FLOWS (unaudited)



	Six Months Ended
(in millions)	September 30, 2019			September 30, 2018
Cash flows from operating activities:
Net (loss) income	$	(1,947	)	$	525
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	946			1,002
Goodwill impairment losses	2,887			—
Operating right-of-use expense	340			—
Share-based compensation	48			41
Gain on dispositions	(4		)	(65		)
Unrealized foreign currency exchange gains	(50		)	(12		)
Other non-cash charges, net	2			(18		)
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Decrease (increase) in assets	167			(483		)
Decrease in operating lease liability	(340		)	—
Decrease in other liabilities	(464		)	(141		)
Net cash provided by operating activities	1,585			849

Cash flows from investing activities:
Purchases of property and equipment	(192		)	(133		)
Payments for transition and transformation contract costs	(158		)	(183		)
Software purchased and developed	(126		)	(125		)
Payments for acquisitions, net of cash acquired	(1,921		)	(43		)
Business dispositions	—			(65		)
Cash collections related to deferred purchase price receivable	371			445
Proceeds from sale of assets	40			57
Short-term investing	(75		)	—
Other investing activities, net	14			(1		)
Net cash used in investing activities	(2,047		)	(48		)

Cash flows from financing activities:
Borrowings of commercial paper	2,879			1,158
Repayments of commercial paper	(2,866		)	(1,158		)
Borrowings on long-term debt, net of discount	2,198			483
Principal payments on long-term debt	(519		)	(2,036		)
Payments on finance leases and borrowings for asset financing	(421		)	(475		)
Borrowings for USPS spin transaction	—			1,114
Proceeds from bond issuance	—			753
Proceeds from stock options and other common stock transactions	10			36
Taxes paid related to net share settlements of share-based compensation awards	(12		)	(20		)
Repurchase of common stock and advance payment for accelerated share repurchase	(650		)	(447		)
Dividend payments	(107		)	(105		)
Other financing activities, net	(32		)	11
Net cash provided by (used in) financing activities	480			(686		)
Effect of exchange rate changes on cash and cash equivalents	(37		)	(64		)
Net (decrease) increase in cash and cash equivalents	(19		)	51
Cash and cash equivalents at beginning of year	2,899			2,729
Cash and cash equivalents at end of period	$	2,880		$	2,780

(in millions, except shares in thousands) Common Stock
Additional
Paid-in Capital
Retained Earnings (Accumulated Deficit)
Accumulated
Other
Comprehensive (Loss)
Income
Treasury Stock ⁽³⁾
Total
DXC Equity
Non-
Controlling Interest
Total Equity
Shares Amount
Reported balance at March 31, 2017 151,932
$ 152
$ 2,565
$ (170 ) $ (162 ) $ (497 ) $ 1,888
$ 278
$ 2,166
Recapitalization adjustment⁽¹⁾
(10,633 ) (151 ) (346 ) —
—
497
—
—
—
Recast balance at March 31, 2017 141,299
$ 1
$ 2,219
$ (170 ) $ (162 ) $ —
$ 1,888
$ 278
$ 2,166
Business acquired in purchase, net of issuance costs⁽²⁾
141,741
2
9,848

9,850
55
9,905
Net Income 1,191
1,191
26
1,217
Other comprehensive income 44
44
8
52
Share-based compensation expense 74
74
74
Acquisition of treasury stock (83 ) (83 ) (83 )
Share repurchase program (842 )

(36 ) (30 ) (66 ) (66 )
Stock option exercises and other common stock transactions 4,356

96

96
96
Dividends declared (157 ) (157 ) (157 )
Non-controlling interest distributions and other —
(2 ) (2 )
Balance at December 31, 2017 286,554
$ 3
$ 12,201
$ 834
$ (118 ) $ (83 ) $ 12,837
$ 365
$ 13,202

(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
Reported balance at April 1, 2016 148,747
$ 149
$ 2,439
$ 33
$ (111 ) $ (485 ) $ 2,025
$ 7
$ 2,032
Recapitalization adjustment⁽¹⁾
—
(147 ) 147
—
—
—
—
—
—
Recast balance at April 1, 2016 148,747
$ 2
$ 2,586
$ 33
$ (111 ) $ (485 ) $ 2,025
$ 7
$ 2,032
Net Income 25
25
13
38
Other comprehensive loss (175 ) (175 )

(175 )
Share-based compensation expense 54
54
54
Acquisition of treasury stock (11 ) (11 ) (11 )
Stock option exercises and other common stock transactions 2,855

49
49
49
Dividends declared (59 ) (59 ) (59 )
Non-controlling interest distributions and other —
(13 ) (13 )
Non-controlling interest from acquisition —
281
281
Divestiture of NPS (2 ) (2 ) (2 )
Balance at December 30, 2016 151,602
$ 2
$ 2,689
$ (3 ) $ (286 ) $ (496 ) $ 1,906
$ 288
$ 2,194


⁽¹⁾	~~Certain prior year amounts were adjusted to retroactively reflect the legal capital of DXC.~~


⁽²⁾	~~See Note 3 - "Acquisitions"~~


⁽³⁾	~~1,000,856 treasury shares as of December 31, 2017~~

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, 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 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

	Three Months Ended September 30, 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 June 30, 2018	282,829		$	3	$	11,868		$	—		$	(312	)	$	(87	)	$	11,472		$	342		$	11,814
Net income								262									262			(3		)	259
Other comprehensive loss											(70		)				(70		)	1			(69		)
Share-based compensation expense					18												18						18
Acquisition of treasury stock														(18		)	(18		)				(18		)
Share repurchase program	(1,449	)			(58		)	(69		)							(127		)				(127		)
Stock option exercises and other common stock transactions	1,139				20												20						20
Dividends declared ($0.19 per share)								(54		)							(54		)				(54		)
Non-controlling interest distributions and other								(3		)							(3		)	(3		)	(6		)
Balance at September 30, 2018	282,519		$	3	$	11,848		$	136		$	(382	)	$	(105	)	$	11,500		$	337		$	11,837

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



	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 ⁽¹⁾			Total DXC Equity			Non- Controlling Interest			Total Equity
	Shares		Amount
Balance at March 31, 2019	270,214		$	3	$	11,301		$	478		$	(244	)	$	(136	)	$	11,402		$	323		$	11,725
Net loss								(1,956		)							(1,956		)	9			(1,947		)
Other comprehensive loss											(184		)				(184		)	(22		)	(206		)
Share-based compensation expense					49												49						49
Acquisition of treasury stock														(14		)	(14		)				(14		)
Share repurchase program	(13,580	)			(571		)	(79		)							(650		)				(650		)
Stock option exercises and other common stock transactions	992				14												14						14
Dividends declared ($0.42 per share)								(111		)							(111		)				(111		)
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

	Six Months Ended September 30, 2018
(in millions, except shares in thousands)	Common Stock				Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total DXC Equity			Non- Controlling Interest			Total Equity
	Shares		Amount
Balance at March 31, 2018	286,393		$	3	$	12,210		$	1,301		$	58		$	(85	)	$	13,487		$	350		$	13,837
Cumulative effect of adopting the new revenue standard								114									114						114
Net income								521									521			4			525
Other comprehensive loss											(440		)				(440		)	(5		)	(445		)
Share-based compensation expense					40												40						40
Acquisition of treasury stock														(20		)	(20		)				(20		)
Share repurchase program	(5,228	)			(251		)	(200		)							(451		)				(451		)
Stock option exercises and other common stock transactions	1,354				26												26						26
Dividends declared ($0.38 per share)								(109		)							(109		)				(109		)
Non-controlling interest distributions and other																	—			(12		)	(12		)
Divestiture of USPS					(177		)	(1,491		)							(1,668		)				(1,668		)
Balance at September 30, 2018	282,519		$	3	$	11,848		$	136		$	(382	)	$	(105	)	$	11,500		$	337		$	11,837

⁽¹⁾ 2,018,148 treasury shares as of September 30, 2019.

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

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 1 - Summary of Significant Accounting Policies

Business

DXC Technology Company ~~(“DXC”~~("DXC" or the "Company") ~~is the world's~~, a world leading independent, end-to-end IT services ~~company.~~company, manages and modernizes mission-critical systems, integrating them with new digital solutions to produce better business outcomes.The Company’s global reach and talent, innovative platforms, technology independence and extensive partner network enable more than 6,000 private and public-sector clients in approximately 70 countries to thrive on change.

Luxoft Acquisition

On June 14, 2019, DXC completed its acquisition of Luxoft Holding, Inc. ("Luxoft"), a global digital strategy and software engineering firm (the "Luxoft Acquisition"). The acquisition builds on DXC’s ~~mission is~~unique value proposition as an end-to-end, mainstream IT and digital services market leader, and strengthens the Company’s ability to ~~enable superior returns on~~design and deploy transformative digital solutions for clients at scale. See Note 3 - "Acquisitions" for further information.

Separation of USPS

On May 31, 2018, DXC completed the separation of its ~~clients' technology investments through best-in-class vertical industry solutions, domain expertise, strategic partnerships~~U.S. Public Sector business ("USPS" or the "Separation"), and combination with key technology leaders and global scale. The Company helps lead its clients through their digital transformations to meet new business demands and customer expectations in a market of escalating complexity, interconnectivity, mobility, and opportunity. DXC strives to be a trusted IT partner to its clients by addressing their requirements and providing next-generation IT services that include applications modernization, cloud infrastructure, cyber security, and big data solutions.

~~On October 11, 2017, the Company announced that it had entered into an Agreement and Plan of Merger with Ultra SC Inc., Ultra First VMS Inc., Ultra Second VMS LLC, Ultra KMS Inc.,~~ Vencore Holding Corp. ~~(“Vencore”~~("Vencore"), KGS Holding Corp (“KeyPoint”), The SI Organization Holdings LLC and KGS Holding LLC (the “Ultra Merger Agreement”). The Ultra Merger Agreement provides that the Company will spin off its U.S. public sector business and combine it with Vencore and KeyPoint Government Solutions ("Keypoint") (the "Mergers") to form ~~a separate,~~Perspecta Inc. ("Perspecta"), an independent ~~publicly traded~~public company ~~to serve U.S. public sector clients. The formation~~(collectively, the "USPS Separation and Mergers"). Under the terms of the ~~new company is subject to regulatory~~separation agreements, on May 31, 2018, stockholders who held DXC common stock at the close of business on May 25, 2018 (the “Record Date”), received a distribution of one share of Perspecta common stock for every two shares of DXC common stock held as of the Record Date (the "Distribution"). See Note 4 - "Divestitures" for more information.

As a result of the Separation, the Condensed Consolidated Statements of Operations, Condensed Consolidated Balance Sheets, and ~~other approvals.~~related financial information reflect USPS's operations, assets and liabilities as discontinued operations for all periods presented. The cash flows of USPS have not been segregated and are included in the Condensed Consolidated Statement of Cash Flows for the six months ended September 30, 2018.

Basis of Presentation

In order to make this report easier to read, DXC refers throughout to (i) the interim unaudited Condensed Consolidated Financial Statements as the “financial statements,” (ii) the Condensed Consolidated Statements of Operations as the “statements of operations,” (iii) the Condensed Consolidated Statement of Comprehensive Income (Loss) as the "statements of comprehensive income," (iv) the Condensed Consolidated Balance Sheets as the “balance sheets,” and (v) the Condensed Consolidated Statements of Cash Flows as the “statements of cash flows.” In addition, references throughout to numbered “Notes” refer to the numbered Notes in these Notes to Condensed Consolidated Financial Statements, unless otherwise noted.

The accompanying ~~interim unaudited condensed consolidated~~ financial statements ~~(the "financial statements")~~ include the accounts of DXC, its consolidated subsidiaries, and those business entities in which DXC maintains a controlling interest. Investments in business entities in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies, are accounted for by the equity method. Other investments are accounted for by the cost method. Non-controlling interests are presented as a separate component within equity in the ~~condensed consolidated~~ balance sheets. Net earnings attributable to the non-controlling interests are presented separately in the ~~condensed consolidated~~ statements of operations and comprehensive income attributable to non-controlling interests are presented separately in the ~~condensed consolidated~~ statements of comprehensive ~~income (loss).~~income. All intercompany transactions and balances have been eliminated.

~~As previously disclosed, effective April 1, 2017, Computer Sciences Corporation ("CSC") completed its previously announced combination with~~ Certain amounts reported in the Enterprise Services business of Hewlett Packard Enterprise Company ("HPES"), which resulted in CSC becoming a wholly owned subsidiary of DXC (the "Merger"). See Note 3 - "Acquisitions" for further information. DXC common stock began regular-way trading under the symbol "DXC" on the New York Stock Exchange on April 3, 2017. Because CSC was deemed the accounting acquirer in this combination for accounting purposes under GAAP (defined below), CSC is considered DXC's predecessor and the historical financial statements of CSC prior to April 1, 2017, are reflected in this Quarterly Report on Form 10-Q as DXC's historical financial statements. Accordingly, the financial results of DXC as of and for any periods ending prior to April 1, 2017 do not include the financial results of HPES, and therefore, are not directly comparable. Additionally, "prepaid expenses" and "other current assets" previously aggregated within "prepaid expenses and other current assets" have been separately disclosed, and priorprevious year ~~amounts~~ have been reclassified to conform to the current year presentation.

CSC used to report its results based on a fiscal year convention that comprises four thirteen-week quarters. However, effective April 1, 2017, DXC's fiscal year was modified to end on March 31 of each year with each quarter ending on the last calendar day.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

The financial statements of the Company have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission for quarterly reports and accounting principles generally accepted in the United States ("GAAP"). Certain disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules. These financial statements should therefore be read in conjunction with the audited consolidated financial statements and accompanying notes included in ~~CSC's~~the Company's Annual Report on Form 10-K for the fiscal year ended March 31, ~~2017~~2019 ("fiscal ~~2017"~~2019")~~, included~~.

Use of Estimates

The preparation of financial statements in ~~DXC's Annual Report~~conformity with GAAP, requires the Company's management to make estimates and assumptions that affect amounts reported in the financial statements. The Company bases its estimates on ~~Form ARS for fiscal 2017.~~assumptions regarding historical experience, currently available information and anticipated developments that it believes are reasonable and appropriate. However, because the use of estimates involves an inherent degree of uncertainty, actual results could differ from those estimates. In the opinion of the Company's management, the accompanying financial statements of DXC contain all adjustments, including normal recurring adjustments, necessary to present fairly the Company's financial statements. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full fiscal year.

Leases

~~Note 2 - Recent Accounting Pronouncements~~

~~The following Accounting Standards Updates ("ASU") were recently issued but have not yet been~~Effective April 1, 2019, the Company adopted ~~by DXC:~~

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815).” This amendment was issued to improve the financial reporting of hedge relationships to better portray the economic results of an entity’s risk management activities in its financial statements and to make certain improvements to simplify the application of hedge accounting. ASU 2017-12 will be effective for DXC in fiscal 2020 and early adoption is permitted. The ASU must be adopted by applying the standard to existing hedge instruments at the adoption date. DXC is currently evaluating the effect the adoption of ASU 2017-12 will have on its consolidated financial statements and notes thereto.

~~In February 2016, the FASB issued~~ ASU 2016-02, "Leases, ~~(Topic 842)." This amendment~~Topic ASC 842" using the modified retrospective method. Refer to Note 2 - "Recent Accounting Pronouncements" and Note 7 - "Leases" for further discussion of the impact of adoption and other required disclosures. The Company determines if an arrangement is ~~intended~~a lease at inception by evaluating whether the arrangement conveys the right to ~~increase transparency~~use an identified asset and ~~comparability among organizations by recognizing virtually~~whether DXC obtains substantially all economic benefits from and has the ability to direct the use of the asset. Operating leases are included in operating right-of-use ("ROU") assets, net, current operating lease liabilities and non-current operating lease liabilities in DXC's balance sheets. Finance leases are included in property and equipment, net, short term debt and current maturities of long-term debt and long-term debt, net of current maturities in DXC's balance sheets.

ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating ROU assets and operating lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

As most of the Company's leases do not provide an implicit rate, DXC uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that DXC would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environment and over a similar term. The rate is dependent on several factors, including the lease term, currency of the lease payments and the Company's credit ratings.

Operating ROU assets also includes any lease payments made and excludes lease incentives. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating ROU assets and lease liabilities ~~on the balance sheet and disclosing key information about lease arrangements. ASU 2016-02~~include these options when it is reasonably certain that they will be ~~effective~~exercised. Lease arrangements generally do not contain any residual value guarantees or material restrictive covenants.

Lease expense for ~~DXC in fiscal 2020 and early adoption~~lease payments is ~~permitted. This ASU must be adopted using~~recognized on a ~~modified retrospective transition and provides for certain practical expedients. DXC~~straight-line basis over the lease term. Variable lease expense is currently evaluating the effect the adoption of ASU 2016-02 will have on its existing accounting policies and the consolidated financial statements in future reporting periods, but expects there will be an increase in assets and liabilities on its balance sheets at adoption duerelated to the ~~recording of right-of-use assets~~Company's leased real estate for offices and ~~corresponding lease liabilities, which may be significant. Refer~~primarily includes labor and operational costs. DXC subleases certain leased office space to ~~Note 18 - "Commitments and Contingencies~~"third parties when it determines there is excess leased capacity. Sublease income was not material for ~~information about its operating lease obligations.~~

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which, along with amendments issued in 2015 and 2016, will replace most existing revenue recognition guidance under U.S. GAAP and eliminate industry specific guidance. The core principle of ASU 2014-09 is that revenue is recognized when the transfer of goods or services to customers occurs in an amount that reflects the consideration to which DXC expects to be entitled in exchange for those goods or services. The guidance also addresses the timing of recognition of certain costs incurred to obtain or fulfill a customer contract. Further, it requires the disclosure of sufficient information to enable readers of DXC’s financial statements to understand the nature, amount, timing and uncertainty of revenues, and cash flows arising from customer contracts, and information regarding significant judgments and changes in judgments made.

~~ASU 2014-09 provides two methods of adoption: full retrospective and modified retrospective. Under the full retrospective method, the standard would be applied to~~ all periods presented with previously disclosed periods restated under the new guidance. Under the modified retrospective method, prior periods would not be restated but rather a cumulative catch-up adjustment would be recorded on the adoption date.presented. The Company ~~will adopt this standard in the first quarter of Fiscal 2019~~combines lease and ~~expects to adopt using the modified retrospective method.~~

DXC has performed an initial assessment of the impact of the standard and continues to assess the impact that the guidance will have on accounting policies, processes, systems and internal controls. The Company is currently in the process of implementing the new standard. Based on the implementation efforts to-date, including the assessment of contracts acquired through the combination with HPES, the Company expects the primary accounting impacts to include the following:

The Company’s IT and business process outsourcing arrangements comprise a series of distinct services, for which revenue is expected to be recognized as the services are provided in a manner that is generally consistent with current practices.non-lease components under its lease agreements.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Goodwill Impairment Analysis

Effective July 1, 2019, the Company adopted ASU 2017-04, " Intangibles-Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment" using the prospective method. Refer to Note 2 - "Recent Accounting Pronouncements" and Note 11 - "Goodwill" for further discussion of impact of adoption and other required disclosures. The Company tests goodwill for impairment on an annual basis, as of the first day of the second fiscal quarter, and between annual tests if circumstances change, or if an event occurs that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company has defined its reporting units as its reportable segments. A significant amount of judgment is involved in determining whether an event indicating impairment has occurred between annual testing dates. Such indicators include: a significant decline in the Company's stock price, a significant decline in expected future cash flows, a significant adverse change in legal factors or in the business climate, unanticipated competition, the disposal of a significant component of a reporting unit and the testing for recoverability of a significant asset group within a reporting unit.

The Company initially conducts an assessment of qualitative factors in order 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.

The Company has ~~certain arrangements involving~~ the ~~sale~~option to bypass the initial qualitative assessment stage and proceed directly to the quantitative goodwill 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 ~~proprietary software~~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 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 using a discount rate. 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 is based on the specific risk characteristics of each reporting unit, the weighted-average cost of capital and its underlying forecasts. 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 that have operating and investment characteristics similar to those of the reporting unit. If the fair value of the reporting unit derived using one approach is significantly different from the fair value estimate using the other approach, the Company reevaluates its assumptions used in the two models. Assumptions are modified as considered appropriate under the circumstances until the two models yield similar and reasonable results. The fair values determined by the market approach and income approach, as described above, are weighted to determine the fair value for each reporting unit. The weighting ascribed to the market approach fair value assigned to each reporting unit is influenced by two primary factors: 1) the number of comparable publicly traded companies used in the market approach, and 2) the similarity of the operating and investment characteristics of the reporting units to the comparable publicly traded companies used in the market approach.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

If DXC performs a quantitative goodwill impairment test for all of its reporting units in conjunction with its annual goodwill testing, it also compares the sum of all of its reporting units’ fair values to the Company's market capitalization (per-share stock price multiplied by the number of shares outstanding) and calculates an implied control premium representing the excess of the sum of the reporting units’ fair values over the market capitalization. The Company evaluates the reasonableness of the control premium by comparing it to control premiums derived from recent comparable business combinations. If the implied control premium is not supported by market data, the Company reconciles its fair value estimates of the reporting units to a market capitalization supported by relevant market data. As a result, when DXC’s stock price and thus market capitalization is low relative to the sum of the estimated fair value of its reporting units, this reconciliation can result in reductions to the estimated fair values for the reporting units.

Property and Equipment

Property and equipment, which includes assets under capital leases, are stated at cost less accumulated depreciation. Depreciation is computed predominantly on a straight-line basis over the estimated useful lives of the assets or the remaining lease term, whichever is shorter. The estimated useful lives of DXC’s property and equipment are as follows:



Buildings	Up to 40 years
Computers and related equipment	4 to 7 years
Furniture and other equipment	3 to 15 years
Leasehold improvements	Shorter of lease term or useful life up to 20 years

In accordance with its policy, the Company reviews the estimated useful lives of its property and equipment on an ongoing basis. As a result, effective April 1, 2019, the Company changed its estimate of the useful lives of its computers and related ~~services~~equipment from an average of four to five years to an average of four to seven years, which better reflects the estimated periods during which these assets will remain in service. This change resulted in a $56 million and $111 million decrease to depreciation expense for ~~which vendor-specific objective evidence of fair value may not exist, resulting in~~ the ~~deferral of revenues. Under~~three and six months ended September 30, 2019, respectively.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Note 2 - Recent Accounting Pronouncements

During the ~~new standard, estimates of standalone selling price will be necessary for all software performance obligations, which may result in~~six months ended September 30, 2019, DXC adopted the ~~acceleration of revenues.~~following Accounting Standards Updates ("ASU") issued by the Financial Accounting Standards Board:



Date Issued and ASU	Date Adopted and Method	Description	Impact
February 2016 ASU 2016-02 "Leases (Topic 842)"	April 1, 2019 Modified retrospective	This update is intended to increase transparency and comparability among organizations by recognizing virtually all lease assets and lease liabilities on the balance sheet and disclosing key information about lease arrangements. Early adoption of this update is permitted. This update must be adopted using a modified retrospective transition at the beginning of the earliest period presented or at the adoption date recognizing a cumulative adjustment to the opening balance of retained earnings in the period of adoption and provides for certain practical expedients.	The Company adopted this update utilizing the simplified transition method allowing the Company to not restate comparative periods and apply Topic 842 beginning on April 1, 2019. During adoption, the Company implemented changes in its systems, including the implementation of new lease accounting software, internal controls, business processes, and accounting policies related to both the implementation of, and ongoing compliance with, the new guidance. The adoption resulted in following impacts. The Company recorded increases of $1.7 billion in assets and $1.8 billion in liabilities as of April 1, 2019, due to the recording of operating right-of-use assets and operating lease liabilities for lease obligations that were historically classified as operating leases. The Company's cumulative adjustment to the opening balance of retained earnings was not material. Additionally, the update did not have a material impact on the statements of operations or statements of cash flows. DXC elected the practical expedient package permitted under Topic 842, which among other things, permits the Company not to reassess historical conclusions related to contracts that contain leases, lease classification and initial direct costs for leases that commenced prior to the adoption date. DXC applied the lessee component election, allowing the Company to account for lease and non-lease components as a single lease component. In addition, DXC made an accounting policy election to keep leases with an initial term of 12 months or less that do not contain a ‘reasonably certain’ purchase option off the balance sheets. Refer to Note 7 - "Leases" for additional information.
February 2018 ASU 2018-02 - "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income"	April 1, 2019 Retrospective	This update provides an option to reclassify stranded tax effects within accumulated other comprehensive income ("AOCI") to retained earnings in each period in which the effect (or portion thereof) of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recorded.	The Company adopted this update and opted to not elect to reclassify any stranded tax effects within AOCI to retained earnings, and as such, the adoption of ASU 2018-02 did not have an effect on its condensed consolidated financial statements. In accordance with its accounting policy, the Company uses the portfolio approach and will release income tax effects from AOCI once the reason the tax effects were established cease to exist (e.g., when available-for-sale debt securities are sold or if a pension plan is liquidated).

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



January 2017 ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the test for Goodwill Impairment	July 1, 2019 Prospective	This update is intended to simplify goodwill impairment testing by eliminating Step 2 from the goodwill impairment test. Under the new guidance, if a reporting unit’s carrying amount exceeds its fair value, the entity will record an impairment loss based on that difference. The impairment loss will be limited to the amount of goodwill allocated to that reporting unit. Previously, if the fair value of a reporting unit was lower than its carrying amount (Step 1), an entity was required to calculate any impairment loss by comparing the implied fair value of goodwill with its carrying amount (Step 2). Additionally, under the new standard, companies that have reporting units with zero or negative carrying amounts will no longer be required to perform the qualitative assessment to determine whether to perform Step 2 of the goodwill impairment test. As a result, reporting units with zero or negative carrying amounts will generally be expected to pass the simplified impairment test; however, additional disclosure will be required of those companies.	DXC early adopted this guidance on a prospective basis as of July 1, 2019. As a result of adopting this ASU, the Company no longer performs Step 2 while completing its goodwill impairment testing, beginning with its annual goodwill impairment testing performed during the second quarter of fiscal 2020. DXC's impairment testing performed during the second quarter of fiscal 2020 resulted in a non-cash impairment charge of $2,887 million consisting of $2,625 million and $262 million in its GBS and GIS reporting units, respectively. See Note 11 - "Goodwill" for additional information.

The Company currently does not capitalize commission costs, which will be required in certain cases under the new standard and amortized over the period that services or goods are transferred to the customer. However, the Company is currently assessing the impact of the standard on commission plans of the combined company.

~~As the quantitative impact of adopting the standard may be significantly impacted by arrangements contracted before the adoption date, the Company has~~following ASUs were recently issued but have not yet reached a conclusion about whether the accounting impact of the new standard will be material to its consolidated financial statements. However, the Company expects continuing significant implementation efforts to accumulate and report additional disclosures requiredbeen adopted by ~~the standard.~~DXC:



Date Issued and ASU	DXC Effective Date	Description	Impact
June 2016 ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”	Fiscal 2021	This update is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this update replace the existing incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This update must be adopted using a prospective transition approach for debt securities for which an other-than-temporary impairment has been recognized before the effective date.	DXC is currently evaluating its trade receivables and financial arrangements for the potential impact this update may have on its financial statements in future reporting periods.

Other recently issued ASUs effective after ~~December 31, 2017~~September 30, 2019 are not expected to have a material effect on DXC's consolidated financial statements.

Note 3 - Acquisitions

Fiscal ~~2018~~2020 Acquisitions

~~HPES Merger~~Luxoft Acquisition

On ~~April 1, 2017, CSC, Hewlett Packard Enterprise Company (“HPE”), Everett SpinCo, Inc.(“Everett”),~~June 14, 2019, DXC completed the acquisition of Luxoft, a digital service provider whose offerings encompass strategic consulting, custom software development services, and ~~New Everett Merger Sub Inc., a wholly-owned subsidiary~~digital solution engineering for total consideration of ~~Everett~~$2.0 billion. The acquisition will combine Luxoft’s digital engineering capabilities with DXC’s expertise in IT modernization and integration. The purchase agreement (“Merger ~~Sub”~~Agreement”)~~, completed the strategic combination of CSC with the Enterprise Services business of HPE to form DXC. The combination~~ was ~~accomplished through a series of transactions that included the transfer~~entered into by ~~HPE of its Enterprise Services business, HPES, to Everett,~~DXC and ~~spin-off by HPE of Everett~~Luxoft on ~~March 31, 2017,~~January 6, 2019 and the ~~merger of Merger Sub~~transaction was closed on June 14, 2019.

The transaction between DXC and Luxoft is an acquisition, with DXC as the acquirer and ~~into CSC~~Luxoft as the acquiree, based on ~~April 1, 2017 (the “Merger”). At~~ the ~~time~~fact that DXC acquired 100% of the ~~Merger, Everett was renamed DXC,~~equity interests and as a result of the Merger, CSC became a direct wholly owned subsidiary of DXC. DXC common stock began regular-way trading on the New York Stock Exchange on April 3, 2017. The strategic combination of the two complementary businesses was to create a versatile global technology services business, well positioned to innovate, competevoting rights in Luxoft, and ~~serve clients in a rapidly changing marketplace.~~

~~The transaction involving HPES and CSC is a reverse merger acquisition, in which~~that DXC is ~~considered~~ the ~~legal acquirer of~~entity that transferred the business and CSC is considered the accounting acquirer. While purchase consideration transferred in a business combination is typically measured by reference to the fair value of equity issued or other assets transferred by the accounting acquirer, CSC did not issue any consideration in the Merger. CSC stockholders received one share of DXC common stock for every one share of CSC common stock held immediately prior to the Merger. DXC issued a total of 141,298,797 shares of DXC common stock to CSC stockholders, representing approximately 49.9% of the outstanding shares of DXC common stock immediately following the Merger.cash consideration.

All share and per share information has been restated to reflect the effects of the Merger. The reverse merger is deemed a capital transaction and the net assets of CSC (the accounting acquirer) are carried forward to DXC (the legal acquirer and the reporting entity) at their carrying value before the combination. The acquisition process utilizes the capital structure of the Company and the assets and liabilities of CSC, which are recorded at historical cost. The equity of the Company is the historical equity of CSC, retroactively restated to reflect the number of shares issued by DXC in the transaction.

~~In connection with the Merger, the Company entered into a number of agreements with HPE including the following:~~

Information Technology Services Agreement - The Company and HPE have entered into an Agreement pursuant to which the Company will provide information technology services to HPE. This agreement terminates on the fifth anniversary of its effective date, unless earlier terminated by the parties in accordance with its terms.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Preferred Vendor Agreements - The Company and HPE have entered into Preferred Vendor Agreements, pursuant to which HPE and Micro Focus International, the acquirer of HPE's software business, will: (1) make available to DXC for purchase hardware products sold by HPE and technology services provided by HPE and (2) make available to DXC for purchase and license software products sold or licensed by HPE and Micro Focus, and technology (including SaaS), support, professional and other services provided by HPE and Micro Focus.

Certain other additional agreements were entered into, including a Separation and Distribution Agreement, as amended (the "Separation Agreement"), an employee matters agreement, a tax matters agreement, a transition services agreement, an intellectual property matters agreement, and certain real estate related agreements.

Subsequent to the Merger, HPE settled certain obligations as required under the Separation Agreement. In accordance with the provisions of the agreement, a calculation was performed to make certain adjustments required to complete the separation and standup of legacy HPES and achieve accurate cut off for intercompany transactions with its former parent. The aggregate adjustment to settle the obligations was $203 million.

In May 2016, CSC, HPE and DXC (f/k/a Everett Spinco, Inc.) entered into an agreement and plan of merger, as amended (the “Merger Agreement”), and HPE and DXC entered into a Separation Agreement, in each case relating to the combination of HPES and CSC. At the time the Merger Agreement and the Separation Agreement were executed, HPES was a party to several thousand leases with Hewlett-Packard Financial Services that were classified as capital leases. Under the terms of the Separation Agreement the balance of long-term capital leases for which HPES would be liable at the time of the spin-off was not to exceed $250 million. The Separation Agreement provided HPE an opportunity to modify the terms of the long-term leases to reduce the balance classified as capital leases. Between late May 2016 and the end of March 2017, Hewlett-Packard Financial Services entered into lease amendments that purported to modify most of the leases between HPES and Hewlett-Packard Financial Services in a manner that would cause those leases to be classified as operating leases.

After the closing of the Merger, the Company began assessing the terms of the leases (including the amendments described above). During the Company’s second fiscal quarter, the Company concluded that the long-term capital leases that were amended by Hewlett-Packard Financial Services did not satisfy the requirements for classification as operating leases and as a result should be classified as capital leases as of the closing of the spin-off. Accordingly, as part of the process of determining fair value of these leases as of April 1, 2017, the Company recorded a lease liability of $977 million, fixed assets under capital leases of $594 million, and a $383 million increase to goodwill.

The Company is addressing this matter with HPE in a manner consistent with the terms of the Separation Agreement, with any disagreement being treated in a confidential manner under the Separation Agreement, including dispute resolution through executive escalation, mediation and binding arbitration.

~~Under the acquisition method of accounting, total consideration exchanged was:~~

(in millions) Amount
Preliminary fair value of purchase consideration received by HPE stockholders⁽¹⁾
$ 9,782
Preliminary fair value of HPES options assumed by CSC⁽²⁾
68
Total estimated consideration transferred $ 9,850

⁽¹⁾

Represents the fair value of consideration received by HPE stockholders to give them 50.1% ownership in the combined company. The fair value of the purchase consideration transferred was based on a total of 141,865,656 shares of DXC common stock distributed to HPE stockholders as of the close of business on the record date (141,741,712 after the effect of 123,944 cancelled shares) at CSC's closing price of $69.01 per share on March 31, 2017.


⁽²⁾	~~Represents the fair value of certain stock-based awards of HPES employees that were unexercised on March 31, 2017, which HPE, HPES and CSC agreed would be converted to DXC stock-based awards.~~

~~DXC TECHNOLOGY COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued~~

~~Due to the complexity of the Merger, the Company recorded the assets acquired and liabilities assumed at their preliminary fair values.~~ The Company's preliminary estimates of ~~the~~ fair values of the assets acquired and the liabilities assumed ~~as well as the fair value of non-controlling interest,~~ are based on the information that was available as of the ~~Merger~~acquisition date, and the Company is continuing to evaluate the underlying inputs and assumptions used in its valuations. Accordingly, these preliminary estimates are subject to change during the measurement period, which is up to one year from the ~~Merger~~acquisition date. The cumulative impact of any subsequent changes resulting from the facts and circumstances that existed as of the Merger date will be adjusted in the reporting period in which the adjustment amount is determined. The preliminary estimated purchase price is allocated as follows:



(in millions)	Estimated Fair Value
Cash and cash equivalents	$	113
Accounts receivable	233
Other current assets	15
Total current assets	361
Property and equipment	31
Intangible assets	631
Other assets	91
Total assets acquired	1,114
Accounts payable, accrued payroll, accrued expenses, and other current liabilities	(119		)
Deferred revenue	(8		)
Long-term deferred tax liabilities and income tax payable	(86		)
Other liabilities	(63		)
Total liabilities assumed	(276		)
Net identifiable assets acquired	838
Goodwill	1,185
Total estimated consideration transferred	$	2,023

(in millions) Estimated Fair Value
Cash and cash equivalents $ 974
Accounts receivable⁽¹⁾
4,092
Other current assets 535
Total current assets 5,601
Property and equipment 2,799
Intangible assets 6,169
Other assets 1,614
Total assets acquired 16,183
Accounts payable, accrued payroll, accrued expenses, and other current liabilities (4,496 )
Deferred revenue (1,267 )
Long-term debt, net of current maturities (4,817 )
Long-term deferred tax liabilities and income tax payable (1,570 )
Other liabilities (1,336 )
Total liabilities assumed (13,486 )
Net identifiable assets acquired 2,697
Add: Fair value of non-controlling interests (55 )
Goodwill 7,208
Total estimated consideration transferred $ 9,850


⁽¹⁾	~~Includes aggregate adjustments received from HPE, in accordance with the provisions of the Separation Agreement, of $203 million.~~

As of December 31, 2017, DXC has not finalized the determination of fair values allocated to various assets and liabilities, including, but not limited to: receivables; property and equipment; deferred income taxes, net; deferred revenue and advanced contract payments; deferred costs; intangible assets; accounts payable and accrued liabilities; lease obligations; loss contracts; non-controlling interest; and goodwill.

~~As of the period ended December 31, 2017, the Company made a number of refinements to the April 1, 2017 preliminary purchase price allocation as reported June 30, 2017~~. These refinements were primarily driven by the Company recording valuation adjustments to certain preliminary estimates of fair values which resulted in a decrease in net assets of $450 million. Total assets increased by $1.2 billion, primarily driven by a $127 million increase of accounts receivable; $317 million increase in property and equipment primarily arising from the recognition of $594 million of fixed assets under capital lease, offset by a $277 million reduction in the preliminary fair value of assets related to data centers and land; and a $1.1 billion increase in intangible assets, primarily driven by a $1.3 billion increase in the preliminary fair value assessment for customer relationships. Liabilities increased by $1.7 billion primarily driven by an increase in capital lease obligations of $1.0 billion, a $343 million adjustment to deferred revenue primarily related to a valuation adjustment for outsourcing and other customer contracts taking into account continuing performance obligation, an increase of $106 million of debt, and an increase in long-term tax related liabilities of $200 million.

In accordance with ASU 2015-16, "Business Combinations (Topic 805)," Simplifying the Accounting for Measurement-period Adjustments, during the three months ended December 31, 2017, the Company continued to refine its fair value assessment of assets acquired and liabilities assumed. As a result, a $16 million increase in income before income

~~DXC TECHNOLOGY COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued~~

taxes related to six months ended September 30, 2017 was recognized in the condensed consolidated statement of operations for the three months ended December 31, 2017. The change in income before income taxes was primarily attributed to a decrease of $9 million of interest expense related to capital leases and a decrease of $7 million in cost of services.

Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed at the ~~Merger~~acquisition date. The goodwill recognized with the ~~Merger~~acquisition was attributable to the synergies expected to be achieved by combining the businesses of ~~CSC~~DXC and ~~HPES,~~Luxoft, expected future contracts and the acquired workforce. The cost-saving opportunities are expected to include improved operating efficiencies and asset optimization. ~~During~~The total goodwill arising from the ~~three months ended December 31, 2017, the Company refined its preliminary allocation of goodwill by reportable segment, resulting in an allocation~~acquisition was allocated to ~~the Company's reportable segments of $2.7 billion to the~~ Global Business Services ("GBS") ~~segment, $2.5 billion to the Global Infrastructure Services ("GIS") segment~~ and ~~$2.0 billion to the United States Public Sector ("USPS") segment. A portion of the total goodwill~~ is ~~expected to be~~not deductible for tax purposes. See Note 911 - "Goodwill."

~~Current Assets~~As of September 30, 2019, DXC has not finalized the determination of fair values allocated to various assets and ~~Liabilities~~liabilities, including, but not limited to, receivables; other current assets; property and equipment; intangible assets; other assets; deferred income taxes, net and other income tax liabilities; deferred revenue and advanced contract payments; accounts payable and accrued liabilities; other liabilities; loss contracts; non-controlling interest; and goodwill.

~~For the preliminary fair value estimates reported in~~During the three months ended ~~December 31, 2017,~~September 30, 2019, the Company made a number of refinements to the June 14, 2019 preliminary purchase price allocation. These refinements were primarily driven by the Company recording valuation adjustments that decreased customer related intangibles by $110 million and, increased trade names by $113 million and related deferred tax adjustments which resulted in an increase in net identifiable assets of $24 million.

Current assets and liabilities

The Company valued current assets and liabilities ~~with the exception of the current portion of deferred revenue and capital leases,~~ using existing carrying values as an estimate ~~for~~of the approximate fair value of those items ~~as of~~at the ~~Merger date.~~acquisition date except for certain contract receivables for which the Company determined preliminary fair value based on a cost plus margin approach.

~~Property and Equipment~~

~~The acquired property and equipment are summarized in the following table:~~

(in millions) Amount
Land, buildings, and leasehold improvements $ 1,500
Computers and related equipment 1,122
Furniture and other equipment 45
Construction in progress 132
Total $ 2,799

~~The Company estimated the value of acquired property and equipment using predominately the market method and in certain specific cases, the cost method.~~

~~Identified Intangible Assets~~

~~The acquired identifiable intangible assets are summarized in the following table:~~

(in millions) Amount Estimated Useful Lives (Years)
Customer relationships $ 5,200
10-13
Developed technology 141
2-7
Third-party purchased software 508
2-7
Deferred contract costs 320
n/a
Total $ 6,169

The Company estimated the value of customer relationships and developed technology using the multi-period excess earnings and relief from royalty methods, respectively. Deferred contract costs were fair valued taking into account continuing performance obligation.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

~~Restructuring Liabilities~~Property and equipment

The acquired property and equipment are summarized in the following table:



(in millions)	Amount
Land, buildings, and leasehold improvements	$	8
Computers and related equipment	12
Furniture and other equipment	11
Total	$	31

During the three months ended September 30, 2019, DXC updated the fair value allocation to land, buildings and leasehold improvements using the direct capitalization method of the income approach and the cost approach. For all other categories of property and equipment, based on the nature of the assets, the Company determined that the net book value represents the preliminary fair value.

Identified intangible assets

The acquired identifiable intangible assets are summarized in the following table:



(in millions)	Amount		Estimated Useful Lives (Years)
Customer related intangibles	$	379	10
Trade names	166		10
Developed technology	75		7
Third-party purchased software	11		2 to 10 years
Total	$	631

Developed technology and third-party purchased software are included in the software category and trade names are included in the other intangible assets category in Note 10 -"Intangible Assets".

The Company ~~acquired approximately $328 million~~estimated the preliminary value of ~~restructuring liabilities incurred~~customer relationships using the multi-period excess earnings method under ~~HPES' restructuring plans, which are expected to be paid out through 2029. Approximately $256 million relates to workforce reductions~~the income approach and ~~$72 million relates mainly to facilities costs.~~

~~Long-Term Debt~~

~~Assumed indebtedness included senior notes in~~ the ~~principal amount~~preliminary value of ~~$1.5 billion issued in 2017 and $0.3 billion issued in 1999 for total principal amount of $1.8 billion;~~trade names using a ~~term loan with three tranches all borrowed on March 31, 2017 in an aggregate principal equivalent of $2.0 billion; as well as capitalized lease liabilities and other debt. Subsequent to~~relief from royalty method under the ~~initial~~ ~~preliminary purchase price allocation as reported June 30, 2017, there was a fair value assessment of~~income approach. For developed technology, the ~~senior notes and term loans as of~~Company calculated the Merger date, which resulted in a purchase accounting adjustment that increased debt by $94 million, including $12 million to eliminate historical deferred debt issuance costs, premium, and discounts. Converted capital leases were recorded on the balance sheet at preliminary fair value asbased on an industry benchmarking analysis based on recent and relevant transactions and identified the percentage of ~~April 1, 2017 resulting in a~~the total ~~capital lease obligation of $1.6 billion. Additionally,~~consideration that should be allocated to the identified intangible assets categories and calculated the preliminary estimated value. The Company ~~completed its fair value assessment of certain debt and accrued interest with a carrying~~determined that the net book value of ~~$87 million as of~~ the ~~Merger date, which resulted in a purchase accounting adjustment that increased debt by $12 million. The Company will continue to assess~~purchased software represents the preliminary fair ~~value of assumed debt, including capital leases, during the measurement period.~~value.

Deferred ~~Tax Liabilities~~tax liabilities

The Company preliminarily valued deferred tax ~~assets and~~ liabilities based on statutory tax rates in the jurisdictions of the legal entities where the acquired non-current assets and liabilities are taxed.

~~Defined Benefit Pension Plans~~

Certain eligible employees, retirees and other former employees of HPES participated in certain U.S. and international defined benefit pension plans offered by HPE. The plans whose participants were exclusively HPES employees were acquired, while the plans whose participants included both HPES employees and HPE employees were replicated to allow separation of HPES and HPE employees. The resulting separate plans containing only HPES were acquired.

HPES pension obligations depend on various assumptions. The Company's actuaries remeasured all of the acquired HPES plan obligations as of March 31, 2017. The following table summarizes the balance sheet impact of the pension plans assumed from HPES as a result of the Merger.

(in millions) Amount
Other assets $ 558
Accrued expenses and other current liabilities (13 )
Other long-term liabilities (547 )
Net amount recorded $ (2 )

~~The following table summarizes the projected benefit obligation, fair value of the plan assets and the funded status assumed from HPES as a result of the Merger.~~

(in millions) Amount
Projected benefit obligation $ (7,413 )
Fair value of plan assets 7,411
Funded status $ (2 )

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

~~The following table summarizes the plan asset allocations by asset category for HPES pension plans assumed by the Company as a result of the Merger.~~



~~Equity securities~~	22	%
~~Debt securities~~⁽¹⁾	72	%
~~Alternatives~~	5	%
~~Cash and other~~	1	%
~~Total~~	~~100~~	%

⁽¹⁾ ~~Includes liability-driven investments~~

~~The following table summarizes the estimated future benefit payments due to the pension and benefit plans assumed from HPES as a result of the Merger.~~

(in millions) Amount
Employer contributions:
2018 $ 39

Benefit payments:
2018 $ 225
2019 $ 151
2020 $ 163
2021 $ 224
2022 $ 180
2023 through 2027 $ 1,132

Unaudited ~~and Pro Forma~~ Results ~~of Operations~~

The Company's condensed consolidated statements of operations includes the following revenues and net income

attributable to ~~HPES~~Luxoft since the ~~Merger~~acquisition date:


(in millions)	Three Months Ended December 31, 2017		Nine Months Ended December 31, 2017		Three Months Ended September 30, 2019		Six Months Ended September 30, 2019⁽¹⁾
Revenues	$	4,374	$	12,942	$	214	$	259
Net income	$	422	$	1,199
Net loss					$	11	$	7

~~The following table provides unaudited pro forma results of operations~~

⁽¹⁾ Results for the ~~Company for the three and nine~~six months ended ~~December 31, 2016, as if the Merger had been consummated on April 2, 2016, the first day of DXC's fiscal year ended March 31, 2017. These unaudited pro forma results do not~~September 30, 2019, reflect any cost saving synergies from operating efficiencies. In addition, the unaudited pro forma adjustments are preliminary and are subject to change as additional information becomes available and as additional analyses are performed during the measurement period. Accordingly, the Company presents these unaudited pro forma results for informational purposes only, and they are not necessarily indicative of what the actual results of operations ~~of DXC would have been if the Merger had occurred at the beginning of the period presented, nor are they indicative of future results of operations.~~

~~DXC TECHNOLOGY COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued~~

CSC reported its results based on a fiscal year convention that comprised four thirteen-week quarters. HPES reported its results on a fiscal year basis ended October 31. As a consequence of CSC and HPES having different fiscal year-end dates, all referencessubsequent to the ~~unaudited pro forma statement~~acquisition date of ~~operations include~~June 14, 2019, not the ~~results of operations of CSC for the three and nine months ended December 31, 2016 and of HPES for the three and nine months ended October 31, 2016.~~full six-month period.

(in millions, except per-share amounts)
Three Months Ended December 30, 2016⁽¹⁾

Nine Months Ended December 30, 2016⁽¹⁾
Revenues $ 6,585
$ 19,358
Net loss (166 ) (570 )
Loss attributable to the Company (174 ) (587 )

Loss per common share:
Basic $ (0.61 ) $ (2.07 )
Diluted $ (0.61 ) $ (2.07 )
Fiscal 2019 Acquisitions


⁽¹⁾	~~The unaudited pro forma information is based on legacy CSC results for the three and nine months ended December 31, 2016 and legacy HPES results for the three and nine months ended October 31, 2016.~~

The unaudited pro forma information above is based on events that are (i) directly attributable to the Merger, (ii) factually supportable, and (iii) with respect to the unaudited pro forma statement of operations, expected to have a continuing impact on the consolidated results of operations of the combined company. Nonrecurring transaction costs associated with the Merger of $26 million for the nine months ended December 31, 2017 are not included in the unaudited pro forma information above.

Subsequent to the Merger, the Company adjusted the preliminary purchase price allocation, which would have decreased pro forma combined net loss and loss per common share by $96 million and $0.34, respectively, for the three months ended December 30, 2016, and $292 million and $1.03, respectively, for the nine months ended December 30, 2016. The decrease in pro forma combined net loss and loss per common share was primarily attributed to the acquisition-related fair value adjustments discussed above.

~~Tribridge~~Molina Medicaid Solutions Acquisition

On ~~July~~October 1, ~~2017,~~2018, DXC ~~acquired all~~completed its acquisition of ~~the outstanding capital stock of Tribridge Holdings LLC, an independent integrator of Microsoft Dynamics 365,~~Molina Medicaid Solutions ("MMS"), a Medicaid Management Information Systems business, from Molina Healthcare, Inc. for total consideration of ~~$152~~$233 million. ~~The acquisition includes the Tribridge affiliate company, Concerto Cloud Services LLC.~~ The combination of ~~Tribridge~~MMS with DXC expands DXC’s ~~Microsoft Dynamics 365 global systems integration business.~~ability to provide services to state agencies in the administration of Medicaid programs, including business processing, information technology development and administrative services.

The ~~Company’s~~ purchase price allocation for the ~~Tribridge~~MMS acquisition was finalized during the second quarter of fiscal 2020. The purchase price allocation was based upon the current determination of fair values at the date of acquisition as follows: $87 million to current assets, $112 million to intangible assets other than goodwill, $11 million to other assets, $51 million to current liabilities, $18 million to other liabilities and $92 million to goodwill. The goodwill is associated with the Company's Global Business Services ("GBS") segment and is tax deductible. The intangible assets acquired include customer relationships and developed technology which have a 13-year weighted average estimated useful life.

Other Acquisitions

In addition to the MMS acquisition, DXC completed 7 acquisitions to complement the Company's Microsoft Dynamics and ServiceNow offerings and to provide opportunities for future growth. The acquired businesses are included in the results of the GBS segment. The purchase consideration of $232 million includes contingent consideration with an estimated fair value of $41 million. For acquisitions within the measurement period, the Company's purchase price allocation is preliminary and subject to revision as additional information related to the fair value of assets and liabilities becomes available. The ~~preliminary~~ purchase price ~~was~~is allocated to assets acquired and liabilities assumed based upon ~~current~~ determination of fair values at the ~~date~~dates of acquisition as follows: ~~$32~~$74 million to current assets, ~~$4 million to property and equipment, $62~~$71 million to intangible assets other than goodwill, ~~$24~~$9 million to other non-current assets, $63 million to current liabilities and ~~$78~~$141 million to goodwill. The goodwill is ~~primarily~~ associated with the Company's GBS segment, ~~and~~some of which is tax deductible. ~~The amortizable lives associated with the intangible assets acquired includes customer relationships which have a 12-year estimated useful life.~~

~~Fiscal 2017 Acquisitions~~

~~Xchanging Acquisition~~

On May 5, 2016, DXC acquired Xchanging plc ("Xchanging"), a provider of technology-enabled business solutions to organizations in global insurance and financial services, healthcare, manufacturing, real estate, and the public sector in a step acquisition. Xchanging was listed on the London Stock Exchange under the symbol “XCH.” Total cash consideration paid to and on behalf of the Xchanging shareholders of $693 million (or $492 million net of cash

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

~~acquired) was funded~~

Note4 - Divestitures

Separation of USPS

During fiscal 2019, the Company completed the USPS Separation and Mergers to form Perspecta, an independent public company.

Implementation of the Separation and DXC's post-Separation relationship with Perspecta is governed by several agreements, including the following:

a Separation and Distribution Agreement;

an Employee Matters Agreement;

a Tax Matters Agreement;

an Intellectual Property Matters Agreement;

a Transition Services Agreement;

a Real Estate Matters Agreement;

an IT Services Agreement and,

a Non-US Agency Agreement.

These agreements provide for the allocation of assets, employees, liabilities and obligations (including property, employee benefits, litigation, and tax-related assets and liabilities) between DXC and Perspecta attributable to periods prior to, at and after the Separation. In addition, DXC and Perspecta have service and commercial contracts that generally extend through fiscal 2023. Results for the six months ended September 30, 2019 include $39 million of revenue and income from ~~existing cash balances and borrowings under DXC's credit facility. Transaction costs~~continuing operations before taxes associated with the ~~acquisition~~IT services agreement.

Pursuant to the Separation and Distribution Agreement, immediately prior to the Separation, Perspecta made a net cash payment of ~~$17~~$984 million to DXC, which reflects transaction consideration of $1,050 million less $66 million in principal amount of debt that was outstanding at a subsidiary of Perspecta. Perspecta financed the payment through borrowings under a new senior secured term loan facility.

DXC's former Chief Executive Officer, J. Michael Lawrie, will serve as DXC's Chairman until his planned retirement on December 31, 2019. Mr. Lawrie became Chairman of Perspecta effective as of the Separation and he continues to serve as Chairman of Perspecta. DXC's Chief Financial Officer, Paul N. Saleh, served as a Director of Perspecta until his term ended on August 13, 2019. Due to Mr. Lawrie's and Mr. Saleh's leadership positions at DXC and Perspecta, Perspecta is considered a related party under ASC 850 "Related Party Disclosures" for periods subsequent to the Separation. Transactions with Perspecta were ~~included~~immaterial to the Company's financial statements for the three and six months ended September 30, 2019 and balances due to and from Perspecta were immaterial to the Company's balance sheet as of September 30, 2019.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

The following is a summary of the operating results for USPS which have been reflected within ~~Selling, general, and administrative expenses.~~ income from discontinued operations, net of tax:



(in millions)	Six Months Ended September 30, 2018⁽¹⁾
Revenue	$	431

Costs of services	311
Selling, general and administrative	50
Depreciation and amortization	33
Restructuring costs	1
Interest expense	8
Other income, net	(25		)
Total costs and expenses	378
Total income from discontinued operations, before income taxes	53
Income tax expense	18
Total income from discontinued operations	$	35

⁽¹⁾ Results for the six months ended September 30, 2018 reflect operations through the Separation date of May 31, 2018, not the full six-month period.

There was 0 gain or loss on disposition recognized as a result of the Separation.

The ~~acquisition expanded CSC's market coverage~~following selected financial information of USPS is included in the ~~global insurance industry and enabled the Company to offer access to a broader, partner-enriched portfolio~~statements of ~~services including property and casualty insurance and wealth management business processing services.~~

cash flows:

~~The Xchanging purchase price was allocated to assets acquired and liabilities assumed based upon the determination of fair value at date of acquisition as follows:~~ ~~$396 million~~ ~~to current assets,~~ ~~$99 million~~ ~~to non-current assets,~~ ~~$582 million~~ ~~to intangible assets other than goodwill,~~ ~~$267 million~~ ~~to current liabilities,~~ ~~$516 million~~ ~~to long-term liabilities,~~ ~~$680 million~~ ~~to goodwill, and~~ ~~$281 million~~ to non-controlling interest. The amortizable lives associated with the intangible assets acquired includes developed technology, customer relationships and trade names, which have estimated useful lives of 7 to 8 years, 15 years and 3 to 5 years, respectively. The goodwill arising from the acquisition was allocated to the GBS and GIS segments and is not deductible for tax purposes.



(in millions)	Six Months Ended September 30, 2018
Depreciation	$	16
Amortization	$	17
Capital expenditures	$	—
Significant operating non-cash items:
Gain on dispositions	$	24

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Note 45 - Earnings (Loss) per Share

Basic EPS ~~are~~is computed using the weighted average number of shares of common stock outstanding during the period. Diluted EPS ~~reflect~~reflects the incremental shares issuable upon the assumed exercise of stock options and equity awards. The following table reflects the calculation of basic and diluted EPS:



	Three Months Ended					Six Months Ended
(in millions, except per-share amounts)	September 30, 2019			September 30, 2018		September 30, 2019			September 30, 2018
Net (loss) income attributable to DXC common shareholders:
From continuing operations	$	(2,119	)	$	262	$	(1,956	)	$	486
From discontinued operations	$	—		$	—	$	—		$	35

Common share information:
Weighted average common shares outstanding for basic EPS	258.71			281.37		262.83			282.89
Dilutive effect of stock options and equity awards	—			4.41		—			4.64
Weighted average common shares outstanding for diluted EPS	258.71			285.78		262.83			287.53

Earnings (Loss) per share:
Basic
Continuing operations	$	(8.19	)	$	0.93	$	(7.44	)	$	1.72
Discontinued operations	$	—		$	—	$	—		$	0.12
Total	$	(8.19	)	$	0.93	$	(7.44	)	$	1.84

Diluted
Continuing operations	$	(8.19	)	$	0.92	$	(7.44	)	$	1.69
Discontinued operations	$	—		$	—	$	—		$	0.12
Total	$	(8.19	)	$	0.92	$	(7.44	)	$	1.81

Three Months Ended Nine Months Ended
(in millions, except per-share amounts)
December 31, 2017 December 30, 2016 December 31, 2017 December 30, 2016

Net income attributable to DXC common shareholders: $ 776
$ 31
$ 1,191
$ 25

Common share information:
Weighted average common shares outstanding for basic EPS 285.38
140.88
284.70
140.13
Dilutive effect of stock options and equity awards 4.39
3.93
4.83
3.67
Weighted average common shares outstanding for diluted EPS 289.77
144.81
289.53
143.80

Earnings per share:
Basic $ 2.72
$ 0.22
$ 4.18
$ 0.18
Diluted $ 2.68
$ 0.21
$ 4.11
$ 0.17

~~Certain~~For the three months ended September 30, 2019, stock options of 765,883, performance stock units of 434,862 and ~~RSUs~~restricted stock units (RSUs) of 2,354,528 were excluded from the computation of ~~dilutive~~diluted EPS ~~because inclusion~~due to the Company's net loss. For the three months ended September 30, 2018 RSUs of ~~these amounts~~1,419 were excluded in the computation of diluted EPS, which if included, would have ~~had an anti-dilutive effect. The number~~been anti-dilutive.

For the six months ended September 30, 2019, stock options of ~~options~~979,644, performance stock units of 437,507 and ~~shares~~RSUs of 1,180,177 were excluded from the computation of diluted EPS due to the Company's net loss. For the six months ended September 30, 2018 RSUs of 713 were ~~as follows:~~

Three Months Ended Nine Months Ended
December 31, 2017 December 30, 2016 December 31, 2017 December 30, 2016
Stock Options —
1,956,698
24,850
1,621,950
RSUs 10,552
1,470
21,030
1,611
excluded in the computation of diluted EPS, which if included, would have been anti-dilutive.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Note 56 - Sale of Receivables

Receivables ~~Securitization~~ Facility

~~On December 21, 2016, CSC established a $250 million~~The Company has an accounts receivable ~~securitization~~sales facility ~~(the~~(as amended or supplemented to date, the "Receivables Facility") with certain unaffiliated financial institutions (the "Purchasers") for the sale of commercial ~~account receivables~~accounts receivable in the United States. Under the Receivables Facility, ~~CSC~~the Company and certain of its subsidiaries ~~(collectively, the~~(the "Sellers") sell ~~billed and unbilled~~ accounts receivable to ~~CSC~~DXC Receivables LLC ("~~CSC Receivables"~~Receivables SPV"), a ~~wholly owned~~wholly-owned bankruptcy-remote ~~entity. CSC~~entity, in a true sale. Receivables ~~in turn~~SPV subsequently sells ~~such purchased accounts receivable~~certain of the receivables in their entirety to the Purchasers pursuant to a receivables purchase agreement. The financial obligations of Receivables SPV to the Purchasers under the Receivables Facility are limited to the assets it owns and non-recourse to the Company. Sales of receivables by ~~CSC~~ Receivables SPV occur continuously and are settled on a monthly basis. ~~The proceeds~~During the second quarter of fiscal 2020, Receivables SPV amended the Receivables Facility to increase the investment limit from $600 million to $750 million and extend the ~~sale~~termination date to August 19, 2020. Under the terms of ~~these receivables comprise a combination of cash and a~~the amended Receivables Facility, there is no longer deferred purchase price receivable ("DPP")~~. The DPP~~ as the entire purchase price is paid in cash when the receivables are sold to the Purchasers. Prior DPP's were realized by ~~the Company~~Receivables SPV upon the ultimate collection of the underlying receivables

~~DXC TECHNOLOGY COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued~~

sold to the Purchasers. Cash receipts on the DPP were classified as cash flows from investing activities. The DPP was $525 million before the amendment was executed. Upon execution of the amendment, the Purchasers extinguished the DPP and returned the related underlying receivables titles to Receivables SPV. The DPP extinguishment was classified as a non-cash investing activity, please refer to Note 19 - "Cash Flows."

The amount available under the Receivables Facility fluctuates over time based on the total amount of eligible receivables generated during the normal course of business after deducting excess concentrations. As of ~~December 31, 2017,~~September 30, 2019, the total availability under the Receivables Facility was ~~approximately $177 million.~~$663 million and the amount sold to the Purchasers was $650 million, which was derecognized from the Company's balance sheet. The Receivables Facility terminates on ~~September 14, 2018,~~August 19, 2020, but provides for ~~one~~1 or more optional one-year extensions, if agreed to by the Purchasers. The Company uses the proceeds from Receivables SPV's sale of receivables ~~sales~~ under the Receivables Facility for general corporate purposes.

The Company has no retained interests in the transferred receivables, other than collection and administrative services and its right to the DPP. The DPP is included in receivables at fair value on the condensed consolidated balance sheets. The fair value of the sold receivables approximated ~~their~~ book value due to ~~their~~the short-term nature, and as a result, no0 gain or loss on sale of receivables was recorded. ~~In exchange for the sale of accounts receivable during the nine months ended December 31, 2017,~~

While the Company received cash of $201 million and recorded a DPP. The DPP, which fluctuates over time based on the total amount of eligible receivables generated during the normal course of business, was $249 million as of December 31, 2017. Additionally, as of December 31, 2017, the Company recorded a $24 million liability within accounts payable because the amount of cash proceeds received by the Company under the Receivables Facility exceeded the maximum funding limit.

The Company's risk of loss following the transfer of accounts receivable under the Receivables Facility is limited to the DPP outstanding and any short-falls in collections for specified non-credit related reasons after sale. Paymentguarantees certain non-financial performance obligations of the ~~DPP is not subject to significant risks other than delinquencies and~~Sellers, the Purchasers bear customer credit ~~losses on accounts receivable~~risk associated with the receivables sold ~~under the Receivables Facility.~~

~~Certain obligations of Sellers~~ under the Receivables Facility and ~~CSC, as initial servicer, are guaranteed by~~have recourse in the ~~Company under a performance guaranty, made in favor~~event of ~~an administrative agent on behalf~~credit-related customer non-payment solely to the assets of the ~~Purchasers. However, the performance guaranty does not cover CSC Receivables’ obligations to pay yield, fees or invested amounts to the administrative agent or any of the Purchasers.~~Receivables SPV.

The following table is a reconciliation of the beginning and ending balances of the DPP:



(in millions)	As of and for the Three Months Ended						As of and for the Six Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
Beginning balance	$	525		$	207		$	574		$	233
Transfers of receivables	—			2,436			1,214			2,976
Collections	—			(1,378		)	(1,265		)	(1,900		)
Change in funding availability	—			(295		)	2			(310		)
Facility amendments	(525		)	(457		)	(525		)	(457		)
Fair value adjustment	—			27			—			(2		)
Ending balance	$	—		$	540		$	—		$	540

As of and for the
(in millions) Three Months Ended December 31, 2017 Nine Months Ended
December 31, 2017
Beginning balance $ 272
$ 252
Transfers of receivables 562
1,716
Collections (593 ) (1,717 )
Fair value adjustment 8
(2 )
Ending balance $ 249
$ 249

~~Receivables Sales Facility~~

On July 14, 2017, Enterprise Services LLC, a wholly-owned subsidiary of the Company ("Enterprise"), entered into a Master Accounts Receivable Purchase Agreement (the “Purchase Agreement”) with certain financial institutions (the "Financial Institutions"). The Purchase Agreement established a federal government obligor receivables purchase facility (the “Facility”). Concurrently, the Company entered into a guaranty made in favor of the Financial Institutions, that guarantees the obligations of the sellers and servicers of receivables under the Purchase Agreement. The guaranty does not cover any credit losses under the receivables. In connection with the previously announced spin-off of the Company's USPS business, the Company entered into certain amendments to the guaranty whereby the Company can request to terminate its guaranty at the time of the separation of the USPS business. In accordance with the terms of the Purchase Agreement, on January 23, 2018, the Purchase Agreement was amended to increase the facility limit from $200 million to $300 million in funding based on the availability of eligible receivables and the satisfaction of certain conditions.

Under the Facility, the Company sells eligible federal government obligor receivables, including both billed and certain unbilled receivables. The Company has no retained interests in the transferred receivables other than collection and

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

~~administrative functions~~Federal Receivables Sales Facility

Since July 14, 2017, the Company has given a parent guaranty in connection with a federal receivables sales facility with certain financial institutions, under which certain subsidiaries of the Company previously sold eligible federal government obligor receivables, including billed and certain unbilled receivables. In connection with the Separation, the sellers and servicers of the receivables sold under the Federal Receivables Sales Facility were divested and, effective May 31, 2018, the parent guaranty was terminated.

The following table reflects activity of the Federal Receivables Sales Facility, prior to the Separation:



(in millions)	As of and for the Six Months Ended September 30, 2018⁽¹⁾
Transfers of receivables	$	464
Collections	$	521
Operating cash flow effect	$	(57	)

⁽¹⁾Results for the ~~Financial Institutions for a servicing fee. The Facility has a one-year term but may be extended. The Company uses~~six months ended September 30, 2018 reflect operations through the ~~proceeds from receivables sales under~~Separation date of May 31, 2018, not the ~~Facility for general corporate purposes.~~full six-month period.

Note 7 - Leases

The Company ~~accounts~~has operating and finance leases for ~~these receivable transfers~~data centers, corporate offices, retail stores and certain equipment. Our leases have remaining lease terms of 1 to 13 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 to 3 years.

The components of lease expense were as ~~sales~~follows:



(in millions)	Three Months Ended September 30, 2019			Six Months Ended September 30, 2019
Operating lease cost	$	164		$	340
Short-term lease cost	14			24
Variable lease cost	11			26
Sublease income	(10		)	(19		)
Total operating costs	$	179		$	371

Finance lease cost:
Amortization of right-of-use assets	$	140		$	249
Interest on lease liabilities	17			34
Total finance lease cost	$	157		$	283

Cash payments made from variable lease costs and ~~derecognizes~~short-term leases are not included in the ~~sold receivables~~measurement of operating and finance lease liabilities, and as such, are excluded from ~~its condensed consolidated balance sheets. The fair value of~~ the ~~sold receivables approximated their book value due~~supplemental cash flow information stated below. In addition, for the supplemental non-cash information on operating and finance leases, please refer to ~~their short-term nature. The Company estimated that its servicing fee was at fair value and therefore, no servicing asset or liability~~Note 19 - "Cash Flows."



(in millions)	Six Months Ended September 30, 2019
Cash paid for amounts included in the measurement of:
Operating cash flows from operating leases	$	340
Operating cash flows from finance leases	$	34
Financing cash flows from finance leases	$	279

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Supplemental Balance Sheet information related to ~~these services~~leases was ~~recognized~~as follows:



		As of
(in millions)	Balance Sheet Line Item	September 30, 2019
Assets:
ROU operating lease assets	Operating right-of-use assets, net	$	1,482
ROU finance lease assets	Property and Equipment, net	1,291
Total		$	2,773

Liabilities:
Current
Operating lease	Current operating lease liabilities	$	489
Finance lease	Short-term debt and current maturities of long-term debt	488
Total		$	977

Non-current
Operating lease	Non-current operating lease liabilities	$	1,139
Finance lease	Long-term debt, net of current maturities	688
Total		$	1,827

The following table provides information on the weighted average remaining lease term and weighted average discount rate for operating and finance leases:



Weighted Average remaining lease term:	Years
Operating leases	4.8
Finance leases	2.9

Weighted average remaining discount rate:	Rate
Operating leases	3.3	%
Finance leases	5.4	%

The following maturity analysis presents expected undiscounted cash payments for operating and finance leases on an annual basis as of ~~December~~September 30, 2019:



Fiscal year	Operating Leases
(in millions)	Real Estate			Equipment			Finance Leases
Remainder of 2020	$	221		$	73		$	327
2021	366			88			391
2022	283			37			301
2023	213			14			169
2024	163			9			58
Thereafter	297			14			3
Total lease payments	1,543			235			1,249
Less: imputed interest	(138		)	(12		)	(73		)
Total payments	$	1,405		$	223		$	1,176

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Prior to fiscal 2020, required disclosure under ASC 840 for minimum fixed rentals under operating leases that have initial or remaining terms in excess of one year at March 31, ~~2017.~~2019, was as follows:

~~During the three and nine months ended December~~



Fiscal year	Operating Leases
(in millions)	Real Estate			Equipment
2020	$	409		$	248
2021	288			119
2022	203			27
2023	159			4
2024	124			1
Thereafter	274			—
Minimum fixed rentals	1,457			399
Less: sublease rental income	(149		)	—
Total rental payments	$	1,308		$	399

Prior to fiscal 2020, required disclosure under ASC 840 for future minimum lease payments to be made under finance leases as of March 31, 2017, the Company sold $0.7 billion and $1.2 billion of billed and unbilled receivables, respectively. Collections corresponding to these receivables sales were $0.6 billion and $1.0 billion during the three and nine months ended December 31, 2017, respectively. As of December 31, 2017, there2019, was $27 million of cash collected by the Company, but not remitted to the Financial Institutions, which represents restricted cash and is included within other current assets on the condensed consolidated balance sheets. The operating cash flow effect, net of collections and fees from sales was $176 million.as follows:



Fiscal year
(in millions)	Finance leases
2020	$	509
2021	310
2022	212
2023	128
2024	36
Thereafter	—
Total minimum lease payments	1,195
Less: Amount representing interest and executory costs	(68		)
Present value of net minimum lease payments	$	1,127

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Note 68 - Fair Value

Fair Value Measurements on a Recurring Basis

The following table presents the Company’s assets and liabilities ~~excluding pension assets, see Note 12 - "Pension and Other Benefit Plans" and derivative assets and liabilities, see Note 7 - "Derivative Instruments",~~ that are measured at fair value on a recurring ~~basis.~~basis, excluding pension assets and derivative assets and liabilities. See Note 9 - "Derivative and Hedging Activities" for information about the fair value of the Company's derivative assets and liabilities. There were no transfers between any of the levels during the periods presented.



	Fair Value Hierarchy
(in millions)	September 30, 2019
Assets:	Fair Value		Level 1		Level 2		Level 3
Money market funds and money market deposit accounts	$	6	$	6	$	—	$	—
Time deposits⁽¹⁾	217		217		—		—
Other debt securities⁽²⁾	54		—		50		4
Total assets	$	277	$	223	$	50	$	4

Liabilities:
Contingent consideration	$	44	$	—	$	—	$	44
Total liabilities	$	44	$	—	$	—	$	44

Fair Value Hierarchy
(in millions) Fair Value Level 1 Level 2 Level 3
Assets: As of December 31, 2017
Money market funds and money market deposit accounts⁽¹⁾
$ 217
$ 217
$ —
$ —
Time deposits⁽¹⁾
35
35
—
—
Foreign bonds 52
—
52
—
Other debt securities 7
—
—
7
Deferred purchase price receivable 249
—
—
249
Total assets $ 560
$ 252
$ 52
$ 256

Liabilities:
Contingent consideration $ 8
$ —
$ —
$ 8
Total liabilities $ 8
$ —
$ —
$ 8



	March 31, 2019
Assets:	Fair Value		Level 1		Level 2		Level 3
Money market funds and money market deposit accounts	$	6	$	6	$	—	$	—
Time deposits⁽¹⁾	194		194		—		—
Other debt securities⁽²⁾	53		—		49		4
Deferred purchase price receivable	574		—		—		574
Total assets	$	827	$	200	$	49	$	578

Liabilities:
Contingent consideration	$	41	$	—	$	—	$	41
Total liabilities	$	41	$	—	$	—	$	41

⁽¹⁾Cost basis approximated fair value due to the short period of time to maturity.

⁽²⁾ Other debt securities include available-for-sale investments with Level 2 inputs that have a cost basis of $38 million and $38 million, and unrealized gains of $12 million and $11 million, as of September 30, 2019 and March 31, 2019, respectively.

As of March 31, 2017
Assets: Fair Value Level 1 Level 2 Level 3
Money market funds and money market deposit accounts $ 406
$ 406
$ —
$ —
Deferred purchase price receivable 252
—
—
252
Total assets $ 658
$ 406
$ —
$ 252

Liabilities:
Contingent consideration $ 7
$ —
$ —
$ 7
Total liabilities $ 7
$ —
$ —
$ 7

~~DXC TECHNOLOGY COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued~~

The fair value of money market funds, money market deposit accounts, and time deposits, ~~reported as~~included in cash and cash equivalents, are based on quoted market prices. The fair value of ~~foreign government bonds~~other debt securities, included in other long-term assets, is based on actual market ~~prices and included in Other long-term assets.~~prices. Fair value of the DPP, included in ~~Receivables,~~receivables, net, iswas determined by calculating the expected amount of cash to be received and is principally based on unobservable inputs consisting primarily of the face amount of the receivables adjusted for anticipated credit losses. The fair value of contingent consideration, ~~presented~~included in ~~Other~~other liabilities, is based on contractually defined targets of financial performance and other considerations.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Other Fair Value Disclosures

The carrying amounts of the Company’s ~~other~~ financial instruments with short-term maturities, primarily accounts receivable, accounts payable, short-term debt, and financial liabilities included in ~~Other~~other accrued liabilities, are deemed to approximate their market ~~values.~~values due to their short-term nature. If measured at fair value, these financial instruments would be classified in Level 2 or Level 3 of the fair value hierarchy.

The Company estimates the fair value of its long-term debt, primarily by using quoted prices obtained from third party providers such as Bloomberg, and by using an expected present value technique ~~which~~that is based on observable market inputs ~~using interest rates currently available to the Company~~ for instruments with similar terms ~~and remaining maturities.~~currently available to the Company. The estimated fair value of the Company's long-term debt, excluding ~~capital leases,~~finance lease liabilities, was ~~$5.9~~$7.4 billion and $5.6 billion as of ~~December~~September 30, 2019 and March 31, ~~2017,~~2019, respectively, as compared with carrying value of ~~$5.7 billion.~~$7.3 billion and $5.6 billion as of September 30, 2019 and March 31, 2019, respectively. If measured at fair value, long-term debt, excluding ~~capital~~finance lease liabilities would be classified in Level 1 or Level 2 of the fair value hierarchy.

Non-financial assets such as goodwill, tangible assets, intangible assets and other contract related long-lived assets are recorded at fair value in the period they are initially recognized, and such fair value may be adjusted in subsequent periods if an ~~impairment charge is recognized.~~event occurs or circumstances change that indicate that the asset may be impaired. The fair value measurements, in such instances, would be classified in Level 3. ~~There~~Other than the goodwill impairment losses discussed in Note 11 - "Goodwill," there were no significant impairments recorded during the ~~three and nine months ended December 31, 2017 and December 30, 2016.~~

~~The Company is subject to counterparty risk in connection with its derivative instruments, see Note 7 - "Derivative Instruments". With respect to its foreign currency derivatives, as of~~ ~~December 31, 2017~~ there were five counterparties with concentration of credit risk. Based on gross fair value of these foreign currency derivative instruments, the maximum amount of loss that the Company could incur is approximately $22 million.fiscal periods covered by this report.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Note 79 - Derivative ~~Instruments~~and Hedging Activities

In the normal course of business, the Company is exposed to interest rate and foreign exchange rate fluctuations. As part of its risk management strategy, the Company uses derivative instruments, primarily foreign currency forward and option contracts and interest rate swaps, to hedge certain foreign currency and interest rate exposures. The Company’s objective is to ~~offset~~reduce earnings volatility by offsetting gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge ~~them, thereby reducing volatility of earnings.~~them. The Company does not use derivative instruments for trading or any speculative purpose.

Derivatives Designated for Hedge Accounting

Cash flow hedges

The Company uses interest rate swap agreements designated as cash flow hedges to mitigate its exposure to interest rate risk associated with the variability of cash outflows for interest payments on certain floating interest rate debt, which effectively converted the debt into fixed interest rate debt. As of December 31, 2017, the Company had interest rate swap agreements with a total notional amount of $625 million.

~~DXC TECHNOLOGY COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued~~

For the three and nine months ended December 31, 2017, the Company performed both retrospective and prospective hedge effectiveness analyses for the interest rate swaps designated as cash flow hedges. The Company applied the long-haul method outlined in ASC 815 “Derivatives and Hedging", to assess retrospective and prospective effectiveness of the interest rate swaps. A quantitative effectiveness analysis assessment of the hedging relationship was performed using regression analysis. As of December 31, 2017~~, the Company has determined that the hedging relationship was highly effective.~~

The Company has designated certain foreign currency forward contracts as cash flow hedges to reduce foreign currency risk related to certain Indian Rupee, ~~denominated~~Euro and British Pound-denominated intercompany obligations and forecasted transactions. The notional ~~amount~~amounts of foreign currency forward contracts designated as cash flow hedges as of ~~December~~September 30, 2019 and March 31, ~~2017~~2019 was ~~$686~~$576 million and $277 million, respectively. As of September 30, 2019, the related forecasted transactions extend through ~~February 2020.~~March 2021.

For the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2019 and ~~December~~September 30, ~~2016,~~2018, the Company performed an assessment at the inception of the cash flow hedge transactions and determined all critical terms of the hedging instruments and hedged items matched; therefore, there is no ineffectiveness to be recorded and all changes in the hedging instruments’ fair value are recorded in accumulated other comprehensive income (loss) ("AOCI") and subsequently reclassified into earnings in the period during which the hedged transactions are recognized in earnings.matched. The Company performs an assessment of critical terms on an on-going basis throughout the hedging period. During the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2019 and ~~December~~September 30, ~~2016,~~2018, the Company had no cash flow hedges for which it was probable that the hedged transaction would not occur. As of ~~December 31, 2017, $24~~September 30, 2019, $3 million of the existing amount of ~~gain~~gains related to the cash flow hedge reported in AOCI is expected to be reclassified into earnings within the next 12 months.

~~For derivative instruments that are designated and qualify as cash flow~~Net investment hedges

During fiscal 2019, the Company ~~initially records changes in fair value for~~designated certain foreign currency forward contracts as net investment hedges. These contracts were de-designated and settled during the ~~effective portion~~six months ended September 30, 2019, and as of the derivative instrument in AOCI in the condensed consolidated balance sheets and subsequently reclassifies these amounts into earnings in the period during which the hedged transaction is recognized in the condensed statementsSeptember 30, 2019, there were 0ne outstanding. As of ~~operations. The Company reports the effective portion of its cash flow hedges in the same financial statement line item~~September 30, 2018, there were no foreign currency forward contracts designated as ~~changes in the fair value of the hedged item.~~net investment hedges.

The pre-tax ~~impact of~~ gain ~~(loss)~~on derivatives designated for hedge accounting recognized in income from continuing operations was $1 million and $3 million for the three and six months ended September 30, 2019. The pre-tax loss on derivatives designated for hedge accounting recognized in other comprehensive ~~income~~loss was $2 million and ~~net income was not material~~$12 million for the three and ~~nine~~six months ended ~~December 31, 2017 and December~~September 30, ~~2016.~~2019, respectively.

Derivatives ~~not~~Not Designated for Hedge Accounting

The derivative instruments not designated as hedges for purposes of hedge accounting include ~~total return swaps and~~ certain short-term foreign currency forward ~~and option~~ contracts. Derivatives that are not designated as hedging instruments are adjusted to fair value through earnings in the financial statement line item to which the derivative relates.

~~Total return swaps~~

The Company manages the exposure to market volatility of the notional investments underlying its deferred compensation obligations by using total return swaps derivative contracts ("TRS"). The TRS are reset monthly and are marked-to-market on the last day of each fiscal month. Gain (loss) on TRS was not material for the three and nine months ended December 31, 2017 and December 30, 2016.

Foreign currency forward contracts

The Company manages the exposure to fluctuations in foreign currencies by using short-term foreign currency forward contracts to ~~economically~~ hedge certain foreign currency denominated assets and liabilities, including intercompany accounts and ~~loans.~~forecasted transactions. The notional amount of the foreign currency forward contracts outstanding as of ~~December~~September 30, 2019 and March 31, ~~2017 was $2.4 billion. (Loss) gain on foreign currency forward contracts not designated for hedge accounting, recognized within other income, net,~~2019 were ~~$(3) million~~$2.5 billion and ~~$(117) million during the three and nine months ended December 31, 2017, respectively, and $2 million and $(3) million during the three and nine months ended December 30, 2016,~~$2.5 billion, respectively.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

The following table presents the pretax amounts impacting income related to foreign currency forward contracts:



		For the Three Months Ended					For the Six Months Ended
(in millions)	Statement of Operations Line Item	September 30, 2019			September 30, 2018		September 30, 2019			September 30, 2018
Foreign currency forward contracts	Other expense (income), net	$	(41	)	$	11	$	(22	)	$	43

Fair Value of Derivative Instruments

All ~~derivatives~~derivative instruments are recorded at fair value. The Company’s accounting treatment for these derivative instruments is based on its hedge designation. The following tables ~~show~~present the ~~Company’s~~fair values of derivative instruments ~~at gross fair value:~~included in the balance sheets:


		Derivative Assets						Derivative Assets
			As of						As of
(in millions)		Balance Sheet Line Item	December 31, 2017		March 31, 2017			Balance Sheet Line Item	September 30, 2019		March 31, 2019

Derivatives designated for hedge accounting:	Derivatives designated for hedge accounting:						Derivatives designated for hedge accounting:
Interest rate swaps		Other assets	$	5	$	5
Foreign currency forward contracts		Other current assets	27		27			Other current assets	$	7	$	38
Total fair value of derivatives designated for hedge accounting	Total fair value of derivatives designated for hedge accounting		$	32	$	32	Total fair value of derivatives designated for hedge accounting		$	7	$	38

Derivatives not designated for hedge accounting:	Derivatives not designated for hedge accounting:						Derivatives not designated for hedge accounting:
Foreign currency forward contracts		Other current assets	$	9	$	15		Other current assets	$	6	$	5
Total fair value of derivatives not designated for hedge accounting	Total fair value of derivatives not designated for hedge accounting		$	9	$	15	Total fair value of derivatives not designated for hedge accounting		$	6	$	5



	Derivative Liabilities
		As of
(in millions)	Balance Sheet Line Item	September 30, 2019		March 31, 2019

Derivatives designated for hedge accounting:
Foreign currency forward contracts	Accrued expenses and other current liabilities	$	4	$	4
Total fair value of derivatives designated for hedge accounting:		$	4	$	4

Derivatives not designated for hedge accounting:
Foreign currency forward contracts	Accrued expenses and other current liabilities	$	2	$	9
Total fair value of derivatives not designated for hedge accounting		$	2	$	9

Derivative Liabilities
As of
(in millions) Balance Sheet Line Item December 31, 2017 March 31, 2017

Derivatives designated for hedge accounting:
Interest rate swaps Other long-term liabilities $ —
$ 1
Foreign currency forward contracts Accrued expenses and other current liabilities —
—
Total fair value of derivatives designated for hedge accounting: $ —
$ 1

Derivatives not designated for hedge accounting:
Foreign currency forward contracts Accrued expenses and other current liabilities $ 13
$ 12
Total fair value of derivatives not designated for hedge accounting $ 13
$ 12

~~Derivative instruments include foreign currency forward contracts and interest rate swap contracts.~~ The fair value of foreign currency forward contracts represents the estimated amount required to settle the contracts using current market exchange rates and is based on the period-end foreign currency exchange rates and forward points ~~as Level 2 inputs. The fair value of interest rate swaps is estimated based on valuation models that use interest rate yield curves~~which are classified as Level 2 inputs.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Other ~~risks~~Risks for Derivative Instruments

The Company is exposed to the risk of losses in the event of non-performance by the counterparties to its derivative contracts. The amount subject to credit risk related to derivative instruments is generally limited to the amount, if any, by which a counterparty's obligations exceed the obligations of the Company with that counterparty. To mitigate counterparty credit risk, the Company regularly reviews its credit exposure and the creditworthiness of the counterparties. With respect to its foreign currency derivatives, as of September 30, 2019, there were 8 counterparties with concentration of credit risk, and based on gross fair value, the maximum amount of loss that the Company could incur is approximately $6 million.

The Company also enters into enforceable master netting arrangements with some of its counterparties. However, for financial reporting purposes, it is ~~Company~~the Company's policy not to offset derivative assets and liabilities despite the existence of enforceable master netting arrangements. The potential effect of such netting arrangements on the Company's balance sheets is not material for the periods presented.

Non-Derivative Financial Instruments Designated for Hedge Accounting

The Company applies hedge accounting for foreign currency-denominated debt used to manage foreign currency exposures on its net investments in certain non-U.S. operations. To qualify for hedge accounting, the hedging instrument must be highly effective at reducing the risk from the exposure being hedged.

Net Investment Hedges

DXC seeks to reduce the impact of fluctuations in foreign exchange rates on its net investments in certain non-U.S. operations with ~~some~~foreign currency-denominated debt. For foreign currency denominated debt designated as a hedge, the effectiveness of ~~its counterparties.~~the hedge is assessed based on changes in spot rates. For qualifying net investment hedges, all gains or losses on the hedging instruments are included in currency translation. Gains or losses on individual net investments in non-U.S. operations are reclassified to earnings from accumulated other comprehensive (loss) income when such net investments are sold or substantially liquidated.

DXC had designated $1.9 billion as of September 30, 2019 and $0 billion as of March 31, 2019 of foreign currency-denominated debt, as hedges of net investments in non-U.S. subsidiaries. The pre-tax impact of gain (loss) on foreign currency-denominated debt designated for hedge accounting recognized in other comprehensive income (loss) were $76 million and $66 million for the three and six months ended September 30, 2019, respectively.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Note 810 - Intangible Assets

Intangible assets consisted of the following:


	As of December 31, 2017						As of September 30, 2019
(in millions)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Software	$	3,231	$	1,792	$	1,439	$	4,195	$	2,438	$	1,757
Outsourcing contract costs	1,436		612		824
Customer related intangible assets	6,151		583		5,568		5,759		1,445		4,314
Other intangible assets	114		18		96		255		33		222
Total intangible assets	$	10,932	$	3,005	$	7,927	$	10,209	$	3,916	$	6,293



	As of March 31, 2019
(in millions)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Software	$	3,864	$	2,235	$	1,629
Customer related intangible assets	5,389		1,139		4,250
Other intangible assets	85		25		60
Total intangible assets	$	9,338	$	3,399	$	5,939

The components of amortization expense were as follows:

As of March 31, 2017
(in millions) Gross Carrying Value Accumulated Amortization Net Carrying Value
Software $ 2,347
$ 1,554
$ 793
Outsourcing contract costs 793
475
318
Customer related intangible assets 851
248
603
Other intangible assets 96
16
80
Total intangible assets $ 4,087
$ 2,293
$ 1,794



	Three Months Ended				Six Months Ended
(in millions)	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Intangible asset amortization	$	239	$	214	$	475	$	440
Transition and transformation contract cost amortization⁽¹⁾	59		73		126		129
Total amortization expense	$	298	$	287	$	601	$	569

Total intangible assets amortization was $279 million and $81 million for the three months ended December 31, 2017 and December 30, 2016, respectively, and included reductions of revenue for amortization of outsourcing contract cost premiums of $2 million and $2 million, respectively.


⁽¹⁾	Transaction and transformation contract costs are included within other assets on the balance sheet.

Total intangible assets amortization was $793 million and $243 million for the nine months ended December 31, 2017 and December 30, 2016, respectively, and included reductions of revenue for amortization of outsourcing contract cost premiums of $8 million and $8 million, respectively.

~~The increase in net and gross carrying value for the nine months ended December 31, 2017 were primarily due to the Merger. See Note 3 - "Acquisitions".~~

Estimated future amortization related to intangible assets as of ~~December 31, 2017~~September 30, 2019 is as follows:



Fiscal Year	(in millions)
Remainder of 2020	$	568
2021	$	997
2022	$	915
2023	$	853
2024	$	780

Fiscal Year (in millions)
Remainder of 2018 $ 306
2019 $ 1,094
2020 $ 1,032
2021 $ 943
2022 $ 804

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Note 911 - Goodwill

The following table summarizes the changes in the carrying amount of ~~Goodwill,~~goodwill, by segment, as of ~~December 31, 2017.~~September 30, 2019.



(in millions)	GBS			GIS			Total
Goodwill, gross	$	5,300		$	5,068		$	10,368
Accumulated impairment losses	(701		)	(2,061		)	(2,762		)
Balance as of March 31, 2019, net	$	4,599		$	3,007		$	7,606

Acquisitions	1,202			—			1,202
Foreign currency translation	(72		)	(65		)	(137		)
Impairment losses	(2,625		)	(262		)	(2,887		)

Goodwill, gross	6,430			5,003			11,433
Accumulated impairment losses	(3,326		)	(2,323		)	(5,649		)
Balance as of September 30, 2019, net	$	3,104		$	2,680		$	5,784

(in millions) GBS GIS USPS Total
Balance as of March 31, 2017, net $ 1,470
$ 385
$ —
$ 1,855
Additions 2,800
2,532
1,984
7,316
Foreign currency translation 94
55
—
149
Balance as of December 31, 2017, net $ 4,364
$ 2,972
$ 1,984
$ 9,320

The additions to goodwill ~~during the nine months ended December 31, 2017~~ were ~~primarily~~ due to the ~~Merger~~acquisitions described in Note 3 - "Acquisitions." As a result of the Merger, the Company began to report the United States Public Sector ("USPS") segment, formerly a component of the HPES business, see Note 17 - "Segment Information" for additional information."Acquisitions". The foreign currency translation ~~amounts reflect~~amount reflects the impact of currency movements on non-U.S. dollar-denominated goodwill balances.

Goodwill Impairment Analyses

The Company tests goodwill for impairment on an annual basis, as of the first day of the second fiscal quarter, and between annual tests if circumstances change, or if an event occurs that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

The ~~Company’s~~Company performed its annual goodwill impairment ~~analysis, which was performed qualitatively during the three months ended September 30, 2017, did not result in an impairment charge. This qualitative analysis, which is commonly referred to~~assessment as ~~step zero under ASC Topic 350, Goodwill and Other Intangible Assets, considered all relevant factors specific~~of July 1, 2019. Subsequent to the ~~reporting units, including macroeconomic conditions; industry~~measurement date, the Company experienced a decline in its stock price and market ~~considerations; overall financial performance~~capitalization that represented an indicator of impairment as the observed declines were substantial and ~~relevant entity-specific events.~~

~~At the end of the third quarter of fiscal 2018,~~sustained. As a result, the Company ~~assessed whether there were events or changes in circumstances that would more likely than not reduce the fair value of any~~performed a quantitative goodwill impairment test for all of its reporting units, ~~below~~consistent with its policy described in Note 1 - "Summary of Significant Accounting Policies.” As part of the reconciliation to the Company’s market capitalization, the Company concluded that the carrying ~~amount~~values of it’s reporting units exceeded their estimated fair values and ~~require goodwill to be tested for impairment.~~recognized a non-cash impairment charge of $2,887 million, consisting of $2,625 million and $262 million in its GBS and GIS segments, respectively. Further declines in DXC’s share price or other impairment indicators could result in additional impairment charges in the future. The ~~Company determined that there have been no such indicators, and, therefore, it was unnecessary to perform an interim~~ goodwill impairment ~~test as~~charge does not have an impact on the calculation of ~~December 31, 2017.~~the Company's financial covenants under the Company's debt arrangements.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Note 1012 - Debt

The following is a summary of the Company's debt:


			As of
(in millions)	Interest Rates	Fiscal Year Maturities	December 31, 2017		March 31, 2017		Interest Rates	Fiscal Year Maturities	September 30, 2019		March 31, 2019
Short-term debt and current maturities of long-term debt
Euro-denominated commercial paper	(0.1) - 0.02%⁽¹⁾	2018	$	841	$	646
EUR term loan	1.75%⁽²⁾	2019	480		—
Euro-denominated commercial paper⁽¹⁾							(0.21)% - 2.76%	2020	$	687	$	694
Current maturities of long-term debt	Various	2019	128		55		Various	2020 - 2021	296		766
Current maturities of capitalized lease liabilities	1.1% - 6.7%	2019	724		37
Current maturities of finance lease liabilities							1.06% - 17.70%	2020 - 2021	488		482
Short-term debt and current maturities of long-term debt			$	2,173	$	738			$	1,471	$	1,942

Long-term debt, net of current maturities
AUD term loan							1.87% - 2.66%⁽²⁾	2021	539		567
GBP term loan	1.0 - 1.2%⁽³⁾	2019	$	250	$	233	1.57 - 1.63%⁽³⁾	2022	553		583
USD term loan	1.2% - 2.3%⁽⁴⁾	2021	—		571
AUD term loan	2.9% - 3.0%⁽⁵⁾	2022	215		76
EUR term loan							0.65%⁽⁴⁾	2022	816		—
EUR term loan	0.9%⁽⁶⁾	2022	179		—		0.80%⁽⁵⁾	2023	816		—
USD term loan	2.2% - 2.8%⁽⁷⁾	2022	1,149		—		3.29% - 3.67%⁽⁶⁾	2025	492		—
$500 million Senior notes	2.875%	2020	503		—		2.88%	2020	—		502
$650 million Senior notes	2.3% - 2.4%⁽⁸⁾	2021	646		—
$500 million Senior notes							3.08% - 3.69%⁽⁷⁾	2021	498		498
$274 million Senior notes	4.45%	2023	278		—		4.45%	2023	276		277
$170 million Senior notes	4.45%	2023	174		453
$171 million Senior notes							4.45%	2023	172		172
$500 million Senior notes	4.25%	2025	507		—		4.25%	2025	506		506
£250 million Senior notes							2.75%	2025	305		322
€650 million Senior notes							1.75%	2026	704		725
$500 million Senior notes	4.75%	2028	509		—		4.75%	2028	508		508
$300 million Senior notes	7.45%	2030	357		—
Revolving credit facility	1.4% - 1.6%	2021 - 2023	388		678
$234 million Senior notes							7.45%	2030	273		273
Lease credit facility	2.0% - 2.6%	2020 - 2023	51		60		3.11% - 3.50%	2020 - 2023	18		25
Capitalized lease liabilities	1.1% - 6.7%	2018 - 2022	1,518		104
Finance lease liabilities							1.06% - 17.70%	2020 - 2025	1,176		1,127
Borrowings for assets acquired under long-term financing	2.3% -3.2%	2018 - 2023	318		77		0.48% - 5.78%	2020 - 2025	697		462
Mandatorily redeemable preferred stock outstanding	3.5%	2023	61		61		6.00%	2023	62		62
Other borrowings	0.5% - 14.0%	2018 - 2037	116		4		0.50% - 7.40%	2020 - 2022	71		109
Long-term debt			7,219		2,317				8,482		6,718
Less: current maturities			852		92				784		1,248
Long-term debt, net of current maturities			$	6,367	$	2,225			$	7,698	$	5,470


⁽¹⁾	~~Approximate weighted average interest rate~~At DXC's option, DXC can borrow up to a maximum of €1 billion or its equivalent in U.S. dollars.

⁽²⁾ ~~Three-month EURIBOR rate plus 1.75%~~

⁽³⁾ ~~Three-month LIBOR rate plus 0.65%~~

⁽⁴⁾ At DXC's option, the USD term loan bears interest at a variable rate equal to the adjusted LIBOR for a one-, two-, three-, or six-month interest period, plus a margin between 0.75% and 1.50% based on a pricing grid consistent with the Company's outstanding revolving credit facility or the greater of the prime rate, the federal funds rate plus 0.50%, or the adjusted LIBOR for a one-month interest period plus 1.00%, in each case plus a margin of up to 0.50%, based on a pricing grid consistent with the revolving credit facility.

⁽⁵⁾ Variable interest rate equal to the bank bill swap bid rate for a one-, two-, three- or six-month interest period plus ~~0.95%~~0.60% to ~~1.45%~~0.95% based on the published credit ratings of DXC.

⁽⁶⁾⁽³⁾ Three-month LIBOR rate plus 0.80%.

⁽⁴⁾ At ~~DXC’s~~DXC's option, the EUR term loan bears interest at the Eurocurrency Rate for a one-, two-, three-, or six-month interest period, plus a margin of between ~~0.75%~~0.40% and ~~1.35%~~0.9%, based on published credit ratings of DXC.

~~DXC TECHNOLOGY COMPANY~~⁽⁵⁾ At DXC's option, the EUR term loan bears interest at the Eurocurrency Rate for a one-, two-, three-, or six-month interest period, plus a margin between 0.55% and 1.05%, based on published credit ratings of DXC.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued~~

⁽⁷⁾⁽⁶⁾ At ~~DXC’s~~DXC's option, the USD term loan bears interest at the Eurocurrency Rate for a one-, two-, three-, or six-month interest period, plus a margin of between 1.00% and ~~1.75%~~1.50%, based on published credit ratings of DXC or the Base Rate plus a margin of between 0%0.00% and ~~0.75%~~0.50%, based on published credit ratings of DXC.

^{(8) (7)}Three-month LIBOR plus 0.95%.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Senior Notes and ~~Terms~~Term Loans

Interest on the Company's term loans is payable monthly or quarterly in ~~arrears.~~arrears at the election of the borrowers. The Company fully and unconditionally ~~guaranteed~~guarantees term loans issued by its 100% owned subsidiaries. Interest on the Company's senior notes is payable semi-annually in arrears, except for interest on the $500 million Senior Notes due 2021 which is payable quarterly in arrears, and interest on the £250 million Senior Notes due 2025 and the €650 million Senior Notes due 2026 which are payable annually in arrears. Generally, the Company's notes are redeemable at the Company's discretion at the then-applicable redemption ~~prices~~premium plus accrued interest.

~~On April 3, 2017, as a result~~

Note 13 - Revenue

Revenue Recognition

The following table presents our revenues disaggregated by geography, based on the location of incorporation of the ~~Merger, financial covenants were amended~~DXC entity providing the related goods or services:



	Three Months Ended				Six Months Ended
(in millions)	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
United States	$	1,806	$	1,863	$	3,657	$	3,750
United Kingdom	678		760		1,393		1,560
Australia	366		391		739		845
Other Europe	1,260		1,263		2,490		2,610
Other International	741		736		1,462		1,530
Total Revenues	$	4,851	$	5,013	$	9,741	$	10,295

The revenue by geography pertains to both of the Company’s reportable segments. Refer to Note 20 - "Segment Information" for the Company’s segment disclosures.

Remaining Performance Obligations

Remaining performance obligations represent the aggregate amount of the transaction price in contracts allocated to performance obligations not delivered, or partially undelivered, as of the end of the reporting period. Remaining performance obligation estimates are subject to change and ~~CSC was replaced with DXC as~~are affected by several factors, including terminations, changes in the ~~borrower~~scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and ~~guarantor~~adjustments for currency. As of September 30, 2019, approximately $25.9 billion of revenue is expected to ~~certain outstanding debt including short-term Euro-denominated commercial paper, senior notes and term loans. In connection~~be recognized from remaining performance obligations. We expect to recognize revenue on approximately 26%of these remaining performance obligations in fiscal 2020, with the Merger, DXC entered into an unsecured term loan agreement consisting of a $375 million U.S. dollar term loan maturing in 2020, a $1.3 billion U.S. dollar term loan maturing in 2022 and a Euro-equivalent of $315 million EUR term loan maturing in 2022. The $375 million U.S. term loan maturing in 2020 and portionsremainder of the ~~term loans maturing in 2022 were repaid subsequent to~~balance recognized thereafter.

Contract Balances

The following table provides information about the ~~Merger. DXC assumed pre-existing indebtedness incurred by HPES including 7.45% senior notes due 2030 which were issued at a principal amount~~balances of ~~$300 million.~~the Company's trade receivables and contract assets and contract liabilities:

During the nine months ended December 31, 2017, DXC completed an offering of senior notes in an aggregate principal amount of $1.5 billion consisting of 2.875% senior notes due 2020, 4.25% senior notes due 2025 and 4.75% senior notes due 2028.



	As of
(in millions)	September 30, 2019		March 31, 2019
Trade receivables, net	$	3,343	$	3,232
Contract assets	$	517	$	390
Contract liabilities	$	1,800	$	1,886

~~Revolving Credit Facility~~

In connection with the Merger, the Company entered into several amendments to its revolving credit facility agreement pursuant to which DXC replaced CSC as the principal borrower and as the guarantor of borrowings by subsidiary borrowers. During the nine months ended December 31, 2017, DXC exercised its option to extend the maturity date and also increased commitments to $3.81 billion, $70 million of which matures in January 2021 and $3.74 billion matures in January 2023.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Change in contract liabilities were as follows:



(in millions)	Six Months Ended September 30, 2019
Balance, beginning of period	$	1,886
Deferred revenue	1,400
Recognition of deferred revenue	(1,416		)
Currency translation adjustment	(48		)
Other	(22		)
Balance, end of period	$	1,800

Note 1114 - Restructuring Costs

The Company recorded restructuring costs of ~~$213~~$32 million and $3$157 million, net of reversals, for the three months ended ~~December 31, 2017~~September 30, 2019 and ~~December~~September 30, ~~2016,~~2018, respectively. For the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2019 and ~~December~~September 30, ~~2016,~~2018, the Company recorded ~~$595~~restructuring costs of $174 million and ~~$85~~$342 million, net of reversals, respectively. The costs recorded during the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2019 were largely a result of the Fiscal ~~2018~~2020 Plan (defined below).

The composition of restructuring liabilities by financial statement line ~~items~~item is as follows:



	As of
(in millions)	September 30, 2019
Accrued expenses and other current liabilities	$	204
Other long-term liabilities	35
Total	$	239

As of
(in millions) December 31, 2017
Accrued expenses and other current liabilities $ 343
Other long-term liabilities 173
Total $ 516

Summary of Restructuring Plans

Fiscal 2020 Plan

During fiscal 2020, management approved cost savings initiatives designed to reduce operating costs by re-balancing its workforce and facilities structures (the "Fiscal 2020 Plan"). The Fiscal 2020 Plan includes workforce optimization programs and facilities and data center rationalization.

Fiscal 2019 Plan

During fiscal 2019, management approved global cost savings initiatives designed to better align the Company's organizational structure with its strategic initiatives and continue the integration of the Enterprise Services business of Hewlett Packard Enterprise Company ("HPES") and other acquisitions (the "Fiscal 2019 Plan"). The Fiscal 2019 Plan includes workforce optimization and rationalization of facilities and data center assets. Costs incurred to date under the Fiscal 2019 Plan total $497 million, comprising $353 million in employee severance and $144 million of facilities costs.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Fiscal 2018 Plan

OnIn June ~~30,~~ 2017, management approved a ~~post-Merger~~post-HPES Merger (as defined below) restructuring plan to optimize the Company's operations in response to a continuing business contraction (the "Fiscal 2018 Plan"). The additional restructuring initiatives are intended to reduce the company's core structure and related operating costs, improve its competitiveness, and facilitate the achievement of acceptable and sustainable profitability. The Fiscal 2018 Plan focuses mainly on optimizing specific aspects of global workforce, increasing the proportion of work performed in low cost offshore locations and re-balancing the pyramid structure. Additionally, this plan included global facility restructuring, including a global data center restructuring program. Costs incurred to date under the Fiscal 2018 Plan total $772 million, comprising $585 million in employee severance and $187 million of facilities costs.

~~Fiscal 2017 Plan~~Other Prior Year Plans

In May 2016, the Company initiated a restructuring plan to realign the Company's cost structure and resources to take advantage of operational efficiencies following recent acquisitions. During the fourth quarter of ~~Fiscal~~fiscal 2017, the Company expanded the plan to strengthen the Company's competitiveness and to optimize the workforce by increasing work performed in low-cost locations (the "Fiscal 2017 Plan"). ~~Total costs~~Costs incurred to date under the Fiscal 2017 Plan total ~~$221~~$215 million, comprising ~~$214~~$206 million in employee severance and $7$9 million of facilities costs.

~~Fiscal 2016 Plan~~

In September 2015, the Company initiated a restructuring plan to optimize utilization of facilities and right-size overhead organizations as a result of CSC's separation of its former NPS segment (the "Fiscal 2016 Plan"). No additional costs are expected to be expensed under this plan. Total costs incurred to date under the Fiscal 2016 Plan total $58 million, comprising $25 million in employee severance and $33 million of facilities costs.

~~Fiscal 2015 Plan~~

In June 2014, the Company initiated a restructuring plan to optimize the workforce in high cost markets, particularly in Europe, address the Company's labor pyramid and right shore its labor mix (the "Fiscal 2015 Plan"). No additional costs are expected to be expensed under this plan. Total costs incurred to date under the Fiscal 2015 Plan total $228 million, comprising $220 million in employee severance and $8 million of facilities costs.

Acquired Restructuring Liabilities

As a result of the ~~Merger,~~merger of Computer Sciences Corporation ("CSC") and HPES ("HPES Merger"), DXC acquired restructuring liabilities under restructuring plans that were initiated for HPES under plans approved by the HPE Board of Directors.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Restructuring Liability Reconciliations by Plan


																		Restructuring Liability as of March 31, 2019		Adoption of ASC 842⁽¹⁾			Costs Expensed, Net of Reversals⁽²⁾			Costs Not Affecting Restructuring Liability⁽³⁾			Cash Paid			Other⁽⁴⁾			Restructuring Liability as of September 30, 2019
Fiscal 2020 Plan
Workforce Reductions																		$	—	$	—		$	182		$	(7	)	$	(100	)	$	(4	)	$	71
Facilities Costs																		—		—			16			(8		)	(6		)	—			2
Total																		$	—	$	—		$	198		$	(15	)	$	(106	)	$	(4	)	$	73

Fiscal 2019 Plan
Workforce Reductions																		$	138	$	—		$	(10	)	$	(5	)	$	(59	)	$	(3	)	$	61
Facilities Costs																		68		(53		)	—			(1		)	(7		)	—			7
Total																		$	206	$	(53	)	$	(10	)	$	(6	)	$	(66	)	$	(3	)	$	68
	Restructuring Liability as of March 31, 2017		Acquired Balance as of April 1, 2017		Costs Expensed, net of reversals⁽¹⁾			Costs Not Affecting Restructuring Liability ⁽²⁾			Cash Paid			Other⁽³⁾		Restructuring Liability as of December 31, 2017
Fiscal 2018 Plan
Workforce Reductions	$	—	n/a		$	451		$	(13	)	$	(228	)	$	6	$	216	$	59	$	—		$	(9	)	$	—		$	(17	)	$	—		$	33
Facilities Costs	—		n/a		174			(15		)	(70		)	1		90		35		(36		)	(1		)	—			(2		)	4			—
Total	$	—	n/a		$	625		$	(28	)	$	(298	)	$	7	$	306	$	94	$	(36	)	$	(10	)	$	—		$	(19	)	$	4		$	33

Fiscal 2017 Plan
Workforce Reductions	$	155	n/a		$	(25	)	$	(6	)	$	(91	)	$	10	$	43
Facilities Costs	6		n/a		(2		)	—			(4		)	—		—
Total	$	161	n/a		$	(27	)	$	(6	)	$	(95	)	$	10	$	43

Fiscal 2016 Plan
Workforce Reductions	$	8	n/a		$	(1	)	$	—		$	(3	)	$	—	$	4
Facilities Costs	5		n/a		—			—			(3		)	—		2
Total	$	13	n/a		$	(1	)	$	—		$	(6	)	$	—	$	6

Fiscal 2015 Plan
Other Prior Year Plans
Workforce Reductions	$	3	n/a		$	—		$	—		$	(2	)	$	—	$	1	$	9	$	—		$	(1	)	$	—		$	—		$	—		$	8
Facilities Costs	—		n/a		—			—			—			—		—		1		(1		)	—			—			—			—			—
Total	$	3	n/a		$	—		$	—		$	(2	)	$	—	$	1	$	10	$	(1	)	$	(1	)	$	—		$	—		$	—		$	8

Acquired Liabilities
Workforce Reductions	n/a		$	256	$	1		$	(2	)	$	(139	)	$	6	$	122	$	51	$	—		$	1		$	—		$	(5	)	$	—		$	47
Facilities Costs	n/a		72		(3		)	(3		)	(29		)	1		38		$	18	—			(4		)	—			(1		)	(3		)	10
Total	n/a		$	328	$	(2	)	$	(5	)	$	(168	)	$	7	$	160	$	69	$	—		$	(3	)	$	—		$	(6	)	$	(3	)	$	57

⁽¹⁾ Represents restructuring liability recorded as an offset to right-of-use assets upon the adoption of ASC 842.

⁽²⁾ Costs expensed, net of reversals include ~~$29~~$14 million, $2$10 million, and $3$1 million of costs reversed from the Fiscal ~~2017~~2019 Plan, Fiscal ~~2016~~2018 Plan and ~~Acquired liabilities,~~Other Prior Year Plans, respectively.

⁽²⁾⁽³⁾Pension benefit augmentations recorded as a pension liability, asset impairments and ~~asset impairment.~~restructuring costs associated with right-of-use assets.

^{(3) (4)}Foreign currency translation adjustments.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Note 1215 - Pension and Other Benefit Plans

The Company offers a number of pension and other post-retirement benefit ("OPEB") plans, life insurance benefits, deferred compensation and defined contribution plans. Most of the Company's pension plans are not admitting new participants; therefore, changes to pension liabilities are primarily due to market fluctuations of investments for existing participants and changes in interest rates.

Defined Benefit Plans

The Company sponsors a number of defined benefit and post-retirement medical benefit plans for the benefit of eligible employees. The benefit obligations of the Company's U.S. pension, U.S. OPEB, and non-U.S. OPEB represent an insignificant portion of the Company's pension and other post-retirement benefits. As a result, the disclosures below include the Company's U.S. and non-U.S. pension plans on a global consolidated basis.

~~DXC TECHNOLOGY COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued~~

The Company contributed $8$23 million and ~~$40~~$33 million to the defined benefit pension and ~~other post-retirement benefit~~OPEB plans during the three and ~~nine~~six months ended ~~December 31, 2017.~~September 30, 2019, respectively. The Company expects to contribute an additional ~~$31~~$48 million during the remainder of fiscal ~~2018,~~2020, which does not include certain salary deferral programs and future potential termination benefits related to the Company's potential restructuring activities.

During the three and six months ended ~~December 31, 2017, we adopted amendments to certain U.K. pension plans which necessitated an interim remeasurement of~~September 30, 2019, the ~~plans assets~~Company accrued $6 million and ~~liabilities as of December 1, 2017. The remeasurement resulted in a net gain of~~ $17 million, ~~comprising a curtailment gain~~respectively, of ~~$40 million~~additional contractual termination benefits for certain employees as part of restructuring plans (see Note 14 - "Restructuring Costs"). These amounts are reflected in the projected benefit obligation and ~~an actuarial loss $23 million. The~~in the net ~~gain was recognized within costs of services and selling, general and administrative.~~periodic pension cost.

The components of net periodic pension ~~expense (benefit)~~income were:



	Three Months Ended						Six Months Ended
(in millions)	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
Service cost	$	23		$	22		$	46		$	45
Interest cost	57			63			117			128
Expected return on assets	(154		)	(138		)	(315		)	(287		)
Amortization of prior service costs	(2		)	(6		)	(4		)	(7		)
Contractual termination benefit	6			—			17			—
Curtailment gain	—			—			—			(1		)
Net periodic pension income	$	(70	)	$	(59	)	$	(139	)	$	(122	)

Three Months Ended Nine Months Ended
(in millions) December 31, 2017 December 30, 2016 December 31, 2017 December 30, 2016
Service cost $ 30
$ 6
$ 96
$ 17
Interest cost 63
20
184
62
Expected return on assets (133 ) (40 ) (393 ) (123 )
Amortization of prior service costs (5 ) (4 ) (13 ) (13 )
Contractual termination benefit 10
—
21
—
Curtailment gain (40 ) —
(40 ) —
Recognition of actuarial loss 23
—
23
—
Net periodic pension benefit $ (52 ) $ (18 ) $ (122 ) $ (57 )

The service cost component of net periodic pension income is presented in cost of services and selling, general and administrative and the other components of net periodic pension income are presented in other income, net, except for contractual termination benefit which is included in restructuring, in the Company’s statements of operations.

The weighted-average rates used to determine net periodic pension cost for the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2019 and ~~December~~September 30, ~~2016~~2018 were:



	September 30, 2019		September 30, 2018
Discount or settlement rates	2.4	%	2.3	%
Expected long-term rates of return on assets	5.8	%	5.3	%
Rates of increase in compensation levels	2.0	%	2.1	%

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

December 31, 2017 December 30, 2016
Discount or settlement rates 2.4 % 3.1 %
Expected long-term rates of return on assets 5.0 % 6.3 %
Rates of increase in compensation levels 2.7 % 2.6 %

Deferred Compensation Plans

Effective as of the HPES Merger, DXC assumed sponsorship of the Computer Sciences Corporation Deferred Compensation Plan, which was renamed the “DXC Technology Company Deferred Compensation Plan” (the “DXC DCP”) and adopted the Enterprise Services Executive Deferred Compensation Plan (the “ES DCP”). Both plans are non-qualified deferred compensation plans maintained for a select group of management, highly compensated employees and non-employee directors.

The DXC DCP covers eligible employees who participated in CSC’s Deferred Compensation Plan prior to the HPES Merger. The ES DCP covers eligible employees who participated in the HPE Executive Deferred Compensation Plan prior to the HPES Merger. Both plans allow participating employees to defer the receipt of current compensation to a future distribution date or event above the amounts that may be deferred under DXC’s tax-qualified 401(k) plan, the DXC Technology Matched Asset Plan. Neither plan provides for employer contributions. As of April 3, 2017, the ES DCP does not admit new participants.

~~DXC TECHNOLOGY COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued~~

Certain management and highly compensated employees are eligible to defer all, or a portion of, their regular salary that exceeds the limitation set forth in Internal Revenue Section 401(a)(17) and all or a portion of their incentive compensation. Non-employee directors are eligible to defer up to 100% of their cash compensation. The liability, which is included in ~~Other~~other long-term liabilities in the Company's ~~condensed consolidated~~ balance sheets, amounted to ~~$74~~$55 million as of ~~December 31, 2017~~September 30, 2019 and ~~$67~~$59 million as of March 31, ~~2017.~~2019.

Note 1316 - Income Taxes

~~On December 22, 2017,~~The Company's effective tax rate from continuing operations ("ETR") was (5.8)% and 22.0% for the ~~President~~three months ended September 30, 2019 and September 30, 2018, respectively, and (8.6)% and 29.2% for the six months ended September 30, 2019 and September 30, 2018, respectively. For the three months ended September 30, 2019, the primary drivers of the United States signed into law comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Act"). The Act makes significant changes to the Internal Revenue Code of 1986 with varying effective dates. The Act reduces the maximum corporate income tax rate to 21% effective as of January 1, 2018, requires companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries, broadens the tax base, generally eliminates U.S. federal income taxes on dividends from foreign subsidiaries, creates a new limitation on the deductibility of interest expense, limits the deductibility of certain executive compensation, and allows for immediate capital expensing of certain qualified property. It also requires companies to pay minimum taxes on foreign earnings and subjects certain payments from U.S. corporations to foreign related parties to additional taxes. As a fiscal year taxpayer, the Company will not be subject to many of the tax law provisions until fiscal year 2019; however, U.S. generally accepted accounting principles require companies to revalue their deferred tax assets and liabilities with resulting tax effects accounted for in the reporting period of enactment including retroactive effects. Section 15 of the Internal Revenue Code stipulates that the Company's fiscal year ending March 31, 2018, will have an estimated blended corporate U.S. federal income tax rate of 28.87%, which is based on the applicable tax rates before and after the Act and the number of days in the Company's federal tax year pro-rated for actual earnings through its October 31, 2017 tax year-end.

The SEC staff issued SAB 118, which provides guidance on accounting for the tax effects of the Act. SAB 118 provides a measurement period that should not extend beyond one year from the Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws thatETR were ~~in effect immediately before the enactment of the Act.~~

~~Based on a preliminary assessment of the Act, the Company believes that the most significant impact on the Company’s consolidated financial statements are as follows:~~

~~Reduction of US federal corporate income tax rate:~~ As discussed above, the Act reduces the corporate tax rate to 21%, effective January 1, 2018. For certain DTAs and DTLs, the Company has recorded a provisional deferred income tax discrete benefit of $320 million, resulting in a $320 million decrease in net deferred tax liabilities as of December 31, 2017. While the Company is able to make a reasonable estimate of the impact of the ~~reduction~~non-deductible goodwill impairment charge, the non-taxable gain on the arbitration award, the global mix of income, an increase in ~~corporate~~prior year U.S. federal research and development income tax ~~rate,~~credits, and an increase in unrecognized tax benefits primarily related to the ~~amount will be impacted by changes in estimated deferred~~disallowance of certain legacy CSC foreign restructuring expenses deducted on the U.S. federal tax ~~balances prior to and after December 22, 2017~~return for ~~fiscal~~tax year March 31, ~~2018.~~

~~Deemed Repatriation Transition Tax:~~ ~~The deemed repatriation one-time~~2013. For the six months ended September 30, 2019, the primary drivers of the ETR were the impact of the non-deductible goodwill impairment charge, the non-taxable gain on the arbitration award, the global mix of income, an increase in unrecognized tax benefits primarily related to the disallowance of certain legacy CSC foreign restructuring expenses deducted on the U.S. federal tax return for tax year March 31, 2013 and an increase in prior year U.S. federal research and development income tax credits. For the three and six months ended September 30, 2018, the primary unfavorable drivers of the ETR were the global mix of income, the increase in the provisional transition tax, ~~is a~~an increase in state tax expense due to remeasurement of deferred taxes, and the impact of U.S. proposed regulations on ~~previously untaxed accumulated and current earnings and profits (E&P) of~~the ability to claim certain foreign tax credits. The primary favorable drivers of the ~~Company's~~ETR were due to the filing of the October 31, 2017 U.S. federal tax return and a decrease in valuation allowances on certain foreign ~~subsidiaries. To determine~~subsidiary deferred tax assets.

The tax expense associated with discontinued operations for the six months ended September 30, 2019 was $0 million as compared to $18 million during the same period of the prior fiscal year. The primary driver of the variance in the tax expense for the six months ended September 30, 2019 and September 30, 2018 was the difference in income before tax for the respective periods.

As the result of the issuance of new U.S. Treasury regulations in the first quarter of fiscal 2020, the Company changed its permanent reinvestment assertion in the first quarter of fiscal 2020 with respect to certain foreign corporations, reducing the amount that will ultimately be repatriated to the U.S. by approximately $506 million. With the exception of ~~the transition tax,~~this change, DXC's prior permanent reinvestment assertion, that the Company ~~must determine, in addition~~will repatriate all current and accumulated earnings for all non-U.S. subsidiaries other than India, continues to apply. DXC does not believe this assertion change will have an adverse effect on the Company as U.S. cash needs will be satisfied from other ~~factors, the amount of post-1986 E&P of the relevant foreign subsidiaries, as well as the amount~~sources of non-U.S. ~~income taxes paid on such~~ earnings. The Company is able to make a reasonable estimate of the transition tax and recorded a provisional discrete income tax expense and related liability of $386 million. However, the Company is continuing to gather additional information to compute the amount of the transition tax, including further analysis regarding the amount and composition of the Company’s and HPES’s historical foreign earnings and taxes.

~~The Company's accounting for the following elements of the Act is incomplete, and it is not yet able to make reasonable estimates of the effects. Therefore, no provisional adjustments were recorded.~~

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

~~Capital expensing:~~ The Company has not yet completed all of the computations necessary or completed an inventory of its 2018 expenditures that qualify for immediate expensing to determine a reasonable estimate. The income tax effects for this change in law require further analysis due to the volume of data required to complete the calculations.

~~Executive compensation~~: As a result of changes made by the Act, starting with compensation paid in fiscal 2019, Section 162(m) will limit us from deducting compensation, including performance-based compensation, in excess of $1 million paid to anyone who, starting in 2018, serves as the Chief Executive Officer or Chief Financial Officer, or who is among the three most highly compensated executive officers for any fiscal year. The only exception to this rule is for compensation that is paid pursuant to a binding contract in effect on November 2, 2017 that would have otherwise been deductible under the prior Section 162(m) rules. Accordingly, any compensation paid in the future pursuant to new compensation arrangements entered into after November 2, 2017, even if performance-based, will count towards the $1 million fiscal year deduction limit if paid to a covered executive. The Company has not yet completed an analysis of the binding contract requirement on the various compensation plans to determine the impact of the law change.

~~Global intangible low taxed income (GILTI):~~ The Act creates a new requirement that certain income (i.e., GILTI) earned by controlled foreign corporations (CFCs) must be included currently in the gross income of the CFCs’ U.S. shareholder for taxable years of foreign corporations beginning after December 31, 2017. GILTI is the excess of the shareholder’s “net CFC tested income” over the net deemed tangible income return, which is currently defined as the excess of (1) 10 percent of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain interest expense taken into account in the determination of net CFC-tested income.

Because of the complexity of the new GILTI tax rules, the Company is continuing to evaluate this provision of the Act and the application of ASC 740. Under U.S. GAAP, the Company is allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into a company’s measurement of its deferred taxes (the “deferred method”). The Company's selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing its global income to determine whether we expect to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be as well as a final determination of a tax year-end for the Company. Because whether the Company expects to have future U.S. inclusions in taxable income related to GILTI depends on not only its current structure and estimated future results of global operations but also its intent and ability to modify its structure and business, the Company is not yet able to reasonably estimate the effect of this provision of the Act in the current reporting period. Therefore, the Company has not made any adjustments related to potential GILTI tax in its financial statements and has not made an accounting policy decision.

Due to anticipated future guidance to be issued by the Internal Revenue Service, interpretation of the changes in tax law and analysis of the information required to complete the calculations, the amounts recorded as a result of the Act in the period are provisional and subject to material changes. The Company will continue to analyze the Act’s impact on its consolidated financial statements and adjust the provisional amounts recorded as our analysis is completed, no later than December 2018.

The Company's income tax (benefit) expense was $(341) million and $13 million for the three months ended December 31, 2017 and December 30, 2016, respectively, and $(207) million and $(25) million for the nine months ended December 31, 2017 and December 30, 2016, respectively. For the three and nine months ended December 31, 2017, the primary drivers of the effective tax rate ("ETR") were the remeasurement of deferred tax assets and liabilities as a result of the Act, the remeasurement of a deferred tax liability relating to the outside basis difference of HPES foreign subsidiaries, the accrual of a one-time transition tax on estimated unremitted foreign earnings and India dividend distribution tax (DDT) accrual on historic earnings and taxes. The primary drivers of the ETR for the three and nine months ended December 30, 2016 were the global mix of income, release of a valuation allowance in a non-U.S. jurisdiction and excess tax benefits related to employee share-based payment awards.

As a result of the Merger and changes in U.S. cash requirements, a deferred tax liability of $545 million was recorded for U.S. income taxes based on the estimated historical taxable earnings of the HPES foreign subsidiaries. In addition, the Company recorded an estimated liability of $50 million for India DDT tax based on estimated historical taxable earnings of the HPES India subsidiary. These liabilities were recorded as part of acquisition accounting.

~~DXC TECHNOLOGY COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued~~

As a result of the Act, the Company has changed its permanently reinvested assertion on the remaining CSC foreign subsidiaries and will no longer consider current and accumulated earnings for all non-U.S. subsidiaries permanently reinvested, except for current year Indian earnings. The deferred tax liability of $575 million has been released and the Company's estimated liability for India DDT was increased by $30 million to $80 million to include estimated historical taxable earnings for CSC Indian subsidiaries. For those investments from which the Company was able to make a reasonable estimate of the tax effects of its change in assertion, the Company has recorded a provisional estimate for withholding taxes, state taxes, and India DDT of $115 million. For those investments from which the Company was not able to make a reasonable estimate, it has not recorded any deferred taxes. The Company will record the tax effects of any change in its prior assertion with respect to these investments, and disclose any unrecognized deferred tax liability for temporary differences related to its foreign investments, if practicable, in the period that it is first able to make a reasonable estimate, no later than December 2018.

In connection with the ~~Merger,~~Separation of USPS, the Company entered into a tax matters agreement with HPE. HPE generally will be responsible for pre-Merger tax liabilities including adjustments made by tax authorities to HPES U.S. and non-U.S. income tax returns. Likewise, DXC is liable to HPE for income tax receivables and refunds which it receives related to pre-Merger periods.Perspecta. Pursuant to the tax matters agreement, the Company generally will be responsible for tax liabilities arising prior to the Separation of USPS. Income tax liabilities transferred to Perspecta primarily relate to pre-HPES Merger periods, for which the Company is indemnified by HPE pursuant to the tax matters agreement between the Company and HPE. The Company is also liable to HPE for tax receivables and refunds which it receives from Perspecta related to pre-HPES Merger periods that were transferred to Perspecta. Pursuant to the tax matters agreement with Perspecta, the Company has recorded a tax indemnification receivable from Perspecta of $77 million and a tax indemnification payable to Perspecta of $64 million related to income tax and other tax liabilities. As a result of the HPES Merger, the Company continues to have a net ~~payable~~receivable of~~$24~~ $18 million ~~due~~from HPE, comprised of a $107 million tax indemnification receivable related to ~~$111~~tax payables, a $43 million of tax indemnification receivable related to uncertain tax positions ~~net~~(net of related deferred tax ~~benefits, $72 million of tax indemnification receivable related to other tax payables~~benefits), and ~~$207~~$132 million of tax indemnification payable related to other tax receivables.

As part of the acquisition of HPES, DXC acquired uncertain tax liabilities including interest and penalties of $115 million for prior year income taxes, which are indemnified by HPE. There were no other material changes to uncertain tax positions during the three and nine months ended December 31, 2017.

The IRS is examining CSC's federal income tax returns for fiscal 2008 through ~~2016.~~2017. With respect to CSC's fiscal 2008 through 2010 federal tax returns, the Company previously entered into negotiations for a resolution through settlement with the IRS Office of Appeals. The IRS examined several issues for this audit that resulted in various audit adjustments. The Company and the IRS Office of Appeals have an agreement in principle as to some, but not all of these adjustments.

The Company has agreed to extend the statute of limitations associated with this audit through ~~September~~June 30, ~~2018.~~ 2020.

In ~~addition, during~~ the first quarter of fiscal ~~2018,~~2020, we filed for competent authority relief relating to certain legacy CSC foreign restructuring expenses deducted for the U.S. federal tax return for tax year March 31, 2013. The Company has agreed to extend the statute of limitations associated with this audit through March 31, 2020. In the second quarter of fiscal 2020, the Company received a Revenue ~~Agent’s~~Agent's Report with proposed adjustments to CSC's fiscal ~~2011~~2014 through ~~2013~~2017 federal returns. The Company has filed a protest offor certain of these adjustments towith the IRS Office of Appeals. The ~~IRS is also examining CSC's~~Company has agreed to extend the statute of limitations for the fiscal 2014 through fiscal 2016 ~~federal income tax returns.~~through December 31, 2020. The Company ~~has not received any adjustments~~expects to reach a resolution for ~~this cycle. The Company continues~~all years no earlier than the third quarter of fiscal 2021 except agreed issues related to ~~believe that its~~fiscal 2008 through 2010 federal tax ~~positions~~returns, which are ~~more-likely-than-not sustainable and that the Company will ultimately prevail.~~expected to be resolved within twelve months.

In addition, the Company may settle certain other tax examinations, have lapses in statutes of limitations, or voluntarily settle income tax positions in negotiated settlements for different amounts than the Company has accrued asfor unrecognized tax benefits. In the second quarter of fiscal 2020 the Company’s liability for uncertain tax ~~positions.~~positions increased by $43 million (excluding interest and penalties and related tax attributes) largely due to additions for U.S. federal research and development credits and certain legacy CSC foreign restructuring expenses deducted in the U.S. The Company may need to accrue and ultimately pay additional amounts for tax positions that previously met a more-likely-than-not standard if such positions are not upheld. Conversely, the Company could settle positions by payment with the tax authorities for amounts lower than those that have been accrued or extinguish a position through payment. The Company believes the outcomes that are reasonably possible within the next 12 months may result in a reduction in liability for uncertain tax positions of ~~$14~~$13 million to ~~$20~~$17 million, excluding interest, penalties and tax carry-forwards.

~~DXC TECHNOLOGY COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~

Note17 - ~~continued~~

~~Note~~14 - Stockholders' Equity

~~Description of Capital Stock~~

~~The Company has authorized share capital consisting of 750,000,000 shares of common stock, par value $.01 per share, and 1,000,000 shares of preferred stock, par value $0.01 per share.~~

Each share of common stock is equal in all respects to every other share of common stock of the Company. Each share of common stock is entitled to one vote per share at each annual or special meeting of stockholders for the election of directors and upon any other matter coming before such meeting. Subject to all the rights of the preferred stock, dividends may be paid to holders of common stock as and when declared by the Board of Directors.

The Company's charter requires that preferred stock must be all of one class but may be issued from time to time in one or more series, each of such series to have such full or limited voting powers, if any, and such designations, preferences and relative, participating, optional or other special rights or qualifications, limitations or restrictions as provided in a resolution adopted by the Board of Directors. Each share of preferred stock will rank on a parity with each other share of preferred stock, regardless of series, with respect to the payment of dividends at the respectively designated rates and with respect to the distribution of capital assets according to the amounts to which the shares of the respective series are entitled.

Share ~~repurchases~~Repurchases

On April 3, 2017, DXC announced the establishment of a share repurchase program approved by the Board of Directors with an initial authorization of $2.0 billion for future repurchases of outstanding shares of DXC common stock. On November 8, 2018, DXC's Board of Directors approved an incremental $2.0 billion share repurchase authorization. An expiration date has not been established for this repurchase plan. Share repurchases may be made from time to time through various means, including in open market purchases, 10b5-1 plans, privately-negotiated transactions, accelerated stock repurchases, block trades and other transactions, in compliance with Rule 10b-18 under the Exchange Act as well as, to the extent applicable, other federal and state securities laws and other legal requirements. The timing, volume, and nature of share repurchases pursuant to the share repurchase plan are at the discretion of management and may be suspended or discontinued at any time.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

As part of the share repurchase program, during the first quarter of fiscal 2020, DXC entered into an accelerated share repurchase ("ASR") agreement with a third-party financial institution by advancing $200 million including a $100 million prepayment. At inception, the ASR was initially settled by delivery of 1,849,194 shares of common stock to the Company. During the second quarter of fiscal 2020, DXC received an additional 1,805,350 shares of common stock. In total, 3,654,544 shares of common stock were repurchased under the ASR for $200 million, resulting in an average price paid of $54.73 per share.

The shares repurchased are retired immediately and included in the category of authorized but unissued shares. The excess of purchase price over par value of the common shares is allocated between additional paid-in capital and retained earnings. The details of shares repurchased are shown below:

Fiscal Period Number of Shares Repurchased Average Price per Share Amount (in millions)
1st Quarter 2018 250,000
$ 77.39
$ 19
2nd Quarter 2018 591,505
78.20
47
3rd Quarter 2018 —
—
—
Total 841,505
$ 77.96
$ 66



	Fiscal 2020					Fiscal 2019
Fiscal Period	Number of Shares Repurchased	Average Price Per Share		Amount (in millions)		Number of Shares Repurchased	Average Price Per Share		Amount (in millions)⁽¹⁾
1st Quarter
Open market purchases	5,510,415	$	54.44	$	300	3,779,194	$	85.86	$	324
ASR	1,849,194	54.08		100		—	—		—
1st Quarter Total	7,359,609	54.35		400		3,779,194	85.86		324
2nd Quarter
Open market purchases	4,414,840	33.96		150		1,448,729	87.16		127
ASR	1,805,350	55.39		100		—	—		—
2nd Quarter Total	6,220,190	40.18		250		1,448,729	87.16		127
Total	13,579,799	$	47.86	$	650	5,227,923	$	86.22	$	451

⁽¹⁾DXC ~~TECHNOLOGY COMPANY~~recorded $9 million as an accrued liability for shares purchased but not yet settled in cash as of September 30, 2018.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued~~

Accumulated ~~other comprehensive income (loss)~~Other Comprehensive Income (Loss)

The following table shows the changes in accumulated other comprehensive income (loss), net of taxes:

(in millions) Foreign Currency Translation Adjustments Cash Flow Hedges Pension and Other Post-retirement Benefit Plans Accumulated Other Comprehensive (Loss) Income
Balance at March 31, 2017 $ (458 ) $ 20
$ 276
$ (162 )
Current-period other comprehensive income 62
—
—
62
Amounts reclassified from accumulated other comprehensive income (8 ) —
(10 ) (18 )
Balance at December 31, 2017 $ (404 ) $ 20
$ 266
$ (118 )



(in millions)	Foreign Currency Translation Adjustments			Cash Flow Hedges			Available-for-sale Securities		Pension and Other Post-retirement Benefit Plans			Accumulated Other Comprehensive (Loss)
Balance at March 31, 2019	$	(517	)	$	(3	)	$	9	$	267		$	(244	)
Current-period other comprehensive loss	(184		)	2			2		—			(180		)
Amounts reclassified from accumulated other comprehensive income (loss)	—			—			—		(4		)	(4		)
Balance at September 30, 2019	$	(701	)	$	(1	)	$	11	$	263		$	(428	)

(in millions) Foreign Currency Translation Adjustments Cash Flow Hedges Pension and Other Post-retirement Benefit Plans Accumulated Other Comprehensive Loss
Balance at April 1, 2016 $ (399 ) $ (1 ) $ 289
$ (111 )
Current-period other comprehensive (loss) income (180 ) 15
—
(165 )
Amounts reclassified from accumulated other comprehensive loss —
—
(10 ) (10 )
Balance at December 30, 2016 $ (579 ) $ 14
$ 279
$ (286 )

~~Note 15 - Stock Incentive Plans~~

~~Equity Plans~~

As a result of the Merger, all outstanding CSC awards of stock options, stock appreciation rights, restricted stock units ("CSC RSUs"), including performance-based restricted stock units, relating to CSC common stock granted under the 2011 Omnibus Incentive Plan, the 2007 Employee Incentive Plan and the 2010 Non-Employee Director Incentive Plan (the “CSC Equity Incentive Plans”) held by CSC employees and non-employee directors were converted into an adjusted award relating to DXC common shares subject to the same terms and conditions after the Merger as the terms and conditions applicable to such awards prior to the Merger.

Under the terms of the CSC Equity Incentive Plans and the individual award agreements, all unvested equity incentive awards, including all stock options and CSC RSUs held by all participants under the plans, including its named executive officers and directors, are subject to accelerated vesting in whole or in part upon the occurrence of a change in control or upon the participant’s termination of employment on or after the occurrence of a change in control under certain circumstances ("CIC events"). As a result of CIC events triggered by the Merger, approximately $3.6 million unvested awards became vested on April 1, 2017 and $26 million of incremental stock compensation expense was recognized. CSC options granted in fiscal 2017 vested 33% upon the Merger; the remaining 67% were converted into DXC RSUs based on the accounting value of the options. These RSUs will vest on the second and third anniversaries of the original option grant date. For equity incentive awards granted by HPE under HPE equity incentive plans to HPES prior to the Merger, outstanding options (vested and unvested) and unvested RSU awards were converted upon the Merger into

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

~~economically equivalent DXC option and RSU awards, with terms and conditions substantially the same as the terms of such awards prior to the Merger.~~



(in millions)	Foreign Currency Translation Adjustments			Cash Flow Hedges			Available-for-sale Securities			Pension and Other Post-retirement Benefit Plans			Accumulated Other Comprehensive Income (Loss)
Balance at March 31, 2018	$	(261	)	$	9		$	9		$	301		$	58
Current-period other comprehensive loss	(408		)	(30		)	(1		)	—			(439		)
Amounts reclassified from accumulated other comprehensive loss	—			5			—			(6		)	(1		)
Balance at September 30, 2018	$	(669	)	$	(16	)	$	8		$	295		$	(382	)

~~In March 2017, prior to the Merger, the board of directors and shareholders of HPES approved DXC’s 2017 Omnibus~~

Note 18 - Stock Incentive Plan (the “DXC Employee Equity Plan”), DXC’s 2017 Non-Employee Director Incentive Plan (the “DXC Director Equity Plan”) and DXC’s 2017 Share Purchase Plan (“DXC Share Purchase Plan”). The terms of the DXC Employee Equity Plan and DXC Director Plans

Equity Plans are substantially similar to the terms of the CSC Equity Incentive Plans. The former allows DXC to grant stock options (including incentive stock options), stock appreciation rights (“SARs”), restricted stock, RSUs (including PSUs), and cash awards intended to qualify for the performance-based compensation exemption to the $1 million deduction limit under Section 162(m) of the Internal Revenue Code (collectively the "Awards"). Awards are typically subject to vesting over the 3-year period following the grant date. Vested stock options are generally exercisable for a term of 10years from the grant date. All of DXC’s employees are eligible for awards under the plan. The Company issues authorized but previously unissued shares upon the granting of stock options and the settlement of RSUs and PSUs.

The Compensation Committee of the Board of Directors (the "Board") has broad authority to grant awards and otherwise administer the DXC Employee Equity Plan. The plan became effective March 30, 2017 and will continue in effect for a period of 10 years thereafter, unless earlier terminated by the Board. The Board has the authority to amend the plan in such respects as it deems desirable, subject to approval of DXC’s stockholders for material modifications.

RSUs represent the right to receive ~~one~~1 share of DXC common stock upon a future settlement date, subject to vesting and other terms and conditions of the award, plus any dividend equivalents accrued during the award period. In general, if the employee’s status as a full-time employee is terminated prior to the vesting of the RSU grant in full, then the RSU grant is automatically canceled on the termination date and any unvested shares and dividend equivalents are forfeited. Certain executives were awarded service-based "career share" RSUs for which the shares are settled over the 10 anniversaries following the executive's separation from service as a full-time employee, provided the executive complies with certain non-competition covenants during that period.

The Company also grants PSUs, which generally vest over a period of 3 years. The number of PSUs that ultimately vest is dependent upon the Company’s achievement of certain specified financial performance criteria over a three-year period. If the specified performance criteria are met, awards are settled for shares of DXC common stock and dividend equivalents upon the filing with the SEC of the Annual Report on Form 10-K for the last fiscal year of the performance period. PSU awards include the potential for up to 25% of the shares granted to be earned after the first and second fiscal years if certain of the Company's performance targets are met early, subject to vesting based on the participant's continued employment through the end of the three-year performance period.

The terms of the DXC Director Equity Plan allow DXC to grant RSU awards to non-employee directors of DXC. Such RSU awards vest in full at the earlier of (i) the first anniversary of the grant date or (ii) the next annual meeting date, and are automatically redeemed for DXC common stock and dividend equivalents either at that time or, if an RSU deferral election form is submitted, upon the date or event elected by the director. Distributions made upon a director’s separation from the Board may occur in either a lump sum or in annual installments over periods of 5, 10, or 15 years, per the director’s election. In addition, RSUs vest in full upon a change in control of DXC.

The DXC Share Purchase Plan allows DXC’s employees located in the United Kingdom to purchase shares of DXC’s common stock at the fair market value of such shares on the applicable purchase date. There were no5,581 and 10,481 shares purchased under this plan during the three and ~~nine~~six months ended ~~December 31, 2017.~~September 30, 2019.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

The Board has reserved for issuance shares of DXC common stock, par value $0.01 per share, under each of the plans as detailed below:



	As of September 30, 2019
	Reserved for issuance	Available for future grants
DXC Employee Equity Plan	34,200,000	19,790,522
DXC Director Equity Plan	230,000	33,451
DXC Share Purchase Plan	250,000	224,908
Total	34,680,000	20,048,881

As of December 31, 2017
Reserved for issuance Available for future grants
DXC Employee Equity Plan 34,200,000
22,403,601
DXC Director Equity Plan 230,000
121,334
DXC Share Purchase Plan 250,000
250,000
Total 34,680,000
22,774,935

Stock Options



	Number of Option Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (in millions)
Outstanding as of March 31, 2019	2,318,768		$	30.40	4.80	$	79
Granted	—		$	—
Exercised	(301,909	)	$	32.20		$	7
Canceled/Forfeited	(618	)	$	48.60
Expired	(91,442	)	$	33.37
Outstanding as of September 30, 2019	1,924,799		$	29.97	4.90	$	8
Vested and expected to vest in the future as of September 30, 2019	1,924,648		$	29.97	4.90	$	8
Exercisable as of September 30, 2019	1,922,449		$	29.94	4.90	$	8

Number
of Option Shares

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value
(in millions)
Outstanding as of March 31, 2017 4,767,396
$ 38.70
8.01 $ 145
HPE options converted to DXC options at Merger 2,654,872
$ 46.56

CSC Options converted to RSUs due to Merger (1,521,519 ) $ 51.00

Exercised (2,390,929 ) $ 40.07
$ 104
Canceled/Forfeited (2,629 ) $ 57.08

Expired (46,578 ) $ 42.40

Outstanding as of December 31, 2017 3,460,613
$ 38.31
5.58 $ 196
Vested and expected to vest in the future as of December 31, 2017 3,455,538
$ 38.28
5.58 $ 196
Exercisable as of December 31, 2017 3,419,060
$ 38.02
5.57 $ 194

Restricted Stock ~~Units~~



	Employee Equity Plan				Director Equity Plan
	Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value
Outstanding as of March 31, 2019	2,809,775		$	67.27	75,750		$	46.31
Granted	2,656,777		$	48.56	68,200		$	35.70
Settled	(668,412	)	$	49.70	(21,971	)	$	63.82
Canceled/Forfeited	(486,330	)	$	61.43	—		$	—
Outstanding as of September 30, 2019	4,311,810		$	59.13	121,979		$	37.23

Employee Equity Plan Director Equity Plan
Number of
Shares Weighted
Average
Grant Date
Fair Value Number of
Shares
Weighted
Average
Grant Date
Fair Value
Outstanding as of March 31, 2017 3,710,985
$ 34.86
85,766
$ 34.19
Granted 1,566,361
$ 79.11
22,900
$ 84.40
HPE RSUs converted to DXC RSUs due to Merger 95,683
$ 69.33
—
$ —
Options converted to RSUs due to Merger 609,416
$ 32.58
—
$ —
Settled (1,926,043 ) $ 35.89
(39,980 ) $ 45.25
Canceled/Forfeited (172,881 ) $ 54.65
—
$ —
Outstanding as of December 31, 2017 3,883,521
$ 51.80
68,686
$ 44.50

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Share-Based Compensation


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
(in millions)	December 31, 2017		December 30, 2016		December 31, 2017		December 30, 2016		September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Total share-based compensation cost	$	19	$	21	$	76	$	56	$	30	$	19	$	48	$	41
Related income tax benefit	$	5	$	7	$	24	$	18	$	7	$	3	$	11	$	6
Total intrinsic value of options exercised	$	30	$	6	$	104	$	60	$	1	$	25	$	7	$	35
Tax benefits from exercised stock options and awards	$	9	$	4	$	62	$	30	$	1	$	14	$	10	$	19

As of ~~December 31, 2017,~~September 30, 2019, total unrecognized compensation expense related to unvested DXC stock options and unvested DXC RSUs, net of expected forfeitures was $1 million and ~~$136~~$163 million, respectively. The unrecognized compensation expense for unvested RSUs is expected to be recognized over a weighted-average period of ~~2.02~~2.17 years.

Note 1619 - Cash Flows

Cash payments for interest on indebtedness and income taxes and other select non-cash activities are as follows:



	Six Months Ended
(in millions)	September 30, 2019			September 30, 2018
Cash paid for:
Interest	$	178		$	149
Taxes on income, net of refunds ⁽¹⁾	$	130		$	74

Non-cash activities:
Operating:
ROU assets obtained in exchange for lease, net ⁽²⁾	$	142		$	—
Prepaid assets acquired under long-term financing	$	14		$	—
Investing:
Capital expenditures in accounts payable and accrued expenses	$	92		$	28
Capital expenditures through finance lease obligations	$	380		$	396
Assets acquired under long-term financing	$	248		$	76
(Decrease) / increase in deferred purchase price receivable	$	(204	)	$	818
Financing:
Dividends declared but not yet paid	$	55		$	54

Nine Months Ended
(in millions) December 31, 2017 December 30, 2016
Cash paid for:
Interest $ 188
$ 70
Taxes on income, net of refunds $ 235
$ 43

Non-cash activities:
Investing:
Capital expenditures in accounts payable and accrued expenses $ 4
$ 33
Capital expenditures through capital lease obligations $ 510
$ 34
Assets acquired under long-term financing $ 284
$ 75
Financing:
Dividends declared but not yet paid $ 52
$ 20
Stock issued for the acquisition of HPES $ 9,850
$ —

⁽¹⁾ Income tax refunds were $20 million and $157 million for the six months ended September 30, 2019 and September 30, 2018, respectively.

⁽²⁾ Net of $87 million change in lease classification from operating to finance lease.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Note 1720 - Segment Information

DXC has a matrix form of organization and is managed in several different and overlapping groupings including services, industry and geographic region. As a result and in accordance with accounting standards, operating segments are organized by the type of services provided. DXC's chief operating decision maker ("CODM"), the chief executive officer, obtains, reviews, and manages the Company’s financial performance based on these segments. The CODM uses these results, in part, to evaluate the performance of, and allocate resources to, each of the segments.

As a result of the ~~Merger, the HPES legacy~~Separation, USPS is no longer included as a reportable segment and its results have been reclassified to discontinued operations, net of taxes, for all periods presented. See Note 4 - "Divestitures". DXC now operates in 2 reportable segments ~~were combined with GBS and GIS, and the HPES U.S. public sector business, USPS, is now a separate operating segment. DXC's operating segments are the same~~ as its reportable segments: GBS, GIS, and USPS. In addition, DXC management changed its primary segment performance measure to segment profit from the previously used consolidated segment operating income. Prior periods presented have been restated to reflect this change. The accounting policies of the reportable segments are the same as those described ~~in Note 1 - “Summary of Significant Accounting Policies.”~~below:

Global Business Services

GBS provides innovative technology solutions ~~including Enterprise and Cloud Applications, Consulting Application Services, and Analytics. GBS also includes our Industry-aligned IP and Business Process Services. These offerings~~that help its clients address key business challenges and accelerate digital transformations tailored to each ~~customer’s~~client’s industry and specific objectives. GBS ~~strives to help clients understand and take advantage of IT modernization and virtualization across the IT portfolio (hardware, software, networking, storage, and computing assets).~~offerings include:


•	Enterprise, Cloud Applications and Consulting. GBS provides industry, business process systems integration and technical delivery experience to maximize value from enterprise application portfolios. GBS also helps clients accelerate their digital transformations and business results with industry, business, technology and complex integration services.


•	Application Services. GBS's comprehensive services helps clients modernize, develop, test and manage their applications.


•	Analytics. GBS's portfolio of analytics services and robust partner ecosystem helps clients gain rapid insights and accelerate their digital transformation journeys.


•	Business Process Services. GBS provides seamless digital integration and optimization of front and back office processes, including its Agile Process Automation approach.


•	Industry Software and Solutions. GBS's industry-specific solutions enable businesses to quickly integrate technology, transform their operations and develop new ways of doing business. GBS's vertical-specific IP includes insurance, healthcare and life sciences, travel and transportation, and banking and capital markets solutions.

Enterprise and Cloud Applications provide industry, business process, systems integration, technical delivery experience, and innovation to deliver value across our clients' enterprise application portfolios. The Company's Consulting professionals act as a trusted source for clients in creating bold digital strategies, designing innovative digital experiences, managing complex digital integration, and delivering safe and secure digital operations that help the Company's clients disrupt their industry, without disrupting their business operations. DXC's Application Services offerings utilize the Company's IP and world-class partner ecosystem to modernize and transform its clients' applications landscape, develop and manage their portfolio and roadmap, and execute with precision. In Analytics, DXC offers a complete portfolio of services to rapidly provide insights and drive impactful business outcomes. DXC's Partner Network allows clients to leverage investment while building the analytic solutions of tomorrow. DXC’s industry-aligned IP is centered on the insurance, banking, healthcare, and travel and transportation industries.

Activities are primarily related to vertical alignment of software solutions and process-based IP that power mission-critical transaction engines. DXC's Business Process Services combine business process expertise and intellectual property with the resources of a global Tier I IT services company, leveraging intelligent automation and innovative solutions to reduce manual effort and the associated cost.

Key competitive differentiators for GBS include global scale, solution objectivity, depth of industry expertise, strong partnerships, vendor and product independence and end-to-end solutions and capabilities. Evolving business demands such as globalization, fast-developing economies, government regulation and growing concerns around risk, security, and compliance drive demand for these offerings.

Global Infrastructure Services

GIS provides Cloud, Platforms and Infrastructure Technology Outsourcing, Workplace and Mobility and Security solutions to commercial clients globally. This includes DXC’s next-generation cloud offerings, including Infrastructure as a Service ("IaaS"), private cloud solutions, and Storage as a Service. GIS provides a portfolio of ~~standard~~ offerings that ~~have~~deliver predictable outcomes and measurable results while reducing business risk and operational costs for clients. Further, DXC's industry-leading security solutions help clients predict attacks, proactively respond to threats, ensure compliance, and protect data, applications, infrastructure and endpoints. To provide clients with differentiatedGIS offerings GIS maintains a Partner Network to make investments in developing unique offerings and go-to-market strategies. This collaboration helps the Company independently determine the best technology, develop road maps, and enhance opportunitiesinclude:


•	Cloud and Platform Services. GIS helps clients maximize their private cloud, public cloud and legacy infrastructures, as well as securely manage their hybrid environments.


•	Workplace and Mobility. GIS's workplace, mobility and Internet of Things ("IoT") services provides a consumer-like experience with enterprise security and instant connectivity for its clients.


•	Security. GIS's security solutions help predict attacks, proactively respond to threats, ensure compliance and protect data, applications, infrastructure and endpoints.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

~~differentiate solutions, expand market reach, augment capabilities, and jointly deliver impactful solutions that best address client needs.~~

~~United States Public Sector~~

USPS delivers technology services and business solutions to all levels of government in the United States. USPS helps clients to address their key objectives of: (1) transforming and modernizing through innovation, (2) enhancing security and privacy, (3) improving efficiency and effectiveness, (4) reducing and optimizing costs, and (5) becoming more agile, flexible, and resilient. USPS aims to be a transformation partner that can maximize technology’s potential to create the solutions that matter most to its government clients. USPS supports hundreds of accounts at the federal, state, and local government levels. Commensurate with DXC's strategy of leading the next generation of IT services, USPS is leveraging the Company’s commercial best practices and next-generation offerings to help civilian government agencies address their business issues and provide better and more secure access to citizen services while reducing costs for community & social service, environmental management, education, transportation, and general government & revenue collection.

Segment Measures

The following table summarizes operating results regularly provided to the CODM by reportable segment and a reconciliation to the financial statements:



(in millions)	GBS		GIS		Total Reportable Segments		All Other			Totals
Three Months Ended September 30, 2019
Revenues	$	2,285	$	2,566	$	4,851	$	—		$	4,851
Segment profit	$	359	$	243	$	602	$	(73	)	$	529
Depreciation and amortization⁽¹⁾	$	39	$	252	$	291	$	25		$	316

Three Months Ended September 30, 2018
Revenues	$	2,111	$	2,902	$	5,013	$	—		$	5,013
Segment profit	$	400	$	473	$	873	$	(74	)	$	799
Depreciation and amortization⁽¹⁾	$	16	$	305	$	321	$	31		$	352

(in millions) GBS GIS USPS Total Reportable Segments All Other Totals
Three Months Ended December 31, 2017
Revenues $ 2,315
$ 3,145
$ 726
$ 6,186
$ —
$ 6,186
Segment profit $ 431
$ 463
$ 110
$ 1,004
$ (77 ) $ 927
Depreciation and amortization⁽¹⁾
$ 16
$ 269
$ 20
$ 305
$ 27
$ 332

Three Months Ended December 30, 2016
Revenues $ 1,046
$ 871
$ —
$ 1,917
$ —
$ 1,917
Segment profit $ 134
$ 84
$ —
$ 218
$ (42 ) $ 176
Depreciation and amortization⁽¹⁾
$ 25
$ 100
$ —
$ 125
$ 16
$ 141


(in millions)	GBS		GIS		USPS		Total Reportable Segments		All Other			Totals		GBS		GIS		Total Reportable Segments		All Other			Totals
Nine Months Ended December 31, 2017
Six Months Ended September 30, 2019
Revenues	$	6,893	$	9,256	$	2,113	$	18,262	$	—		$	18,262	$	4,444	$	5,297	$	9,741	$	—		$	9,741
Segment profit	$	1,093	$	1,222	$	296	$	2,611	$	(129	)	$	2,482	$	725	$	583	$	1,308	$	(127	)	$	1,181
Depreciation and amortization⁽¹⁾	$	67	$	743	$	55	$	865	$	76		$	941	$	67	$	527	$	594	$	54		$	648

Nine Months Ended December 30, 2016
Six Months Ended September 30, 2018
Revenues	$	3,130	$	2,588	$	—	$	5,718	$	—		$	5,718	$	4,324	$	5,971	$	10,295	$	—		$	10,295
Segment profit	$	349	$	201	$	—	$	550	$	(148	)	$	402	$	803	$	947	$	1,750	$	(148	)	$	1,602
Depreciation and amortization⁽¹⁾	$	81	$	309	$	—	$	390	$	48		$	438	$	36	$	586	$	622	$	66		$	688

⁽¹⁾Depreciation and amortization as presented excludes amortization of acquired intangible assets of ~~$149~~$151 million and ~~$20~~$132 million for the three months ended ~~December 31, 2017~~September 30, 2019 and ~~December 30, 2016,~~2018, respectively, and ~~$438~~$289 million and ~~$56~~$267 million for the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2019 and ~~December 30, 2016,~~2018 respectively.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Reconciliation of Reportable Segment Profit to Consolidated Total

The Company's management uses segment profit as the measure for assessing performance of its segments. Segment profit is defined as segment ~~revenues~~revenue less ~~segment cost~~costs of services, segment selling, general and administrative, ~~and~~ depreciation and amortization, and other income (excluding ~~amortization of acquired intangible assets)~~the movement in foreign currency exchange rates on our foreign currency denominated assets and liabilities and the related economic hedges). The Company does not allocate to its segments certain operating expenses managed at the corporate level. These unallocated costs include certain corporate function costs, stock-based compensation expense, pension and OPEB actuarial and settlement gains and losses, restructuring costs, transaction, separation and integration-related costs and amortization of acquired intangible assets.



	Three Months Ended						Six Months Ended
(in millions)	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
Profit
Total profit for reportable segments	$	602		$	873		1,308			$	1,750
All other loss	(73		)	(74		)	(127		)	(148		)
Interest income	67			33			97			65
Interest expense	(104		)	(83		)	(195		)	(168		)
Restructuring costs	(32		)	(157		)	(174		)	(342		)
Transaction, separation and integration-related costs	(53		)	(128		)	(158		)	(198		)
Amortization of acquired intangible assets	(151		)	(132		)	(289		)	(267		)
Goodwill impairment losses	(2,887		)	—			(2,887		)	—
Gain on arbitration award	632			—			632			—
(Loss) income from continuing operations before income taxes	$	(1,999	)	$	332		$	(1,793	)	$	692

Three Months Ended Nine Months Ended
(in millions) December 31, 2017 December 30, 2016 December 31, 2017 December 30, 2016
Profit
Total profit for reportable segments $ 1,004
$ 218
$ 2,611
$ 550
All other loss (77 ) (42 ) (129 ) (148 )
Interest income 27
8
59
26
Interest expense (77 ) (33 ) (231 ) (87 )
Restructuring costs (213 ) (3 ) (595 ) (85 )
Pension and OPEB actuarial and settlement gains 17
—
17
—
Amortization of acquired intangible assets (149 ) (20 ) (438 ) (56 )
Transaction and integration-related costs (94 ) (78 ) (284 ) (187 )
Income before income taxes $ 438
$ 50
$ 1,010
$ 13

Management does not use total assets by segment to evaluate segment performance or allocate resources. As a result, assets are not tracked by segment and therefore, total assets by segment is not disclosed.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Note 1821 - Commitments and Contingencies

Commitments

The Company has operating leases for the use of certain real estate and equipment. Substantially all operating leases are non-cancelable or cancelable only through payment of penalties. Lease payments are typically based upon the period of the lease but may include payments for insurance, maintenance, and property taxes. There are no purchase options on operating leases at favorable terms. Most real estate leases have one or more renewal options. Certain leases on real estate are subject to annual escalations for increases in utilities and property taxes.

~~DXC TECHNOLOGY COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued~~

~~Minimum fixed rentals required for the next five years and thereafter under operating leases in effect at December 31, 2017, were as follows:~~

Fiscal year
(in millions) Real Estate Equipment
Remainder of 2018 $ 110
$ 86
2019 359
297
2020 264
211
2021 206
68
2022 155
8
Thereafter 719
1
Minimum fixed rentals 1,813
671
Less: Sublease rental income (187 ) —
Totals $ 1,626
$ 671

The Company signed long-term purchase agreements with certain software, hardware, telecommunication, and other service providers to obtain favorable pricing and terms for services, and products that are necessary for the operations of business activities. Under the terms of these agreements, the Company is contractually committed to purchase specified minimums over periods ranging from 1 to 6 years. If the Company does not meet the specified minimums, the

Company would have an obligation to pay the service provider all, or a portion, of the shortfall. Minimum purchase commitments as of ~~December 31, 2017~~September 30, 2019 were as follows:



Fiscal year	Minimum Purchase Commitment⁽¹⁾
(in millions)	Minimum Purchase Commitment⁽¹⁾
Remainder of 2020	$	967
2021	1,685
2022	565
2023	454
2024	261
Thereafter	25
Total	$	3,957

Fiscal year Minimum Purchase Commitment
(in millions)
Remainder of 2018
$ 664
2019 2,201
2020 2,095
Thereafter 1,222
Total $ 6,182

⁽¹⁾A significant portion of the minimum purchase commitments infor fiscal ~~2018, 2019~~2020 and ~~2020~~fiscal 2021 relate to the amounts committed under the HPE preferred vendor agreements.

In the normal course of business, the Company may provide certain clients with financial performance guarantees, and at times performance letters of credit or surety bonds. In general, the Company would only be liable for the amounts of these guarantees in the event that non-performance by the Company permits termination of the related contract by the Company’s client. The Company believes it is in compliance with its performance obligations under all service contracts for which there is a financial performance guarantee, and the ultimate liability, if any, incurred in connection with these guarantees will not have a material adverse effect on its ~~condensed~~ consolidated results of operations or financial position.

The Company also uses stand-by letters of credit, in lieu of cash, to support various risk management insurance policies. These letters of credit represent a contingent liability and the Company would only be liable if it defaults on its payment obligations on these policies. The following table summarizes the expiration of the Company’s financial guarantees and stand-by letters of credit outstanding as of ~~December 31, 2017:~~September 30, 2019:

~~DXC TECHNOLOGY COMPANY~~



(in millions)	Fiscal 2020		Fiscal 2021		Fiscal 2022 and Thereafter		Totals
Surety bonds	$	30	$	326	$	151	$	507
Letters of credit	126		55		385		566
Stand-by letters of credit	72		101		21		194
Totals	$	228	$	482	$	557	$	1,267

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued~~

(in millions) Fiscal 2018 Fiscal 2019 Fiscal 2020 and Thereafter Totals
Surety bonds $ 48
$ 152
$ 157
$ 357
Performance letters of credit 140
85
338
563
Stand-by letters of credit 8
15
32
55
Totals $ 196
$ 252
$ 527
$ 975

The Company generally indemnifies licensees of its proprietary software products against claims brought by third parties alleging infringement of their intellectual property rights, including rights in patents (with or without geographic limitations), copyrights, trademarks, and trade secrets. DXC’s indemnification of its licensees relates to costs arising from court awards, negotiated settlements, and the related legal and internal costs of those licensees. The Company maintains the right, at its own cost, to modify or replace software in order to eliminate any infringement. The Company has not incurred any significant costs related to licensee software indemnification.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Contingencies

Vincent Forcier v. Computer Sciences Corporation and The City of New ~~York~~:York: On October 27, 2014, the United States Attorney’s Office for the Southern District of New York and the Attorney General for the State of New York filed complaints-in-intervention on behalf of the United States and the State of New York, respectively, against CSC and The City of New ~~York. This action arose out of~~York, based on a qui tam complaint originally filed under seal in 2012 by Vincent Forcier, a former employee of CSC. The complaints allege that from 2008 to 2012 New York City and CSC, in its role as fiscal agent for New York City’s Early Intervention Program ("EIP"), ~~a federal program that provides services for infants and toddlers with manifest or potential developmental delays,~~ violated the federal and state False Claims Acts and various common law standards by allegedly orchestrating a billing fraud against Medicaid through the misapplication of default billing codes and the failure to exhaust private insurance coverage before submitting claims to Medicaid. The ~~New York Attorney General’s complaint also alleges that New York City and CSC failed to reimburse Medicaid in certain instances where insurance had paid a portion of the claim. The~~ lawsuits seek treble statutory damages, other civil penalties and attorneys’ fees and costs.

~~On January 26, 2015, CSC and the City of New York moved to dismiss Forcier’s amended~~ ~~qui tam~~ ~~complaint as well as the federal and state complaints-in-intervention.~~ In June 2016, the Court dismissed Forcier’s amended complaint in its entirety. With regard to the complaints-in-intervention, the Court dismissed the federal claims alleging misuse of default diagnosis codes when the provider had entered an invalid code, and the state claims alleging failure to reimburse Medicaid when claims were subsequently paid by private insurance. The Court ~~denied~~allowed the ~~motions to dismiss with respect to the federal and state claims relating to (i) submission of insurance claims with a code signifying that the patient’s policy ID was unknown, and (ii) submission of~~remaining claims to ~~Medicaid after the statutory deadline for payment by private insurance had passed, and state common law claims.~~proceed. In ~~accordance with the ruling,~~September 2016, the United States and the State of New York each filed amended complaints-in-intervention, ~~on September 6, 2016. In addition to reasserting the~~asserting additional claims ~~upheld by the Court, the amended complaints assert new claims alleging~~ that the compensation provisions of CSC’s contract with New York City rendered it ineligible to serve as a billing agent under state law.

~~On November 9, 2016,~~ CSC filed motions to dismiss ~~the amended complaints~~and in ~~their entirety. On~~ August ~~10,~~ 2017, the Court granted in part and denied in part ~~the motions to dismiss, allowing the remaining causes of action to proceed. On~~CSC's motions. In January 9, 2018, ~~the Company answered the complaints, and~~CSC asserted a counterclaim against the State of New York on a theory of contribution and indemnification. ~~On January 30, 2018,~~The court denied the ~~State of New York filed a~~State's motion to dismiss CSC's counterclaim with respect to liability for claims not arising under the ~~Company’s counterclaim.~~Federal False Claims Act. The Parties participated in a non-binding mediation onin November ~~29, 2017, and~~2017. No settlement ~~discussions~~has been reached to date, but negotiations are ~~continuing. Commencement of discovery will be deferred by the parties pending settlement negotiations.~~ongoing. Discovery has now commenced. The Company believes that these claims are without merit and intends to continue to defend itself vigorously.

~~Washington, DC Navy Yard Litigation~~: In December 2013, a wrongful death action was filed in U.S. District Court for the Middle District of Florida against HP Enterprise Services, LLC, now known as Enterprise Services, LLC (“ES”) and others in connection with the September 2013 Washington, DC Navy Yard shooting that resulted in the deaths of 12 individuals. The perpetrator was an employee of The Experts, ES’s now terminated subcontractor on ES’s IT services contract with the U.S. Navy (a contract served by USPS). A total of 15 lawsuits arising out of the shooting have been filed. All have

~~DXC TECHNOLOGY COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued~~

~~been consolidated in the U.S. District Court for the District of Columbia. ES filed motions to dismiss, which the Court has granted in part and denied in part. Discovery is proceeding.~~

Strauch Fair Labor Standards Act Collective ~~Action~~:Action: On July 1, 2014, several plaintiffs ~~Joseph Strauch, Timothy Colby, Charles Turner, and Vernon Carre~~ filed an action in the U.S. District Court for the District of Connecticut on behalf of themselves and a putative nationwide collective of CSC system administrators, alleging CSC’s failure to properly classify these employees as non-exempt under the federal Fair Labor Standards Act ("FLSA"). Plaintiffs ~~allege~~alleged similar state-law Rule 23 class claims pursuant to Connecticut and California ~~statutes, including the Connecticut Minimum Wage Act, the California Unfair Competition Law, California Labor Code, California Wage Order No. 4-2001 and the California Private Attorneys General Act.~~statutes. Plaintiffs ~~claim~~claimed double overtime damages, liquidated damages, ~~pre- and post-judgment interest, civil penalties,~~ and other ~~state-specific~~amounts and remedies.

In 2015 the Court entered an order granting conditional certification under the FLSA of the collective of over 4,000 system ~~administrators, and notice of the right to participate in the FLSA collective action was mailed to the system~~ administrators. Approximately 1,000 system administrators ~~prior to the announced deadline,~~ filed consents with the Court to participate in the FLSA collective. The class/collective action is currently made up of approximately 800 individuals who held the title of associate professional or professional system administrator.

OnIn June ~~30,~~ 2017, the Court granted Rule 23 certification of a Connecticut state-law class and a California state-law class consisting of professional system administrators and associate professional system administrators. Senior professional system administrators were found not to qualify for Rule 23 certification under the state-law claims. ~~On July 14, 2017,~~CSC sought permission to appeal the ~~Company petitioned~~Rule 23 decision to the Second Circuit Court of Appeals, ~~for permission to file an appeal of the Rule 23 decision. That petition~~which was ~~denied on November 21, 2017.~~denied.

AsIn December 2017, a result of the Court's findings in its Rule 23 certification order, the parties entered into a stipulation to decertify the senior professional system administrators from the FLSA collective. On August 2, 2017, the Court approved the stipulation, and the FLSA collective action is currently made up of approximately 700 individuals who held the title of associate professional or professional system administrator.

A jury trial ~~commenced on December 11, 2017. On December 20, 2017, the jury returned~~was held and a verdict was returned in favor of plaintiffs. On August 6, 2019, the Court issued an order awarding plaintiffs ~~finding that the Company had misclassified the class of employees as exempt under federal~~$18.75 million in damages. In September 2019, Plaintiffs filed a motion seeking $14.1 million in attorneys’ fees and ~~state laws, and finding that it had done so willfully.~~costs. The Court ~~will determine damages and address post-trial motions in further proceedings.~~has yet to rule on this motion. The Company disagrees with the ~~verdict and intends to continue to defend itself vigorously, including by appealing the~~jury verdict and the ~~final~~damages award and is appealing the judgment of the Court.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Computer Sciences Corporation v. Eric Pulier, et al.: On May 12, 2015, CSC ~~and its wholly owned subsidiary, ServiceMesh Inc. ("SMI"),~~ filed a civil complaint in the Court of Chancery of the State of Delaware against Eric Pulier, the former CEO of ~~SMI,~~Service Mesh Inc. ("SMI"), which CSC had ~~been~~ acquired ~~by CSC~~in November 2013. The complaint asserted claims for fraud, breach of contract and breach of fiduciary duty, based on November 15, 2013. Following the acquisition, Mr. Pulier signed a retention agreement with SMI pursuant to which he received a grant of restricted stock units of CSC and agreed to be bound by CSC’s rules and policies, including CSC’s Code of Business Conduct. Mr. Pulier resigned from SMI on April 22, 2015 amid allegations that heMr. Pulier had engaged in fraudulent transactions with two employees of the Commonwealth Bank of Australia Ltd. (“CBA”). The original complaint against Mr. Pulier asserted claims for fraud, breach of contract and breach of fiduciary duty. In an amended complaint, CSC named TechAdvisors, LLC and Shareholder Representative Services LLC ("SRS") as additional defendants. In ruling on a motion to dismiss filed by Mr. Pulier, the Court dismissed CSC’s claim for breach of the implied covenant of good faith, but allowed substantially all of the remaining claims to proceed. Mr. Pulier asserted counter-claims for breach of contract, fraud, negligent representation, rescission, and violations of the California Blue Sky securities ~~law. With the exception~~law, all of ~~the claim for breach of his retention agreement,~~which the Court dismissed in whole or in part, ~~each~~except for claims for breach of Mr. Pulier’s ~~counterclaims.~~retention agreement.

On December 17, 2015, CSC entered into a settlement agreement with the majority of the former equityholders of SMI, as well as with SRS acting in its capacity as the agent and attorney-in-fact for the settling equityholders. Pursuant to the settlement agreement, CSC received $16.5 million, which amount was equal to the settling equityholders’ pro rata share of the funds remaining in escrow from the transaction, which was recorded as an offset to selling, general and administrative costs in CSC’s Consolidated Statements of Operations for the fiscal year ended March 31, 2016. On February 20, 2017, CSC, SRS and the former equityholders of SMI who remain named defendants entered into a partial settlement agreement by which CSC received payment of some of the funds remaining in escrow.

~~DXC TECHNOLOGY COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued~~

~~Discovery was proceeding when on~~In July ~~20,~~ 2017, the Court granted a motion by the United States for a 90-day stay of discovery pending the completion of a criminal ~~investigation. On September 27, 2017, a grand jury empaneled~~investigation by the ~~United States District Court~~U.S. Attorney’s Office for the Central District of ~~California~~California. In September 2017, a federal grand jury returned an indictment against Mr. Pulier, charging him with conspiracy, securities and wire fraud, obstruction of justice, and other violations of federal law (United States v. Eric Pulier, CR 17-599-AB). The Government sought an extension of the stay which the Delaware Chancery Court granted.

In December 2018, the Government filed an application to dismiss the indictment against Mr. Pulier, which was granted, ~~on November 3, 2017.~~ and the indictment was dismissed with prejudice. In March 2019, the Delaware Chancery Court lifted the stay and denied CSC’s motion for a temporary restraining order and preliminary injunction with respect to certain of Mr. Pulier’s assets.

In August 2019, the Company entered into an agreement with Mr. Pulier, resolving all claims and counterclaimsin the Delaware litigation through the division of amounts previously held in escrow for post-closing disputes.

The ~~civil action is now stayed pending resolution of the criminal case.~~

~~Law enforcement officials in Australia have brought bribery-related charges~~Securities and Exchange Commission (“SEC”) has filed a complaint against ~~the two former CBA employees. One of these has since pled guilty, and in 2016 received a sentence of imprisonment. In 2016, the United States Attorney’s Office~~Mr. Pulier alleging various claims, including for ~~the Central District of California announced similar criminal charges against this same CBA employee for securities~~ fraud and ~~wire fraud. CSC is cooperating with~~falsifying books and ~~assisting the Australian~~records (Securities and ~~U.S. authorities in their investigations.~~Exchange Commission v. Eric Pulier, Case No. 2:17-cv-07124). The Court has set a trial date of December 1, 2020.

OnIn February ~~17,~~ 2016, Mr. Pulier filed a complaint in Delaware Chancery Court ~~against CSC and its subsidiary - CSC Agility Platform, Inc., formerly known as SMI -~~ seeking advancement of his legal fees and ~~costs. On May 12, 2016,~~costs in the civil and criminal actions, pursuant to the terms of his agreements with SMI. The Court ruled that CSC Agility Platform - as the successor to SMI - is liable for advancing 80% of Mr. Pulier’s fees and costs in the ~~underlying~~ civil ~~action. Mr. Pulier has also filed a complaint for advancement of the legal fees~~ and ~~costs incurred in connection~~criminal actions. Pursuant to agreements with his defense of criminal investigations by the U.S. Government and other entities. On March 30, 2017, Mr. Pulier filed a motion for judgment on the pleadings in this fee advancement matter. Mr. Pulier's motion for judgment on the pleadings and other advancement-related issues were argued before the Court on August 2, 2017, and, on August 7, 2017, the Court ruled substantially in Mr. Pulier's favor. On January 30, 2018, the Court reduced the Company’s advancement obligation to only 80% of the criminal defense fees and costs sought by Mr. Pulier. In undertakings previously provided to SMI, Mr. Pulier ~~agreed~~is obligated to repay all amounts advanced to him if it should ultimately be determined that he is not entitled to indemnification.

~~Cisco Systems Inc.~~The Company remains obligated to advance amounts for Mr. Pulier’s legal fees and ~~Cisco Systems Capital Corporation v. Hewlett-Packard Co.: On August 24, 2015, Cisco Systems, Inc. (“Cisco”) and Cisco Systems Capital Corporation (“Cisco Capital”) filed an~~costs to defend the SEC action against Hewlett Packard Co., now known as HP Inc. ("HP") in California Superior Court, Santa Clara County, for declaratory judgment and breach of contract in connection with a contract to utilize Cisco products and services, and to finance the services through Cisco Capital. HP terminated the contract, and the parties dispute the calculation of the proper cancellation credit. On December 18, 2015, Cisco filed an amended complaint that abandoned the claim for breach of contract set forth in the original complaint, and asserted a single cause of action for declaratory relief concerning the proper calculation of the cancellation credit. On January 19, 2016, HP answered the complaint and filed a counterclaim for breach of contract and declaratory judgment. Discovery is completed, and the trial, originally scheduled for March of this year, is now scheduled to begin on June 11, 2018. A court-ordered mediation took place on August 30, 2017, and a second mediation has been scheduled for February 13, 2018. DXC is the party in interest in this matter pursuant to the Separation and Distribution Agreement between the then Hewlett-Packard Co. and HPE and the subsequent Separation and Distribution Agreement between HPE and DXC.him.

Kemper Corporate Services, Inc. v. Computer Sciences ~~Corporation~~:Corporation: In October 2015, Kemper Corporate Services, Inc. (“Kemper”) filed a demand for arbitration against CSC with the American Arbitration Association (“AAA”), alleging that CSC breached the terms of a 2009 Master Software License and Services Agreement and related Work Orders (the “Agreement”) by failing to complete a software translation and implementation plan by certain contractual deadlines. Kemper claimed breach of contract, seeking approximately $100 million in ~~damages measured in part by the amount of the fees paid under the contract, as well as pre-judgment interest, and in the alternative claimed rescission of the Agreement.~~damages. CSC answered the demand for arbitration denying Kemper’s claims and asserting a counterclaim for unpaid invoices for services rendered by CSC.

A single arbitrator conducted an evidentiary hearing on the merits of the claims and counterclaims in April 2017. ~~Oral argument took place on August 28, 2017. On~~In October 2, 2017, the arbitrator issued a partial final award, finding for Kemper on its breach of contract theory, awarding Kemper $84.2 million in compensatory damages plus prejudgment interest, denying Kemper’s claim for rescission as moot, and denying CSC’s counterclaim. Kemper moved ~~on October 10, 2017, in federal district court in Texas~~ to confirm ~~the award. On November 16, 2017, the arbitrator issued a Final Award which reiterated his findings of fact and law, calculated the amount of prejudgment interest, and awarded Kemper its costs~~

~~DXC TECHNOLOGY COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued~~

~~of arbitration including reasonable attorneys’ fees and expenses. On December 6, 2017, the Company filed a motion to vacate~~ the award in federal district court in ~~New York. A week later,~~Texas.

CSC moved to vacate the ~~New York court stayed~~award, and in August 2018, the ~~action~~Magistrate Judge issued its Report and Recommendation denying CSC's vacatur motion. In September 2018, the District Court summarily accepted the Report and Recommendation without further briefing and entered a Final Judgment in ~~deference~~the case. The Company promptly filed a notice of appeal to the ~~Texas court’s~~Fifth Circuit Court of Appeals. Following the submission of briefs, oral argument was held on September 5, 2019. A decision as to which venue was more appropriate to address the vacatur arguments. On January 12, 2018, the Company appeared in the Texas action seeking a stay of the confirmation proceedings or a transfer of venue to New York. The venue motion will be fully briefed by February 23, 2018.is now pending.

~~The Company disagrees with the decision of the arbitrator and intends to continue to defend itself vigorously.~~ The Company is also pursuing coverage for the full scope of the award, interest, and legal fees and expenses, under the Company's applicable insurance policies.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Forsyth, et al. v. HP Inc. and Hewlett Packard ~~Enterprise: This~~Enterprise: On August 18, 2016, this purported class and collective action was filed ~~on August 18, 2016~~ in the U.S. District Court for the Northern District of California, against HP and HPE alleging violations of the Federal Age Discrimination in Employment Act (“ADEA”), the California Fair Employment and Housing Act, California public policy and the California Business and Professions Code. Former business units of HPE now owned by the Company ~~will~~may be proportionately liable for any recovery by plaintiffs in this matter. ~~Plaintiffs filed an amended complaint on December 19, 2016.~~

Plaintiffs seek to certify a nationwide class action under the ADEA comprised of all U.S. residents employed by defendants who had their employment terminated pursuant to a work force reduction (“WFR”) plan ~~on or after December 9, 2014 (deferral states) and April 8, 2015 (non-deferral states),~~ and who were 40 years of age or older at the time of termination. The class seeks to cover those impacted by WFRs on or after December 2014. Plaintiffs also seek to represent a Rule 23 class under California law comprised of all persons 40 years of age or older employed by defendants in the state of California and terminated pursuant to a WFR plan on or after August 18, 2012. On

In January ~~30,~~ 2017, defendants filed a partial motion to dismiss and a motion to compel arbitration of claims by certain named and opt-in plaintiffs who had signed ~~releases~~release agreements as part of their WFR packages. OnIn September ~~20,~~ 2017, the Court denied the partial motion to dismiss without prejudice, but granted defendants’ motions to compel ~~arbitration. Accordingly, the~~arbitration for those named and opt-in plaintiffs. The Court has stayed the entire action pending arbitration for these individuals, and administratively closed the case. ~~Plaintiffs have~~

A mediation was held in October 2018 with the 16 named and opt-in plaintiffs who were involved in the case at that time. A settlement was reached, which included seven plaintiffs who were employed by former business units of HPE that are now owned by the Company. In June 2019, a second mediation was held with 145 additional opt-in plaintiffs who were compelled to arbitration pursuant to their release agreements. No agreement was reached, but settlement negotiations are ongoing.

Former business units of the Company now owned by Perspecta may be proportionately liable for any recovery by plaintiffs in this matter.

Oracle America, Inc., et al. v. Hewlett Packard Enterprise Company:On March 22, 2016, Oracle filed a complaint against HPE in the Northern District of California, alleging copyright infringement, interference with contract, intentional interference with prospective economic relations, and unfair competition. The litigation relates in part to former business units of HPE that are now owned by the Company. The Company may be required to indemnify HPE for a portion of any recovery by Oracle in the litigation related to these business units.

Oracle’s claims arise primarily out of HPE’s prior relationship with a third-party maintenance provider named Terix Computer Company, Inc. (“Terix”). Oracle claims that Terix infringed its copyrights while acting as HPE’s subcontractor for certain customers of HPE’s multivendor support business. Oracle claims that HPE is liable for vicarious and contributory infringement arising from the alleged actions of Terix and for direct infringement arising from its own alleged conduct.

On June 14, 2018, the court heard oral argument on the parties’ cross-motions for summary judgment. On January 29, 2019, the court granted HPE’s motion for ~~reconsideration as well as a notice of appeal~~summary judgment and denied Oracle’s motion for summary judgment, resolving the matter in HPE’s favor. Oracle has appealed the judgment to the U.S. Court of Appeals for the Ninth ~~Circuit (which~~Circuit. The parties have submitted their initial briefs in the appellate case, and briefing is expected to conclude in November 2019.

In re DXC Technology Company Securities Litigation:On December 27, 2018, a purported class action lawsuit was filed in the United States District Court for the Eastern District of Virginia against the Company and two of its current officers. The lawsuit asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and is premised on allegedly false and/or misleading statements, and alleged non-disclosure of material facts, regarding the Company’s business, operations, prospects and performance during the proposed class period of February 8, 2018 to November 6, 2018. The Company has ~~been denied as premature). The reconsideration~~moved to dismiss the claims in their entirety. On July 26, 2019, the court heard oral argument on the Company’s motion to dismiss, and ~~others pending before~~a decision is now pending.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

In March 2019, 3 related shareholder derivative lawsuits were filed in the District Court ~~relating~~of the State of Nevada, in and for Clark County, against 2 of the Company’s current officers and the members of the Company’s board of directors, asserting claims for breach of fiduciary duty, waste of corporate assets, and unjust enrichment. The Company intends to file a motion to dismiss these actions.

On August 20, 2019, a purported class ~~arbitration,~~action lawsuit was filed in the Superior Court of the State of California, County of Santa Clara, against the Company and officers and directors of the Company, among other defendants. On September 16, 2019, a substantially similar purported class action lawsuit was filed in the United States District Court for the Northern District of California against the Company and officers and directors of the Company, among other defendants. On November 8, 2019, a third purported class action lawsuit was filed in the Superior Court of the State of California, County of San Mateo, against the Company and officers and directors of the Company, among other defendants. The 3 California lawsuits assert claims under Sections 11, 12 and 15 of the Securities Act of 1933, as amended, and are ~~fully briefed~~premised on allegedly false and/or misleading statements, and ~~will be adjudicated~~alleged non-disclosure of material facts, regarding the Company’s prospects and expected performance. The putative class of plaintiffs in these cases includes all persons who acquired shares of the Company’s common stock pursuant to the offering documents filed with the Securities and Exchange Commission in connection with the April 2017 transaction that formed DXC. The Company intends to file a motion to dismiss all claims asserted in these actions.

On October 2, 2019, a shareholder derivative lawsuit was filed in the District Court of the State of Nevada, in and for Clark County, asserting various claims, including for breach of fiduciary duty and unjust enrichment, and challenging certain sales of securities by officers under Rule 10b5-1 plans. The shareholder filed this action after making a demand on the board of directors, alleging breaches of fiduciary duty, corporate waste and disclosure violations, and demanding that the board take certain actions to evaluate the allegations and respond. The Company’s board of directors analyzed the demand, and has determined to defer its decision on the demand pending developments in the securities and derivative lawsuits described above. The Company intends to file a motion to dismiss this action.

The Company believes that the lawsuits described above are without ~~oral argument.~~merit, and it intends to vigorously defend them.

Voluntary Disclosure of Certain Possible Sanctions Law ~~Violations~~:Violations: On February 2, 2017, CSC submitted an initial notification of voluntary disclosure to the U.S. Department of Treasury, Office of Foreign Assets Control ("OFAC") regarding certain possible violations of U.S. sanctions laws pertaining to insurance premium data and claims data processed by ~~two~~2 partially-owned joint ventures of Xchanging, which CSC acquired during the first quarter of fiscal 2017. A copy of the disclosure was also provided to Her Majesty’s Treasury Office of Financial Sanctions Implementation in the ~~U.K.~~United Kingdom. The ~~Company’s related~~Company is finalizing its internal investigation ~~is continuing,~~and plans to provide supplemental information to OFAC in early 2020.

Perspecta-related disputes: In October 2019, Perspecta Inc. (“Perspecta”) submitted a demand for arbitration claiming that in June 2018 DXC breached certain obligations under the Separation and Distribution Agreement between Perspecta and DXC, and seeking at least $120 million in alleged damages. In its arbitration demand, Perspecta also challenges $39 million in invoices issued by DXC in June 2019 under its IT Services Agreement with Perspecta. DXC believes the invoices were properly issued and the ~~Company has undertaken~~amounts are owed by Perspecta. DXC believes that Perspecta's claims are without merit and intends to ~~cooperate with and provide a full report of its findings to OFAC when completed.~~vigorously defend itself.

DXC TECHNOLOGY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

In addition to the matters noted above, the Company is currently subject in the normal course of business to various claims and contingencies arising from, among other things, disputes with customers, vendors, employees, contract counterparties and other parties, as well as securities matters, environmental matters, matters concerning the licensing and use of intellectual property, and inquiries and investigations by regulatory authorities and government agencies. Some of these disputes involve or may involve litigation. The ~~consolidated~~ financial statements reflect the treatment of claims and contingencies based on management's view of the expected outcome. DXC consults with outside legal counsel on issues related to litigation and regulatory compliance and seeks input from other experts and advisors with respect to matters in the ordinary course of business. Although the outcome of these and other matters cannot be predicted with certainty, and the impact of the final resolution of these and other matters on the Company’s results of operations in a particular subsequent reporting period could be material and adverse, management does not believe based on information currently available to the Company, that the resolution of any of the matters currently pending against the Company will have a material adverse effect on the financial position of the Company or the ability of the Company to meet its financial obligations as they become due. Unless otherwise noted, the Company is unable to determine at this time a reasonable estimate of a possible loss or range of losses associated with the foregoing disclosed contingent matters.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

All statements and assumptions contained in this Quarterly Report on Form 10-Q and in the documents incorporated by reference that do not directly and exclusively relate to historical facts constitute “forward-looking statements.” Forward-looking statements often include words such as “anticipates,” “believes,” “estimates,” “expects,” “forecast,” “goal,” “intends,” “objective,” “plans,” “projects,” “strategy,” “target,” and “will” and words and terms of similar substance in discussions of future operating or financial performance. These statements represent current expectations and beliefs, and no assurance can be given that the results described in such statements will be achieved.

Forward-looking statements include, among other things, statements with respect to our financial condition, results of operations, cash flows, business strategies, operating efficiencies or synergies, divestitures, competitive position, growth opportunities, share repurchases, dividend payments, plans and objectives of management and other matters. Such statements are subject to numerous assumptions, risks, uncertainties and other factors that could cause actual results to differ materially from those described in such statements, many of which are outside of our control. Important factors that could cause actual results to differ materially from those described in forward-looking statements include, but are not limited to:

the integration of ~~CSC's~~Computer Sciences Corporation's ("CSC") and ~~HPES's~~Enterprise Services business of Hewlett Packard Enterprise Company's ("HPES") businesses, operations, and culture and the ability to operate as effectively and efficiently as expected, and the combined company's ability to successfully manage and integrate acquisitions generally;

the ability to realize the synergies and benefits expected to result from the HPES Merger within the anticipated time frame or in the anticipated amounts;

other risks related to the HPES Merger including anticipated tax treatment, unforeseen liabilities, and future capital expenditures;

risks relating to the Luxoft Acquisition and the ability to achieve the expected results therefrom;

the U.S. Public Sector business ("USPS") Separation and Mergers as described in Note 1 - “Summary of Significant Accounting Policies”, could result in substantial tax liability to DXC and our stockholders;

changes in governmental regulations or the adoption of new laws or regulations that may make it more difficult or expensive to operate our business;

changes in senior management, the loss of key employees or the ability to retain and hire key personnel and maintain relationships with key business partners;

the risk of liability or damage to our reputation resulting from security breaches or disclosure of sensitive data or failure to comply with data protection laws and regulations;

business interruptions in connection with our technology systems;

the competitive pressures faced by our business;

the effects of macroeconomic and geopolitical trends and events;

the need to manage third-party suppliers and the effective distribution and delivery of our products and services;

the protection of our intellectual property assets, including intellectual property licensed from third parties;

the risks associated with international operations;

the development and transition of new products and services and the enhancement of existing products and services to meet customer needs, ~~and~~ respond to emerging technological ~~trends;~~trends and maintain and grow our customer relationships over time;

the ability to succeed in our strategic objectives, including strategic alternatives material for our business;

the execution and performance of contracts by us and our suppliers, customers, clients and partners;

our credit rating and the ability to manage working capital, refinance and raise additional capital for future needs;

the resolution of pending investigations, claims and disputes;

risks relating to the respective abilities of the parties to the USPS Separation and Mergers (defined below) to satisfy the conditions to, and to otherwise consummate, the USPS Separation and Mergers and to achieve the expected results therefrom; and

the other factors described in Part I Item 1A "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended March 31, 2019 and in Part II, Item 1A ~~“Risk Factors”~~of our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019 and of this Quarterly Report on Form ~~10-Q and DXC's Quarterly Reports on Form 10-Q for the quarters ended June 30, 2017 and September 30, 2017.~~10-Q.

No assurance can be given that any goal or plan set forth in any forward-looking statement can or will be achieved, and readers are cautioned not to place undue reliance on such statements which speak only as of the date they are made. We do not undertake any obligation to update or release any revisions to any forward-looking statement or to report any events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events, except as required by law.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The purpose of the MD&A is to present information that management believes is relevant to an assessment and understanding of ~~DXC's~~our results of operations and cash flows for the ~~three~~second quarter and ~~nine~~the first six months ~~ended December 31, 2017.~~of fiscal 2020 and our financial condition as of September 30, 2019. The MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and accompanying notes. ~~The use of "we," "our" and "us" refers to DXC and its consolidated subsidiaries.~~

The MD&A is organized ~~into~~in the following sections:

Background

~~Segments and Services~~

Results of Operations

Liquidity and Capital Resources

Off-Balance Sheet Arrangements

Contractual Obligations

Critical Accounting Policies and Estimates

The following discussion includes a comparison of our results of operations and liquidity and capital resources for the second quarters and the first six months of fiscal 2020 and fiscal 2019.

Background

DXC ~~is the world's~~Technology, a world leading independent, end-to-end IT services company, ~~helping~~manages and modernizes mission-critical systems, integrating them with new digital solutions to produce better business outcomes. The Company’s global reach and talent, innovation platforms, technology independence and extensive partner network enable more than 6,000 private and public-sector clients ~~harness the power of innovation~~in 70 countries to thrive on change. ~~DXC was formed~~

We generate revenue by offering a wide range of information technology services and solutions primarily in North America, Europe, Asia and Australia. We operate through two segments: GBS and GIS. We market and sell our services directly to clients through our direct sales force operating out of sales offices around the ~~spin-off~~world. Our clients include commercial businesses of ~~HPES on March 31, 2017~~many sizes and merger of CSC with a wholly owned subsidiary of DXC on April 1, 2017. As a result of the Merger, CSC became a wholly owned subsidiary of DXC. DXC's common stock began trading under the ticker symbol “DXC” on the New York Stock Exchange on April 3, 2017in many industries and ~~is part of Standard & Poor's (S&P) 500 Index.~~

public sector enterprises.

~~Segments~~

Results of Operations

The following table sets forth certain financial data for the second quarters and ~~Services~~first six months of fiscal 2020 and fiscal 2019:



	Three Months Ended					Six Months Ended
(In millions, except per-share amounts)	September 30, 2019			September 30, 2018		September 30, 2019			September 30, 2018

Revenues	$	4,851		$	5,013	$	9,741		$	10,295

(Loss) income from continuing operations, before taxes	(1,999		)	332		(1,793		)	692
Income tax expense	116			73		154			202
(Loss) income from continuing operations	(2,115		)	259		(1,947		)	490
Income from discontinued operations, net of taxes	—			—		—			35
Net (loss) income	$	(2,115	)	$	259	$	(1,947	)	$	525

Diluted earnings per share:
Continuing operations	$	(8.19	)	$	0.92	$	(7.44	)	$	1.69
Discontinued operations	$	—		$	—	$	—		$	0.12

Fiscal 2020 Highlights

Financial highlights for the second quarters and first six months of fiscal 2020 include the following:

Revenues for the second quarter and first six months of fiscal 2020 were $4.9 billion and $9.7 billion, respectively, a decrease of 3% and 5%, respectively, as compared to the same periods of the prior fiscal year.

Loss from continuing operations and diluted EPS from continuing operations for the second quarter of fiscal 2020 were $2,115 million and $8.19, respectively, including the cumulative impact of certain items of $(2,477) million, reflecting restructuring costs, transaction, separation and integration-related costs, amortization of acquired intangible assets, goodwill impairment losses, gain on arbitration award and a tax adjustment related to U.S. tax reform. This compares with income from continuing operations and diluted EPS from continuing operations of $259 million and $0.92, respectively, for the same period of the prior fiscal year.

Loss from continuing operations and diluted EPS from continuing operations for the first six months of fiscal 2020 were $1,947 million and $7.44, respectively, including the cumulative impact of certain items of $(2,781) million, reflecting restructuring costs, transaction, separation and integration-related costs, amortization of acquired intangible assets, goodwill impairment losses, gain on arbitration award and a tax adjustment related to U.S. tax reform. This compares with income from continuing operations and diluted EPS from continuing operations of $490 million and $1.69, respectively, for the same period of the prior fiscal year.

Our ~~reportable segments are GBS, GIS,~~cash and ~~USPS. Segment information is~~cash equivalents were $2.9 billion as of September 30, 2019.

We generated $1,585 million of cash from operations during the first six months of fiscal 2020, as compared to cash generated of $849 million during the first six months of fiscal 2019.

We returned $757 million to shareholders in the form of common stock dividends and share repurchases during the first six months of fiscal 2020, as compared to $552 million during the first six months of fiscal 2019.

Revenues



	Three Months Ended
(in millions)	September 30, 2019		September 30, 2018		Change			Percentage Change
GBS	$	2,285	$	2,111	$	174		8.2	%
GIS	2,566		2,902		(336		)	(11.6	)%
Total Revenues	$	4,851	$	5,013	$	(162	)	(3.2	)%



	Six Months Ended
(in millions)	September 30, 2019		September 30, 2018		Change			Percentage Change
GBS	$	4,444	$	4,324	$	120		2.8	%
GIS	5,297		5,971		(674		)	(11.3	)%
Total Revenues	$	9,741	$	10,295	$	(554	)	(5.4	)%

The decrease in revenues for the first six months of fiscal 2020 compared with fiscal 2019 of the same period reflects an ongoing decline in our traditional application maintenance business and legacy infrastructure services. Fiscal 2020 revenues included ~~in Note 17 - "Segment Information" to~~an unfavorable foreign currency exchange rate impact of 2.8%, primarily driven by the ~~financial statements.~~ strengthening of the U.S. dollar against the Euro and British Pound.

During the second quarter and first six months of fiscal 2020 and fiscal 2019, the distribution of our revenues across geographies was as follows:

For athe discussion of risks associated with our foreign operations, see Part ~~II,~~1, Item 1A "Risk Factors" of ~~this Quarterly~~our Annual Report on Form ~~10-Q.~~

~~Global Business Services~~

GBS provides innovative technology solutions including Enterprise and Cloud Applications, Consulting Application Services, and Analytics. GBS also includes our Industry-aligned IP and Business Process Services. These offerings address key business challenges and accelerate digital transformations tailored to each customer’s industry and specific objectives. GBS strives to help clients understand and take advantage of IT modernization and virtualization across the IT portfolio (hardware, software, networking, storage, and computing assets).

Enterprise and Cloud Applications provide industry, business process, systems integration, technical delivery experience, and innovation to deliver value across our clients' enterprise application portfolios. Our Consulting professionals act as a trusted source for our clients in creating bold digital strategies, designing innovative digital experiences, managing complex digital integration, and delivering safe and secure digital operations that help our clients disrupt their industry, without disrupting their business operations. DXC’s Application Services offerings utilize our IP and world-class partner ecosystem to modernize and transform our clients applications landscape, develop and manage their portfolio and roadmap, and execute with precision. In Analytics, DXC Technology offers a complete portfolio of services to rapidly provide insights and drive impactful business outcomes. Our Partner Network allows you to leverage investment while building the analytic solutions of tomorrow. DXC’s industry-aligned IP is centered on the insurance, banking, healthcare, and travel and transportation industries.

Activities are primarily related to vertical alignment of software solutions and process-based IP that power mission-critical transaction engines. And, our Business Process Services combine business process expertise and intellectual property with the resources of a global Tier I IT services company, leveraging intelligent automation and innovative solutions to

reduce manual effort and the associated cost. Key competitive differentiators for GBS include global scale, solution objectivity, depth of industry expertise, strong partnerships, vendor and product independence and end-to-end solutions and capabilities. Evolving business demands such as globalization, fast-developing economies, government regulation and growing concerns around risk, security, and compliance drive demand for these offerings.

~~Global Infrastructure Services~~

GIS provides Cloud, Platforms and Infrastructure Technology Outsourcing, Workplace and Mobility and Security solutions to commercial clients globally. This includes DXC’s next-generation cloud offerings, including Infrastructure as a Service ("IaaS"), private cloud solutions, and Storage as a Service. GIS provides a portfolio of standard offerings that have predictable outcomes and measurable results while reducing business risk and operational costs for clients. Further, our industry-leading security solutions help clients predict attacks, proactively respond to threats, ensure compliance, and protect data, applications, infrastructure and endpoints. To provide clients with differentiated offerings, GIS maintains a Partner Network to make investments in developing unique offerings and go-to-market strategies. This collaboration helps us independently determine the best technology, develop road maps, and enhance opportunities to differentiate solutions, expand market reach, augment capabilities, and jointly deliver impactful solutions that best address client needs.

~~United States Public Sector~~

USPS delivers IT services and business solutions to all levels of government in the United States. USPS helps clients to address their key objectives of: (1) transforming and modernizing through innovation, (2) enhancing security and privacy, (3) improving efficiency and effectiveness, (4) reducing and optimizing costs, and (5) becoming more agile, flexible and resilient. USPS aims to be a transformation partner that can maximize technology’s potential to create the solutions that matter most to its government clients. USPS supports hundreds of accounts at the federal, state, and local government levels. Commensurate with DXC's strategy of leading the next generation of IT services, USPS is leveraging our commercial best practices and next-generation offerings to help civilian government agencies address their business issues and provide better and more secure access to citizen services while reducing costs for community & social service, environmental management, education, transportation, and general government & revenue collection.

~~Results of Operations~~

On April 1, 2017, we completed the strategic combination of CSC with HPES to form DXC. See Note 1 - "Summary of Significant Accounting Policies" and Note 3 "Acquisitions". Because it was deemed the accounting acquirer, CSC is considered DXC's predecessor and the historical financial statements of CSC prior to the Merger are reflected in this Quarterly Report on Form 10-Q as DXC's historical financial statements. Accordingly, the financial results of DXC as of and for any periods ending prior to April 1, 2017, included elsewhere in this Quarterly Report on Form 10-Q do not include the financial results of HPES, and therefore, are not directly comparable.

~~The following table calculates the period over period changes in the unaudited condensed consolidated statements of operations:~~

Three Months Ended
(In millions, except per-share amounts) December 31, 2017 December 30, 2016 Change
Percentage Change ^(NC)

Revenues $ 6,186
$ 1,917
$ 4,269
—
Total costs and expenses 5,748
1,867
3,881
—
Income before income taxes 438
50
388
—
Income tax (benefit) expense (341 ) 13
(354 ) —
Net income $ 779
$ 37
$ 742
—

Diluted earnings per share $ 2.68
$ 0.21
$ 2.47
—

~~(NC) - Not comparable~~

Nine Months Ended
(In millions, except per-share amounts) December 31, 2017 December 30, 2016 Change
Percentage Change ^(NC)

Revenues $ 18,262
$ 5,718
$ 12,544
—
Total costs and expenses 17,252
5,705
11,547
—
Income before income taxes 1,010
13
997
—
Income tax benefit (207 ) (25 ) (182 ) —
Net income $ 1,217
$ 38
$ 1,179
—

Diluted earnings per share $ 4.11
$ 0.17
$ 3.94
—

~~(NC) - Not comparable~~

~~Revenues~~

~~The following discussion includes comparisons of our results of operations~~10-K for the three and nine months ended December 31, 2017 to our pro forma results of operations for the three and nine months ended December 30, 2016. Our pro forma results of operations for the three and nine months ended December 30, 2016 are based upon the historical statements of operations of each of CSC and HPES, giving effect to the Merger as if it had been consummated on April 2, 2016. CSC reported its results based on a fiscal year ~~convention that comprised four thirteen-week quarters. HPES reported its results on a fiscal year basis~~ ended October 31. As a consequence of CSC and HPES having different fiscal year-end dates, all references to the unaudited pro forma statement of operations include the results of operations of CSC for the three and nine months ended December 30, 2016 and of HPES for the three and nine months ended OctoberMarch 31, ~~2016.~~2019.

~~See "Unaudited Pro Forma Condensed Combined Statement of Operations" below for additional information.~~

Three Months Ended
(in millions) December 31, 2017 December 30, 2016 Change
Percentage Change ^(NC)
GBS $ 2,315
$ 1,046
$ 1,269
—
GIS 3,145
871
2,274
—
USPS 726
—
726
—
Total Revenues $ 6,186
$ 1,917
$ 4,269
—

~~(NC) - Not comparable~~

Three Months Ended
(in millions) December 31, 2017 Pro Forma December 30, 2016 Change Percentage Change
GBS $ 2,315
$ 2,432
$ (117 ) (4.8 )%
GIS 3,145
3,327
(182 ) (5.5 )%
USPS 726
826
(100 ) (12.1 )%
Total Revenues $ 6,186
$ 6,585
$ (399 ) (6.1 )%

Nine Months Ended
(in millions) December 31, 2017 December 30, 2016 Change
Percentage Change ^(NC)
GBS $ 6,893
$ 3,130
$ 3,763
—
GIS 9,256
2,588
6,668
—
USPS 2,113
—
2,113
—
Total Revenues $ 18,262
$ 5,718
$ 12,544
—

~~(NC) - Not comparable~~

Nine Months Ended
(in millions) December 31, 2017 Pro Forma December 30, 2016 Change Percentage Change
GBS $ 6,893
$ 7,245
$ (352 ) (4.9 )%
GIS 9,256
9,906
(650 ) (6.6 )%
USPS 2,113
2,207
(94 ) (4.3 )%
Total Revenues $ 18,262
$ 19,358
$ (1,096 ) (5.7 )%

As a global company, over ~~56%~~62% of our revenues ~~have been~~for the first six months of fiscal 2020 were earned internationally. As a result, the ~~changes in~~comparison of revenues denominated in currencies other than the U.S. dollar from period to period ~~are~~is impacted, and we expect will continue to be impacted, by fluctuations in foreign currency exchange rates. ~~The table below summarizes our constant currency revenues for the three and nine months ended December 31, 2017 compared to the pro forma three and nine months ended December 30, 2016:~~

Three Months Ended
(in millions) December 31, 2017 at Constant Currency December 30, 2016 Pro Forma Increase (Decrease) at Constant Currency Percentage Change
GBS $ 2,266
$ 2,432
$ (166 ) (6.8 )%
GIS 3,075
3,327
(252 ) (7.6 )%
USPS 726
826
(100 ) (12.1 )%
Total $ 6,067
$ 6,585
$ (518 ) (7.9 )%

Nine Months Ended
(in millions) December 31, 2017 at Constant Currency December 30, 2016 Pro Forma Increase (Decrease) at Constant Currency Percentage Change
GBS $ 6,859
$ 7,245
$ (386 ) (5.3 )%
GIS 9,235
9,906
(671 ) (6.8 )%
USPS 2,113
2,207
(94 ) (4.3 )%
Total $ 18,207
$ 19,358
$ (1,151 ) (5.9 )%

~~The revenue discussions below include references to revenues on a constant currency basis.~~ Constant currency revenues are a non-GAAP measure calculated by translating current period activity into U.S. dollars using the comparable prior period’s currency conversion rates. This ~~non-GAAP measure allows~~information is consistent with how management ~~to evaluate~~views our revenues and evaluates our operating performance ~~separately from movements~~and trends. The table below summarizes our constant currency revenues:



	Three Months Ended
(in millions)	Constant Currency September 30, 2019		September 30, 2018		Change			Percentage Change
GBS	$	2,333	$	2,111	$	222		10.5	%
GIS	2,639		2,902		(263		)	(9.1	)%
Total	$	4,972	$	5,013	$	(41	)	(0.8	)%



	Six Months Ended
(in millions)	Constant Currency September 30, 2019		September 30, 2018		Change			Percentage Change
GBS	$	4,558	$	4,324	$	234		5.4	%
GIS	5,474		5,971		(497		)	(8.3	)%
Total	$	10,032	$	10,295	$	(263	)	(2.6	)%

Global Business Services

GBS revenue was $2,285 million in ~~foreign exchange rates.~~

~~On a GAAP basis, total revenues were $6.2 billion~~the second quarter and ~~$18.3 billion during~~$4,444 million in the ~~three and nine~~first six months ~~ended December 31, 2017, respectively,~~of fiscal 2020, an increase of ~~$4.3 billion~~8.2% and ~~$12.5 billion~~2.8%, respectively, compared to the corresponding periods in fiscal 2019. GBS revenue in constant currency increased 10.5% and 5.4% in the second quarter and first six months of fiscal 2020, respectively, as compared to the ~~comparable~~corresponding periods in fiscal 2019. The increase in GBS revenue in fiscal 2020 periods reflects the contributions from our Luxoft and other acquisitions further discussed in Note 3 - "Acquisitions".

For the second quarter and first six months of fiscal 2020, GBS contract awards were $1.9 billion and $4.3 billion, respectively, as compared to $2.2 billion and $4.2 billion in the corresponding periods of fiscal 2019.

Global Infrastructure Services

GIS revenue was $2,566 million in the ~~prior~~second quarter and $5,297 million in the first six months of fiscal ~~year. The revenue growth is attributed~~2020, a decrease of 11.6% and 11.3%, respectively, compared to the ~~Merger.~~

~~On a GAAP basis, our~~corresponding periods in fiscal 2019. GIS ~~segment revenues during the three~~revenue in constant currency decreased 9.1% and nine months ended December 31, 2017 were $3.1 billion and $9.3 billion, or 50.8% and 50.7% of total revenues, respectively. Our GIS segment includes our Cloud, Platforms and Infrastructure Technology Outsourcing, Workplace and Mobility and Security solutions businesses. Our GBS segment revenues were $2.3 billion and $6.9 billion, or 37.4% and 37.7% of total revenues, during the three and nine months ended December 31, 2017, respectively. Our GBS segment includes Enterprise and Cloud Applications, Consulting Application Services, Analytics, Industry-aligned IP and Business Process Services businesses. Our USPS

segment, which was created upon the consummation of the Merger contributed $0.7 billion and $2.1 billion of revenues, or 11.7% and 11.6% of total revenues during the three and nine months ended December 31, 2017, respectively. The USPS segment provides both infrastructure and other services similar to our GIS and GBS segments to all levels of government8.3% in the ~~United States.~~

~~On a pro forma basis, constant currency revenues decreased $518 million, or 7.9%, during the three~~second quarter and first six months ~~ended December 31, 2017~~of fiscal 2020, respectively, as compared to the three months ended December 30, 2016. The constant currency revenues decrease for both our GIS and GBS segments was driven by contracts that concluded or were renewed at a lower rate. These decreases were partially offset by an increasecorresponding periods in ~~revenues from new business as well as the contributions from our recent acquisition of Tribridge, primarily within our GBS segment.~~fiscal 2019. The decrease in ~~constant currency USPS segment~~GIS revenues ~~for~~in fiscal 2020 periods reflects declines in our traditional infrastructure businesses.

For the ~~three~~second quarter and first six months ~~ended December 31, 2017,~~of fiscal 2020, GIS contract awards were $1.9 billion and $3.7 billion, respectively, as compared to ~~the same period of the prior fiscal year, was largely driven by a contract reset that resulted in a one-time revenue increase~~$2.5 billion and $5.1 billion in the ~~prior year period.~~corresponding periods of fiscal 2019.

On a pro forma basis, constant currency revenues decreased $1,151 million, or 5.9%, during the nine months ended December 31, 2017 as compared to the nine months ended December 30, 2016. The constant currency revenues decrease for both our GIS and GBS segments was driven by contracts that concluded or were renewed at a lower rate. These decreases were partially offset by an increase in revenues from new business as well as the contributions from our recent acquisition of Tribridge, primarily within our GBS segment. The decrease in constant currency USPS segment revenues for the nine months ended December 31, 2017, as compared to the same period of the prior fiscal year, was largely driven by a contract reset that resulted in a one-time revenue increase in the prior year period.

For the three months ended December 31, 2017, GIS, GBS and USPS contract awards were $2.2 billion, $3.3 billion and $0.5 billion, respectively. For the nine months ended December 31, 2017, GIS, GBS and USPS contract awards were $8.8 billion, $8.1 billion and $1.4 billion, respectively.

Costs and Expenses

Our total costs and expenses are shown in the tables below:


	Three Months Ended												Three Months Ended
	Amount						Percentage of Revenues				Percentage of Revenue Change		Amount						Percentage of Revenues				Percentage of Revenue Change
(in millions)	December 31, 2017			December 30, 2016			December 31, 2017		December 30, 2016		Percentage of Revenue Change		September 30, 2019			September 30, 2018			September 30, 2019		September 30, 2018		Percentage of Revenue Change
Costs of services (excludes depreciation and amortization and restructuring costs)	$	4,521		$	1,347		73.1	%	70.2	%	2.9	%	$	3,679		$	3,518		75.8	%	70.1	%	5.7	%
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)	475			333			7.7		17.4		(9.7	)	489			569			10.1		11.4		(1.3	)
Depreciation and amortization	481			161			7.8		8.4		(0.6	)	467			484			9.6		9.7		(0.1	)
Goodwill impairment losses													2,887			—			59.5		—		59.5
Restructuring costs	213			3			3.4		0.2		3.2		32			157			0.7		3.1		(2.4	)
Interest expense	77			33			1.2		1.7		(0.5	)	104			83			2.1		1.7		0.4
Interest income	(27		)	(8		)	(0.4	)	(0.4	)	—		(67		)	(33		)	(1.4	)	(0.7	)	(0.7	)
Other expense (income), net	8			(2		)	0.1		(0.1	)	0.2
Gain on arbitration award													(632		)	—			(13.0	)	—		(13.0	)
Other income, net													(109		)	(97		)	(2.2	)	(1.9	)	(0.3	)
Total costs and expenses	$	5,748		$	1,867		92.9	%	97.4	%	(4.5	)%	$	6,850		$	4,681		141.2	%	93.4	%	47.8	%


	Nine Months Ended												Six Months Ended
	Amount						Percentage of Revenues				Percentage of Revenue Change		Amount						Percentage of Revenues				Percentage of Revenue Change
(in millions)	December 31, 2017			December 30, 2016			December 31, 2017		December 30, 2016		Percentage of Revenue Change		September 30, 2019			September 30, 2018			September 30, 2019		September 30, 2018		Percentage of Revenue Change
Costs of services (excludes depreciation and amortization and restructuring costs)	$	13,621		$	4,131		74.5	%	72.2	%	2.3	%	$	7,301		$	7,385		75.0	%	71.8	%	3.2	%
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)	1,557			931			8.5		16.3		(7.8	)	996			1,009			10.2		9.8		0.4
Depreciation and amortization	1,379			494			7.6		8.6		(1.0	)	937			955			9.6		9.3		0.3
Goodwill impairment losses													2,887			—			29.6		—		29.6
Restructuring costs	595			85			3.3		1.5		1.8		174			342			1.8		3.3		(1.5	)
Interest expense	231			87			1.3		1.6		(0.3	)	195			168			2.0		1.6		0.4
Interest income	(59		)	(26		)	(0.3	)	(0.5	)	0.2		(97		)	(65		)	(1.0	)	(0.6	)	(0.4	)
Other (income) expense, net	(72		)	3			(0.4	)	0.1		(0.5	)
Gain on arbitration award													(632		)	—			(6.5	)	—		(6.5	)
Other income, net													(227		)	(191		)	(2.3	)	(1.9	)	(0.4	)
Total costs and expenses	$	17,252		$	5,705		94.5	%	99.8	%	(5.3	)%	$	11,534		$	9,603		118.4	%	93.3	%	25.1	%

The 47.8% and 25.1% increase in costs and expenses as a percentage of revenue for the second quarter and first six months of fiscal 2020, respectively, primarily reflects our goodwill impairment losses, which were partially offset by the gain on arbitration award.

Costs of Services

Cost of services, excluding depreciation and amortization and restructuring costs ("COS"), was ~~$4.5~~$3.7 billion and ~~$13.6~~$7.3 billion for the ~~three~~second quarter and ~~nine~~first six months ~~ended December 31, 2017,~~of fiscal 2020, respectively. ~~The $3.2~~COS increased $0.2 billion during the second quarter of fiscal 2020 and ~~$9.5~~decreased $0.1 billion ~~increase in COS,~~during the first six months of fiscal 2020, as compared to the same periods of the prior fiscal ~~year, was~~year.

COS as a percentage of revenue increased 5.7% and 3.2% for the second quarter and first six months of fiscal 2020, respectively. These increases were driven by the ~~Merger and was partially offset by reduction~~decline in ~~costs~~revenue exceeding associated ~~with workforce and facilities optimization.~~cost reductions in our traditional infrastructure businesses.

Selling, General, and Administrative

Selling, general, and administrative expense, excluding depreciation and amortization and restructuring costs ("SG&A"), was ~~$475~~$489 million and ~~$1,557~~$996 million for the ~~three~~second quarter and ~~nine~~first six months ~~ended December 31, 2017,~~of fiscal 2020, respectively. ~~The $142~~SG&A decreased $80 million and ~~$626~~$13 million ~~increase in SG&A,~~during the second quarter and first six months of fiscal 2020, respectively, as compared to the same periods of the prior fiscal ~~year, was~~year. These decreases were driven ~~primarily~~ by ~~the Merger. Additionally, integration~~lower transaction, separation and ~~transaction-related~~integration-related costs.

Transaction, separation and integration-related costs of ~~$94~~$53 million and ~~$284~~$158 million were included in SG&A for the ~~three~~second quarter and ~~nine~~first six months ~~ended December 31, 2017,~~of fiscal 2020, respectively, as compared to ~~$78~~$128 million and ~~$187~~$198 million for the comparable periods of the prior fiscal year.

Depreciation and Amortization

Depreciation expense ~~increased $122~~decreased $28 million and amortization expense increased ~~$198~~$11 million for the three months ended ~~December 31, 2017,~~September 30, 2019, compared to the three months ended ~~December~~September 30, ~~2016.~~2018. For the ~~nine~~first six months ~~ended December 31, 2017,~~of fiscal 2020, depreciation expense ~~increased $359~~decreased $50 million and amortization expense increased ~~$526~~$32 million compared to the ~~nine~~first six months ~~ended December 30, 2016.~~ of fiscal 2019.

The net decrease in depreciation for the second quarter and first six months of fiscal 2020 was primarily due to a $56 million and $111 million benefit, respectively, from a change in estimated useful lives of certain equipment described in Note 1 - "Summary of Significant Accounting Policies", offset by an increase in depreciation ~~and~~on assets placed into service as well as dissipation of the benefit from the conversion of assets from operating to finance leases.

The increases in amortization expense ~~("D&A")~~for the second quarter and first six months of fiscal 2020 were primarily due to increases in amortization related software as compared to the same periods in the prior fiscal year.

Goodwill Impairment Losses

DXC recognized goodwill impairment charges totaling $2,887 million for the second quarter and first six months of fiscal 2020. The impairment charge was ~~attributed to acquired property and equipment and intangible assets associated with~~primarily as a result of a decline in market capitalization during the ~~Merger.~~fiscal 2020 second quarter. See Note 11, "Goodwill" for additional information.

Restructuring Costs

During ~~the nine months ended December 31, 2017,~~fiscal 2020, management approved ~~the Fiscal 2018 Plan to optimize operations in response to a continuing business contraction. The additional restructuring~~global cost savings initiatives ~~are intended~~designed to reduce ~~our core structure and related~~ operating costs ~~improve~~by re-balancing our ~~competitiveness,~~workforce and facilitate the achievement of acceptable and sustainable profitability. The Fiscal 2018 Plan focuses mainly on optimizing specific aspects of global workforce, increasing the proportion of work performed in low cost offshore locations and rebalancing the pyramid structure. Additionally, this plan includes global facility restructuring, including a global datacenter restructuring program.

facilities structures. During the ~~three~~second quarter and ~~nine~~first six months ~~ended December 31, 2017,~~of fiscal 2020, restructuring costs, net of reversals, were ~~$213~~$32 million and ~~$595~~$174 million, respectively, as compared ~~with $3~~to $157 million and ~~$85~~$342 million during the ~~comparable~~same periods of the prior fiscal year. ~~The year-over-year increase in restructuring~~Restructuring costs ~~was due to~~for the ~~implementation~~second quarter of fiscal 2020 included $23 million of reversals under the Fiscal ~~2018~~2020 Plan. Restructuring costs included pension benefit augmentations owed to certain employees under legal or contractual obligations. These augmentations will be paid as part of normal pension distributions over several years.

For an analysis of changes in our restructuring liabilities by restructuring plan, see Note 1114 - "Restructuring Costs" to the financial statements.

Interest Expense and Interest Income

Interest expense for the ~~three~~second quarter and ~~nine~~first six months ~~ended~~ ~~December 31, 2017~~of fiscal 2020 increased $4421 million and ~~$144~~$27 million, respectively, over the same periods ofin the prior fiscal ~~year, respectively.~~year. The increase in interest expense in the second quarter and first six months of fiscal 2020 versus the same periods in fiscal 2019 was primarily due to an increase in borrowings and asset financing activities. See the "Capital Resources" caption below and Note 12 - “Debt” for ~~the nine months ended December 31, 2017 includes interest expense associated with $5.6 billion of acquired debt; see Note 3 - "Acquisitions"~~additional information.

Interest income for the ~~three~~second quarter and ~~nine~~first six months ~~ended~~ ~~December 31, 2017~~of fiscal 2020 increased ~~$19~~$34 million and ~~$33~~$32 million, respectively over the same periods ofin the prior fiscal ~~year, respectively.~~year. The ~~year-over-year~~ increase in interest income ~~was due~~in the second quarter and first six months of fiscal 2020 versus the same periods in fiscal 2019 includes pre-award interest of $34 million and post-award interest of $2 million related to ~~higher cash balances during~~arbitration discussed below under the ~~three and nine months ended December 31, 2017 as compared to the prior year periods.~~caption “Gain on Arbitration Award.”

Gain on Arbitration Award

In September 2019, DXC received final arbitration award proceeds of $666 million related to the HPE Enterprise Services merger completed in fiscal 2018. The arbitration award included $632 million in damages that were recorded as a gain. The remaining $34 million of the award related to pre-award interest. Dispute details are subject to confidentiality obligations.

Other ~~Expense (Income),~~Income, Net

Other ~~expense (income),~~income, net comprises non-service cost components of net periodic pension income, movement in foreign currency exchange rates on our foreign currency denominated assets and liabilities and the related economic hedges, equity earnings of unconsolidated affiliates and other miscellaneous gains and losses.

The $10 million increase in other expense for the three months ended December 31, 2017 as compared to the three months ended December 30, 2016 was due to unfavorable movement in exchange rates between the U.S. dollar and the Euro. The $75$12 million increase in other income, net for the ~~nine months ended December 31, 2017 over~~second quarter of fiscal 2020 as compared to the ~~comparable~~same period of the prior fiscal year was ~~primarily~~ due to a year-over-year increase of $20 million in non-service components of net periodic pension income and a year-over-year favorable foreign currency ~~gain~~impact of $20 million. These increases were offset by a $28 million decrease in other gains related to sales of non-operating assets.

The $36 million increase in other income, net for the first six months of fiscal 2020 as compared to the same period of the prior fiscal year was due to a ~~change~~year-over-year increase of $42 million in ~~the functional~~non-service components of net periodic pension income and a year-over-year favorable foreign currency impact of $41 million. These increases were offset by a ~~European holding company.~~$47 million decrease in other gains related to sales of non-operating assets.

Taxes

~~The Company's income tax (benefit) expense~~Our ETR from continuing operations was ~~$(341) million~~(5.8)% and ~~$13 million~~22.0% for the three months ended ~~December 31, 2017~~September 30, 2019 and ~~December~~September 30, ~~2016,~~2018, respectively, and ~~$(207) million~~(8.6)% and ~~$(25) million~~29.2% for the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2019 and ~~December~~September 30, ~~2016,~~2018, respectively. For the three ~~and nine~~ months ended ~~December 31, 2017,~~September 30, 2019, the primary drivers of the ~~effective tax rate ("ETR")~~ETR were the ~~remeasurement of deferred tax assets and liabilities as a result~~impact of the ~~Act,~~non-deductible goodwill impairment charge, the ~~remeasurement of a deferred tax liability recorded~~non-taxable gain on the ~~outside basis difference~~arbitration award, the global mix of ~~HPES~~income, an increase in prior year U.S. federal research and development income tax credits, and an increase in unrecognized tax benefits primarily related to the disallowance of certain legacy CSC foreign ~~subsidiaries,~~restructuring expenses deducted on the ~~accrual of a one-time transition~~U.S. federal tax ~~on estimated unremitted foreign earnings and India DDT accrual due to historic earnings and taxes. The~~return for tax year March 31, 2013. For the six months ended September 30, 2019, the primary drivers of the ETR were the impact of the non-deductible goodwill impairment charge, the non-taxable gain on the arbitration award, the global mix of income, an increase in unrecognized tax benefits primarily related to the disallowance of certain legacy CSC foreign restructuring expenses deducted on the U.S. federal tax return for tax year March 31, 2013 and an increase in prior year U.S. federal research and development income tax credits. For the three and ~~nine~~six months ended ~~December~~September 30, ~~2016~~2018, the primary unfavorable drivers of the ETR were the global mix of income, ~~release~~the increase in the provisional transition tax, an

increase in state tax expense due to remeasurement of ~~a valuation allowance in a non-U.S. jurisdiction~~deferred taxes, and ~~excess tax benefits related to employee share-based payment awards.~~

~~Our accounting for~~ the impact of U.S. proposed regulations on ~~ETR and future earnings for~~ the ~~GILTI, executive compensation and cost recovery for expenditures that qualify for immediate expensing and other base broadening provisions~~ability to claim certain foreign tax credits. The primary favorable drivers of the ~~Act is incomplete and we~~ETR were ~~not yet able~~due to ~~make reasonable estimates for~~ the ~~effects. Therefore, no provisional adjustments were recorded.~~

~~Except for the uncertain tax liabilities acquired as a result~~filing of the ~~Merger, there were no material changes to uncertain~~October 31, 2017 U.S. federal tax ~~positions~~return and a decrease in valuation allowances on certain foreign subsidiary deferred tax assets.

Income from Discontinued Operations

The $35 million of income from discontinued operations reflects the net income generated by USPS during the first quarter of fiscal ~~2018. For further discussion of these uncertain tax positions, please refer to Note 13 - "Income Taxes."~~2019.

Earnings ~~per~~(Loss) Per Share

Diluted EPS from continuing operations for the ~~three~~second quarter and ~~nine~~first six months ~~ended December 31, 2017 increased $2.47~~of fiscal 2020 decreased $9.11 and ~~$3.94,~~$9.13, respectively, from the same periods in the prior fiscal year. This decrease reflects a ~~year ago. The increase~~decrease of $2,374 million and $2,437 million in income from continuing operations for the ~~three~~second quarter and ~~nine~~first six months ~~ended December 31, 2017 was due to increases~~ of ~~$0.7 billion and $1.2 billion,~~fiscal 2020, respectively, over the same periods in ~~net income attributable to DXC common stockholders, partially offset by an increase in weighted average common shares outstanding for diluted~~ ~~EPS~~ ~~attributable to capital restructuring associated with~~ the ~~Merger. The increase in~~ prior fiscal year.

Diluted EPS from continuing operations for the ~~three months ended December 31, 2017, included an increase~~second quarter of ~~$0.04 due to purchase price allocation adjustments~~fiscal 2020 includes $0.11 per share of restructuring costs, $0.18 per share of transaction, separation and integration-related costs, $0.45 per share of amortization of acquired intangible assets, $11.10 per share of goodwill impairment losses, $(2.43) per share of arbitration award gains, and $0.11 per share of tax adjustment related to prior restructuring charges.

Diluted EPS from continuing operations for the first six months ~~ended September 30, 2017 that were recognized in the during the three months ended December 31, 2017; see Note 3 - "Acquisitions").~~of fiscal 2020 includes $0.54 per share of restructuring costs, $0.50 per share of transaction, separation and integration-related costs, $0.85 per share of amortization of acquired intangible assets, $10.91 per share of goodwill impairment losses, $(2.39) per share of arbitration award gains, and $0.11 per share of tax adjustment relating to prior restructuring charges.

~~Unaudited Pro Forma Condensed Combined Statement of Operations~~

In an effort to provide investors with additional information, we are disclosing certain unaudited pro forma financial information of DXC for the three and nine months ended December 30, 2016 as supplemental information herein. The following unaudited pro forma condensed combined statement of operations of DXC (the “unaudited pro forma statement of operations”) is for the three and nine months ended December 30, 2016 after giving effect to the Merger. See Note 1 - "Summary of Significant Accounting Policies" and Note 3 - "Acquisitions" to the financial statements for additional information.

CSC reported its results based on a fiscal year convention that comprised four thirteen-week quarters. Every fifth year included an additional week in the first quarter to prevent the fiscal year moving from an approximate end of March date. HPES reported its results on a fiscal year basis ended October 31. As a consequence of CSC and HPES having different fiscal year-end dates, all references to the unaudited pro forma statement of operations include the results of operations of CSC for the three and nine months ended December 30, 2016 and of HPES for the three and nine months ended October 31, 2016.

The historical condensed combined statement of operations of HPES was “carved-out” from the combined statement of operations of HPE and reflects assumptions and allocations made by HPE. The condensed combined statement of operations of HPES included all revenues and costs directly attributable to HPES and an allocation of expenses related to certain HPE corporate functions. The results of operations in the HPES historical condensed combined statement of operations does not necessarily include all expenses that would have been incurred by HPES had it been a separate, stand-alone entity. Actual costs that may have been incurred if HPES had been a stand-alone company would depend on a number of factors, including the chosen organizational structure, functions outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure. Consequently, HPES’ historical condensed combined statement of operations does not necessarily reflect what HPES’ results of operations would have been had HPES operated as a stand-alone company during the period presented.

~~DXC TECHNOLOGY COMPANY~~
~~UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS~~

~~FOR THE THREE AND NINE MONTHS ENDED DECEMBER 30, 2016~~

The unaudited pro forma statement of operations has been prepared using the acquisition method of accounting with CSC considered the accounting acquirer of HPES. This unaudited pro forma statement includes combining historical results, reflecting preliminary purchase accounting adjustments and aligning accounting policies for our consolidated results and reportable segments. The historical statements of operations have been adjusted in the unaudited pro forma statement of operations to give effect to pro forma events that were (i) directly attributable to the Merger, (ii) factually supportable, and (iii) which are expected to have a continuing impact on the consolidated results of operations of DXC. The pro forma results do not reflect the costs of integration activities or benefits that may result from realization of previously announced anticipated first-year synergies of approximately $1.0 billion. No assurances of the timing or the amount of cost synergies, or the costs necessary to achieve those cost synergies, can be provided.

The adjustments included in the unaudited pro forma statement of operations were based upon currently available information and assumptions that management of DXC believes to be reasonable. The unaudited pro forma statement of operations is for informational purposes only and is not intended to represent or to be indicative of the actual results of operations that the combined company would have reported had the Merger been completed on April 2, 2016, and should not be taken as being indicative of DXC’s future consolidated financial results. The unaudited pro forma statement of operations should be read in conjunction with Exhibit 99.2 of the previously filed Form 8-K/A that DXC filed with the SEC on June 14, 2017, including the accompanying notes.

Subsequent to the Merger, we adjusted the preliminary purchase price allocation, which would have decreased pro forma combined net loss and loss per common share by $96 million and $0.34, respectively, for the three months ended December 30, 2016, and $292 million and $1.03, respectively, for the nine months ended December 30, 2016. The decrease in pro forma combined net loss and loss per common share was primarily attributed to the acquisition-related fair value adjustments described in Note 3 - "Acquisitions."

~~DXC TECHNOLOGY COMPANY~~
~~UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS~~

~~FOR THE THREE AND NINE MONTHS ENDED DECEMBER 30, 2016~~

Historical
(in millions, except per-share amounts) CSC for the Three Months Ended December 30, 2016 HPES for the Three Months Ended October 31, 2016 Reclassifications Merger Adjustments Pro Forma Combined

Revenues $ 1,917
$ 4,668
$ —
$ —
$ 6,585

Costs of services (excludes depreciation and amortization and restructuring costs) 1,347
3,841
(254 ) 81
5,015
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs) 333
553
(74 ) (123 ) 689
Depreciation and amortization 161
32
328
—
521
Restructuring costs 3
211
—
—
214
Interest expense 33
—
38
(16 ) 55
Interest income (8 ) —
(10 ) —
(18 )
Other expense, net (2 ) —
—
—
(2 )
Total costs and expenses 1,867
4,637
28
(58 ) 6,474

Interest and other, net —
(30 ) 30
—
—
Income before income taxes 50
1
2
58
111
Income tax expense 13
185
—
79
277
Net income (loss) 37
(184 ) 2
(21 ) (166 )
Less: net income attributable to non-controlling interest, net of tax 6
—
2
—
8
Net loss attributable to DXC common stockholders $ 31
$ (184 ) $ —
$ (21 ) $ (174 )

Loss per common share:
Basic $ 0.22
$ (0.61 )
Diluted $ 0.21
$ (0.61 )

Weighted-average common shares:
Basic 140.88
283.16
Diluted 144.81
283.16

~~DXC TECHNOLOGY COMPANY~~
~~UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS~~

~~FOR THE THREE AND NINE MONTHS ENDED DECEMBER 30, 2016~~

Historical
(in millions, except per-share amounts) CSC for the Nine Months Ended December 30, 2016 HPES for the Nine Months Ended October 31, 2016 Reclassifications Merger Adjustments Pro Forma Combined

Revenues $ 5,718
$ 13,640
$ —
$ —
$ 19,358

Costs of services (excludes depreciation and amortization and restructuring costs) 4,131
11,563
(805 ) 404
15,293
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs) 931
1,558
(238 ) (192 ) 2,059
Depreciation and amortization 494
231
1,056
(164 ) 1,617
Restructuring costs 85
561
—
—
646
Transaction costs —
13
(13 ) —
—
Interest expense 87
—
137
8
232
Interest income (26 ) —
(33 ) —
(59 )
Other expense, net 3
—
9
—
12
Total costs and expenses 5,705
13,926
113
56
19,800

Interest and other, net —
(117 ) 117
—
—
Income (loss) before income taxes 13
(403 ) 4
(56 ) (442 )
Income tax (benefit) expense (25 ) 92
—
61
128
Net income (loss) 38
(495 ) 4
(117 ) (570 )
Less: net income attributable to non-controlling interest, net of tax 13
—
4
—
17
Net loss attributable to DXC common stockholders $ 25
$ (495 ) $ —
$ (117 ) $ (587 )

Loss per common share:
Basic $ 0.18
$ (2.07 )
Diluted $ 0.17
$ (2.07 )

Weighted-average common shares:
Basic 140.13
283.16
Diluted 143.80
283.16

Non-GAAP Financial Measures

We present non-GAAP financial measures of performance which are derived from the ~~unaudited condensed consolidated~~ statements ~~of operations and unaudited pro forma statement~~ of operations of DXC. These non-GAAP financial measures include earnings before interest and taxes ("EBIT"), adjusted EBIT, non-GAAP income before income taxes, non-GAAP net income and non-GAAP ~~EPS.~~EPS, constant currency revenues, net debt and net debt-to-total capitalization.

We present these non-GAAP financial measures to provide investors with meaningful supplemental financial information, in addition to the financial information presented on a GAAP ~~or pro forma~~ basis. ~~These non-GAAP~~Non-GAAP financial measures exclude certain items from GAAP results ~~that~~which DXC management believes are not indicative of core operating performance. DXC management believes these non-GAAP measures ~~provide~~allow investors ~~supplemental information about~~to better understand the financial performance of DXC exclusive of the impacts of ~~corporate wide~~corporate-wide strategic decisions. DXC management believes that adjusting for these items provides investors with additional measures to evaluate the financial performance of our core business operations on a comparable basis from period to period. DXC management believes the non-GAAP measures provided are also considered important measures by financial analysts covering DXC, as equity research analysts continue to publish estimates and research notes based on our non-GAAP commentary, including our guidance around non-GAAP ~~EPS.~~EPS targets.

Non-GAAP financial measures exclude certain items from GAAP results which DXC management believes are not indicative of operating performance such as the amortization of acquired intangible assets and transaction, separation and integration-related costs.

Incremental amortization of intangible assets acquired through business combinations may result in a significant difference in period over period amortization expense on a GAAP basis. We exclude amortization of certain acquired intangibles assets as these non-cash amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Although DXC management excludes amortization of acquired intangible assets primarily customer related intangible assets, from its non-GAAP expenses, we believe that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and support revenue generation. Any future transactions may result in a change to the acquired intangible asset balances and associated amortization expense.

There are limitations to the use of the non-GAAP financial measures presented in this report. One of the limitations is that they do not reflect complete financial results. We compensate for this limitation by providing a reconciliation between our non-GAAP financial measures and the respective most directly comparable financial measure calculated and presented in accordance with ~~GAAP or on a pro forma basis.~~GAAP. Additionally, other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes between companies.

Non-GAAP financial measures and the respective most directly comparable financial measures calculated and presented in accordance with GAAP include:

Three Months Ended
(in millions) December 31, 2017 Pro Forma December 30, 2016 Change Percentage Change
Income before income taxes $ 438
$ 111
$ 327
294.6 %
Non-GAAP income before income taxes $ 877
$ 589
$ 288
48.9 %
Net income (loss)

$ 779
$ (166 ) $ 945
(569.3 )%
Adjusted EBIT $ 927
$ 626
$ 301
48.1 %



	Three Months Ended
(in millions)	September 30, 2019			September 30, 2018		Change			Percentage Change
(Loss) income from continuing operations before income taxes	$	(1,999	)	$	332	$	(2,331	)	(702.1	)%
Non-GAAP income from continuing operations before income taxes	$	492		$	749	$	(257	)	(34.3	)%
Net (loss) income	$	(2,115	)	$	259	$	(2,374	)	(916.6	)%
Adjusted EBIT	$	529		$	799	$	(270	)	(33.8	)%

Nine Months Ended
(in millions) December 31, 2017 Pro Forma December 30, 2016 Change Percentage Change
Income (loss) before income taxes $ 1,010
$ (442 ) $ 1,452
(328.5 )%
Non-GAAP income before income taxes $ 2,310
$ 1,143
$ 1,167
102.1 %
Net income (loss)

$ 1,217
$ (570 ) $ 1,787
(313.5 )%
Adjusted EBIT $ 2,482
$ 1,316
$ 1,166
88.6 %



	Six Months Ended
(in millions)	September 30, 2019			September 30, 2018		Change			Percentage Change
(Loss) income from continuing operations before income taxes	$	(1,793	)	$	692	$	(2,485	)	(359.1	)%
Non-GAAP income from continuing operations before income taxes	$	1,083		$	1,499	$	(416	)	(27.8	)%
Net (loss) income	$	(1,947	)	$	525	$	(2,472	)	(470.9	)%
Adjusted EBIT	$	1,181		$	1,602	$	(421	)	(26.3	)%

Reconciliation of Non-GAAP Financial Measures

Our non-GAAP adjustments include:

Restructuring costs - reflects costs, net of reversals, related to workforce optimization and real estate ~~charges~~charges.

Transaction, separation and integration-related costs - reflects costs related to integration planning, financing and advisory fees associated with the HPES Merger and other ~~acquisitions.~~acquisitions and costs related to the separation of USPS.

Amortization of acquired intangible assets - reflects amortization of intangible assets acquired through business combinations.

~~Pension and OPEB actuarial and settlement gains and~~Goodwill impairment losses - reflects ~~pension and OPEB actuarial and settlement gains and losses.~~impairment losses on goodwill.

~~Certain overhead costs~~Gain on arbitration award - reflects ~~certain fiscal 2017 HPE costs allocated~~a gain related to the HPES ~~that are expected to be largely eliminated on a prospective basis.~~merger arbitration award.

Tax adjustment - for fiscal 2020 periods, reflects the impact of tax entries related to prior restructuring charges, and for fiscal 2019 periods, reflects the estimated non-recurring benefit of the Tax Cuts and Jobs Act of ~~2017 for fiscal 2018 periods and~~2017. Income tax expense of non-GAAP adjustments is computed by applying the ~~application of an approximate 27.5% pro forma~~jurisdictional tax rate ~~for fiscal 2017 periods, which is~~to the ~~midpoint of prospective targeted effective tax rate range of 25% to 30% and effectively excludes the impact of discrete tax~~pre-tax adjustments ~~for those periods.~~on a jurisdictional basis.

A reconciliation of reported results to non-GAAP results is as follows:



	Three Months Ended September 30, 2019
(in millions, except per-share amounts)	As Reported			Restructuring Costs		Transaction, Separation and Integration-Related Costs			Amortization of Acquired Intangible Assets		Goodwill Impairment Losses		Gain on Arbitration Award			Tax Adjustment			Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)	$	3,679		$	—	$	—		$	—	$	—	$	—		$	—		$	3,679
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)	489			—		(53		)	—		—		—			—			436
(Loss) income from continuing operations before income taxes	(1,999		)	32		53			151		2,887		(632		)	—			492
Income tax expense	116			4		5			34		—		—			(29		)	130
Net (loss) income	(2,115		)	28		48			117		2,887		(632		)	29			362
Less: net income attributable to non-controlling interest, net of tax	4			—		—			—		—		—			—			4
Net (loss) income attributable to DXC common stockholders	$	(2,119	)	$	28	$	48		$	117	$	2,887	$	(632	)	$	29		$	358

Effective Tax Rate	(5.8		)%																26.4		%

Basic EPS from continuing operations	$	(8.19	)	$	0.11	$	0.19		$	0.45	$	11.16	$	(2.44	)	$	0.11		$	1.38
Diluted EPS from continuing operations	$	(8.19	)	$	0.11	$	0.18		$	0.45	$	11.10	$	(2.43	)	$	0.11		$	1.38

Weighted average common shares outstanding for:
Basic EPS	258.71			258.71		258.71			258.71		258.71		258.71			258.71			258.71
Diluted EPS	258.71			260.03		260.03			260.03		260.03		260.03			260.03			260.03


	Three Months Ended December 31, 2017																			Six Months Ended September 30, 2019
(in millions, except per-share amounts)	As Reported			Restructuring Costs		Pension and OPEB Actuarial and Settlement Gains			Transaction and Integration-related Costs			Amortization of Acquired Intangible Assets		Tax adjustment			Non-GAAP Results			As Reported			Restructuring Costs		Transaction, Separation and Integration-Related Costs			Amortization of Acquired Intangible Assets		Goodwill Impairment Losses		Arbitration Award Gain			Tax Adjustment			Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)	$	4,521		$	—	$	—		$	—		$	—	$	—		$	4,521		$	7,301		$	—	$	—		$	—	$	—	$	—		$	—		$	7,301
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)	475			—		17			(94		)	—		—			398			996			—		(158		)	—		—		—			—			838

Income before income taxes	438			213		(17		)	94			149		—			877
Income tax (benefit) expense	(341		)	52		(3		)	26			45		473			252
Net income	779			161		(14		)	68			104		(473		)	625
(Loss) income from continuing operations before income taxes																				(1,793		)	174		158			289		2,887		(632		)	—			1,083
Income tax expense																				154			32		27			65		—		—			(29		)	249
Net (loss) income																				(1,947		)	142		131			224		2,887		(632		)	29			834
Less: net income attributable to non-controlling interest, net of tax	3			—		—			—			—		—			3			9			—		—			—		—		—			—			9
Net income attributable to DXC common stockholders	$	776		$	161	$	(14	)	$	68		$	104	$	(473	)	$	622
Net (loss) income attributable to DXC common stockholders																				$	(1,956	)	$	142	$	131		$	224	$	2,887	$	(632	)	$	29		$	825

Effective Tax Rate	(77.9		)%														28.7		%	(8.6		)%																23.0		%

Basic EPS	$	2.72		$	0.56	$	(0.05	)	$	0.24		$	0.36	$	(1.66	)	$	2.18
Diluted EPS	$	2.68		$	0.56	$	(0.05	)	$	0.23		$	0.36	$	(1.63	)	$	2.15
Basic EPS from continuing operations																				$	(7.44	)	$	0.54	$	0.50		$	0.85	$	10.98	$	(2.40	)	$	0.11		$	3.14
Diluted EPS from continuing operations																				$	(7.44	)	$	0.54	$	0.50		$	0.85	$	10.91	$	(2.39	)	$	0.11		$	3.12

Weighted average common shares outstanding for:
Basic EPS	285.38			285.38		285.38			285.38			285.38		285.38			285.38			262.83			262.83		262.83			262.83		262.83		262.83			262.83			262.83
Diluted EPS	289.77			289.77		289.77			289.77			289.77		289.77			289.77			262.83			264.61		264.61			264.61		264.61		264.61			264.61			264.61


	Nine Months Ended December 31, 2017																			Three Months Ended September 30, 2018
(in millions, except per-share amounts)	As Reported			Restructuring Costs		Pension and OPEB Actuarial and Settlement Gains			Transaction and Integration-related Costs			Amortization of Acquired Intangible Assets		Tax adjustment			Non-GAAP Results			As Reported			Restructuring Costs		Transaction, Separation and Integration-Related Costs			Amortization of Acquired Intangible Assets		Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)	$	13,621		$	—	$	—		$	—		$	—	$	—		$	13,621		$	3,518		$	—	$	—		$	—	$	3,518
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)	1,557			—		17			(284		)	—		—			1,290			569			—		(128		)	—		$	441

Income before income taxes	1,010			595		(17		)	284			438		—			2,310
Income tax (benefit) expense	(207		)	143		(3		)	90			148		473			644
Income from continuing operations before income taxes																				332			157		128			132		749
Income tax expense																				73			41		30			32		176
Income from continuing operations																				259			116		98			100		573
Income from discontinued operations, net of tax																				—			—		—			—		—
Net income	1,217			452		(14		)	194			290		(473		)	1,666			259			116		98			100		573
Less: net income attributable to non-controlling interest, net of tax	26			—		—			—			—		—			26
Less: net (loss) attributable to non-controlling interest, net of tax																				(3		)	—		—			—		(3		)
Net income attributable to DXC common stockholders	$	1,191		$	452	$	(14	)	$	194		$	290	$	(473	)	$	1,640		$	262		$	116	$	98		$	100	$	576

Effective Tax Rate	(20.5		)%														27.9		%	22.0		%								23.5		%

Basic EPS	$	4.18		$	1.59	$	(0.05	)	$	0.68		$	1.02	$	(1.66	)	$	5.76
Diluted EPS	$	4.11		$	1.56	$	(0.05	)	$	0.67		$	1.00	$	(1.63	)	$	5.66
Basic EPS from continuing operations																				$	0.93		$	0.41	$	0.35		$	0.36	$	2.05
Diluted EPS from continuing operations																				$	0.92		$	0.41	$	0.34		$	0.35	$	2.02

Weighted average common shares outstanding for:
Basic EPS	284.70			284.70		284.70			284.70			284.70		284.70			284.70			281.37			281.37		281.37			281.37		281.37
Diluted EPS	289.53			289.53		289.53			289.53			289.53		289.53			289.53			285.78			285.78		285.78			285.78		285.78



	Six Months Ended September 30, 2018
(in millions, except per-share amounts)	As Reported			Restructuring Costs		Transaction, Separation and Integration-Related Costs			Amortization of Acquired Intangible Assets		Tax Adjustment			Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)	$	7,385		$	—	$	—		$	—	$	—		$	7,385
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)	1,009			—		(198		)	—		—			$	811
Income from continuing operations before income taxes	692			342		198			267		—			1,499
Income tax expense (benefit)	202			82		46			65		(33		)	362
Income from continuing operations	490			260		152			202		33			1,137
Income from discontinued operations, net of tax	35			—		—			—		—			35
Net income	525			260		152			202		33			1,172
Less: net income attributable to non-controlling interest, net of tax	4			—		—			—		—			4
Net income attributable to DXC common stockholders	$	521		$	260	$	152		$	202	$	33		$	1,168

Effective Tax Rate	29.2		%											24.1		%

Basic EPS from continuing operations	$	1.72		$	0.92	$	0.54		$	0.71	$	0.12		$	4.01
Diluted EPS from continuing operations	$	1.69		$	0.90	$	0.53		$	0.70	$	0.11		$	3.94

Weighted average common shares outstanding for:
Basic EPS	282.89			282.89		282.89			282.89		282.89			282.89
Diluted EPS	287.53			287.53		287.53			287.53		287.53			287.53

A reconciliation of ~~pro forma combined results~~net income to ~~pro forma non-GAAP results for the three and nine months ended December 30, 2016~~adjusted EBIT is as follows:

Three Months Ended December 30, 2016
(in millions, except per-share amounts) Pro Forma Combined Restructuring Costs Transaction and Integration-related Costs Amortization of Acquired Intangibles Certain Overhead Costs Tax Adjustment Pro Forma Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs) $ 5,015
$ —
$ —
$ —
$ —
$ —
$ 5,015
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs) 689
—
(126 ) —
(19 ) —
$ 544

Income, before income taxes 111
214
126
119
19
—
589
Income tax expense (benefit) 277
—
—
—
—
(112 ) 165
Net (loss) income (166 ) 214
126
119
19
112
424
Less: net income attributable to non-controlling interest, net of tax 8
—
—
—
—
8
Net (loss) income attributable to DXC common stockholders $ (174 ) $ 214
$ 126
$ 119
$ 19
$ 112
$ 416

Effective Tax Rate 249.5 % 28.0 %

Basic EPS $ (0.61 ) $ 0.76
$ 0.44
$ 0.42
$ 0.07
$ 0.40
$ 1.47
Diluted EPS $ (0.61 ) $ 0.75
$ 0.44
$ 0.41
$ 0.07
$ 0.39
$ 1.45

Weighted average common shares outstanding for:
Basic EPS 283.16
283.16
283.16
283.16
283.16
283.16
283.16
Diluted EPS 283.16
287.09
287.09
287.09
287.09
287.09
287.09



	Three Months Ended						Six Months Ended
(in millions)	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
Net (loss) income	$	(2,115	)	$	259		$	(1,947	)	$	525
Income from discontinued operations, net of taxes	—			—			—			(35		)
Income tax expense	116			73			154			202
Interest income	(67		)	(33		)	(97		)	(65		)
Interest expense	104			83			195			168
EBIT	(1,962		)	382			(1,695		)	795
Restructuring costs	32			157			174			342
Transaction, separation and integration-related costs	53			128			158			198
Amortization of acquired intangible assets	151			132			289			267
Goodwill impairment losses	2,887			—			2,887			—
Gain on arbitration award	(632		)	—			(632		)	—
Adjusted EBIT	$	529		$	799		$	1,181		$	1,602

Nine Months Ended December 30, 2016
(in millions, except per-share amounts) Pro Forma Combined Restructuring Costs Transaction and Integration-related Costs Amortization of Acquired Intangibles Pension and OPEB Actuarial and Settlement Losses Certain Overhead Costs Tax Adjustment Pro Forma Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs) $ 15,293
$ —
$ —
$ —
$ (150 ) $ —
$ —
$ 15,143
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs) 2,059
—
(282 ) —
(48 ) (107 ) —
$ 1,622

(Loss) income, before income taxes (442 ) 646
282
352
198
107
—
1,143
Income tax expense 128
—
—
—
—
—
190
318
Net (loss) income (570 ) 646
282
352
198
107
(190 ) 825
Less: net income attributable to non-controlling interest, net of tax 17
—
—
—
—
—
17
Net (loss) income attributable to DXC common stockholders $ (587 ) $ 646
$ 282
$ 352
$ 198
$ 107
$ (190 ) $ 808

Effective Tax Rate (29.0 )% 27.8 %

Basic EPS $ (2.07 ) $ 2.28
$ 1.00
$ 1.24
$ 0.70
$ 0.38
$ (0.67 ) $ 2.85
Diluted EPS $ (2.07 ) $ 2.25
$ 0.98
$ 1.23
$ 0.69
$ 0.37
$ (0.66 ) $ 2.82

Weighted average common shares outstanding for:
Basic EPS 283.16
283.16
283.16
283.16
283.16
283.16
283.16
283.16
Diluted EPS 283.16
286.83
286.83
286.83
286.83
286.83
286.83
286.83

~~Reconciliation of adjusted EBIT and pro forma adjusted EBIT to net income (loss) and pro forma net income (loss):~~

Three Months Ended Nine Months Ended
(in millions) December 31, 2017 Pro Forma December 30, 2016 December 31, 2017 Pro Forma December 30, 2016
Net income (loss) $ 779
$ (166 ) $ 1,217
$ (570 )
Income tax (benefit) expense (341 ) 277
(207 ) 128
Interest income (27 ) (18 ) (59 ) (59 )
Interest expense 77
55
231
232
EBIT 488
148
1,182
(269 )
Restructuring 213
214
595
646
Transaction and integration-related costs 94
126
284
282
Amortization of intangible assets 149
119
438
352
Pension and OPEB actuarial and settlement (gains) losses (17 ) —
(17 ) 198
Certain overhead costs —
19
—
107
Adjusted EBIT $ 927
$ 626
$ 2,482
$ 1,316

Liquidity and Capital Resources

Cash and Cash Equivalents and Cash Flows

As of ~~December 31, 2017,~~September 30, 2019, our cash and cash equivalents were $2.9 billion, of which ~~$1.5~~$1.2 billion was held outside of the U.S. A substantial portion of funds can be returned to the U.S. from funds advanced previously to finance our foreign acquisition initiatives. As a result of the Tax Cuts and Jobs Act of 2017, and after the mandatory one-time income inclusion (deemed repatriation) of the historically untaxed earnings of our foreign subsidiaries, we expect a significant portion of the cash and cash equivalents held by our foreign subsidiaries will no longer be subject to U.S. income tax consequences upon a subsequent repatriation to the United States. However, a portion of this cash may still be subject to foreign income tax consequences upon future remittance. Therefore, if additional funds held outside the U.S. are needed for our operations in the U.S., we plan to repatriate these funds. ~~Based on a preliminary analysis, we have recorded a provisional estimate for foreign withholding taxes, state taxes, and India DDT of $115 million as described in Note 13 - "Income Taxes".~~

Cash and cash equivalents ("cash")~~increased $1.7 billion during the first nine months of fiscal 2018 to~~were $2.9 billion ~~primarily due to the Merger.~~for March 31, 2019 and September 30, 2019. The following table summarizes our cash flow activity:


	Nine Months Ended									Six Months Ended
(in millions)	December 31, 2017			December 30, 2016			Change			September 30, 2019			September 30, 2018			Change
Net cash provided by operating activities	$	2,542		$	805		$	1,737		$	1,585		$	849		$	736
Net cash (used in) provided by investing activities	213			(825		)	1,038
Net cash (used in) provided by financing activities	(1,136		)	72			(1,208		)
Net cash used in investing activities										(2,047		)	(48		)	(1,999		)
Net cash provided by (used in) financing activities										480			(686		)	1,166
Effect of exchange rate changes on cash and cash equivalents	44			(119		)	163			(37		)	(64		)	27
Net increase (decrease) in cash and cash equivalents	$	1,663		$	(67	)	$	1,730
Net decrease in cash and cash equivalents										$	(19	)	$	51		$	(70	)
Cash and cash equivalents at beginning-of-year	1,263			1,178						2,899			2,729
Cash and cash equivalents at the end-of-period	$	2,926		$	1,111					$	2,880		$	2,780

Net cash provided by operating activities during the ~~nine~~first six months ~~ended December 31, 2017~~of fiscal 2020 was ~~$2,542~~$1,585 million as compared to ~~$805~~$849 million during the comparable period of the prior fiscal year. The year-over-year increase of $736 million was due to an increase of net income, net of adjustments of $749 million, which includes cash received on arbitration award of $668 million, offset by a decrease in working capital movements of $(13) million.

Net cash used in investing activities during the first six months of fiscal 2020 was $2,047 million as compared to $48 million during the comparable period of the prior fiscal year. The increase of ~~$1,737~~$1,999 million was predominately due to an increase in ~~net income~~cash paid for acquisitions of ~~$1,179~~$1,878 million, an increase in purchases of property and equipment of $59 million, and ~~additional depreciation expense~~short-term investing of ~~$884~~$75 million. The increase is partially offset by cash paid for business dispositions of $65 million in the second quarter of fiscal 2019.

Net cash provided by ~~operating~~(used in) financing activities during the first ~~nine~~six months of fiscal ~~2018~~2020 was offset by a decrease in working capital movements of $378 million and an increase in unrealized foreign currency exchange loss of $24 million, comprised of a $44 million loss in fiscal 2018 compared to a $20 million loss in fiscal 2017.

~~Net cash provided by investing activities during the nine months ended December 31, 2017 was $213~~$480 million as compared to ~~net cash used by investing activities of $825~~$(686) million during the comparable period of the prior fiscal year. The $1,166 millionincrease of $1,038 million was predominately due to net cash provided by acquisitions of $781 million, compared to cash paid for acquisitions of $434 million in the comparable period of the prior fiscal year. The increase in cash provided by acquisitions is offset by additional cash payments for outsourcing contract costs of $200 million.

Net cash used in financing activities during the nine months ended December 31, 2017 was $1,136 million as compared to net cash provided by financing activities of $72 million during the comparable period of the prior fiscal year. The decrease in cash from financing activities of $1,208 million was primarily due to additional borrowings on long-term debt of $1,715 million and a decrease in ~~credit facility draws, net of repayments of $482 million, additional payments on capitalized lease obligations of $613 million and additional~~ payments on long-term debt ~~obligations~~ of ~~$1,128~~$1,517 million. ~~These cash outflows were~~This was partially offset by ~~draws on long-term debt~~borrowings for the USPS spin transaction of ~~$464~~$1,114 million and ~~cash~~ proceeds from bond issuance of ~~$647~~$753 million in the prior fiscal year, and additional repurchase of common stock and advance payment for accelerated share repurchase of $203 million.

Capital Resources

See Note 1821 - "Commitments and Contingencies" ~~to the financial statements~~ for a discussion of the general purpose of guarantees and commitments. The anticipated sources of funds to fulfill such commitments are listed below and under the subheading "Liquidity."

The following table summarizes our total debt:


	As of				As of
(in millions)	December 31, 2017		March 31, 2017		September 30, 2019		March 31, 2019
Short-term debt and current maturities of long-term debt	$	2,173	$	738	$	1,471	$	1,942
Long-term debt, net of current maturities	6,367		2,225		7,698		5,470
Total debt	$	8,540	$	2,963	$	9,169	$	7,412

The ~~$5.6~~$1.8 billion increase in total debt during the ~~nine~~first six months ~~ended December 31, 2017~~of fiscal 2020 was primarily attributed ~~primarily~~ to ~~debt assumed in connection with~~ the ~~Merger.~~

~~During the nine months ended December 31, 2017, we increased commitments under our revolving~~new term loan credit ~~facility to approximately $3.8 billion from $3.0 billion pre-Merger and completed a senior bond offering~~agreement in an aggregate principal ~~amount~~ of ~~$650~~$2.1 billion, consisting of three tranches: (i) $500 million ~~due 2021, the proceeds of which were used to retire the outstanding USD term loan due 2021. During the nine months ended December 31, 2017, we entered into an unsecured €400~~maturing on fiscal 2025; (ii) €750 million ~~term loan agreement~~ maturing ~~in 2018~~on fiscal 2022; and ~~entered into amendments to its existing AUD term loan to increase total borrowings to AUD $275 million.~~(iii) €750 million maturing on fiscal 2023. The proceeds from ~~these borrowings were~~the new borrowing was used to ~~make prepayments to term loans maturing in 2022 and repay drawn revolving credit facilities.~~

finance the Luxoft acquisition. Additionally, during the first six months of fiscal 2020, we repaid the $500 million Senior Notes due 2020. We were in compliance with all financial covenants associated with our borrowings as of ~~December 31, 2017~~September 30, 2019 and ~~December~~September 30, ~~2016.~~2018.

The maturity chart below summarizes the future maturities of long-term debt principal for fiscal years subsequent to September 30, 2019 and excludes maturities of borrowings for assets acquired under long-term financing and finance lease liabilities. For more information on our debt, see Note 1012 - "Debt" to the financial statements.

The following table summarizes our capitalization ratios:


	As of						As of
(in millions)	December 31, 2017			March 31, 2017			September 30, 2019			March 31, 2019
Total debt	$	8,540		$	2,963		$	9,169		$	7,412
Cash and cash equivalents	2,926			1,263			2,880			2,899
Net debt⁽¹⁾	$	5,614		$	1,700		$	6,289		$	4,513

Total debt	$	8,540		$	2,963		$	9,169		$	7,412
Equity	13,202			2,166			8,870			11,725
Total capitalization	$	21,742		$	5,129		$	18,039		$	19,137

Debt-to-total capitalization	39		%	58		%	50.8		%	38.7		%
Net debt-to-total capitalization⁽¹⁾	26		%	33		%	34.9		%	23.6		%

⁽¹⁾Net debt and Net debt-to-total capitalization are non-GAAP measures used by management to assess our ability to service our debts using only our cash and cash equivalents. We present these non-GAAP measures to assist investors in analyzing our capital structure in a more comprehensive way compared to gross debt based ratios alone.

~~The decrease in net~~Net debt-to-total capitalization ~~was primarily~~as of September 30, 2019 increased as compared to March 31, 2019, due to ~~a $3.9 billion~~the increase in ~~net~~total debt ~~and a $11.0 billion increase in equity, which were primarily a result of~~attributed to the ~~Merger.~~Luxoft acquisition.

As of ~~December 31, 2017,~~September 30, 2019, our credit ratings were as follows:



Rating Agency	Rating	Outlook	Short Term Ratings
Fitch	BBB+	Stable	F-2
Moody's	Baa2	Stable	P-2
S&P	BBB	~~Negative~~Stable	-

See Note 21 - "Commitments and Contingencies" for a discussion of the general purpose of guarantees and commitments. The anticipated sources of funds to fulfill such commitments are listed below.

Liquidity

We expect our existing cash and cash equivalents, together with cash generated from operations, will be sufficient to meet our normal operating requirements for the next 12 months. We expect to continue to use cash generated by operations as a primary source of ~~liquidity;~~liquidity, however, should we require funds greater than that generated from our operations to fund discretionary investment activities, such as business acquisitions, we have the ability to draw on our multi-currency revolving credit facility or raise capital through the issuance of capital market debt instruments such as commercial paper, term loans, and bonds. In addition, we also currently utilize and will further utilize our cross currency cash pool for liquidity needs. However, there ~~can be~~is no guarantee that we will be able to obtain debt financing, if required, on terms and conditions acceptable ~~terms~~to us, if at all, in the future.

Our exposure to operational liquidity risk is primarily from long-term contracts which require significant investment of cash during the initial phases of the contracts. The recovery of these investments is over the life of the contract and is dependent upon our performance as well as customer acceptance.

The following table summarizes our total liquidity:


	As of		As of
(in millions)	December 31, 2017		September 30, 2019
Cash and cash equivalents	$	2,926	$	2,880
Available borrowings under our revolving credit facility	3,422		4,000
Available borrowings under our lease credit facility	57
Total liquidity	$	6,405	$	6,880

Share Repurchases

During the first ~~three months~~quarter of fiscal 2018, our Board of Directors authorized the repurchase of up to $2.0 billion of our common ~~stock.~~stock and during the third quarter of fiscal 2019, our Board of Directors approved an incremental $2.0 billion share repurchase authorization. This program became effective on April 3, 2017 ~~and~~with no end date ~~was~~ established. During the ~~nine~~six months ended ~~December 31, 2017,~~September 30, 2019, we repurchased ~~841,505~~13,579,799 shares of our common stock at an aggregate cost of ~~$66~~$650 million. The repurchase included 3,654,544 shares under the accelerated share repurchase ("ASR") agreement at an average price of $54.73 per share. See Note 17 - "Stockholders' Equity" to the financial statements.

Dividends

During the ~~first three~~six months ended September 30, 2019, our Board of ~~fiscal 2018, we announced a dividend policy targeting $0.18~~Directors declared aggregate cash dividends to our stockholders of $0.42 per share, ~~beginning with our declaration date in June 2017 for the first quarter of fiscal 2018, and $0.72 per share for full year fiscal 2018,~~or approximately $111 million. Future dividends are subject to customary board review and approval prior to declaration. ~~During the nine months ended December 31, 2017, we declared cash dividends to our stockholders of $0.54 per share, or approximately $157 million in the aggregate.~~

Off-Balance Sheet Arrangements

In the normal course of business, we are a party to arrangements that include guarantees, the receivables securitization facility ~~receivables sales arrangements~~ and certain other financial instruments with off-balance sheet risk, such as letters of credit and surety bonds. We also use performance letters of credit to support various risk management insurance policies. No liabilities related to these arrangements are reflected in our condensed consolidated balance sheets. There have been no material changes to our ~~off-balance sheet~~off-balance-sheet arrangements reported under Part II, Item 7 of ~~CSC's~~our Annual Report on Form 10-K other than as disclosed below and in Note 56 - "Sale of Receivables" and Note 1821 - "Commitments and Contingencies" to the financial statements in this Quarterly Report on Form 10-Q.

Contractual Obligations

~~DXC's contractual obligations have materially changed since April 1, 2017, as a result~~With the exception of the ~~Merger. Significant increases~~new term loan credit agreement in ~~debt included $1.8~~an aggregate principal of $2.1 billion, ~~in senior notes~~consisting of three tranches: (i) $500 million maturing on fiscal 2025; (ii) €750 million maturing on fiscal 2022; and ~~$2.0 billion in term loans, see Note 10 - "Debt" for further information.~~

~~The increases in capital lease obligations, future minimum operating lease liabilities~~(iii) €750 million maturing on fiscal 2023, and ~~purchase obligations primarily increased from March 31, 2017 to December 31, 2017 as a result~~repayment of the ~~Merger. The following table summarizes~~$500 million Senior Notes due 2020 as discussed above under the subheading "Capital Resources," there have been no material changes, outside the ordinary course of business, to our contractual obligations ~~as of December 31, 2017:~~

(in millions)
Less than
1 year
2-3 years 4-5 years
More than
5 years
Total
Debt ⁽¹⁾
$ 66
$ 1,070
$ 2,216
$ 2,240
$ 5,592
Capitalized lease liabilities 196
1,064
239
19
1,518
Operating leases 196
1,131
437
720
2,484
Purchase obligations⁽²⁾
664
4,296
775
447
6,182
Interest and preferred dividend payments ⁽³⁾
40
369
294
402
1,105
Totals⁽⁴⁾
$ 1,162
$ 7,930
$ 3,961
$ 3,828
$ 16,881

⁽¹⁾~~Amounts represent scheduled principal cash payments of long-term debt and mandatory redemption of preferred stock of a consolidated subsidiary.~~

⁽²⁾Includes long-term purchase agreements with certain software, hardware, telecommunication and other service providers and exclude agreements that are cancelable without penalty. If we do not meet the specified service minimums, we may have an obligation to pay the service provider a portion of or the entire shortfall. Purchase obligations assumed from HPES will reflect a significant increase as a result of newly executed contracts.

⁽³⁾Amounts represent scheduled interest payments on long-term debt and scheduled dividend payments associated with the mandatorily redeemable preferred stock outstanding excluding contingent dividends associated with the participation and variable appreciation premium features.

⁽⁴⁾ We have excluded the estimated future benefit payments under our Pension and OPEB plans and the estimated liability related to unrecognized tax benefits from this table because they have not materially changed since March 31, ~~2017 other than as a result~~2019. For further information see "Contractual Obligations" in Item 7 of Part II of our Annual Report on Form 10-K for the ~~Merger. For changes due to the Merger, see Note 3 - "Acquisitions".~~fiscal year ended March 31, 2019.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities. These estimates may change in the future if underlying assumptions or factors change. Accordingly, actual results could differ materially from our estimates under different assumptions, judgments or conditions. We consider the following policies to be critical because of their complexity and the high degree of judgment involved in implementing them: revenue recognition, income taxes, business combinations, defined benefit plans and valuation of assets. We have discussed the selection of our critical accounting policies and the effect of estimates with the audit committee of our board of directors.

~~Revenue Recognition~~

~~Most of our revenues are recognized based on objective criteria~~ During the three months and do not require significant estimates that may change over time. However, some arrangements are subject to specific accounting guidance that may require significant estimates, including contracts subject to percentage-of-completion accounting or which include multiple-element deliverables.

~~Percentage-of-completion method~~

Certain software development projects and all long-term construction-type contracts require the use of estimates of completion in the application of the percentage-of-completion accounting method, whereby the determination of revenues and costs on a contract through its completion can require significant judgment and estimation. Under this method, and subject to the effects ofsix months ended September 30, 2019, there were no changes in estimates, we recognize revenues using an estimated margin at completion as contract milestones or other input or output-based measures are achieved. This can result in costs being deferred as work in process until contractual billing milestones are achieved. Alternatively, this can result in revenues recognized in advance of billing milestones if output-based or input-based measures are achieved. Contracts that require estimates at completion using the percentage-of-completion method accounted for approximately 2.3% of our revenues.

The percentage-of-completion method requires estimates of revenues, costs and profits over the entire term of the contract, including estimates of resources and costs necessary to complete performance. The cost estimation process is based upon the professional knowledge and experience of our software and systems engineers, program managers, and financial professionals. We follow this method because reasonably dependable estimates of the revenues and costs applicable to various elements of a contract can be made; however, some estimates are particularly difficult for activities involving state-of-the-art technologies such as system development projects. Key factors that are considered in estimating the work to be completed and ultimate contract profitability include the availability and productivity of labor, the nature and complexity of the work to be performed, results of testing procedures and progress toward completion. Management regularly reviews project profitability and the underlying estimates. A significant change in an estimate on one or more contracts could have a material effect on our results of operations. Revisions in profit estimates are reflected in the period in which the facts that give rise to the revision become evident.

We periodically negotiate modifications to the scope, schedule, and price of contracts accounted for on a percentage-of-completion basis. Accounting for such changes prior to formal contract modification requires evaluation of the characteristics and circumstances of the effort completed and assessment of probability of recovery. If recovery is deemed probable, we may, as appropriate, either defer the costs until the parties have agreed on the contract change or recognize the costs and related revenues as current period contract performance.

~~Multiple-element arrangements~~

~~Many of our contracts require us to provide a range of services or elements~~ to our ~~customers, which may include a combination of services, products or both. As a result, significant judgment may be required to determine the appropriate~~ accounting including whether the elements specified in a multiple-element arrangement should be treated as separate units of accounting for revenue recognition purposes, and, when considered appropriate, how the total revenues should be allocated among the elements and the timing of revenue recognition for each element. If vendor specific objective evidence is not available, allocation of total contract consideration to each element requires estimating the fair value or selling price of each element based on third party evidence or management's best estimate of selling price for the deliverables when third party evidence ("TPE") is not available. TPE is established by considering our competitors' prices for comparable product and service offerings in the market in which we operate. When we conclude that comparable products or services are sold by competitors to similarly situated customers, we consult available information sources such as published list prices, quoted market prices, and industry reports to estimate TPE. We establish a best estimate of selling price consistent with our existing pricing practices involving a cost-plus-reasonable-margin methodology as well as comparison of the margins toestimates from those realized on recent contracts for similar products or services in that market. Once the total revenues have been allocated to the various contract elements, revenues for each element are recognized based on the relevant revenue recognition method for the services performed or elements delivered if the revenue recognition criteria have been met. Estimates of total revenues at contract inception often differ materially from actual revenues due to volume differences, changes in technology or other factors which may not be foreseen at inception.

~~Income Taxes~~

We are subject to income taxes in the United States (federal and state) and numerous foreign jurisdictions. Significant judgment is required in determining our provision for income taxes, analyzing our income tax reserves, the determination of the likelihood of recoverability of deferred tax assets and adjustment of valuation allowances accordingly. In addition,

our tax returns are routinely audited and settlements of issues raised in these audits sometimes affect our tax provisions. For example, we are currently undergoing an IRS audit for fiscal 2011 through 2016 U.S. Federal tax returns.

As a global enterprise, our ETR is affected by many factors, including our global mix of earnings among countries with differing statutory tax rates, the extent to which our non-U.S. earnings in Indian subsidiaries are indefinitely reinvested outside the U.S, changes in the valuation allowance for deferred tax assets, changes in tax regulations, acquisitions, dispositions, and the tax characteristics of our income. We cannot predict what our ETR will be in the future because there is uncertainty regarding these factors.

As a result of the Merger and changes in U.S. cash requirements, a deferred tax liability of $545 million was recorded for U.S. income taxes based on the estimated historical taxable earnings of the HPES foreign subsidiaries. In addition, we recorded an estimated liability of $50 million for India DDT tax based on estimated historical taxable earnings of the HPES India subsidiary. These liabilities were recorded as part of acquisition accounting.

As a result of the Act, we have changed our permanently reinvested assertion on the remaining CSC foreign subsidiaries and will no longer consider current and accumulated earnings for all non-U.S. subsidiaries permanently reinvested, except for current year Indian earnings. The deferred tax liability of $575 million has been released and our estimated liability for India DDT was increased by $30 million to $80 million to include estimated historical taxable earnings for CSC Indian subsidiaries. For those investments from which we were able to make a reasonable estimate of the tax effects of our change in assertion, we have recorded a provisional estimate for withholding taxes, state taxes, and India DDT of $115 million. For those investments from which we were not able to make a reasonable estimate, we have not recorded any deferred taxes. We will record the tax effects of any changedescribed in our prior assertion with respect to these investments and disclose any unrecognized deferred tax liability for temporary differences related to our foreign investments, if practicable, in the period that we are first able to make a reasonable estimate, no later than December 2018.

Considerations impacting the recoverability of deferred tax assets include the period of expiration of the deferred tax asset and historical and projected taxable income as well as tax liabilities for the tax jurisdiction to which the deferred tax asset relates. In determining whether the deferred tax assets are realizable, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, taxable income in prior carryback years, projected future taxable income, tax planning strategies, and recent financial operations. We recorded a valuation allowance against deferred tax assets of approximately $1.1 billion as of March 31, 2017 due to uncertainties related to the ability to utilize these assets. However, valuation allowances are subject to change in future reporting periods due to changes in various factors.

Changes in tax laws, such as the Act or changes in tax laws resulting from the Organization for Economic Co-operation and Development’s multi-jurisdictional plan of action to address “base erosion and profit shifting” could impact our effective tax rate. The calculation of our tax liabilities involves uncertainties in the application of complex changing tax regulations. As discussed in Note 13 - "Income Taxes", for example, the Act provides provisions that limit interest expense, provide for immediate expensing of qualified assets, further limits executive compensation deductions, generally eliminates Federal tax on foreign dividend distributions, subjects certain payments from U.S. corporations to foreign related parties to additional taxes, places restrictions or eliminates certain exclusions, deductions and credits and generally broadens the tax base. Further guidance for these provisions is forthcoming and the laws are subject to change in future periods.

The Finance Act of 2012 (the "2012 Finance Act") was signed into law in India on May 28, 2012. The 2012 Finance Act provides for the taxation of indirect foreign investment in India, including on a retroactive basis. The 2012 Finance Act overrides the Vodafone NL ruling by the Supreme Court of India which held that the Indian Tax Authorities cannot assess capital gains taxes on the sale of shares of non-Indian companies that indirectly own shares in an Indian company. The retroactive nature of these changes in law has been strongly criticized and challenged in the Indian courts; however, there is no assurance that such a challenge will be successful. We have engaged in the purchase of shares of foreign companies that indirectly own shares of an Indian company and internal reorganizations involving Indian companies. The Indian tax authorities may seek to apply the provisions of the 2012 Finance Act to these prior transactions and seek to tax us directly or as a withholding agent or representative assessee of the sellers involved in prior acquisitions. We believe that the 2012 Finance Act does not apply to these prior acquisitions and that we have strong defenses against any claims that might be raised by the Indian tax authorities.

The U.K. Finance (No 2) Act 2017 was passed into law on 16 November 2017, enacting measures deferred from the Finance Act 2017-19. The legislation imposes, with effect from 1 April 2017, restrictions on the utilization of prior period losses against current period profits and limitations on interest deductions. We do not expect there to be a material impact on our consolidated financial statements as a result of this legislation.

~~Business Combinations~~

We account for the acquisition of a business using the acquisition method of accounting, which requires us to estimate the fair values of the assets acquired and liabilities assumed. This includes acquired intangible assets such as customer-related intangibles, the liabilities assumed, and contingent consideration, if any. Liabilities assumed may include litigation and other contingency reserves existing at the time of acquisition and require judgment in ascertaining the related fair values. Independent appraisals may be used to assist in the determination of the fair value of certain assets and liabilities. Such appraisals are based on significant estimates provided by us, such as forecasted revenues or profits utilized in determining the fair value of contract-related acquired intangible assets or liabilities. Significant changes in assumptions and estimates subsequent to completing the allocation of the purchase price to the assets and liabilities acquired, as well as differences in actual and estimated results, could result in material impacts to our financial results. Adjustments to the fair value of contingent consideration are recorded in earnings. Additional information related to the acquisition date fair value of acquired assets and liabilities obtained during the allocation period, not to exceed one year, may result in changes to the recorded values of acquired assets and liabilities, resulting in an offsetting adjustment to the goodwill associated with the business acquired.

~~Defined Benefit Plans~~

The computation of our pension and other post-retirement benefit costs and obligations is dependent on various assumptions. Inherent in the application of the actuarial methods are key assumptions, including discount rates, expected long-term rates of return on plan assets, mortality rates, rates of compensation increases, and medical cost trend rates. Our management evaluates these assumptions annually and updates assumptions as necessary. The fair value of assets is determined based on observable inputs for similar assets or on significant unobservable inputs if not available.

Two of the most significant assumptions are the expected long-term rate of return on plan assets and the discount rate. The assumption for the expected long-term rate of return on plan assets is impacted by the expected asset mix of the plan, judgments regarding the correlation between historical excess returns and future excess returns, and expected investment expenses. The discount rate assumption is based on current market rates for high-quality, fixed income debt instruments with maturities similar to the expected duration of the benefit payment period.

~~Valuation of Assets~~

~~We review long-lived assets, intangible assets, and goodwill for impairment in accordance with our accounting policy disclosed in Note 1 of CSC's~~fiscal 2019 Annual Report on ~~Form10-K for the period ending March 31, 2017. Assessing the fair value~~Form 10-K except as mentioned in Note 1 - "Summary of assets involves significant estimates and assumptions including estimation of future cash flows, the timing of such cash flows, and discount rates reflecting the risk inherent in projecting future cash flows. The valuation of long-lived and intangible assets involves management estimates about future values and remaining useful lives of assets, particularly purchased intangible assets. These estimates are subjective and can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and forecasts.Significant Accounting Policies".

Evaluation of goodwill for impairment requires judgment, including the identification of reporting units, assignment of assets, liabilities, and goodwill to reporting units and determination of the fair value of each reporting unit. The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market conditions, and other factors. Changes in these estimates and assumptions include a significant change in the business climate, established business plans, operating performance indicators or competition which could materially affect the determination of fair value for each reporting unit.

We estimate the fair value of our reporting units using a combination of an income approach, utilizing a discounted cash flow analysis, and a market approach, using market multiples. The discount rate used in an income approach is based on our weighted-average cost of capital and may be adjusted for the relevant risks associated with business-specific characteristics and any uncertainty related to a reporting unit's ability to execute on the projected future cash flows.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~As a multinational company, we are exposed to certain~~For quantitative and qualitative disclosures about market ~~risks such as changes~~risk affecting DXC, see "Quantitative and Qualitative Disclosures About Market Risk" in ~~interest rates and foreign currency exchange rates. Changes in benchmark interest rates can impact Interest expense associated with our floating interest rate debt and the fair value~~Item 7A of Part II of our fixed interest rate debt, whereas changes in foreign currency exchange rates can impact our foreign currency denominated monetary assets and liabilities and forecasted transactions in foreign currency. A variety of practices are employedAnnual Report on Form 10-K for the fiscal year ended March 31, 2019. Our exposure to ~~manage these risks, including operating and financing activities and the use of derivative instruments. We do not use derivatives tor trading or speculative purposes.~~

Presented below is a description of our risks together with a sensitivity analysis, performed annually, of each of these risks based on selected changes in market rates. In order to determine the impact of changes in interest rates on our future results of operations and cash flows, we calculated the increase or decrease in the index underlying these rates. We estimate the fair value of our long-term debt primarily using an expected present value technique using interest rates offered to us for instruments with similar terms and remaining maturities. The foreign currency model incorporates the impact of diversification from holding multiple currencies and the correlation of revenues, costs, and any related short-term contract financing in the same currency. These analyses reflect management's view of changes that are reasonably possible to occur over a one-year period. Our market risk ~~exposures relative to interest rates and currency rates, as discussed below, have~~has not changed materially ~~as compared to prior fiscal year due to the Merger.~~since March 31, 2019.

~~Interest Rate Risk~~

As of December 31, 2017, we had outstanding debt with varying maturities for an aggregate carrying amount of $8.5 billion, of which $4.2 billion was floating rate debt. Most of our variable interest rate debt is based upon varying terms of adjusted LIBOR rates; consequently, changes in LIBOR result in the most volatility to our Interest expense. Pursuant to our interest rate and risk management strategy we had a series of interest rate swap agreements with a total notional amount of $625 million. These instruments hedged the variability of cash outflows for interest payments on certain floating interest rate debt, which effectively converted $625 million of our floating interest rate debt into fixed interest rate debt. As of December 31, 2017, an assumed 10% unfavorable change in interest rates would not be material to our condensed consolidated results of operations or cash flows. A change in interest rates related to our long-term debt would not have had a material impact on our financial statements as we do not record our debt at fair value.

~~Foreign Currency Risk~~

We are exposed to both favorable and unfavorable movements in foreign currency exchange rates. In the ordinary course of business, we enter into certain contracts denominated in foreign currencies. Exposure to fluctuations in foreign currency exchange rates arising from these contracts is analyzed during the contract bidding process. We generally manage these contracts by incurring costs in the same currency in which revenues are received and any related short-term contract financing requirements are met by borrowing in the same currency. Thus, by generally matching revenues, costs, and borrowings to the same currency, we are able to mitigate a portion of the foreign currency risk to earnings. However, due to our increased use of offshore labor centers, we have become more exposed to fluctuations in foreign currency exchange rates. We experienced significant foreign currency fluctuations during the three and nine months ended December 31, 2017 due primarily to the volatility of the Euro in relation to the U.S. dollar.

We have policies and procedures to manage exposure to fluctuations in foreign currency by using short-term foreign currency forward contracts to economically hedge certain foreign currency denominated assets and liabilities, including intercompany accounts and loans. For accounting purposes, these foreign currency forward contracts are not designated as hedges and changes in their fair value are reported in current period earnings within Other (income) expense, net in the condensed consolidated statements of operations. We also use foreign currency forward contracts to reduce foreign currency exchange rate risk related to certain Indian rupee denominated intercompany obligations and forecasted

transactions. For accounting purposes these foreign currency forward contracts are designated as cash flow hedges with critical terms that match the hedged items; therefore, the changes in fair value of these forward contracts are recorded in Accumulated other comprehensive income, net of taxes in the condensed consolidated statements of comprehensive income and subsequently classified into Net income in the period during which the hedged transactions are recognized in Net income. During fiscal 2018, approximately 56% of our revenues were generated outside of the U.S. An unfavorable 10% change in the value of the U.S. dollar against all currencies would have changed revenues by approximately 6%, or $1 billion. The majority of this fluctuation would be offset by expenses incurred in local currency and as a result, there would not be a material change to our Income before income taxes. As such, in the view of management, the resulting impact would not be material to our condensed consolidated results of operations or cash flows.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

~~Under the direction and~~Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, ~~we have~~ evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness ~~of the design and operation~~ of our disclosure controls and procedures as(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ~~("Exchange Act"~~(the “Exchange Act”), as of the end of the period covered by this report to ensure that information required to be disclosed by us in the SEC reports (i) is recorded, processed, summarized, and reported, within the time periods specified in the SEC's rules and forms and (ii) is accumulated and communicated to our management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

). Based on ~~this~~that evaluation, ~~the~~our Chief Executive Officer and Chief ~~Financial~~Operating Officer ~~have~~ concluded that ~~DXC's~~our disclosure controls and procedures were effective as of the end of the period covered by this report and that our condensed consolidated financial statements for the periods covered by and included in this Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with generally accepted accounting principles in the United States of America for each of the periods presented herein.September 30, 2019.

Changes in Internal Control Over Financial Reporting

~~As previously disclosed~~During the first quarter of fiscal 2020, we adopted ASC 842 effective April 1, 2019, as described in ~~Item 4 of our Quarterly Report on Form 10-Q for~~Note 2 - “Recent Accounting Pronouncements” and Note 7 - “Leases” to the ~~three months ended September 30, 2017, we~~financial statements. We implemented a new ~~consolidation~~lease accounting system and reporting system which consolidates the results of all our subsidiaries including the entities acquired in the Merger. The system implementation was completed during the three months ended December 31, 2017. We have modified,redesigned certain processes and ~~will continue to monitor and evaluate, our internal~~ controls ~~relating~~pertaining to our consolidation and reporting processes. The changes in internal controls relating to our consolidation and reporting processes have not materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We will continue to evaluate and test control changes in order to certify in Management's Annual Report on Internal Control over Financial Reporting as of our fiscal year ending March 31, 2018 on the effectiveness, in all material respects, of our internal controls over financial reporting.lease portfolio.

As previously disclosed in Item 4 of our Quarterly Report on Form 10-Q for the three-month period ended September 30, 2017, on April 1, 2017, we completed the strategic combination of CSC with HPES to form DXC, see Note 3 - "Acquisitions" for further information. DXC common stock began regular-way trading under the symbol "DXC" on the New York Stock Exchange on April 3, 2017. As part of our ongoing integration activities, we continue to evaluate our internal controls and procedures to the acquired business and to adjust and augment our company-wide controls and our integration controls to reflect the risks inherent in an acquisition of this magnitude. Otherwise, thereThere were no changes in our internal control over financial reporting during the three ~~and nine~~ months ended ~~December 31, 2017~~September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

See Note 1821 - "Commitments and Contingencies" to the financial statements under the caption “Contingencies” for information regarding legal proceedings in which we are involved.


Item 1A.	RISK FACTORS

Our operations and financial results are subject to various risks and uncertainties, ~~including the risks discussed in Part II, Item 1A-Risk Factors in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017~~which may materially and ~~September 30, 2017, which could~~ adversely affect our business, financial condition, and results of operations, ~~cash flows~~ and the actual outcome of matters as to which forward-looking statements are made in this Quarterly Report on Form 10-Q. In such case, the trading price for DXC common stock could decline, and you could lose all or part of ~~our common stock.~~your investment. Past performance may not be a reliable indicator of future financial performance and historical trends should not be used to anticipate results or trends in future periods. Future performance and historical trends may be adversely affected by the aforementioned risks, and other variables and risks and uncertainties not currently known or that are currently expected to be immaterial may also materially and adversely affect our business, financial condition, and results of operations or the ~~additional risks listed~~price of our common stock in the future. Other than as described below, there have been no material changes in the three months ended September 30, 2019 to the risk factors described in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2019 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019.

We may not succeed in our strategic objectives, which could adversely affect our business, financial condition, results of operations and cash flows.

We recently announced a number of senior leadership changes as well as ~~other variables and should~~updates to our strategic priorities including an initiative to assist DXC customers across a broader range of their information technology needs, which we refer to as “the stack”. We may not be ~~relied upon~~able to ~~project future period results.~~implement our strategic priorities in accordance with our expectations for a variety of reasons including failure to execute on our plans in a timely fashion, lack of adequate skills, ineffective management, inadequate incentives, customer resistance to new initiatives, inability to control costs or maintain competitive offerings. We also cannot be certain that executing on our strategy will generate the benefits we expect. If we fail to execute successfully on our strategic priorities, or if we pursue strategic priorities that prove to be unsuccessful, our business, financial position, results of operations and cash flows may be materially and adversely affected.

~~Risks Related~~Strategic alternatives we are considering may not achieve the results we expect, could result in operating difficulties, harm to ~~Our Business~~

~~Recent U.S. tax legislation may materially affect~~one or more of our businesses and negative impacts our financial condition, results of operations and cash flows.

~~Recently enacted U.S. tax legislation has~~We recently announced our intention to explore strategic alternatives for our US state and local healthcare BPS business, our horizontal BPS business and our workplace & mobility business. Among the alternatives we may consider for those businesses are potential divestiture transactions. Any such transactions may involve significant challenges and risks, including:

the potential loss of key customers, suppliers, vendors and other key business partners;

declining employee morale and retention issues affecting employees, which may result from changes in compensation, or changes in management, reporting relationships, future prospects or perceived expectations;

difficulty making new and strategic hires of new employees;

diversion of management time and a shift of focus from operating the businesses to transaction execution considerations;

the need to provide transition services, which may result in stranded costs and the diversion of resources and focus;

the need to separate operations, systems (including accounting, management, information, human resource and other administrative systems), technologies, products and personnel, which is an inherently risky and potentially lengthy and costly process;

the inefficiencies and lack of control that may result if such separation is delayed or not implemented effectively, and unforeseen difficulties and expenditures that may arise as a result including potentially significant stranded costs;

our desire to maintain an investment grade credit rating may cause us to use cash proceeds if any from any divestitures or other strategic alternatives that we might otherwise have used for other purposes in order to reduce our financial leverage;

the inability to obtain necessary regulatory approvals or otherwise satisfy conditions required in order consummate any such transactions; and

our dependence on accounting, financial reporting, operating metrics and similar systems, controls and processes of divested businesses could lead to challenges in preparing our consolidated financial statements or maintaining effective financial control over financial reporting.

At any given time, we may be engaged in discussions or negotiations with respect to one or more strategic alternatives, and any of these strategic alternatives could be material to our business, financial condition, results of operations and cash flows. In addition, we may explore a divestiture or spin-off or other transaction involving one or more of these businesses and ultimately determine not to proceed with any transaction or other strategic alternative for commercial, financial, strategic or other reasons. As a result, we may not realize benefits expected from exploring one or more strategic alternatives or may realize benefits further in the future and those benefits may ultimately be significantly ~~changed~~smaller than anticipated, which could adversely affect our business, financial condition, operating results and cash flows. Any such transactions may also require us to amortize expenses related to intangible assets or write-off goodwill, which could adversely affect our financial condition and results of operations.

We could suffer additional losses due to asset impairment charges.

We acquired a substantial quantity of goodwill and other intangibles as a result of the ~~U.S. federal income taxation~~HPES Merger increasing our exposure to this risk.

We test our goodwill for impairment during the second quarter of ~~U.S. corporations, including by reducing~~every year and on an interim date should events or changes in circumstances indicate that it is more likely than not that the ~~U.S. corporate income tax rate, limiting interest deductions, permitting immediate expensing of certain capital expenditures, adopting elements~~fair value of a ~~territorial tax system, imposing~~reporting unit is below its carrying amount. If the fair value of a ~~one-time~~reporting unit is revised downward due to declines in business performance or other factors, or if the Company suffers further declines in share price, an impairment could result and a non-cash charge could be required. We test intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. This assessment of the recoverability of finite-lived intangible assets could result in an impairment and a non-cash charge could be required. For example, during the three months ended September 30, 2019, we recorded a non-cash goodwill impairment charge of $2,887 million which is discussed in Note 11 - "Goodwill."

We also test certain equipment and deferred cost balances associated with contracts when the contract is materially underperforming or is expected to materially underperform in the future, as compared to the original bid model or budget. If the projected cash flows of a particular contract are not adequate to recover the unamortized cost balance of the asset group, the balance is adjusted in the tested period based on the contract's fair value. Either of these impairments could materially affect our reported net earnings.

Our ability to provide customers with competitive services is dependent on our ability to attract and retain qualified personnel.

Our ability to grow and provide our customers with competitive services is partially dependent on our ability to attract and retain highly motivated people with the skills necessary to serve our customers. The markets we serve are highly competitive and competition for skilled employees in the technology outsourcing, consulting, and systems integration and enterprise services markets is intense for both onshore and offshore locales. The loss of personnel could impair our ability to perform under certain contracts, which could have a material adverse effect on our consolidated financial position, results of operations and cash flows. Additionally, the inability to adequately develop and train personnel and assimilate key new hires or promoted employees could have a material adverse effect on relationships with third parties, our financial condition and results of operations and cash flows.

We also must manage leadership development and succession planning throughout our business. Any significant leadership change and accompanying senior management transition, ~~tax (or “repatriation tax”) on all undistributed earnings and profits of certain U.S.-owned foreign corporations, revising the rules governing net operating losses~~such as our recent change in Chief Executive Officer, Chief Human Resources Officer and the ~~rules governing foreign tax credits,~~hiring of new leaders in key roles, involves inherent risk and ~~introducing new anti-base erosion provisions. Many~~any failure to ensure a smooth transition could hinder our strategic planning, execution and future performance. While we strive to mitigate the negative impact associated with changes to our senior management team, such changes may cause uncertainty among investors, employees, customers, creditors and others concerning our future direction and performance. If we fail to effectively manage our leadership changes, including ongoing organizational and strategic changes, our business, financial condition, results of ~~these changes are effective immediately, without any transition periods or grandfathering for existing transactions. The legislation is unclear in many respects~~operations, cash flows and ~~could be subject to potential amendments and technical corrections,~~reputation, as well as ~~interpretations~~our ability to successfully attract, motivate and ~~implementing regulations by~~retain key employees, could be harmed.

In addition, uncertainty around future employment opportunities, facility locations, organizational and reporting structures, and other related concerns may impair our ability to attract and retain qualified personnel. If employee attrition is higher than, it may adversely impact our ability to realize the ~~Treasury~~anticipated benefits of our strategic priorities.

If we do not hire, train, motivate, and ~~Internal Revenue Service (“IRS”), any~~effectively utilize employees with the right mix of skills and experience in the right geographic regions and for the right offerings to meet the needs of our clients, our financial performance and cash flows could suffer. For example, if our employee utilization rate is too low, our profitability, and the level of engagement of our employees could decrease. If that utilization rate is too high, it could have an adverse effect on employee engagement and attrition and the quality of the work performed, as well as our ability to staff projects. If we are unable to hire and retain enough employees with the skills or backgrounds needed to meet current demand, we may need to redeploy existing personnel, increase our reliance on subcontractors or increase employee compensation levels, all of which could ~~lessen or increase certain impacts of the legislation.~~also negatively affect our profitability. In addition, ~~it is unclear how these U.S.~~if we have more employees than necessary with certain skill sets or in certain geographies, we may incur increased costs as we work to rebalance our supply of skills and resources with client demand in those geographies.

If we are unable to maintain and grow our customer relationships over time, our operating results and cash flows will suffer. Failure to comply with customer contracts or government contracting regulations or requirements could adversely affect our business, results of operations and cash flows.

We devote significant resources to establish relationships with our customers and implement our offerings and related services, particularly in the case of large enterprises that often request or require specific features or functions specific to their particular business profile. Accordingly, our operating results depend in substantial part on our ability to deliver a successful customer experience and persuade customers to maintain and grow our relationship with us over time. If we are not successful in implementing an offering or delivering a successful customer experience, including achieving cost and staffing levels that meet our customers’ expectations, customers could terminate or elect not to renew their agreements with us and our operating results may suffer.

Contracts with customers may include unique and specialized performance requirements. In particular, our contracts with federal, ~~income tax changes will affect~~ state, provincial, and local ~~taxation,~~governmental customers are generally subject to various procurement regulations, contract provisions, and other requirements relating to their formation, administration, and performance, including the maintenance of necessary security clearances. Contracts with U.S. government agencies are also subject to audits and investigations, which ~~often uses federal taxable income as~~may include a ~~starting point for computing state~~review of performance on contracts, pricing practices, cost structure, and ~~local tax liabilities.~~compliance with applicable laws and regulations.

~~While our analysis and interpretation of this legislation is ongoing, based~~Any failure on our ~~current evaluation,~~part to comply with the ~~reduction~~specific provisions in customer contracts or any violation of ~~the U.S. corporate income tax rate will require a write-down of our deferred income tax liabilities resulting in a material noncash benefit against earnings~~government contracting regulations or other requirements could result in the ~~third quarter~~imposition of ~~fiscal year 2018,~~various civil and criminal penalties, which may include termination of contracts, forfeiture of profits, suspension of payments, and, in the ~~period in which the tax legislation was enacted, which~~case of government contracts, fines and suspension from future government contracting. Such failures could also cause reputational damage to our business. In addition, we may be subject to ~~further adjustment~~qui tam litigation brought by private individuals on behalf of the government relating to government contracts, which could include claims for treble damages. Further, any negative publicity with respect to customer contracts or any related proceedings, regardless of accuracy, may damage our business by harming our ability to compete for new contracts.

If our customer contracts are terminated, or our ability to compete for new contracts is adversely affected, our financial performance could suffer.

We are defendants in ~~subsequent periods throughout fiscal years 2018~~pending litigation that may have a material and ~~2019~~adverse impact on our profitability and liquidity.

As noted in ~~accordance~~Note 21 - “Commitments and Contingencies”, we are currently party to a number of disputes that involve or may involve litigation or arbitration, including securities class actions and other lawsuits in which we and certain of our officers and directors have been named as defendants. The result of these lawsuits and any other future legal proceedings cannot be predicted with ~~recent interpretive guidance issued~~certainty. Regardless of their subject matter or merits, such legal proceedings may result in significant cost to us, which may not be covered by insurance, may divert the ~~SEC,~~attention of management or may otherwise have an adverse effect on our business, financial condition and results of operations. Negative publicity from litigation, whether or not resulting in a substantial cost, could materially damage our reputation and could have a material adverse effect on our business, financial condition, results of operations, and the ~~repatriation tax will result in~~price of our common stock. In addition, such legal proceedings may make it more difficult to finance our operations.

Our credit rating and ability to manage working capital, refinance and raise additional capital for future needs may impact our ability to compete, results of operations and cash flows.

We currently maintain investment grade credit ratings with Moody's Investors Service, Fitch Rating Services, and Standard & Poor's Ratings Services. Our credit ratings are based upon information furnished by us or obtained by a material amount of additional U.S. tax liability, the amount of which is reflected as tax expense in fiscal year 2018, when the tax legislation was enacted, despite the fact that the resulting tax may be paid over eight years. Further, there may be other material adverse effects resultingrating agency from ~~the legislation that we have not yet identified.~~

~~While some of the changes made~~its own sources and are subject to revision, suspension or withdrawal by ~~the tax legislation may adversely affect the Company in~~ one or more ~~reporting periods~~rating agencies at any time. Rating agencies may review the ratings assigned to us due to developments that in some cases are beyond our control, including potential new standards requiring the agencies to reassess rating practices and ~~prospectively, other~~methodologies. Ratings agencies may consider changes ~~may be beneficial~~in credit ratings based on ~~a going forward basis. We continue to work with our tax advisors~~changes in expectations about future profitability and auditors to determine the full impact that the recent tax legislation as a whole will have on us. We urge our investors to consult with their legal and tax advisors with respect to such legislation and the potential tax consequences of investingcash flows even if short-term liquidity expectations are not negatively impacted. If changes in our ~~securities.~~

~~Risks Related~~credit ratings were to occur, it could result in higher interest costs under certain of our credit facilities. It would also cause our future borrowing costs to increase and limit our access to capital markets. For example, we currently fund a portion of our working capital requirements in the ~~Proposed USPS Separation~~U.S. and ~~Mergers (defined below)~~

~~The proposed USPS Separation~~European commercial paper markets. Any downgrade below our current rating would, absent changes to current market liquidity, substantially reduce or eliminate our ability to access that source of funding and ~~Mergers are contingent upon~~could otherwise negatively impact the ~~satisfaction~~perception of our company by lenders and other third parties. In addition, certain of our major contracts provide customers with a right of termination in certain circumstances in the event of a ~~number of conditions, and the USPS Separation and Mergers may not be consummated on the terms or timeline currently contemplated.~~rating downgrade below investment grade.

On October 11, 2017, our board of directors unanimously approved a plan to combine our USPS business with Vencore Holding Corporation (“Vencore”) and KGS Holding Corporation (“KeyPoint”) to form a separate, independent publicly traded company to serve U.S. public sector clients (the “USPS Separation and Mergers”).

As previously announced, aspects of the proposed USPS Separation and Mergers are expected to include: (1) the transfer by DXC of certain subsidiary entities holding our USPS business to Ultra SC Inc. (“Ultra SpinCo”) (the “USPS Reorganization”); (2) the receipt by DXC of $1.05 billion in consideration from Ultra SpinCo via a cash distribution and/or issuance of Ultra SpinCo debt securities (the “Distribution Consideration”) as part of the USPS Reorganization; (3) the distribution by DXC to its stockholders of all of the issued and outstanding shares of common stock, par value $0.01 per share, of Ultra SpinCo by way of a pro rata dividend (the “Distribution,” and together with the USPS Reorganization, the “USPS Separation”); and (4) the acquisition of Vencore and KeyPoint by Ultra SpinCo in exchange for Ultra SpinCo common shares and approximately $400 million of cash merger consideration (the “Mergers”). Upon consummation of the USPS Separation and Mergers, DXC shareholders are expected to own approximately 86 percent of the combined company’s common shares, and funds managed by Veritas Capital and its affiliates are expected to own approximately 14% of the combined company’s common shares.

The terms and conditions of the USPS Separation and Mergers are as set forth in an Agreement and Plan of Merger dated as of October 11, 2017 by and among DXC, Ultra SpinCo, Ultra First VMS Inc., Ultra Second VMS LLC, Ultra KMS Inc., Vencore, KeyPoint, The SI Organization Holdings LLC and KGS Holding LLC (the “Merger Agreement”) and, further to the Merger Agreement, other separation agreements to be entered into by and between DXC and Ultra SpinCo prior to completion of the USPS Separation and Mergers (the “Separation Agreements”).

The consummation of the Mergers is subject to certain conditions, including (i) the completion of the USPS Reorganization, the payment of the Distribution Consideration, and the completion of the Distribution, (ii) the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which was satisfied on December 22, 2017 (iii) the effectiveness of the registration statement to be filed with the Securities and Exchange Commission and the approval for listing on the New York Stock Exchange or the NASDAQ Global Market of the shares of Ultra SpinCo common stock to be issued in the Distribution, (iv) the accuracy of the parties’ representations and warranties and the performance of their respective covenants contained in the Merger Agreement, and (v) our receipt of an opinion of tax counsel to the effect that the USPS Separation should qualify as a tax-free transaction for U.S. federal income tax purposes. For these and other reasons, the USPS Separation and Mergers may not be completed on the terms or timeline contemplated, if at all.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

None during the period covered by this report.

Use of Proceeds

Not applicable.

Issuer Purchases of Equity Securities

The following table provides information on a monthly basis for the quarter ended ~~December 31, 2017~~September 30, 2019, with respect to the Company’s purchase of equity securities:



~~Period~~	~~Total Number~~ ~~of Shares~~ ~~Purchased~~	~~Average Price~~ ~~Paid Per Share~~	~~Total Number~~ ~~of Shares~~ ~~Purchased as~~ ~~Part of Publicly~~ ~~Announced Plans or Programs~~	~~Approximate~~ ~~Dollar Value~~ ~~of Shares that~~ ~~May Yet be Purchased~~ ~~Under the Plans or Programs~~
~~October 1, 2017 to October 31, 2017~~	—	$—	—	~~$1,934,396,361~~
~~November 1, 2017 to November 30, 2017~~	—	$—	—	~~$1,934,396,361~~
~~December 1, 2017 to December 31, 2017~~	—	$—	—	~~$1,934,396,361~~



Period	Total Number of Shares Purchased	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
July 1, 2019 to July 31, 2019	—	$—	—	$2,123,936,464
August 1, 2019 to August 31, 2019	6,220,190	$40.18	6,220,190	$1,874,024,787
September 1, 2019 to September 30, 2019	—	$—	—	$1,874,024,787

On April 3, 2017, DXC announced the establishment of a share repurchase plan approved by the Board of Directors with an initial authorization of $2.0 billion for future repurchases of outstanding shares of DXC common stock. On November 8, 2018, DXC's Board of Directors approved an incremental $2.0 billion share repurchase authorization. An expiration date has not been established for this repurchase plan.

On June 13, 2019, DXC entered into an ASR agreement with a third-party financial institution by advancing $200 million including a $100 million prepayment. At inception, the ASR was initially settled by delivery of 1,849,194 shares of common stock to the Company. During the second quarter of fiscal 2020, DXC received an additional 1,805,350 shares of common stock. In total, 3,654,544 shares of common stock were repurchased under the ASR for $200 million.

Share repurchases may be made from time to time through various means, including in open market purchases, 10b5-1 plans, privately-negotiated transactions, accelerated stock repurchases, block trades and other transactions, in compliance with Rule 10b-18 under the Exchange Act as well as, to the extent applicable, other federal and state securities laws and other legal requirements. The timing, volume, and nature of share repurchases pursuant to the share repurchase plan are at the discretion of management and may be suspended or discontinued at any time.

ITEM 3. DEFAULT UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

On February 7, 2018, the Company completed its previously announced offer (the "Exchange Offer") to exchange any and all validly tendered and not validly withdrawn 7.45% Senior Notes due 2029 (the “Old Notes”) issued by Enterprise Services LLC, a wholly owned subsidiary of the Company, for new 7.45% Senior Notes due 2029 (the “New Notes”) of the Company.None.

Pursuant to the Exchange Offer, $233,633,000 aggregate principal amount of the Old Notes were validly tendered and accepted for exchange. In connection with the settlement of the Exchange Offer, on February 7, 2018, the Company issued $233,633,000 aggregate principal amount of New Notes in exchange for such validly tendered and accepted Old Notes.

The New Notes have been registered under the Securities Act of 1933, as amended (the “Act”), pursuant to a registration statement on Form S-4 (the “Registration Statement”). The Registration Statement was filed with the Securities and Exchange Commission on December 19, 2017, amended on January 8, 2018, and was declared effective on January 8, 2018. The Exchange Offer was made pursuant to the terms and conditions set forth in the Company’s prospectus, dated as of January 8, 2018, which forms a part of the Registration Statement.

The New Notes are governed by the terms of an indenture, dated as of March 27, 2017, between the Company and U.S. Bank National Association (the “Trustee”), as supplemented by the fifth supplemental indenture, dated as of February 7, 2018 (the “Supplemental Indenture”), between the Company and the Trustee. The foregoing summary of the Supplemental Indenture does not purport to be complete and is qualified in its entirety by reference to the complete terms of the Supplemental Indenture, a copy of which is filed with this Quarterly Report on Form 10-Q as Exhibit 4.5 and is incorporated herein by reference.

ITEM 6. EXHIBITS

The following exhibits are filed with this report.



Exhibit Number	Description of Exhibit
2.1	Agreement and Plan of Merger, dated as of May 24, 2016, by and among Computer Sciences Corporation, Hewlett Packard Enterprise Company, Everett SpinCo, Inc. (now known as DXC Technology Company) and Everett Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 to Hewlett Packard Enterprise Company's Current Report on Form 8-K (filed May 26, 2016) (file no. 001-37483))
2.2	First Amendment to Agreement and Plan of Merger, dated as of November 2, 2016, by and among Computer Sciences Corporation, Hewlett Packard Enterprise Company, Everett SpinCo, Inc. (now known as DXC Technology Company), New Everett Merger Sub Inc. and Everett Merger Sub Inc. (incorporated by reference to Exhibit 2.1 to Hewlett Packard Enterprise Company's Current Report on Form 8-K (filed November 2, 2016) (file no. 001-37483))
2.3	Second Amendment to Agreement and Plan of Merger, dated as of December 6, 2016, by and among Hewlett Packard Enterprise Company, Computer Sciences Corporation, Everett SpinCo, Inc. (now known as DXC Technology Company), Everett Merger Sub Inc. and New Everett Merger Sub Inc. (incorporated by reference to Exhibit 2.3 to Amendment No. 1 to Form 10 of Everett SpinCo, Inc. (filed December 7, 2016) (file no. 000-55712))
2.4	Separation and Distribution Agreement, dated May 24, 2016, between Hewlett Packard Enterprise Company and Everett SpinCo, Inc. (now known as DXC Technology Company) (incorporated by reference to Exhibit 2.2 to Hewlett Packard Enterprise Company's Current Report on Form 8-K (filed May 26, 2016) (file no. 001-37483))
2.5	First Amendment to the Separation and Distribution Agreement, dated November 2, 2016, by and between Hewlett Packard Enterprise Company and Everett SpinCo, Inc. (now known as DXC Technology Company) (incorporated by reference to Exhibit 2.2 to Hewlett Packard Enterprise Company's Current Report on Form 8-K (filed November 2, 2016) (file no. 001-37483))
2.6	Second Amendment to the Separation and Distribution Agreement, dated December 6, 2016, by and between Hewlett Packard Enterprise Company and Everett SpinCo, Inc. (now known as DXC Technology Company)(incorporated by reference to Exhibit 2.6 to Everett SpinCo, Inc.'s Amendment No. 1 to Form 10 (filed December 7, 2016) (file no. 000-55712))
2.7	Third Amendment to the Separation and Distribution Agreement, dated January 27, 2017, by and between Hewlett Packard Enterprise Company and Everett SpinCo, Inc. (now known as DXC Technology Company) (incorporated by reference to Exhibit 2.7 to Everett SpinCo Inc.'s Form 10 (filed February 14, 2017) (file no. 000-55712))
2.8	Fourth Amendment to the Separation and Distribution Agreement, dated March 31, 2017, by and between Hewlett Packard Enterprise Company and Everett SpinCo, Inc. (now known as DXC Technology Company) (incorporated by reference to Exhibit 2.6 to DXC Technology Company's Current Report on Form 8-K (filed April 6, 2017) (file no. 001-38033))
2.9	Employee Matters Agreement, dated as of March 31, 2017, by and among the Computer Sciences Corporation, Hewlett Packard Enterprise Company and Everett SpinCo, Inc. (now known as DXC Technology Company) (incorporated by reference to Exhibit 2.1 to DXC Technology Company's Current Report on Form 8-K (filed April 6, 2017) (file no. 001-38033))



2.10	Tax Matters Agreement, dated as of March 31, 2017, by and among the Computer Sciences Corporation, Hewlett Packard Enterprise Company and Everett SpinCo, Inc. (now known as DXC Technology Company) (incorporated by reference to Exhibit 2.2 to DXC Technology Company's Current Report on Form 8-K (filed April 6, 2017) (file no. 001-38033))
2.11	Intellectual Property Matters Agreement, dated as of March 31, 2017, by and among Hewlett Packard Enterprise Company, Hewlett Packard Enterprise Development LP and Everett SpinCo, Inc. (now known as DXC Technology Company) (incorporated by reference to Exhibit 2.3 to DXC Technology Company's Current Report on Form 8-K (filed April 6, 2017) (file no. 001-38033))
2.12	Transition Services Agreement, dated as of March 31, 2017, by and between Hewlett Packard Enterprise Company and Everett SpinCo, Inc. (now known as DXC Technology Company) (incorporated by reference to Exhibit 2.4 to DXC Technology Company's Current Report on Form 8-K (filed April 6, 2017) (file no. 001-38033))
2.13	Real Estate Matters Agreement, dated as of March 31, 2017, by and between Hewlett Packard Enterprise Company and Everett SpinCo, Inc. (now known as DXC Technology Company) (incorporated by reference to Exhibit 2.5 to DXC Technology Company's Current Report on Form 8-K (filed April 6, 2017) (file no. 001-38033))
2.14	Agreement and Plan of Merger, dated as of October 11, 2017, by and among DXC Technology Company, Ultra SCInc., Ultra First VMS Inc., Ultra Second VMS LLC, Ultra KMS Inc., Vencore Holding Corp., KGS Holding Corp.,The SI Organization Holdings LLC and KGS Holding LLC (incorporated by reference to Exhibit 2.1 to DXC Technology Company's Current Report on Form 8-K (filed October 13, 2017) (file no. 001-38033))
2.15	Separation and Distribution Agreement dated as of May 31, 2018, by and between DXC Technology Company and Perspecta Inc. (incorporated by reference to Exhibit 2.1 to DXC Technology Company's Current Report on Form 8-K (filed June 6, 2018) (file no. 001-38033))



2.16	Employee Matters Agreement dated as of May 31, 2018, by and between DXC Technology Company and Perspecta Inc. (incorporated by reference to Exhibit 2.2 to DXC Technology Company's Current Report on Form 8-K (filed June 6, 2018) (file no. 001-38033))
2.17	Tax Matters Agreement dated as of May 31, 2018, by and between DXC Technology Company and Perspecta Inc. (incorporated by reference to Exhibit 2.3 to DXC Technology Company's Current Report on Form 8-K (filed June 6, 2018) (file no. 001-38033))
2.18	Intellectual Property Matters Agreement dated as of May 31, 2018, by and between DXC Technology Company and Perspecta Inc. (incorporated by reference to Exhibit 2.4 to DXC Technology Company's Current Report on Form 8-K (filed June 6, 2018) (file no. 001-38033))
2.19	Transition Services Agreement dated as of May 31, 2018, by and between DXC Technology Company and Perspecta Inc. (incorporated by reference to Exhibit 2.5 to DXC Technology Company's Current Report on Form 8-K (filed June 6, 2018) (file no. 001-38033))
2.20	Real Estate Matters Agreement dated as of May 31, 2018, by and between DXC Technology Company and Perspecta Inc. (incorporated by reference to Exhibit 2.6 to DXC Technology Company's Current Report on Form 8-K (filed June 6, 2018) (file no. 001-38033))
2.21	Non-U.S. Agency Agreement dated as of May 31, 2018, by and between DXC Technology Company and Perspecta Inc. (incorporated by reference to Exhibit 2.7 to DXC Technology Company's Current Report on Form 8-K (filed June 6, 2018) (file no. 001-38033))
2.22	Merger Agreement, dated January 6, 2019, by and among DXC Technology Company, Luna Equities, Inc. and Luxoft Holding, Inc (incorporated by reference to Exhibit 99.1 to Luxoft Holding, Inc's Report of Foreign Private Issuer on Form 6-K (filed January 7, 2019) (file no. 001-35976))
3.1	Articles of Incorporation of DXC Technology Company, as filed with the Secretary of State of the State of Nevada on March 31, 2017 (incorporated by reference to Exhibit 3.3 to DXC Technology Company's Current Report on Form 8-K (filed April 6, 2017) (file no. 001-38033))
3.2	Amended and Restated Bylaws of DXC Technology Company, effective ~~April 1, 2017~~March 15, 2018 (incorporated by reference to Exhibit ~~3.4~~3.1 to DXC Technology Company's Current Report on Form 8-K (filed ~~April 6, 2017)~~March 15, 2018) (file no. 001-38033))
4.1	~~Base~~First Supplemental Indenture, dated as of March 27, 2017, between Everett SpinCo, Inc. (now known as DXC Technology Company) and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit ~~4.1~~4.2 to ~~Everett SpinCo, Inc.'s~~DXC Technology Company’s Current Report on Form 8-K (filed March 27, 2017) (file no. 001-38033))
4.2	Second Supplemental Indenture, dated as of August 9, 2017, between DXC Technology Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to DXC Technology Company's Current Report on Form 8-K (filed August 9, 2017) (file no. 001-38033))
4.3	Third Supplemental Indenture, dated as of August 9, 2017, between DXC Technology Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to DXC Technology Company's Current Report on Form 8-K (filed August 9, 2017) (file no. 001-38033))
4.4	Fourth Supplemental Indenture, dated as of August 17, 2017, between DXC Technology Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to DXC Technology Company's Current Report on Form 8-K (filed August 17, 2017) (file no. 001-38033))
4.5	Fifth Supplemental Indenture, dated as of February 7, 2018, between DXC ~~technology~~Technology Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.5 to DXC Technology Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2017 (filed February 9, 2018) (file no. 001-38033))
4.6	Sixth Supplemental Indenture, dated March 15, 2018, among DXC Technology Company, U.S. Bank National Association, as trustee, and Elavon Financial Services DAC, UK Branch, as paying agent (incorporated by reference to Exhibit 4.1 to DXC Technology Company's Current Report on Form 8-K (filed March 15, 2018) (file no. 001-38033))
4.7	Seventh Supplemental Indenture, dated September 26, 2018, among DXC Technology Company, U.S. Bank National Association, as trustee, and Elavon Financial Services DAC, UK Branch, as paying agent (incorporated by reference to Exhibit 4.1 to DXC Technology Company’s Current Report on Form 8-K (filed September 26, 2018) (file no. 001-38033))
4.8	Form of DXC Technology Company's 4.750% Senior Notes due 2027 (included in Exhibit 4.2) (incorporated by reference to Exhibit 4.2 to DXC Technology Company's Current Report on Form 8-K (filed March 27, 2017) (file no. 001-38033))
4.9	Form of DXC Technology Company's 2.875% Senior Notes due 2020 (included in Exhibit 4.3) (incorporated by reference to Exhibit 4.2 to DXC Technology Company's Current Report on Form 8-K (filed August 9, 2017) (file no. 001-38033))
~~4.7~~4.10	Form of DXC Technology Company's 4.45% Senior Notes due 2022 (included in Exhibit 4.2) (incorporated by reference to Exhibit 4.1 to DXC Technology Company's Current Report on Form 8-K (filed August 9, 2017) (file no. 001-38033))
~~4.8~~4.11	Form of DXC Technology Company's 4.250% Senior Notes due 2024 (included in Exhibit 4.3) (incorporated by reference to Exhibit 4.2 to DXC Technology Company's Current Report on Form 8-K (filed August 9, 2017) (file no. 001-38033))
~~4.9~~4.12	Form of DXC Technology Company's 4.750% Senior Notes due 2027 (included in Exhibit 4.3) (incorporated by reference to Exhibit 4.2 to DXC Technology Company's Current Report on Form 8-K (filed August 9, 2017) (file no. 001-38033))
~~4.10~~4.13	Form of DXC Technology Company's Senior Floating Rate Notes due 2021 (included in Exhibit 4.4) (incorporated by reference to Exhibit 4.2 to DXC Technology Company's Current Report on Form 8-K (filed August 17, 2017) (file no. 001-38033))


~~4.11~~
4.14	Form of DXC Technology Company's 7.45% Senior Notes due 2029 (included in Exhibit 4.5) (incorporated by reference to Exhibit 4.5 to DXC Technology Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2017 (filed February 9, 2018) (file no. 001-38033))
~~4.12~~4.15	~~Ninth Supplemental~~ Form of DXC Technology Company's 2.750% Senior Notes due 2025 (included in Exhibit 4.6) (incorporated by reference to Exhibit 4.1 to DXC Technology Company's Current Report on Form 8-K (filed March 15, 2018) (file no. 001-38033))
4.16	Form of DXC Technology Company’s 1.750% Senior Notes due 2026 (included in Exhibit 4.7) (incorporated by reference to Exhibit 4.1 to DXC Technology Company’s Current Report on Form 8-K (filed September 26, 2018) (file no. 001-38033))
4.17	Indenture dated ~~January 22, 2018,~~as of September 18, 2012, between ~~Enterprise Services LLC~~Computer Sciences Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to Computer Sciences Corporation's Current Report on Form 8-K (filed September 19, 2012) (file no. 001-04850))
4.18	First Supplemental Indenture dated as of September 18, 2012, between Computer Sciences Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 to Computer Sciences Corporation's Current Report on Form 8-K (filed September 19, 2012) (file no. 001-04850))
4.19	Form of Computer Sciences Corporation’s 4.450% Senior Notes due 2022 (included in Exhibit 4.19) (incorporated by reference to Exhibit 4.2 to Computer Sciences Corporation's Current Report on Form 8-K (filed September 19, 2012) (file no. 001-04850))
10.1	Third Amendment to the Purchase and Sale Agreement dated as of August 21, 2019, among DXC Technology Company, as Servicer, DXC Technology Services LLC, as Existing Originator, Alliance-One Services, Inc., Computer Sciences Corporation, CSC Consulting, Inc., CSC Cybertek Corporation, Mynd Corporation, and PDA Software Services LLC, as New Originators, and DXC Receivables LLC (f/k/a CSC Receivables LLC), as Buyer
10.2	Sixth Amendment to the Receivables Purchase Agreement dated as of August 21, 2019, among DXC Receivables LLC (f/k/a CSC Receivables LLC), as Seller, DXC Technology Company, as Servicer, PNC Bank, National Association, as Administrative Agent, and the persons from time to time party thereto as Purchasers and Group Agents
10.3	Second Amended and Restated Performance Guaranty dated as of August 21, 2019, made by DXC Technology Company, as Performance Guarantor, in favor of PNC Bank, National Association, as Administrative Agent, for the benefit of the Purchasers
10.4*	Employment Agreement with Michael J. Salvino (incorporated by reference to Exhibit 10.1 to DXC Technology Company’s Current Report on Form 8-K (filed ~~January 23, 2018)~~September 12, 2019) (file no. 001-38033))
10.5*	Addendum to Employment Agreement with J. Michael Lawrie (incorporated by reference to Exhibit 10.2 to DXC Technology Company’s Current Report on Form 8-K (filed September 12, 2019) (file no. 001-38033))
10.6*	Retention Agreement with Paul N. Saleh
31.1	Section 302 Certification of the Chief Executive Officer
31.2	Section 302 Certification of the Chief Financial Officer
32.1**32.1	Section 906 Certification of Chief Executive Officer
32.2**32.2	Section 906 Certification of Chief Financial Officer
~~101.INS~~101	~~XBRL Instance~~


	Interactive Data Files
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation
101.LAB	XBRL Taxonomy Extension Labels
101.PRE	XBRL Taxonomy Extension Presentation
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Management contract or compensatory plan or agreement ** Furnished, not filed

*Management contract or compensatory plan or agreement

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



			DXC TECHNOLOGY COMPANY

Dated:	~~February 8, 2018~~November 12, 2019	By:	/s/ Neil A. Manna
		Name:	Neil A. Manna
		Title:	Senior Vice President, Corporate Controller Principal Accounting Officer

7882



(in millions)	Amount
Preliminary fair value of purchase consideration received by HPE stockholders⁽¹⁾	$	9,782
Preliminary fair value of HPES options assumed by CSC⁽²⁾	68
Total estimated consideration transferred	$	9,850



(in millions)	Amount
Projected benefit obligation	$	(7,413	)
Fair value of plan assets	7,411
Funded status	$	(2	)



(in millions)	Amount
Employer contributions:
2018	$	39

Benefit payments:
2018	$	225
2019	$	151
2020	$	163
2021	$	224
2022	$	180
2023 through 2027	$	1,132



(in millions, except per-share amounts)	Three Months Ended December 30, 2016⁽¹⁾			Nine Months Ended December 30, 2016⁽¹⁾
Revenues	$	6,585		$	19,358
Net loss	(166		)	(570		)
Loss attributable to the Company	(174		)	(587		)

Loss per common share:
Basic	$	(0.61	)	$	(2.07	)
Diluted	$	(0.61	)	$	(2.07	)



	As of and for the
(in millions)	Three Months Ended December 31, 2017			Nine Months Ended December 31, 2017
Beginning balance	$	272		$	252
Transfers of receivables	562			1,716
Collections	(593		)	(1,717		)
Fair value adjustment	8			(2		)
Ending balance	$	249		$	249



	As of March 31, 2017
Assets:	Fair Value		Level 1		Level 2		Level 3
Money market funds and money market deposit accounts	$	406	$	406	$	—	$	—
Deferred purchase price receivable	252		—		—		252
Total assets	$	658	$	406	$	—	$	252

Liabilities:
Contingent consideration	$	7	$	—	$	—	$	7
Total liabilities	$	7	$	—	$	—	$	7



Fiscal Year	(in millions)
Remainder of 2018	$	306
2019	$	1,094
2020	$	1,032
2021	$	943
2022	$	804



Fiscal year	Minimum Purchase Commitment
(in millions)	Minimum Purchase Commitment
Remainder of 2018	$	664
2019	2,201
2020	2,095
Thereafter	1,222
Total	$	6,182



(in millions)	Fiscal 2018		Fiscal 2019		Fiscal 2020 and Thereafter		Totals
Surety bonds	$	48	$	152	$	157	$	357
Performance letters of credit	140		85		338		563
Stand-by letters of credit	8		15		32		55
Totals	$	196	$	252	$	527	$	975



	Three Months Ended
(in millions)	December 31, 2017 at Constant Currency		December 30, 2016 Pro Forma		Increase (Decrease) at Constant Currency			Percentage Change
GBS	$	2,266	$	2,432	$	(166	)	(6.8	)%
GIS	3,075		3,327		(252		)	(7.6	)%
USPS	726		826		(100		)	(12.1	)%
Total	$	6,067	$	6,585	$	(518	)	(7.9	)%



	Historical
(in millions, except per-share amounts)	CSC for the Three Months Ended December 30, 2016			HPES for the Three Months Ended October 31, 2016			Reclassifications			Merger Adjustments			Pro Forma Combined

Revenues	$	1,917		$	4,668		$	—		$	—		$	6,585

Costs of services (excludes depreciation and amortization and restructuring costs)	1,347			3,841			(254		)	81			5,015
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)	333			553			(74		)	(123		)	689
Depreciation and amortization	161			32			328			—			521
Restructuring costs	3			211			—			—			214
Interest expense	33			—			38			(16		)	55
Interest income	(8		)	—			(10		)	—			(18		)
Other expense, net	(2		)	—			—			—			(2		)
Total costs and expenses	1,867			4,637			28			(58		)	6,474

Interest and other, net	—			(30		)	30			—			—
Income before income taxes	50			1			2			58			111
Income tax expense	13			185			—			79			277
Net income (loss)	37			(184		)	2			(21		)	(166		)
Less: net income attributable to non-controlling interest, net of tax	6			—			2			—			8
Net loss attributable to DXC common stockholders	$	31		$	(184	)	$	—		$	(21	)	$	(174	)

Loss per common share:
Basic	$	0.22											$	(0.61	)
Diluted	$	0.21											$	(0.61	)

Weighted-average common shares:
Basic	140.88												283.16
Diluted	144.81												283.16



	Historical
(in millions, except per-share amounts)	CSC for the Nine Months Ended December 30, 2016			HPES for the Nine Months Ended October 31, 2016			Reclassifications			Merger Adjustments			Pro Forma Combined

Revenues	$	5,718		$	13,640		$	—		$	—		$	19,358

Costs of services (excludes depreciation and amortization and restructuring costs)	4,131			11,563			(805		)	404			15,293
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)	931			1,558			(238		)	(192		)	2,059
Depreciation and amortization	494			231			1,056			(164		)	1,617
Restructuring costs	85			561			—			—			646
Transaction costs	—			13			(13		)	—			—
Interest expense	87			—			137			8			232
Interest income	(26		)	—			(33		)	—			(59		)
Other expense, net	3			—			9			—			12
Total costs and expenses	5,705			13,926			113			56			19,800

Interest and other, net	—			(117		)	117			—			—
Income (loss) before income taxes	13			(403		)	4			(56		)	(442		)
Income tax (benefit) expense	(25		)	92			—			61			128
Net income (loss)	38			(495		)	4			(117		)	(570		)
Less: net income attributable to non-controlling interest, net of tax	13			—			4			—			17
Net loss attributable to DXC common stockholders	$	25		$	(495	)	$	—		$	(117	)	$	(587	)

Loss per common share:
Basic	$	0.18											$	(2.07	)
Diluted	$	0.17											$	(2.07	)

Weighted-average common shares:
Basic	140.13												283.16
Diluted	143.80												283.16



	Three Months Ended December 30, 2016
(in millions, except per-share amounts)	Pro Forma Combined			Restructuring Costs		Transaction and Integration-related Costs			Amortization of Acquired Intangibles		Certain Overhead Costs			Tax Adjustment			Pro Forma Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)	$	5,015		$	—	$	—		$	—	$	—		$	—		$	5,015
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)	689			—		(126		)	—		(19		)	—			$	544

Income, before income taxes	111			214		126			119		19			—			589
Income tax expense (benefit)	277			—		—			—		—			(112		)	165
Net (loss) income	(166		)	214		126			119		19			112			424
Less: net income attributable to non-controlling interest, net of tax	8			—		—					—			—			8
Net (loss) income attributable to DXC common stockholders	$	(174	)	$	214	$	126		$	119	$	19		$	112		$	416

Effective Tax Rate	249.5		%														28.0		%

Basic EPS	$	(0.61	)	$	0.76	$	0.44		$	0.42	$	0.07		$	0.40		$	1.47
Diluted EPS	$	(0.61	)	$	0.75	$	0.44		$	0.41	$	0.07		$	0.39		$	1.45

Weighted average common shares outstanding for:
Basic EPS	283.16			283.16		283.16			283.16		283.16			283.16			283.16
Diluted EPS	283.16			287.09		287.09			287.09		287.09			287.09			287.09



(in millions)	Less than 1 year		2-3 years		4-5 years		More than 5 years		Total
Debt ⁽¹⁾	$	66	$	1,070	$	2,216	$	2,240	$	5,592
Capitalized lease liabilities	196		1,064		239		19		1,518
Operating leases	196		1,131		437		720		2,484
Purchase obligations⁽²⁾	664		4,296		775		447		6,182
Interest and preferred dividend payments ⁽³⁾	40		369		294		402		1,105
Totals⁽⁴⁾	$	1,162	$	7,930	$	3,961	$	3,828	$	16,881