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, 2017June 30, 2021
OR
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-20210630_g1.jpg
DXC TECHNOLOGY COMPANY
(Exact name of registrant as specified in its charter)
Nevada61-1800317
(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 and zip code)
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DXC TECHNOLOGY COMPANY
(Exact name of Registrant as specified in its charter)
Nevada61-1800317
(State of incorporation or organization)(I.R.S. Employer Identification No.)
1775 Tysons Boulevard
Tysons, Virginia22102
(Address of principal executive offices)(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareDXCThe New York Stock Exchange
2.750% Senior Notes Due 2025DXC 25The New York Stock Exchange
1.750% Senior Notes Due 2026DXC 26The New York Stock Exchange
Indicate by check mark whether the Registrantregistrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.x Yes  o No  


Indicate by check mark whether the registrant has submitted electronically 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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes  o No


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

Large Accelerated FilerxAccelerated Filero
Non-accelerated FileroSmaller reporting company☐
Emerging growth company☐
Large Accelerated Filer     x                            Accelerated Filer o
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


285,687,865251,904,242 shares of common stock, par value $0.01 per share, were outstanding as of January 22, 2018.on August 2, 2021.



TABLE OF CONTENTS


ItemPage
1.
1
2.
46
3.
60
4.
61
1.
63
1A.
63
2.
64
3.
64
4.
64
5.
64
6.
65


Item  Page
  
PART I - FINANCIAL INFORMATION
 
    
1. 
Financial Statements (unaudited)
1
2. 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
46
3. 
Quantitative and Qualitative Disclosures About Market Risk
70
4. 
Controls and Procedures
71
    
  
PART II - OTHER INFORMATION
 
    
1. 
Legal Proceedings
72
1A. 
Risk Factors
72
2. 
Unregistered Sales of Equity Securities and Use of Proceeds
73
3. 
Defaults Upon Senior Securities
74
4. 
Mine Safety Disclosures
74
5. 
Other Information
75
6. 
Exhibits
75




PART I


ITEM 1. FINANCIAL STATEMENTS


Index to Condensed Consolidated Financial Statements
Page
2
3
4
5
68
Note 1–Summary of Significant Accounting Policies
79
Note 2–Recent Accounting Pronouncements
811
Note 3–Acquisitions
911
Note 4–Earnings Per Share4–Divestitures
1612
Note 5–Sale of Receivables5–Earnings (Loss) Per Share
1615
Note 6–Fair Value6–Receivables
1816
Note 7–Derivative Instruments7–Leases
1918
Note 8–Intangible Assets8–Fair Value
2220
Note 9–Goodwill9–Derivative and Hedging Activities
2322
Note 10–Debt10–Intangible Assets
2425
Note 11–Restructuring Costs11–Goodwill
26
Note 12–12–Debt
27
Note 13–Revenue
28
Note 14–Restructuring Costs
29
Note 15–Pension and Other Benefit Plans
2731
Note 13–16–Income Taxes
2932
Note 14–Stockholders'17–Stockholders’ Equity
3233
Note 15–18–Stock Incentive Plans
3334
Note 16–19–Cash Flows
36
Note 17–20–Segment Information
37
Note 18–21–Commitments and Contingencies
39







1

DXC TECHNOLOGY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)


Three Months Ended
(in millions, except per-share amounts)June 30, 2021June 30, 2020
Revenues$4,141 $4,502 
Costs of services (excludes depreciation and amortization and restructuring costs)3,255 3,629 
Selling, general and administrative (excludes depreciation and amortization and restructuring costs)383 539 
Depreciation and amortization422 492 
Restructuring costs67 72 
Interest expense62 106 
Interest income(20)(23)
Debt extinguishment costs28 0 
Gain on disposition of businesses(377)0 
Other income, net(103)(88)
Total costs and expenses3,717 4,727 
Income (loss) before income taxes424 (225)
Income tax expense (benefit)142 (26)
Net income (loss)282 (199)
Less: net income attributable to non-controlling interest, net of tax4 6 
Net income (loss) attributable to DXC common stockholders$278 $(205)
Income (loss) per common share:
Basic$1.09 $(0.81)
Diluted$1.07 $(0.81)
  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.









2


DXC TECHNOLOGY COMPANY

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


Three Months Ended
(in millions)June 30, 2021June 30, 2020
Net income (loss)$282 $(199)
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments, net of tax benefit of $2 and $7(112)(3)
Cash flow hedges adjustments, net of tax expense of $0 and $3(1)11 
Available-for-sale securities, net of tax expense of $0 and $00 4 
Pension and other post-retirement benefit plans, net of tax:
Amortization of prior service cost, net of tax benefit of $0 and $1(2)(9)
Pension and other post-retirement benefit plans, net of tax(2)(9)
Other comprehensive (loss) income, net of taxes(115)3 
Comprehensive income (loss)167 (196)
Less: comprehensive income (loss) attributable to non-controlling interest13 5 
Comprehensive income (loss) attributable to DXC common stockholders$154 $(201)
    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)



(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.






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





3

DXC TECHNOLOGY COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
  As of
(in millions, except per-share and share amounts) December 31, 2017 
March 31, 2017 (1)
ASSETS   
Current assets:    
Cash and cash equivalents $2,926
 $1,263
Receivables, net of allowance for doubtful accounts of $39 and $26 5,611
 1,643
Prepaid expenses 540
 223
Other current assets 444
 118
Total current assets 9,521
 3,247
     
Intangible assets, net of accumulated amortization of $3,005 and $2,293 7,927
 1,794
Goodwill 9,320
 1,855
Deferred income taxes, net 458
 381
Property and equipment, net of accumulated depreciation of $3,659 and $2,816 3,812
 903
Other assets 2,544
 483
Total Assets $33,582
 $8,663
     
LIABILITIES and EQUITY    
Current liabilities:    
Short-term debt and current maturities of long-term debt 2,173
 738
Accounts payable 1,510
 410
Accrued payroll and related costs 813
 248
Accrued expenses and other current liabilities 3,403
 998
Deferred revenue and advance contract payments 1,524
 518
Income taxes payable 215
 38
Total current liabilities 9,638
 2,950
     
Long-term debt, net of current maturities 6,367
 2,225
Non-current deferred revenue 856
 286
Non-current income tax liabilities and deferred tax liabilities 1,523
 423
Other long-term liabilities 1,996
 613
Total Liabilities 20,380
 6,497
     
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
Additional paid-in capital 12,201
 2,219
Retained earnings (accumulated deficit) 834
 (170)
Accumulated other comprehensive loss (118) (162)
Treasury stock, at cost, 1,000,856 and 0 shares as of December 31, 2017 and March 31, 2017 (83) —
Total DXC stockholders’ equity 12,837
 1,888
Non-controlling interest in subsidiaries 365
 278
Total Equity 13,202
 2,166
Total Liabilities and Equity $33,582
 $8,663

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

As of
(in millions, except per-share and share amounts)June 30, 2021March 31, 2021
ASSETS
Current assets:
Cash and cash equivalents$2,460 $2,968 
Receivables and contract assets, net of allowance of $84 and $914,081 4,156 
Prepaid expenses659 567 
Other current assets341 517 
Total current assets7,541 8,208 
Intangible assets, net of accumulated amortization of $4,634 and $4,4223,888 4,043 
Operating right-of-use assets, net1,299 1,366 
Goodwill639 641 
Deferred income taxes, net238 289 
Property and equipment, net of accumulated depreciation of $4,120 and $4,1212,841 2,946 
Other assets4,421 4,545 
Total Assets$20,867 $22,038 
LIABILITIES and EQUITY
Current liabilities:
Short-term debt and current maturities of long-term debt817 1,167 
Accounts payable857 914 
Accrued payroll and related costs746 698 
Current operating lease liabilities413 418 
Accrued expenses and other current liabilities3,060 3,476 
Deferred revenue and advance contract payments1,032 1,079 
Income taxes payable481 398 
Total current liabilities7,406 8,150 
Long-term debt, net of current maturities4,116 4,345 
Non-current deferred revenue598 622 
Non-current operating lease liabilities971 1,038 
Non-current income tax liabilities and deferred tax liabilities771 854 
Other long-term liabilities1,619 1,721 
Total Liabilities15,481 16,730 
Commitments and contingencies00
DXC stockholders’ equity:
Preferred stock, par value $0.01 per share, 1,000,000 shares authorized, NaN issued as of June 30, 2021 and March 31, 20210 0 
Common stock, par value $0.01 per share, 750,000,000 shares authorized, 256,681,401 issued as of June 30, 2021 and 257,052,533 issued as of March 31, 20213 3 
Additional paid-in capital10,713 10,761 
Accumulated deficit(5,045)(5,331)
Accumulated other comprehensive loss(426)(302)
Treasury stock, at cost, 2,697,498 and 2,458,027 shares as of June 30, 2021 and March 31, 2021(168)(158)
Total DXC stockholders’ equity5,077 4,973 
Non-controlling interest in subsidiaries309 335 
Total Equity5,386 5,308 
Total Liabilities and Equity$20,867 $22,038 

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.

4


DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITYCASH FLOWS (unaudited)
Three Months Ended
(in millions)June 30, 2021June 30, 2020
Cash flows from operating activities:
Net income (loss)$282 $(199)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization427 496 
Operating right-of-use expense130 156 
Pension & other post-employment benefits, actuarial & settlement losses0 2 
Share-based compensation25 16 
Deferred taxes(25)0 
(Gain) loss on dispositions(414)4 
Provision for losses on accounts receivable(3)35 
Unrealized foreign currency exchange gain(8)(11)
Debt extinguishment costs28 0 
Other non-cash charges, net3 7 
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Decrease (increase) in assets26 (100)
Decrease in operating lease liability(130)(156)
Decrease in other liabilities(370)(131)
Net cash (used in) provided by operating activities(29)119 
Cash flows from investing activities:
Purchases of property and equipment(98)(95)
Payments for transition and transformation contract costs(55)(82)
Software purchased and developed(122)(48)
Payments for acquisitions, net of cash acquired0 (10)
Business dispositions513 0 
Cash collections related to deferred purchase price receivable0 159 
Proceeds from sale of assets67 6 
Other investing activities, net6 9 
Net cash provided by (used in) investing activities311 (61)
Cash flows from financing activities:
Borrowings of commercial paper216 748 
Repayments of commercial paper(194)(317)
Borrowings under lines of credit0 2,500 
Repayment of borrowings under lines of credit0 (750)
Borrowings on long-term debt19 993 
Principal payments on long-term debt(352)(1,084)
Payments on finance leases and borrowings for asset financing(494)(245)
Proceeds from stock options and other common stock transactions9 0 
Taxes paid related to net share settlements of share-based compensation awards(11)(3)
Payments for debt extinguishment costs(28)0 
Repurchase of common stock and advance payment for accelerated share repurchase(48)0 
Dividend payments0 (53)
Other financing activities, net17 (3)
Net cash (used in) provided by financing activities(866)1,786 
Effect of exchange rate changes on cash and cash equivalents13 (14)
Net (decrease) increase in cash and cash equivalents including cash classified within current assets held for sale(571)1,830 
Cash classified within current assets held for sale63 0 
Net (decrease) increase in cash and cash equivalents(508)1,830 
Cash and cash equivalents at beginning of year2,968 3,679 
Cash and cash equivalents at end of period$2,460 $5,509 
5

(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, 2017151,932
 $152
$2,565
$(170)$(162)$(497)$1,888
$278
$2,166
Recapitalization adjustment(1)
(10,633) (151)(346)—
—
497
—
—
—
Recast balance at March 31, 2017141,299
 $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 transactions4,356
 

96
  
96
 96
Dividends declared    (157)  (157) (157)
Non-controlling interest distributions and other       —
(2)(2)
Balance at December 31, 2017286,554
 $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, 2016148,747
 $149
$2,439
$33
$(111)$(485)$2,025
$7
$2,032
Recapitalization adjustment(1)
—
 (147)147
—
—
—
—
—
—
Recast balance at April 1, 2016148,747
 $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 transactions2,855
 

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, 2016151,602
 $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.

6


DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Three Months Ended June 30, 2021
(in millions, except
shares in thousands)		Common Stock
Additional
Paid-in Capital
 Accumulated Deficit
Accumulated
Other
Comprehensive Loss
Treasury Stock(1)
Total
DXC Equity
Non-
Controlling Interest
Total Equity
SharesAmount
Balance at March 31, 2021257,053 $3 $10,761 $(5,331)$(302)$(158)$4,973 $335 $5,308 
Net income278 278 4 282 
Other comprehensive loss(124)(124)9 (115)
Share-based compensation expense18 18 18 
Acquisition of treasury stock(10)(10)(10)
Share repurchase program(1,750)(74)7(67)(67)
Stock option exercises and other common stock transactions1,378 8 8 8 
Non-controlling interest distributions and other1 1 (39)(38)
Balance at June 30, 2021256,681$3 $10,713 $(5,045)$(426)$(168)$5,077 $309 $5,386 
Three Months Ended June 30, 2020
(in millions, except
shares in thousands)		Common Stock
Additional
Paid-in Capital
Accumulated DeficitAccumulated
Other
Comprehensive Loss		Treasury Stock
Total
DXC Equity
Non-
Controlling Interest
Total Equity
SharesAmount
Balance at March 31, 2020255,674 $3 $10,714 $(5,177)$(603)$(152)$4,785 $344 $5,129 
Cumulative effect of adopting ASU 2016-13(4)(4)(4)
Net loss(205)(205)6 (199)
Other comprehensive income4 4 (1)3 
Share-based compensation expense15 15 15 
Acquisition of treasury stock(2)(2)(2)
Stock option exercises and other common stock transactions709 0 0 
Balance at June 30, 2020256,383 $3 $10,729 $(5,386)$(599)$(154)$4,593 $349 $4,942 

    (1) 2,697,498 treasury shares as of June 30, 2021.



The accompanying notes are an integral part of these condensed consolidated financial statements.
7


Note 1 -– Summary of Significant Accounting Policies


Business


DXC Technology Company (“DXC”DXC,” the “Company,” “we,” “us,” or “our”) helps global companies run their mission critical systems and operations while modernizing IT, optimizing data architectures, and ensuring security and scalability across public, private and hybrid clouds. With decades of driving innovation, the world’s largest companies trust DXC to deploy its enterprise technology stack to deliver new levels of performance, competitiveness and customer experiences.

HPS Sale

On April 1, 2021, DXC completed the sale of its healthcare provider software business (“HPS” or the "Company"“HPS Business”) isto Dedalus Holding S.p.A. (“Dedalus”). The sale was accomplished by the world's leading independent, end-to-end IT services company. DXC’s mission iscash purchase of all equity interests and assets attributable to enable superior returns on its clients' technology investments through best-in-class vertical industry solutions, domain expertise, strategic partnerships with key technology leaders and global scale. The Company helps lead its clients through their digital transformationsthe HPS Business for €468 million (approximately $551 million), subject 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.certain adjustments. See Note 4 – “Divestitures” for further information.

HHS Sale

On October 11, 2017,1, 2020, DXC completed the sale of its U.S. State and Local Health and Human Services business (“HHS” or the “HHS Business”) to Veritas Capital Fund Management, L.L.C. (“Veritas Capital”) to form Gainwell Technologies. The sale was accomplished by the cash purchase of all equity interests and assets attributable to the HHS Business together with future services to be provided by the Company announced that it had entered into an Agreement and Planfor a total enterprise value of Merger with Ultra SC Inc., Ultra First VMS Inc., Ultra Second VMS LLC, Ultra KMS Inc., Vencore Holding Corp. (“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 to form a separate, independent publicly traded company to serve U.S. public sector clients. The formation of the new company is$5 billion, subject to regulatorynet working capital adjustments and other approvals.assumed liabilities. See Note 4 – “Divestitures” for further information.


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 Statements 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 (“SEC”) for quarterly reports and accounting principles generally accepted in the United States ("GAAP"(“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'sthe Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2017 ("2021 (“fiscal 2017"2021”), included.
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DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Use of Estimates

The preparation of the financial statements, in DXC's Annual Reportaccordance with GAAP, requires the Company’s management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expense during the reporting period. The Company bases its estimates on Form ARSassumptions 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. The severity, magnitude and duration, as well as the economic consequences of the coronavirus disease 2019 (“COVID-19”) crisis, are uncertain, rapidly changing and difficult to predict. Therefore, accounting estimates and assumptions may change over time in response to the COVID-19 crisis and may change materially in future periods. Estimates are used for, fiscal 2017.but are not limited to, contracts accounted for using the percentage -of-completion method, cash flows used in the evaluation of impairment of goodwill and other long-lived assets, reserves for uncertain tax positions, valuation allowances on deferred tax assets, loss accruals for litigation, and obligations related to our pension plans. In the opinion of the Company’s management, the accompanying financial statements of DXC contain all adjustments necessary, including those of a normal recurring adjustments, necessarynature, to fairly 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.
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DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 2 -– Recent Accounting Pronouncements


During the three months ended June 30, 2021, DXC adopted the following Accounting Standards Update (“ASU”) issued by the Financial Accounting Standards Board:

Date Issued and ASUDate Adopted and MethodDescriptionImpact
December 2019

ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”		April 1, 2021
Multiple Methods
This update is intended tosimplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The transition method (retrospective, modified retrospective, or prospective basis) related to the amendments depends on the applicable guidance, and all amendments for which there is no transition guidance specified are applied on a prospective basis.
The Company determined that this standard had no material impact to its condensed consolidated financial statements following adoption.

The following Accounting Standards Updates ("ASU") wereASU was recently issued but havehas not yet been 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.
Date Issued and ASUDXC Effective DateDescriptionImpact
July 2021

ASU 2021-05, “Leases (Topic 842): Lessors–Certain Leases with Variable Lease Payments”		April 1, 2022The amendments in this update modify lease classification requirements for lessors, providing that lease contracts with variable lease payments that do not depend on a reference index or a rate should be classified as operating leases if they would have been classified as a sales-type or direct financing lease and resulted in the recognition of a selling loss at lease commencement.The Company is currently evaluating the potential impact this standard may have on its financial statements in future reporting periods.

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." This amendment 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. ASU 2016-02 will be effective for DXC in fiscal 2020 and early adoption is permitted. This ASU must be adopted using a modified retrospective transition and provides for certain practical expedients. DXC 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 due to the recording of right-of-use assets and corresponding lease liabilities, which may be significant. Refer to Note 18 - "Commitments and Contingencies" 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. The Company will adopt this standard in the first quarter of Fiscal 2019 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.
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


The Company has certain arrangements involving the sale of proprietary software and related services for which vendor-specific objective evidence of fair value may not exist, resulting in the deferral of revenues. Under the new standard, estimates of standalone selling price will be necessary for all software performance obligations, which may result in the acceleration of revenues.
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 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 required by the standard.


Other recently issued ASUs effective after December 31, 2017June 30, 2021 are not expected to have a material effect on DXC'sDXC’s consolidated financial statements.


Note 3 -– Acquisitions


Fiscal 20182021 Acquisitions

HPES Merger

AXA Bank Germany Acquisition

On AprilJanuary 1, 2017, CSC, Hewlett Packard Enterprise Company2021, DXC completed the acquisition of AXA Bank Germany (“HPE”AXA Bank”), Everett SpinCo, Inc.(“Everett”), and New Everett Merger Sub Inc., a wholly-owned subsidiaryGerman retail bank, from AXA Group for the total consideration of Everett (“Merger Sub”), 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 by HPE of its Enterprise Services business, HPES, to Everett, and spin-off by HPE of Everett on March 31, 2017, and the merger of Merger Sub with and into CSC on April 1, 2017 (the “Merger”). At the time of the Merger, Everett was renamed DXC, 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, compete and serve clients in a rapidly changing marketplace.

The transaction involving HPES and CSC is a reverse merger acquisition, in which DXC is considered the legal acquirer of 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.

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.

$101 million. In connection with its acquisition of AXA Bank, DXC received cash of $294 million which included customer deposit liabilities totaling $197 million. DXC recorded goodwill associated with the Merger, the Company entered into a numberacquisition of agreements with HPE including the following:AXA Bank totaling $2 million.


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.
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DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued




Preferred Vendor Agreements - The Company and HPE have entered into Preferred Vendor Agreements, pursuantNote4– Divestitures

Fiscal 2022 Divestitures

HPS Sale

On April 1, 2021, DXC completed the sale of its HPS Business to Dedalus for €468 million (approximately $551 million), which HPE and Micro Focus International, the acquirer of HPE's software business, will: (1) make availableincludes €10 million (approximately $12 million) related to DXC for purchase hardware products sold by HPE and technologyfuture services to be provided by HPEthe Company. The sale proceeds were used to repay the remainder of two series of 4.45% senior notes due fiscal 2023 for $154 million and (2) make available$165 million. The HPS Sale resulted in a pre-tax gain on sale of $341 million, net of closing costs. The sale price is subject 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.adjustment based on changes in actual closing net working capital. Final potential working capital adjustments are pending.


Certain other additional agreements were entered into, includingThe following is 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 provisionssummary of the agreement, a calculation was performed to make certain adjustments required to complete the separationassets 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,liabilities distributed as part of the process of determining fair value of these leases as ofHPS Sale on 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.2021:


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)
(in millions)		Represents the fair valueAs 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.April 1, 2021
Assets:
(2)
Cash and cash equivalents		Represents the fair value of certain stock-based awards of HPES employees that were unexercised on March 31, 2017, which HPE, HPES$34 
Accounts receivable, net62 
Prepaid expenses6 
Total current assets102 
Intangible assets, net101 
Operating right-of-use assets, net3 
Goodwill81 
Deferred income taxes, net62 
Property and CSC agreed would be converted to DXC stock-based awards.equipment, net4 
Other assets15 
Total non-current assets266 
Total assets$368 
Liabilities:
Accounts payable$4 
Accrued payroll and related costs7 
Current operating lease liabilities1 
Accrued expenses and other current liabilities14 
Deferred revenue and advance contract payments45 
Total current liabilities71 
Non-current deferred revenue10 
Long-term operating lease liabilities2 
Other long-term liabilities3 
Total long-term liabilities15 
Total liabilities$86 


During the first quarter of fiscal 2022, the Company sold some insignificant businesses that resulted in a gain of $49 million. This was partially offset by $13 million in sales price adjustments related to prior year dispositions, which resulted from changes in estimated net working capital.

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DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Fiscal 2021 Divestitures
Due
HHS Sale

On October 1, 2020, DXC completed the sale of its HHS Business to Veritas Capital. The sale was accomplished by the cash purchase of all equity interests and assets attributable to the complexityHHS Business for a total enterprise value of $5.0 billion (including $85 million related to future services to be provided by the Company). As part of the Merger, the Company recorded the assets acquired and liabilities assumed at their preliminary fair values. The Company's preliminary estimatessale of the fair valuesHHS business, $272 million of repurchased receivables, previously sold under the Milano Receivables Facility (“Milano Facility”) (see Note 6 – “Receivables” to the financial statements), $12 million of prepaid maintenance, and $48 million of software licenses were transferred to the HHS Business. DXC made payment for these assets acquiredduring the third quarter of fiscal 2021. The repurchase of receivables and payment on prepaid maintenance are reported as operating cash outflows, 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 date, and the Companypayment for software license 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 date.considered an investing cash outflow. 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 $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 whichHHS Sale resulted in a decreasepre-tax gain on sale of $2,014 million, net of closing costs. The sale price is subject to adjustment based on changes in actual closing net assetsworking capital. Final potential working capital adjustments are pending. Approximately $3.5 billion of $450 million. Total assets increasedthe sale proceeds were used to prepay debt.

DXC’s post-divestiture relationship with the HHS Business is governed 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 inPurchase Agreement, which provides for the preliminary fair valueallocation of assets, relatedemployees, liabilities and obligations (including property, employee benefits, litigation, and tax-related assets and liabilities) between DXC and the HHS Business attributable to data centersperiods prior to, at and land;after the divestment. In addition, DXC and the HHS Business have service and commercial contracts that generally extend through fiscal 2023.

The divestment of the HHS Business, reported as part of the GBS segment, did not meet the requirements for presentation as discontinued operations as it did not represent a $1.1 billion increase in intangible assets, primarily driven bystrategic shift that would have 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 outsourcingmajor effect on DXC’s operations and other customer contracts taking into account continuing performance obligation, an increase of $106 million of debt,financial results 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 increasewas included in income before incomeprior to its divestment.
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DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED 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 tofollowing is 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 excesssummary of the purchase price over the fair value of identifiable assets acquired and liabilities assumed at the Merger date. The goodwill recognized with the Merger was attributable to the synergies expected to be achieved by combining the businesses of CSC and HPES, expected future contracts and the acquired workforce. The cost-saving opportunities are expected to include improved operating efficiencies and asset optimization. During the three months ended December 31, 2017, the Company refined its preliminary allocation of goodwill by reportable segment, resulting in an allocation 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 deductible for tax purposes. See Note 9 - "Goodwill."

Current Assets and Liabilities

For the preliminary fair value estimates reported in the three months ended December 31, 2017, the Company valued current assets and liabilities with the exceptiondistributed as part of the current portionHHS Sale on October 1, 2020:

(in millions)As of October 1, 2020
Assets:
Cash and cash equivalents$8 
Accounts receivable, net295 
Prepaid expenses39 
Other current assets2 
Total current assets344 
Intangible assets, net1,308 
Operating right-of-use assets, net74 
Goodwill1,354 
Property and equipment, net46 
Other assets54 
Total non-current assets2,836 
Total assets$3,180 
Liabilities:
Accounts payable$79 
Accrued payroll and related costs13 
Current operating lease liabilities27 
Accrued expenses and other current liabilities36 
Deferred revenue and advance contract payments20 
Total current liabilities175 
Non-current deferred revenue32 
Long-term operating lease liabilities48 
Other long term liabilities2 
Total long-term liabilities82 
Total liabilities$257 

During fiscal 2021, the Company sold some insignificant businesses that resulted in a net loss of deferred revenue and capital leases, using existing carrying values as an estimate for the fair value of those items as of the Merger date.$10 million.


Property and Equipment

The acquired property and equipment are summarized in the following table:
13
(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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued




Restructuring Liabilities

The Company acquired approximately $328 million of restructuring liabilities incurred under HPES' restructuring plans, which are expected to be paid out through 2029. Approximately $256 million relates to workforce reductions and $72 million relates mainly to facilities costs.

Long-Term Debt

Assumed indebtedness included senior notes in the principal amount of $1.5 billion issued in 2017 and $0.3 billion issued in 1999 for total principal amount of $1.8 billion; 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 the initial preliminary purchase price allocation as reported June 30, 2017, there was a fair value assessment of the senior notes and term loans as of 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 as of April 1, 2017 resulting in a total capital lease obligation of $1.6 billion. Additionally, the Company completed its fair value assessment of certain debt and accrued interest with a carrying 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 the fair value of assumed debt, including capital leases, during the measurement period.

Deferred 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 securities22%
Debt securities(1)
72%
Alternatives5%
Cash and other1%
Total100%

(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 since the Merger date:
(in millions) Three Months Ended December 31, 2017 Nine Months Ended December 31, 2017
Revenues $4,374
 $12,942
Net income $422
 $1,199

The following table provides unaudited pro forma results of operations for the Company for the three and nine 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 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 references to the unaudited pro forma statement of operations include 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.
(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)

(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 Acquisition

On July 1, 2017, DXC acquired all of the outstanding capital stock of Tribridge Holdings LLC, an independent integrator of Microsoft Dynamics 365, for total consideration of $152 million. The acquisition includes the Tribridge affiliate company, Concerto Cloud Services LLC. The combination of Tribridge with DXC expands DXC’s Microsoft Dynamics 365 global systems integration business.

The Company’s purchase price allocation for the Tribridge acquisition 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 allocated to assets acquired and liabilities assumed based upon current determination of fair values at the date of acquisition as follows: $32 million to current assets, $4 million to property and equipment, $62 million to intangible assets other than goodwill, $24 million to current liabilities and $78 million to goodwill. The goodwill is primarily associated with the Company's GBS segment and 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 MayNote 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 from existing cash balances and borrowings under DXC's credit facility. Transaction costs associated with the acquisition of $17 million were included within Selling, general, and administrative expenses. The acquisition expanded CSC's market coverage in the global insurance industry and enabled the Company to offer access to a broader, partner-enriched portfolio of services including property and casualty insurance and wealth management business processing services.

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.

Note 4 -– Earnings (Loss) per Share


Basic EPS areearnings (loss) per share (“EPS”) is computed using the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflectreflects 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 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


Three Months Ended
(in millions, except per-share amounts)June 30, 2021June 30, 2020
Net income (loss) attributable to DXC common shareholders:$278 $(205)
Common share information:
Weighted average common shares outstanding for basic EPS254.67 253.63 
Dilutive effect of stock options and equity awards5.65 0 
Weighted average common shares outstanding for diluted EPS260.32 253.63 
Earnings (Loss) per share:
Basic$1.09 $(0.81)
Diluted$1.07 $(0.81)

Certain stock options and RSUsshare-based equity awards were excluded from the computation of dilutive EPS because inclusion of these amountsawards would have had an anti-dilutive effect. The number of options and sharesawards excluded were as follows:

Three Months Ended
June 30, 2021
June 30, 2020(1)
Stock Options529,216 1,749,189 
Restricted Stock Units759,922 3,149,436 
Performance Stock Units393,802 233,762 

(1)Due to the Company’s net loss for the three months ended June 30, 2020, stock options, restricted stock units and performance stock units were excluded from the computation of dilutive EPS because they would have had an anti-dilutive effect.
14
  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
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



Note 5 - Sale of6 – Receivables


Allowance for Doubtful Accounts

The Company calculates expected credit losses for trade accounts receivable based on historical credit loss rates for each aging category as adjusted for the current market conditions and forecasts about future economic conditions. The following table presents the activity in allowances against trade accounts receivables:

As of
(in millions)June 30, 2021March 31, 2021
Beginning balance$91 $74 
Impact of adoption of the Credit Loss Standard0 4 
(Reversals) provisions for expected credit losses(3)53 
Other adjustments to allowance and write off’s(4)(40)
Ending balance$84 $91 

Receivables Securitization Facility


On December 21, 2016, CSC established a $250 millionThe Company has an accounts receivable securitizationsales facility (the "Receivables Facility"(as amended, restated, supplemented or otherwise modified as of June 30, 2021, the “Receivables Facility”) with certain unaffiliated financial institutions (the "Purchasers"“Purchasers”) for the sale of commercial account receivablesaccounts receivable in the United States. The Receivables Facility has a facility limit of $500 million as of June 30, 2021. Under the Receivables Facility, CSC and certain of itsthe Company’s subsidiaries (collectively, the "Sellers"(the “Sellers”) sell billed and unbilled accounts receivable to CSCDXC Receivables LLC ("CSC Receivables"(“Receivables SPV”), a wholly owned bankruptcy-remote entity. CSCentity, in a true sale. Receivables in turnSPV subsequently sells such purchased accounts receivablecertain 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 with non-recourse to the Company. Sales of receivables by CSC Receivables SPV occur continuously and are settled on a monthly basis. The proceedsOn July 30, 2021, Receivables SPV amended the Receivables Facility (the “Amendment”) to decrease the facility limit from $500 million to $400 million and extend the sale of these receivables comprise a combination of cash and a deferred purchase price receivable ("DPP"). The DPP is realized by the Company upon the ultimate collection of the underlying receivablestermination date to July 29, 2022.
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


sold to the Purchasers. 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,June 30, 2021, the total availability under the Receivables Facility was approximately $177 million.$380 million, and the amount sold to the Purchasers was $350 million, which was derecognized from the Company’s balance sheet. As of June 30, 2021, the Company recorded a $30 million receivable within accounts receivable because the amount of cash proceeds received by the Company under the Receivables Facility was less than the total availability. The Receivables Facility terminatesis scheduled to terminate on September 14, 2018,July 29, 2022, but provides for one1 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 theirthe 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 andSellers, the Purchasers bear customer credit losses on accounts receivablerisk associated with the receivables sold under the Receivables Facility.

Certain obligations of Sellers under the Receivables Facility and CSC, as initial servicer, are guaranteed byhave recourse in the event of credit-related customer non-payment solely to the assets of the Receivables SPV.

Milano Receivables Facility

On October 1, 2020, in connection with the consummation of the sale of the HHS Business, and at the direction of the purchaser of the HHS Business, the Milano Facility was terminated. For more information, refer to Note 4 – “Divestitures.”

15
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

German Receivables Facility

On October 1, 2019, the Company under a performance guaranty, madeexecuted an accounts receivable securitization facility (the “DE Receivables Facility”) with certain unaffiliated financial institutions (the “DE Purchasers”) for the sale of commercial accounts receivable in favor of an administrative agent on behalfGermany. On June 30, 2021, the Company terminated the agreement governing the DE Receivables Facility. In connection with the termination of the Purchasers. However,DE Receivables Facility, the performance guaranty does not cover CSC Receivables’Company repaid all outstanding obligations and fees thereunder.

Under the DE Receivables Facility, certain of the Company’s subsidiaries organized in Germany (the “DE Sellers”) sold accounts receivable to pay yield, fees or invested amountsDXC ARFacility Designated Activity Company (“DE Receivables SPV”), a trust-owned bankruptcy-remote entity, in a true sale. DE Receivables SPV subsequently sold certain of the receivables in their entirety to the administrative agent or anyDE Purchasers pursuant to a receivables purchase agreement. Sales of receivables by DE Receivables SPV occurred continuously and were settled on a monthly basis. During the first quarter of fiscal 2021, DE Receivables SPV amended the DE Receivables Facility. Under the terms of the DE Receivables Facility, there was no longer any deferred purchase price (“DPP”) for receivables as the entire purchase price is paid in cash when the receivables are sold to the DE Purchasers. Prior to the Amendment, DPPs were realized by DE Receivables SPV upon the ultimate collection of the underlying receivables sold to the DE Purchasers. Cash receipts on the DPPs were classified as cash flows from investing activities. The DPP balance was $102 million before the Amendment was executed. Upon execution of the Amendment, the Purchasers extinguished the DPP balance and returned title to the applicable underlying receivables to DE Receivables SPV. The DPP extinguishment was classified as a non-cash investing activity. See Note 19 – “Cash Flows” for additional information.


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

(in millions)As of June 30, 2020
Beginning balance, as of April 1, 2020$103 
Transfers of receivables417 
Collections(420)
Change in funding availability2 
Facility amendments(102)
Ending balance$0 


16
  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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued




administrative functions for the Financial Institutions for a servicing fee. The Facility has a one-year term but may be extended. Note 7 – Leases

The Company useshas operating and finance leases for data centers, corporate offices, and certain equipment. Its leases have remaining lease terms of one to 11 years, some of which include options to extend the proceeds from receivables sales underleases for up to 10 years, and some of which include options to terminate the Facility for general corporate purposes.leases within one to three years.


Operating Leases

The Company accountscomponents of lease expense were as follows:

(in millions)Three Months Ended June 30, 2021Three Months Ended June 30, 2020
Operating lease cost$130 $156 
Short-term lease cost11 15 
Variable lease cost18 8 
Sublease income(9)(12)
Total operating costs$150 $167 

Cash payments made for these receivable transfersvariable lease costs and short-term leases are not included in the measurement of operating lease liabilities, and as salessuch, are excluded from the supplemental cash flow information stated below.

(in millions)Three Months Ended June 30, 2021Three Months Ended June 30, 2020
Cash paid for amounts included in the measurement of operating lease liabilities – operating cash flows$130 $156 
ROU assets obtained in exchange for operating lease liabilities(1)
$52 $275 

(1) Net of $242 million and derecognizes$58 million in lease modifications and terminations during the sold receivables from its condensed consolidated balance sheets. first quarters of fiscal 2022 and 2021, respectively. See Note 19 – “Cash Flows” for further information on non-cash activities affecting cash flows.

The fair valuefollowing table presents operating lease balances:

As of
(in millions)Balance Sheet Line ItemJune 30, 2021March 31, 2021
ROU operating lease assetsOperating right-of-use assets, net$1,299 $1,366 
Operating lease liabilitiesCurrent operating lease liabilities$413 $418 
Operating lease liabilitiesNon-current operating lease liabilities971 1,038 
Total operating lease liabilities$1,384 $1,456 

The weighted-average operating lease term was 4.8 years and 4.9 years as of the sold receivables approximated their book value due to their short-term nature.June 30, 2021 and March 31, 2021, respectively. The Company estimated that its servicing feeweighted-average operating lease discount rate was at fair value3.7% and therefore, no servicing asset or liability3.8% as of June 30, 2021 and March 31, 2021, respectively.

17
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following maturity analysis presents expected undiscounted cash payments for operating as of June 30, 2021:

Fiscal Year
(in millions)Remainder of 20222023202420252026ThereafterTotal
Operating lease payments$345 $374 $277 $201 $114 $209 $1,520 
Less: imputed interest(136)
Total operating lease liabilities$1,384 

Finance Leases

The components of lease expense were as follows:

(in millions)Three Months Ended June 30, 2021Three Months Ended June 30, 2020
Amortization of right-of-use assets$87 $116 
Interest on lease liabilities9 14 
Total finance lease cost$96 $130 

The following table provides supplemental cash flow information related to these servicesthe Company’s finance leases:

(in millions)Three Months Ended June 30, 2021Three Months Ended June 30, 2020
Interest paid for finance lease liabilities – Operating cash flows$9 $14 
Cash paid for amounts included in the measurement of finance lease obligations – financing cash flows170 138 
Total cash paid in the measurement of finance lease obligations$179 $152 
Capital expenditures through finance lease obligations(1)
$71 $88 

(1) See Note 19 – ”Cash Flows” for further information on non-cash activities affecting cash flows.

The following table presents finance lease balances:

As of
(in millions)Balance Sheet Line ItemJune 30, 2021March 31, 2021
ROU finance lease assetsProperty and Equipment, net$835 $834 
Finance leaseShort-term debt and current maturities of long-term debt$360 $398 
Finance leaseLong-term debt, net of current maturities448 496 
Total finance lease liabilities(1)
$808 $894 

(1) See Note 12 – “Debt” for further information on finance lease liabilities.

The weighted-average finance lease term was recognized2.6 years and 2.6 years as of DecemberJune 30, 2021 and March 31, 2017.2021, respectively. The weighted-average finance lease discount rate was 3.4% and 3.6% as of June 30, 2021 and March 31, 2021, respectively.


During the three and nine months ended December 31, 2017, the Company sold $0.7 billion and $1.2 billion
18
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following maturity analysis presents expected undiscounted cash payments for finance leases as 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, there 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.June 30, 2021:


Fiscal Year
(in millions)Remainder of 20222023202420252026ThereafterTotal
Finance lease payments$314 $274 $159 $72 $22 $1 $842 
Less: imputed interest(34)
Total finance lease liabilities$808 

Note 6 -8 – 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 Instruments” for information about these excluded assets and liabilities. There were no transfers between any of the levels during the periods presented.

   Fair Value HierarchyFair Value Hierarchy
(in millions) Fair Value Level 1 Level 2 Level 3(in millions)June 30, 2021
Assets: As of December 31, 2017Assets:Fair ValueLevel 1Level 2Level 3
Money market funds and money market deposit accounts(1)
 $217
 $217
 $—
 $—
Money market funds and money market deposit accountsMoney market funds and money market deposit accounts$13 $13 $0 $0 
Time deposits(1)
 35
 35
 —
 —
Time deposits(1)
67 67 0 0 
Foreign bonds 52
 —
 52
 —
Other debt securities 7
 —
 —
 7
Deferred purchase price receivable 249
 —
 —
 249
Other securities(2)
Other securities(2)
59 0 56 3 
Total assets $560
 $252
 $52
 $256
Total assets$139 $80 $56 $3 
        
Liabilities:        Liabilities:
Contingent consideration $8
 $—
 $—
 $8
Contingent consideration$24 $0 $0 $24 
Total liabilities $8
 $—
 $—
 $8
Total liabilities$24 $0 $0 $24 


March 31, 2021
Assets:Fair ValueLevel 1Level 2Level 3
Money market funds and money market deposit accounts$12 $12 $0 $0 
Time deposits(1)
78 78 0 0 
Other securities(2)
57 0 55 2 
Total assets$147 $90 $55 $2 
Liabilities:
Contingent consideration$27 $0 $0 $27 
Total liabilities$27 $0 $0 $27 
        


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

(2) Other securities include available-for-sale equity security investments with Level 2 inputs that have a cost basis of $57 million and $57 million, and gains/(losses) of $(1) million and $(2) million, as of June 30, 2021 and March 31, 2021, respectively, included in other income, net in the Company’s statements of operations.

19
  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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued




The fair value of money market funds, money market deposit accounts, U.S. Treasury bills with less than three months maturity and time deposits, reported asincluded in cash and cash equivalents, are based on quoted market prices. The fair value of foreign government bondsother debt securities, included in other long-term assets, is based on actual market prices and included in Other long-term assets. Fairprices. The fair value of the DPP,DPPs, included in Receivables,receivables, net, is 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, presentedincluded in Otherother liabilities, is based on contractually defined targets of financial performance in connection with earn outs and other considerations.


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 Otherother 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 inas Level 2 or Level 3 ofwithin 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 whichthat 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'sCompany’s long-term debt, excluding capital leases,finance lease liabilities, was $5.9$4.2 billion and $4.7 billion as of DecemberJune 30, 2021 and March 31, 2017, as2021, respectively, compared with carrying value of $5.7 billion. If measured at fair value, long-term$3.9 billion and $4.4 billion as of June 30, 2021 and March 31, 2021, respectively. Long-term debt, excluding capitalfinance lease would beliabilities, is classified inas Level 1 or Level 2 ofwithin 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 inas Level 3.3 within the fair value hierarchy. There were no0 significant impairments recorded during the three and nine months ended December 31, 2017 and DecemberJune 30, 2016.2021.

20
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.
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



Note 7 -9 – Derivative Instruments


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 contracts and interest rate swaps, to hedge certain foreign currency and interest rate exposures. The Company’s objective is to offsetreduce 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.purposes.


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 denominatedRupee-denominated intercompany obligations and forecasted transactions. The notional amountamounts of foreign currency forward contracts designated as cash flow hedges as of DecemberJune 30, 2021 and March 31, 2017 was $6862021 were $537 million and $546 million, respectively. As of June 30, 2021, the related forecasted transactions extend through February 2020.March 2023.


For the three and nine months ended December 31, 2017June 30, 2021 and DecemberJune 30, 2016,2020, respectively, the Company performed an assessment at the inception of the cash flow hedge transactions and determined that 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 months ended December 31, 2017June 30, 2021 and DecemberJune 30, 2016,2020, respectively, the Company had no cash flow hedges for which it was probable that the hedged transaction would not occur. As of December 31, 2017, $24June 30, 2021, $2.2 million of the existing amount of gain related to the cash flow hedge reported in AOCIaccumulated other comprehensive loss is expected to be reclassified into earnings within the next 12 months.


For derivative instruments that are designated and qualify as cash flow hedges, the Company initially records changes in fair value for the effective portion 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 isAmounts recognized in other comprehensive income (loss) and income (loss)

During the condensed statements of operations. The Company reportsthree months ended June 30, 2021, the effective portion of its cash flow hedges in the same financial statement line item as changes in the fair value of the hedged item.

The pre-tax impact of gain (loss) on derivatives designated for hedge accounting recognized in other comprehensive income and net income was not material for three and nine months ended December 31, 2017 and December 30, 2016.0t material.


Derivatives notNot 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 net notional amountamounts of the foreign currency forward contracts outstanding as of DecemberJune 30, 2021 and March 31, 2017 was $2.4 billion. (Loss) gain on2021 were $1.3 billion and $2.1 billion, respectively.

The following table presents the pretax amounts impacting income related to designated and non-designated foreign currency forward contracts not designated for hedge accounting, recognized within other income, net, were $(3) million 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, respectively.contracts:
For the Three Months Ended
(in millions)Statement of Operations Line ItemJune 30, 2021June 30, 2020
Foreign currency forward contractsOther income, net$35 $25 

21
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued





Fair Value of Derivative Instruments


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

 Derivative AssetsDerivative Assets
 As ofAs of
(in millions) Balance Sheet Line Item December 31, 2017 March 31, 2017(in millions)Balance Sheet Line ItemJune 30, 2021March 31, 2021
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
Foreign currency forward contractsOther current assets$8 $9 
Total fair value of derivatives designated for hedge accountingTotal fair value of derivatives designated for hedge accounting $32
 $32
Total fair value of derivatives designated for hedge accounting$8 $9 
  
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
Foreign currency forward contractsOther current assets$10 $3 
Total fair value of derivatives not designated for hedge accountingTotal fair value of derivatives not designated for hedge accounting $9
 $15
Total fair value of derivatives not designated for hedge accounting$10 $3 


Derivative Liabilities
As of
(in millions)Balance Sheet Line ItemJune 30, 2021March 31, 2021
Derivatives designated for hedge accounting:
Foreign currency forward contractsAccrued expenses and other current liabilities$5 $5 
Total fair value of derivatives designated for hedge accounting:$5 $5 
Derivatives not designated for hedge accounting:
Foreign currency forward contractsAccrued expenses and other current liabilities$11 $3 
Total fair value of derivatives not designated for hedge accounting$11 $3 
  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 curveswhich are classified as Level 2 inputs.


Other risksRisks 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 June 30, 2021, 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 $5 million.

The Company also enters into enforceable master netting arrangements with some of its counterparties. However, for financial reporting purposes, it is Companythe 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 with some of its counterparties.on the Company’s balance sheets is not material for the periods presented.


22
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued




Note 8 - Intangible AssetsNon-Derivative Financial Instruments Designated for Hedge Accounting

  As of December 31, 2017
(in millions) Gross Carrying Value Accumulated Amortization Net Carrying Value
Software $3,231
 $1,792
 $1,439
Outsourcing contract costs 1,436
 612
 824
Customer related intangible assets 6,151
 583
 5,568
Other intangible assets 114
 18
 96
Total intangible assets $10,932
 $3,005
 $7,927
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.

  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
Net Investment Hedges


Total intangible assets amortization was $279 million and $81 million forDXC seeks to reduce the impact of fluctuations in foreign exchange rates on its net investments in certain non-U.S. operations with foreign currency-denominated debt. For foreign currency-denominated debt designated as a hedge, the effectiveness of 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 income (loss) when such net investments are sold or substantially liquidated.

As of June 30, 2021, DXC had $0.8 billion of foreign currency-denominated debt designated as hedges of net investments in non-U.S. subsidiaries. For the three months ended DecemberJune 30, 2021, the pre-tax impact of loss on foreign currency-denominated debt designated for hedge accounting recognized in other comprehensive income (loss) was $(7) million. As of March 31, 2017 and December 30, 2016, respectively, and included reductions2021, DXC had $0.8 billion of revenue for amortizationforeign currency-denominated debt designated as hedges of outsourcing contract cost premiumsnet investments in non-U.S. subsidiaries.

23
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 10 – Intangible Assets

Intangible assets consisted of $2 million and $2 million, respectively.the following:


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.
As of June 30, 2021
(in millions)Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Software$4,067 $2,843 $1,224 
Customer related intangible assets4,218 1,739 2,479 
Other intangible assets237 52 185 
Total intangible assets$8,522 $4,634 $3,888 


As of March 31, 2021
(in millions)Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Software$4,014 $2,733 $1,281 
Customer related intangible assets4,212 1,641 2,571 
Other intangible assets239 48 191 
Total intangible assets$8,465 $4,422 $4,043 

The increase in netcomponents of amortization expense were as follows:

Three Months Ended
(in millions)June 30, 2021June 30, 2020
Intangible asset amortization$215 $253 
Transition and transformation contract cost amortization(1)
49 61 
Total amortization expense$264 $314 

(1)Transaction and gross carrying value fortransformation contract costs are included within other assets on the nine months ended December 31, 2017 were primarily due to the Merger. See Note 3 - "Acquisitions".balance sheet.


Estimated future amortization related to intangible assets as of December 31, 2017June 30, 2021 is as follows:

Fiscal Year(in millions)
Remainder of 2022$650 
2023$762 
2024$663 
2025$556 
2026$515 

24
Fiscal Year (in millions)
Remainder of 2018 $306
2019 $1,094
2020 $1,032
2021 $943
2022 $804
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued





Note 11 – Goodwill
Note 9 - Goodwill


The following table summarizes the changes in the carrying amount of Goodwill,goodwill, by segment, as of December 31, 2017.June 30, 2021.

(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
(in millions)GBSGISTotal
Goodwill, gross$5,131 $5,066 $10,197 
Accumulated impairment losses(4,490)(5,066)(9,556)
Balance as of March 31, 2021, net$641 $0 $641 
Foreign currency translation(2)0 (2)
Goodwill, gross5,129 5,066 10,195 
Accumulated impairment losses(4,490)(5,066)(9,556)
Balance as of June 30, 2021, net$639 $0 $639 


The additions to goodwill during the nine months ended December 31, 2017 were primarily due to the Merger 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. The foreign currency translation amounts reflectamount 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 annual goodwill impairment analysis, which was performed qualitatively during the three months ended SeptemberAs of June 30, 2017, did not result in an impairment charge. This qualitative analysis, which is commonly referred to as step zero under ASC Topic 350, Goodwill and Other Intangible Assets, considered all relevant factors specific to the reporting units, including macroeconomic conditions; industry and market considerations; overall financial performance and relevant entity-specific events.

At the end of the third quarter of fiscal 2018,2021, the Company assessed whether there were events or changes in circumstances that would more likely than not reduce the fair value of any of its reporting units below its carrying amount and require goodwill to be tested for impairment. The Company determined that there have been no such indicators and therefore, it was unnecessary to perform an interim goodwill impairment test as of December 31, 2017.June 30, 2021.



25
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 10 -12 – Debt


The following is a summary of the Company'sCompany’s debt:
      As of
(in millions) Interest Rates Fiscal Year Maturities December 31, 2017 March 31, 2017
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
 —
Current maturities of long-term debt Various 2019 128
 55
Current maturities of capitalized lease liabilities 1.1% - 6.7% 2019 724
 37
Short-term debt and current maturities of long-term debt     $2,173
 $738
         
Long-term debt, net of current maturities        
GBP term loan 
1.0 - 1.2%(3)
 2019 $250
 $233
USD term loan 
1.2% - 2.3%(4)
 2021 —
 571
AUD term loan 
2.9% - 3.0%(5)
 2022 215
 76
EUR term loan 
0.9%(6)
 2022 179
 —
USD term loan 
2.2% - 2.8%(7)
 2022 1,149
 —
$500 million Senior notes 2.875% 2020 503
 —
$650 million Senior notes 
2.3% - 2.4%(8)
 2021 646
 —
$274 million Senior notes 4.45% 2023 278
 —
$170 million Senior notes 4.45% 2023 174
 453
$500 million Senior notes 4.25% 2025 507
 —
$500 million Senior notes 4.75% 2028 509
 —
$300 million Senior notes 7.45% 2030 357
 —
Revolving credit facility 1.4% - 1.6% 2021 - 2023 388
 678
Lease credit facility 2.0% - 2.6% 2020 - 2023 51
 60
Capitalized lease liabilities 1.1% - 6.7% 2018 - 2022 1,518
 104
Borrowings for assets acquired under long-term financing 2.3% -3.2% 2018 - 2023 318
 77
Mandatorily redeemable preferred stock outstanding 3.5% 2023 61
 61
Other borrowings 0.5% - 14.0% 2018 - 2037 116
 4
Long-term debt     7,219
 2,317
Less: current maturities     852
 92
Long-term debt, net of current maturities     $6,367
 $2,225


(1)
Approximate weighted average interest rate
(2) Three-month EURIBOR rate plus 1.75%
(in millions)Interest RatesFiscal Year MaturitiesJune 30, 2021March 31, 2021
Short-term debt and
current maturities of long-term debt
Commercial paper(1)
(0.38)% - (0.15)%2022$237 $213 
Current maturities of long-term debtVarious2022 - 2023220 556 
Current maturities of finance lease liabilities0.35% - 17.68%2022 - 2023360 398 
Short-term debt and current maturities of long-term debt$817 $1,167 
Long-term debt, net of current maturities
EUR term loan
0.80%(2)
2023 - 2024$473 $469 
$274 million Senior notes4.45%20230 154 
$171 million Senior notes4.45%20230 165 
$500 million Senior notes4.25%2025504 504 
$500 million Senior notes4.125%2026463 496 
£250 million Senior notes2.75%2025343 343 
€650 million Senior notes1.75%2026767 760 
$500 million Senior notes4.75%2028506 506 
$234 million Senior notes7.45%2030267 268 
Finance lease liabilities0.35% - 17.68%2022 - 2027808 894 
Borrowings for assets acquired under long-term financing0.00% - 5.78%2022 - 2027498 672 
Mandatorily redeemable preferred stock outstanding6.00%202363 63 
Other borrowingsVarious2022 - 20234 5 
Long-term debt4,696 5,299 
Less: current maturities580 954 
Long-term debt, net of current maturities$4,116 $4,345 
(3) Three-month LIBOR rate plus 0.65%
(4)
(1)At DXC'sDXC’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 ofDXC can borrow up to 0.50%, based on a pricing grid consistent with the revolving credit facility.maximum of €1 billion.
(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% to 1.45% based on the published credit ratings of DXC.
(6)(2) 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 of between 0.75%0.55% and 1.35%1.05%, based on published credit ratings of DXC.
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


(7) At 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%, based on published credit ratings of DXC or the Base Rate plus a margin of between 0% and 0.75%, based on published credit ratings of DXC.
 (8) Three-month LIBOR plus 0.95%



Senior Notes and TermsTerm Loans


During the first quarter of fiscal 2022, the Company used the proceeds from the sale of its HPS business to complete the retirement of the remaining $319 million of the two series of 4.45% senior notes due fiscal 2023. The Company also repurchased $33 million of its 4.125% senior notes due fiscal 2026 using the proceeds from the divestitures of other insignificant businesses and existing cash on hand.

Interest on the Company'sCompany’s remaining term loansloan is payable monthly or quarterly in arrears.at DXC’s election. The Company fully and unconditionally guaranteedguarantees term loans issued by its 100% owned subsidiaries. InterestThe interest on the Company'sCompany’s senior notes is payable semi-annually in arrears, except for interest on the £250 million senior notes due fiscal 2025 and the €650 million senior notes due fiscal 2026, which are payable annually in arrears. Generally, the Company'sCompany’s notes are redeemable at the Company'sCompany’s discretion at the then-applicable redemption pricespremium plus accrued and unpaid interest.


On April 3, 2017, as a result of the Merger, financial covenants were amended and CSC was replaced with DXC as the borrower and guarantor to certain outstanding debt including short-term Euro-denominated commercial paper, senior notes and term loans. In connection 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 portions of the term loans maturing in 2022 were repaid subsequent to the Merger. DXC assumed pre-existing indebtedness incurred by HPES including 7.45% senior notes due 2030 which were issued at a principal amount of $300 million.
26

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.

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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued





Note 13 – Revenue

Revenue Recognition

The following table presents DXC’s revenues disaggregated by geography, based on the location of incorporation of the DXC entity providing the related goods or services:
Three Months Ended
(in millions)June 30, 2021June 30, 2020
United States$1,209 $1,709 
United Kingdom602 573 
Other Europe1,305 1,205 
Australia401 361 
Other International624 654 
Total Revenues$4,141 $4,502 

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 are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustments for revenue that have not materialized and adjustments for currency. As of June 30, 2021, approximately $24 billion of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 33%of these remaining performance obligations in fiscal 2022, with the remainder of the balance recognized thereafter.

Contract Balances

The following table provides information about the balances of the Company’s trade receivables and contract assets and contract liabilities:
As of
(in millions)June 30, 2021March 31, 2021
Trade receivables, net$2,802 $2,871 
Contract assets$403 $351 
Contract liabilities$1,630 $1,701 

Change in contract liabilities were as follows:
Three Months Ended
(in millions)June 30, 2021June 30, 2020
Balance, beginning of period$1,701 $1,756 
Deferred revenue609 698 
Recognition of deferred revenue(668)(719)
Currency translation adjustment6 30 
Other(18)(2)
Balance, end of period$1,630 $1,763 
27
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 11 -14 – Restructuring Costs


The Company recorded restructuring costs of $213$67 million and $3$72 million, net of reversals, for the three months ended December 31, 2017June 30, 2021 and DecemberJune 30, 2016, respectively. For the nine months ended December 31, 2017 and December 30, 2016, the Company recorded $595 million and $85 million,2020, respectively. The costs recorded during the three and nine months ended December 31, 2017June 30, 2021 were largely a result of the Fiscal 20182022 Plan (defined below).


The composition of restructuring liabilities by financial statement line itemsitem is as follows:
As of
(in millions)June 30, 2021
Accrued expenses and other current liabilities$170 
Other long-term liabilities35 
Total$205 
  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 20182022 Plan


OnDuring fiscal 2022, management approved global cost savings initiatives designed to better align the Company’s workforce and facility structures (the “Fiscal 2022 Plan”). Also included in restructuring costs for the three months ended June 30, 2021 is $2 million related to amortization of the right-of-use asset and interest expense for leased facilities that we have vacated but are being actively marketed for sublease or we are in negotiations with the landlord to potentially terminate or modify those leases.

Fiscal 2021 Plan

During fiscal 2021, management approved global cost savings initiatives designed to better align the Company’s workforce and facility structures (the “Fiscal 2021 Plan”). The Fiscal 2021 Plan includes workforce optimization programs and facilities and data center rationalization. Costs incurred to date under the Fiscal 2021 Plan total $542 million, comprising $500 million in employee severance and $42 million of facilities costs.

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. Costs incurred to date under the Fiscal 2020 Plan total $296 million, comprising $279 million in employee severance and $17 million of facilities costs.

Other Prior Year Plans

In June 2017, management approved a post-Mergerpost-HPES Merger restructuring plan to optimize the Company'sCompany’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 focusescontraction. Other prior year plans focus mainly on optimizing specific aspects of the global workforce, increasing the proportion of work performed in low cost offshore locations and re-balancing the pyramidorganizational structure. Additionally, this planthese plans included global facility restructuring, including a global data center restructuring program.

Fiscal 2017 Plan

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 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 Planother prior year plans total $221$1,477 million, comprising $214$1,139 million in employee severance and $7$338 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.

28
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Restructuring Liability Reconciliations by Plan
Restructuring Liability as of March 31, 2021Costs Expensed, Net of Reversals
Costs Not Affecting Restructuring Liability(1)
Cash Paid
Other(2)
Restructuring Liability as of June 30, 2021
 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              
Fiscal 2022 PlanFiscal 2022 Plan
Workforce Reductions $—
 n/a
 $451
 $(13) $(228) $6
 $216
Workforce Reductions$0 $45 $0 $(15)$0 $30 
Facilities Costs —
 n/a
 174
 (15) (70) 1
 90
Facilities Costs0 20 (13)(4)0 3 
Total $—
 n/a
 $625
 $(28) $(298) $7
 $306
Total$0 $65 $(13)$(19)$0 $33 
              
Fiscal 2017 Plan              
Fiscal 2021 PlanFiscal 2021 Plan
Workforce Reductions $155
 n/a
 $(25) $(6) $(91) $10
 $43
Workforce Reductions$180 $(1)$0 $(77)$1 $103 
Facilities Costs 6
 n/a
 (2) —
 (4) —
 —
Facilities Costs3 5 (4)(1)(1)2 
Total $161
 n/a
 $(27) $(6) $(95) $10
 $43
Total$183 $4 $(4)$(78)$0 $105 
              
Fiscal 2016 Plan              
Fiscal 2020 PlanFiscal 2020 Plan
Workforce Reductions $8
 n/a
 $(1) $—
 $(3) $—
 $4
Workforce Reductions$27 $0 $0 $(6)$0 $21 
Facilities Costs 5
 n/a
 —
 —
 (3) —
 2
Facilities Costs0 0 0 0 0 0 
Total $13
 n/a
 $(1) $—
 $(6) $—
 $6
Total$27 $0 $0 $(6)$0 $21 
              
Fiscal 2015 Plan              
Other Prior Year PlansOther Prior Year Plans
Workforce Reductions $3
 n/a
 $—
 $—
 $(2) $—
 $1
Workforce Reductions$19 $0 $0 $(5)$0 $14 
Facilities Costs —
 n/a
 —
 —
 —
 —
 —
Facilities Costs6 0 0 (3)0 3 
Total $3
 n/a
 $—
 $—
 $(2) $—
 $1
Total$25 $0 $0 $(8)$0 $17 
              
Acquired Liabilities              Acquired Liabilities
Workforce Reductions n/a
 $256
 $1
 $(2) $(139) $6
 $122
Workforce Reductions$34 $(3)$0 $(3)$0 $28 
Facilities Costs n/a
 72
 (3) (3) (29) 1
 38
Facilities Costs$1 1 0 (1)0 1 
Total n/a
 $328
 $(2) $(5) $(168) $7
 $160
Total$35 $(2)$0 $(4)$0 $29 
        


(1) Costs expensed, net of reversals include $29 million, $2 million and $3 million of costs reversed from the Fiscal 2017 Plan, Fiscal 2016 Plan and Acquired liabilities, respectively.
(2) Pension benefit augmentations recorded as a pension liability, asset impairments and asset impairment.restructuring costs associated with right-of-use assets.
(3) (2)Foreign currency translation adjustments.
29

DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 12 -15 – Pension and Other Benefit Plans


The Company offers a number of pension and other post-retirement benefit ("OPEB"(“OPEB”) plans, life insurance benefits, deferred compensation and defined contribution plans. Most of the Company'sCompany’s pension plans are not admitting new participants;participants, except where locally required; 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'sCompany’s U.S. pension, U.S. OPEB, and non-U.S. OPEB represent an insignificant portion of the Company'sCompany’s pension and other post-retirement benefits. As a result, the disclosures below include the Company'sCompany’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 million and $40 million to the defined benefitcomponents of net periodic pension and other post-retirement benefit plans during the three and nine months ended December 31, 2017. income were:
Three Months Ended
(in millions)June 30, 2021June 30, 2020
Service cost$23 $22 
Interest cost52 58 
Expected return on assets(147)(153)
Amortization of prior service costs(2)(2)
Curtailment gain0 (9)
Recognition of actuarial loss0 11 
Net periodic pension income$(74)$(73)

The Company expects to contribute an additional $31 million during the remainderservice cost component of fiscal 2018, which does not include certain salary deferral programs and future potential termination benefits related to the Company's potential restructuring activities.

During the three months ended December 31, 2017, we adopted amendments to certain U.K.net periodic pension plans which necessitated an interim remeasurement of the plans assets and liabilities as of December 1, 2017. The remeasurement resultedincome is presented in a net gain of $17 million, comprising a curtailment gain of $40 million and an actuarial loss $23 million. The net gain was recognized within costs of services and selling, general and administrative.

Theadministrative and the other components of net periodic pension expense (benefit) were:income are presented in other income, net.
  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 weighted-average rates used to determine net periodic pension cost for the three and nine months ended December 31, 2017 and December 30, 2016 were:
  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 theHPE’s 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 and the DXC Technology Matched Asset Plan. Neither plan provides for employer contributions. As ofStarting on April 3, 2017, the ES DCP does not admitno longer admits 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 Otherother long-term liabilities in the Company's condensed consolidatedCompany’s balance sheets, amounted to $74$43 million as of December 31, 2017June 30, 2021 and $67$42 million as of March 31, 2017.2021.
30

Note 13 - Income Taxes

On December 22, 2017, the President 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 that 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 in corporate tax rate, the amount will be impacted by changes in estimated deferred tax balances prior to and after December 22, 2017 for fiscal year March 31, 2018.

Deemed Repatriation Transition Tax: The deemed repatriation one-time transition tax is a tax on previously untaxed accumulated and current earnings and profits (E&P) of certain of the Company's foreign subsidiaries. To determine the amount of the transition tax, the Company must determine, in addition to other factors, the amount of post-1986 E&P of the relevant foreign subsidiaries, as well as the amount 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued




Capital expensing:Note 16 – Income Taxes

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 incomeCompany’s effective 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 Actrate (“ETR”) was 33.5% 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 million11.6% for the three months ended December 31, 2017June 30, 2021 and DecemberJune 30, 2016, respectively, and $(207) million and $(25) million for the nine months ended December 31, 2017 and December 30, 2016,2020, respectively. For the three and nine months ended December 31, 2017,June 30, 2021, 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, releasegain on sale of a valuation allowanceHPS business and tax rate changes in a non-U.S. jurisdiction and excess tax benefits related to employee share-based payment awards.

As a resultjurisdictions. For the three months ended June 30, 2020, the primary drivers of the Merger and changes in U.S. cash requirements, a deferred tax liabilityETR were the global mix of $545 million was recorded for U.S. income, taxes based on the estimated historical taxable earningsadjustment of the HPESprior tax provisions due to the filing of tax returns in non-U.S. jurisdictions and generation of additional foreign subsidiaries. In addition,tax credits in the Company recorded an estimated liability of $50 million for India DDT tax based on estimated historical taxable earningsU.S.

A significant portion of the HPES India subsidiary. These liabilities were recorded as partcash held by our foreign subsidiaries is not expected to be impacted by U.S. federal income tax upon repatriation. However, a portion of acquisition accounting.
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



As a resultthis cash may still be subject to foreign and U.S. state income tax consequences upon future remittance. Such earnings and all current foreign earnings are not indefinitely reinvested. The following foreign earnings are considered indefinitely reinvested: approximately $530 million that could be taxable when repatriated to the U.S. under section 1.245A-5(b) of the Act, the Company has changed its permanently reinvested assertion on the remaining CSC foreign subsidiariesfinal Treasury regulations issued during fiscal 2021; and will no longer consider current andour accumulated earnings for all non-U.S. subsidiaries permanentlyin India as of fiscal 2021. A portion of these indefinitely reinvested except for current year Indian earnings. The deferredearnings may be subject to foreign and U.S. state 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.consequences when remitted. The Company will record the tax effects of any change incontinue to evaluate 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,position in the period that it is first able to make a reasonable estimate, no later than December 2018.future based on its future strategy and cash needs.


In connection with the HPES Merger, the Company entered into a tax matters agreement with HPE. HPE generally will be responsible for pre-Mergerpre-HPES 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-Mergerpre-HPES Merger periods. Pursuant to the tax matters agreement, the Company recorded a net payable of$24 million due to $111$34 million of tax indemnification receivable related to uncertain tax positions, net of related deferred tax benefits, $72$66 million of tax indemnification receivable related to other tax payables and $207$118 million of tax indemnification payable related to other tax receivables.


As partIn connection with the spin-off of the acquisitionCompany’s former U.S. public sector business (the “USPS Separation”), the Company entered into a tax matters agreement with Perspecta Inc. (“Perspecta”). Pursuant to the tax matters agreement, the Company generally will be responsible for tax liabilities arising prior to the USPS Separation. 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 remains 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, the Company has recorded a tax indemnification receivable from Perspecta of HPES, DXC acquired uncertain$72 million related to other tax payable and a tax indemnification payable to Perspecta of $29 million related to income tax and other tax liabilities.

In connection with the sale of HPS business, the Company entered into a tax matters agreement with Dedalus. Pursuant to the tax matters agreement, the Company generally will be responsible for tax liabilities arising prior to the sale of HPS business. The Company will also be responsible for pre-sale tax liabilities including interest and penalties of $115 million for prior yearadjustments made by tax authorities to HPS 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.returns.


The IRSInternal Revenue Service (the “IRS”) is examining CSC'sthe Company’s federal income tax returns for fiscal 2008 through 2016.the tax year ended October 31, 2018. With respect to CSC'sCSC’s fiscal 2008 through 20102017 federal tax returns, the Company previouslyhas entered into negotiations for a resolution through settlement with the IRS Office of Appeals. The IRS examined several issues for this auditthese tax years 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. adjustments, and we disagree with the IRS’ disallowance of certain losses and deductions resulting from restructuring costs and tax planning strategies in previous years. As we believe we will ultimately prevail on the technical merits of the disagreed items and intend to challenge them in the IRS Office of Appeals or Tax Court, these matters are not fully reserved and would result in a federal and state tax expense of $407 million (including estimated interest and penalties) and related cash cost for the unreserved portion of these items if we do not prevail. We do not expect these matters that proceed to Tax Court to be resolved in the next 12 months. We have received a notice of deficiency with respect to fiscal 2011 and 2013 and have filed petitions in Tax Court with respect to both years. We also expect fiscal 2009 and 2010 to proceed to Tax Court.

31
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The Company has agreed to extend the statute of limitations associated with this auditfor fiscal years 2008 through 2010 to April 30, 2022, for fiscal years 2011 through 2012 to August 31, 2021, for fiscal years 2014 through fiscal 2017 to February 28, 2022, and for the tax year ended October 31, 2017 to September 30, 2018. In addition, during2022, to provide the first quarter ofIRS time to complete their review.

The Company expects to reach a resolution for fiscal 2018, the Company received a Revenue Agent’s Report with proposed adjustments to CSC's fiscal 2011years 2008 through 2013 federal returns. The Company has filed a protest of certain of these adjustmentsno earlier than fiscal 2025, except for agreed issues related to the IRS Office of Appeals. The IRS is also examining CSC's fiscal 2008 through 2010, and to reach resolution for fiscal years 2014 through 2016 federal income tax returns. The Company has not received any adjustments for this cycle. The Company continues2017, which are expected to believe that its tax positions are more-likely-than-not sustainable and that the Company will ultimately prevail.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 as uncertain tax positions. In the first quarter of fiscal 2022 the Company’s liability for uncertain tax positions increased by $4 million (excluding interest and penalties and related tax attributes) primarily related to disallowance of certain credits. 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.less payment than previously estimated. 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 million to $20$63 million, excluding interest, penalties and tax carry-forwards.
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

Note17–Stockholders’ Equity


Note14 - 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 repurchasesRepurchases


On April 3, 2017, DXC announced the establishment of a share repurchase program approved by the Board of Directors (the “Board”) 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 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.


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. There was 0 share repurchase activity during the three months ended June 30, 2020. The details of shares repurchased during the three months ended June 30, 2021 are shown below:


Fiscal 2022
Fiscal PeriodNumber of Shares RepurchasedAverage Price Per ShareAmount
(in millions)
1st Quarter
Open market purchases1,750,000 $38.52 $67 
Total1,750,000 $38.52 $67 
32
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

DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued




Accumulated other comprehensive income (loss)Other Comprehensive Loss


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

(in millions)Foreign Currency Translation AdjustmentsCash Flow HedgesPension and Other Post-retirement Benefit PlansAccumulated Other Comprehensive Loss
Balance at March 31, 2021$(554)$(1)$253 $(302)
Other comprehensive loss before reclassifications(35)(1)0 (36)
Amounts reclassified from accumulated other comprehensive loss(1)
(86)0 (2)(88)
Balance at June 30, 2021$(675)$(2)$251 $(426)

(1)Includes net cumulative foreign currency translation losses of $86 million upon sale of foreign entities primarily related to the HPS business divestiture. See Note 4 – “Divestitures” for additional information.


(in millions)Foreign Currency Translation AdjustmentsCash Flow HedgesAvailable-for-sale SecuritiesPension and Other Post-retirement Benefit PlansAccumulated Other Comprehensive Loss
Balance at March 31, 2020$(851)$(20)$9 $259 $(603)
Other comprehensive loss before reclassifications(2)7 4 0 9 
Amounts reclassified from accumulated other comprehensive loss0 4 0 (9)(5)
Balance at June 30, 2020$(853)$(9)$13 $250 $(599)


(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 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 -18 – 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 March 2017, prior to the Merger, the board of directors and shareholders of HPES approved DXC’s 2017 Omnibus 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 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 terminated 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.


RSUsRestricted stock units (“RSUs”) represent the right to receive one1 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"“career share” RSUs for which the shares are settled overon the 10 anniversaries10th anniversary following the executive'sexecutive’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,Performance-based restricted stock units (“PSUs”), which generally vest over a period of 3three 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'sCompany’s performance targets are met early, subject to vesting based on the participant'sparticipant’s continued employment through the end of the three-year performance period.


33
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Beginning in fiscal 2021, DXC issued awards that are considered to have a market condition. A Monte Carlo simulation model was used for the valuation of the grants. Settlement of shares for these PSU awards will be made at the end of the third fiscal year subject to certain compounded annual growth rates of the stock price and continued employment through the last day of the third fiscal year.

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, peraccording to 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 no7,519 shares purchased under this plan during the three and nine months ended December 31, 2017.June 30, 2021.


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 December 31, 2017
 Reserved for issuance Available for future grants
DXC Employee Equity Plan34,200,000
 22,403,601
DXC Director Equity Plan230,000
 121,334
DXC Share Purchase Plan250,000
 250,000
Total34,680,000
 22,774,935


As of June 30, 2021
Reserved for
Issuance		Available for
Future Grants
DXC Employee Equity Plan51,200,000 30,549,341 
DXC Director Equity Plan745,000 430,351 
DXC Share Purchase Plan250,000 147,789 
Total52,195,000 31,127,481 

Stock Options
Number
of Option Shares
Weighted Average Exercise PriceWeighted Average Remaining Contractual Term
Aggregate Intrinsic Value
(in millions)
Outstanding as of March 31, 20211,675,580 $30.43 3.61$8 
Granted0 $0 
Exercised(331,914)$23.16 $5 
Canceled/Forfeited0 $0 
Expired(27,016)$33.82 
Outstanding as of June 30, 20211,316,650 $32.19 3.54$11 
Vested and exercisable as of June 30, 20211,316,650 $32.19 3.54$11 
  
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 PlanDirector 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, 20218,326,220 $28.98 184,660 $28.42 
Granted2,787,947 $51.56 5,600 $31.96 
Settled(1,515,475)$34.06 0 $0 
Canceled/Forfeited(593,725)$44.49 0 $0 
Outstanding as of June 30, 20219,004,967 $35.55 190,260 $28.52 

34
 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, 20173,710,985
 $34.86
 85,766
 $34.19
Granted1,566,361
 $79.11
 22,900
 $84.40
HPE RSUs converted to DXC RSUs due to Merger95,683
 $69.33
 —
 $—
Options converted to RSUs due to Merger609,416
 $32.58
 —
 $—
Settled(1,926,043) $35.89
 (39,980) $45.25
Canceled/Forfeited(172,881) $54.65
 —
 $—
Outstanding as of December 31, 20173,883,521
 $51.80
 68,686
 $44.50

DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued




Share-Based Compensation

 Three Months Ended Nine Months EndedThree Months Ended
(in millions) December 31, 2017 December 30, 2016 December 31, 2017 December 30, 2016(in millions)June 30, 2021June 30, 2020
Total share-based compensation cost $19
 $21
 $76
 $56
Total share-based compensation cost$25 $16 
Related income tax benefit $5
 $7
 $24
 $18
Related income tax benefit$3 $1 
Total intrinsic value of options exercised $30
 $6
 $104
 $60
Total intrinsic value of options exercised$5 $0 
Tax benefits from exercised stock options and awards $9
 $4
 $62
 $30
Tax benefits from exercised stock options and awards$11 $3 


As of December 31, 2017,June 30, 2021, total unrecognized compensation expense related to unvested DXC stock options and unvested DXC RSUs, net of expected forfeitures was $1 million and $136 million, respectively.$255 million. The unrecognized compensation expense for unvested RSUs is expected to be recognized over a weighted-average period of 2.022.36 years.


Note 16 -19 – Cash Flows


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

Three Months Ended
(in millions)June 30, 2021June 30, 2020
Cash paid for:
Interest$65 $103 
Taxes on income, net of refunds (1)
$52 $31 
Non-cash activities:
Operating:
ROU assets obtained in exchange for lease, net (2)
$52 $275 
   Prepaid assets acquired under long-term financing$111 $2 
Investing:
Capital expenditures in accounts payable and accrued expenses$1 $11 
Capital expenditures through finance lease obligations$71 $88 
Assets acquired under long-term financing$35 $2 
Decrease in deferred purchase price receivable$0 $(52)
Contingent consideration$0 $3 
Financing:
Dividends declared but not yet paid$0 $1 
Shares repurchased but not settled in cash$19 $0 
(1) Income tax refunds were $14 million and $18 million for the three months ended June 30, 2021 and June 30, 2020, respectively.
(2) Net of $242 million and $58 million in lease modifications and terminations during the first quarters of fiscal 2022 and 2021, respectively.
35
  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
 $—
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued





Note 17 -20 – Segment Information


DXC has a matrix form of organization and is managed in several different and overlapping groupings including services, industryindustries and geographic region.regions. As a result, and in accordance with accounting standards, operating segments are organized by the type of services provided. DXC'sDXC’s chief operating decision maker ("CODM"(“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 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.”


Global Business Services (“GBS”)


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 offeringsthat help its customers address key business challenges and accelerate digital transformations tailored to each customer’s industry and specific objectives. GBS strives to help clients understandofferings include:

•Analytics and take advantageEngineering. Our portfolio of IT modernizationanalytics services 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. 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-classextensive partner ecosystem help customers gain rapid insights, automate operations, and accelerate their transformation journeys. We provide software engineering and solutions that enable businesses to modernize and transform its clients' applications landscape, developrun and manage their portfoliomission-critical functions, transform their operations, and roadmap,develop new ways of doing business.
•Applications. We use advanced technologies and execute with precision. In Analytics, DXC offers a complete portfoliomethods to accelerate the creation, modernization, delivery and maintenance of serviceshigh-quality, secure applications allowing customers to rapidly provide insightsinnovate faster while reducing risk, time to market, and drive impactful business outcomes. DXC's Partner Network allows clients to leverage investment while building the analytictotal cost of ownership, across industries. Our vertical-specific IP includes solutions of tomorrow. DXC’s industry-aligned IP is centered on thefor insurance, banking healthcare, and travelcapital markets, and transportation industries.automotive among others.

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 businessServices. Includes integration and optimization of front and back office processes, and agile process expertise and intellectual property with the resources of a global Tier I IT services company, leveraging intelligent automation and innovative solutionsautomation. This helps companies to reduce manual effortcost and the associated cost.minimize business disruption, human error, and operational risk while improving customer experiences.

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”)


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 standardtechnology offerings that havedeliver predictable outcomes and measurable results while reducing business risk and operational costs for clients. Further, DXC's industry-leadingcustomers. GIS offerings include:

•Cloud and Security. We help customers to rapidly modernize by adapting legacy apps to cloud, migrate the right workloads, and securely manage their multi-cloud environments.Our security solutions help clients predict attacks, proactively respond to threats, ensure compliance and protect data, applications and infrastructure.
•IT Outsourcing (“ITO”). Our ITO services support infrastructure, applications, and endpoints. To provide clientsworkplace IT operations, including hardware, software, physical/virtual end-user devices, collaboration tools, and IT support services. We help customers securely optimize operations to ensure continuity of their systems and respond to new business and workplace demands while achieving cost takeout, all with differentiated offerings, GIS maintainslimited resources, expertise, and budget.
•Modern Workplace. Services to fit our customer’s employee, business and IT needs from intelligent collaboration, modern device management, digital support services, Internet of Things (“IoT”) and mobility services, providing 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 opportunities toconsumer-like, digital experience.

36
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED 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 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(in millions)GBSGISTotal Reportable SegmentsAll OtherTotals
Nine Months Ended December 31, 2017            
Three Months Ended June 30, 2021Three Months Ended June 30, 2021
Revenues $6,893
 $9,256
 $2,113
 $18,262
 $—
 $18,262
Revenues$1,887 $2,254 $4,141 $0 $4,141 
Segment profit $1,093
 $1,222
 $296
 $2,611
 $(129) $2,482
Segment profit$272 $131 $403 $(71)$332 
Depreciation and amortization(1)
 $67
 $743
 $55
 $865
 $76
 $941
Depreciation and amortization(1)
$40 $246 $286 $27 $313 
            
Nine Months Ended December 30, 2016            
Three Months Ended June 30, 2020Three Months Ended June 30, 2020
Revenues $3,130
 $2,588
 $—
 $5,718
 $—
 $5,718
Revenues$2,174 $2,328 $4,502 $0 $4,502 
Segment profit $349
 $201
 $—
 $550
 $(148) $402
Segment profit$215 $23 $238 $(48)$190 
Depreciation and amortization(1)
 $81
 $309
 $—
 $390
 $48
 $438
Depreciation and amortization(1)
$50 $267 $317 $27 $344 
        
(1) Depreciation and amortization as presented excludes amortization of acquired intangible assets of $149$109 million and $20$148 million for the three months ended December 31, 2017June 30, 2021 and December 30, 2016,2020, respectively and $438 million and $56 million for the nine months ended December 31, 2017 and December 30, 2016, respectively..
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued




Reconciliation of Reportable Segment Profit to Consolidated Total


The Company'sCompany’s management uses segment profit as the measure for assessing performance of its segments. Segment profit is defined as segment revenues less segment costcosts 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 DXC’s 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 Nine Months EndedThree Months Ended
(in millions) December 31, 2017 December 30, 2016 December 31, 2017 December 30, 2016(in millions)June 30, 2021June 30, 2020
Profit        Profit
Total profit for reportable segments $1,004
 $218
 $2,611
 $550
Total profit for reportable segments$403 $238 
All other loss (77) (42) (129) (148)All other loss(71)(48)
Interest income 27
 8
 59
 26
Interest income20 23 
Interest expense (77) (33) (231) (87)Interest expense(62)(106)
Restructuring costs (213) (3) (595) (85)Restructuring costs(67)(72)
Pension and OPEB actuarial and settlement gains 17
 —
 17
 —
Transaction, separation and integration-related costsTransaction, separation and integration-related costs(9)(110)
Amortization of acquired intangible assets (149) (20) (438) (56)Amortization of acquired intangible assets(109)(148)
Transaction and integration-related costs (94) (78) (284) (187)
Income before income taxes $438
 $50
 $1,010
 $13
Gains and (losses) on dispositionsGains and (losses) on dispositions347 0 
Debt extinguishment costsDebt extinguishment costs(28)0 
Pension and OPEB actuarial and settlement lossesPension and OPEB actuarial and settlement losses0 (2)
Income (loss) before income taxesIncome (loss) before income taxes$424 $(225)
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 isare not disclosed.
37

DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 18 -21 – 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 1one to 6five 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, 2017June 30, 2021 were as follows:
Fiscal yearMinimum Purchase Commitment
(in millions)
Remainder of 2022$1,517 
20231,028 
2024536 
2025255 
2026255 
Thereafter16 
     Total$3,607 
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 in fiscal 2018, 2019 and 2020 relate to the amounts committed under the HPE preferred vendor agreements.


In the normal course of business, the Company may provide certain clientscustomers 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.customers. 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:June 30, 2021:
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued
(in millions) Remainder of Fiscal 2022Fiscal 2023Fiscal 2024 and ThereafterTotals
Surety bonds$57 $11 $11 $79 
Letters of credit160 46 521 727 
Stand-by letters of credit46 49 14 109 
Totals$263 $106 $546 $915 


(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.

38

Contingencies

Vincent Forcier v. Computer Sciences Corporation and The City of New 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 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 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 claims to Medicaid after the statutory deadline for payment by private insurance had passed, and state common law claims. In accordance with the ruling, the United States and the State of New York each filed amended complaints-in-intervention on September 6, 2016. In addition to reasserting the 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 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 January 9, 2018, the Company answered the complaints, and asserted a counterclaim against the State of New York on a theory of contribution and indemnification. On January 30, 2018, the State of New York filed a motion to dismiss the Company’s counterclaim. The Parties participated in a non-binding mediation on November 29, 2017, and settlement discussions are continuing. Commencement of discovery will be deferred by the parties pending settlement negotiations. 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 CONDENSED 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.

Contingencies

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"(“FLSA”). Plaintiffs allegealleged 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 claimclaimed double overtime damages, liquidated damages, pre- and post-judgment interest, civil penalties, and other state-specificamounts 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 petitionedRule 23 decision to the Second Circuit Court of Appeals, for permission to file an appeal of the Rule 23 decision. That petitionwhich 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 returnedwas held and a verdict was returned in favor of plaintiffs. On August 6, 2019, the Court issued an order awarding plaintiffs finding that$18.75 million in damages. In September 2019, Plaintiffs filed a motion seeking $14.1 million in attorneys’ fees and costs. In July 2020, the Company had misclassified the class of employees as exempt under federalCourt issued an order awarding Plaintiffs $8.1 million in attorneys’ fees and state laws, and finding that it had done so willfully. The Court will determine damages and address post-trial motions in further proceedings.costs. The Company disagrees with the jury verdict, the damages award, and intends to continue to defend itself vigorously, including bythe fee award, and is appealing the verdict and the final judgment of the Court.


Computer Sciences Corporation v. Eric Pulier, et al.: On May 12, 2015, CSC and its wholly owned subsidiary, ServiceMesh Inc. ("SMI"), filed a civil complaintIn October 2020, the Company reached an agreement in principle with the Court of Chancery ofplaintiffs to resolve the State of Delaware against Eric Pulier,matter. In February 2021, the former CEO of SMI, which had been acquired by CSC 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 he 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 of the claim for breach of his retention agreement, the Court dismissed in whole or in part each of Mr. Pulier’s counterclaims.

On December 17, 2015, CSC entered intoCompany executed a settlement agreement with the majority of the former equityholders of SMI, as well as with SRS actingplaintiffs, and 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 July 20, 2017,2021 the Court granted a motion byapproved 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 by the United States District Court for the Central District of California returned an indictment against 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 Court granted on November 3, 2017. The civil actionsettlement.This matter is now stayed pending resolution of the criminal case.closed.


Law enforcement officials in Australia have brought bribery-related charges 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 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 and assisting the Australian and U.S. authorities in their investigations.

On 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, 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 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 to repay all amounts advanced to him if it should ultimately be determined that he is not entitled to indemnification.

Cisco Systems Inc. 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 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.

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. OnIn 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 stayedaward, and in August 2018, the actionMagistrate 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 deferencethe case. The Company promptly filed a notice of appeal to the Texas court’s decision as to which venueFifth Circuit Court of Appeals. Following the submission of briefs, oral argument was more appropriate to address the vacatur arguments.held on September 5, 2019. On January 12, 2018,10, 2020, the Court of Appeals issued a decision denying the Company’s appeal. On January 24, 2020, the Company appeared infiled a Petition for Rehearing, seeking review by the Texas action seeking a stayentire en banc Court of Appeals. On February 14, 2020, the confirmation proceedings or a transferCourt of venue to New York. The venue motion will be fully briefed by February 23, 2018.Appeals denied the Company’s Petition.


The Company disagrees with the decision of the arbitrator and intends to continue to defend itself vigorously. The Company is alsohas been pursuing coverage for the full scope of the award, interest, and legal fees and expenses, under the Company'sCompany’s applicable insurance policies. Certain carriers have accepted coverage while others have denied coverage. On February 21, 2020, the Company paid the balance of the judgment, which net of insurance recovery totalled $60 million. The Company has since recovered an additional $12.5 million from its insurance carriers. The Company continues to pursue recovery with its insurance carriers.


39
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Forsyth, et al. v. HP Inc. and Hewlett Packard Enterprise:  ThisEnterprise:  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 willmay 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 releasesrelease 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, thearbitration for those named and opt-in plaintiffs. The Court has stayed the entire action pending arbitration for these individuals, and administratively closed the case.

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 7 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. In December 2019, a settlement was reached with 142 of the opt-in plaintiffs, 35 of whom were employed by former business units of HPE that are now owned by the Company, and for which the Company was liable.

In December 2020, Plaintiffs have filed a motion for reconsiderationpreliminary certification of the collective action, which Defendants opposed. In April 2021, the court granted Plaintiffs’ motion for preliminary certification and lifted the previously imposed stay of the action.

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 wellHPE’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 January 29, 2019, the court granted HPE’s motion for summary judgment and denied Oracle’s motion for summary judgment, resolving the matter in HPE’s favor. Oracle appealed the judgment to the U.S. Court of Appeals for the Ninth Circuit. In August 2020, the court granted Oracle’s appeal in part. The case was then remanded to the District Court for further proceedings.

In January 2021, the District Court entered a scheduling order that provided for summary judgment briefing to be completed by May 2021 and a trial date in November 2021.In June 2021, the Court issued a decision denying HPE’s motion for summary judgment and granting Oracle’s motion for summary judgment on various HPE defenses.The matter is scheduled to proceed to trial in November 2021.

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DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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 moved to dismiss the claims in their entirety, and on June 2, 2020, the court granted the Company’s motion, dismissing all claims and entering judgment in the Company’s favor. On July 1, 2020, the plaintiffs filed a notice of appeal to the Ninth Circuit (whichU.S. Court of Appeals for the Fourth Circuit. The appeal has been denied as premature). The reconsideration motion, and others pending before the District Court relating to class arbitration, are fully briefed and will be adjudicatedis scheduled for oral argument in September 2021.

In March 2019, 3 related shareholder derivative lawsuits were filed in the Eighth Judicial District Court of the State of Nevada, in and for Clark County, against 1 of the Company’s current officers and a former officer as well as members of the Company’s board of directors, asserting claims for breach of fiduciary duty, waste of corporate assets, and unjust enrichment. By agreement of the parties and order of the court, those lawsuits were consolidated on July 18, 2019, and are presently stayed pending the outcome of the appeal of the Eastern District of Virginia matter.

On August 20, 2019, a purported class action lawsuit was filed in the Superior Court of the State of California, County of Santa Clara, against the Company, directors of the Company, and a former officer 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, directors of the Company, and a former officer 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, directors of the Company, and a former officer of the Company, among other defendants. The third lawsuit was voluntarily dismissed by the plaintiff and re-filed in the Superior Court of the State of California, County of Santa Clara on November 26, 2019, and thereafter was consolidated with the earlier-filed action in the same court on December 10, 2019. The California lawsuits assert claims under Sections 11, 12 and 15 of the Securities Act of 1933, as amended, and are premised on allegedly false and/or misleading statements, and alleged non-disclosure of material facts, regarding the Company’s prospects and expected performance. Plaintiff in the federal action filed an amended complaint on January 8, 2020. 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. On July 15, 2020, the Superior Court of California, County of Santa Clara, denied the Company’s motion to stay the state court case but extended the Company’s deadline to seek dismissal of the state action, until after a decision on the Company’s motion to dismiss the federal action. The Company has since moved to dismiss the state action, and the court has continued the motion until after the outcome of the federal action. On July 27, 2020, the United States District Court for the Northern District of California granted the Company’s motion to dismiss the federal action. The Court’s order permitted plaintiffs to amend and refile their complaint within 60 days, and on September 25, 2020, the plaintiffs filed an amended complaint. On November 12, 2020, the Company filed a motion to dismiss the amended complaint. On April 30, 2021, the Court granted the Company’s motion to dismiss the amended complaint, while granting Plaintiffs leave to again amend and refile their complaint within 30 days. On June 1, 2021, the plaintiffs filed a third amended complaint, which the Company has moved to dismiss. A hearing on the Company’s motion is scheduled for October 2021.

On October 2, 2019, a shareholder derivative lawsuit was filed in the Eighth Judicial 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 moved to dismiss the complaint on the basis that the Board’s decision to defer action was not a refusal of the demand and was within its discretion. The Company’s motion to dismiss was denied on January 22, 2020. By agreement of the parties and order of the court, the case is presently stayed, pending the outcome of the appeal in the Eastern District of Virginia matter.
41
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

On March 31, 2020, a group of individual shareholders filed a complaint in the United States District Court for the Northern District of California, asserting non-class claims based on allegations substantially similar to those at issue in the earlier-filed putative class action complaints pending in the Northern District of California and Eastern District of Virginia. The plaintiffs assert claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and under Sections 11 and 15 of the Securities Act of 1933, as amended. On April 29, 2020, the court granted an administrative motion to relate the case with the earlier-filed putative class action pending in the Northern District of California. And on May 13, 2020, the parties filed a stipulation requesting to stay the case subject to resolution of the motions to dismiss in the Northern District of California and Eastern District of Virginia class actions.

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"(“OFAC”) regarding certain possible violations of U.S. sanctions laws pertaining to insurance premium data and claims data processed by two2 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 internal investigation is continuing, and the Company has undertaken to cooperate with and provide a full report ofsubstantially completed its findingsinternal investigation. The Company provided supplemental information to OFAC when completed.on January 31, 2020 and continues to work with OFAC on these issues.


Tax Examinations:The Company is under IRS examination in the U.S. on its federal income tax returns for certain fiscal years and is in disagreement with the IRS on certain of our tax positions. See Note 16 – “Income Taxes” for further information.

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'smanagement’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.

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DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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 future 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. Furthermore, many of these risks and uncertainties are currently amplified by and may continue to be amplified by or may, in the future, be amplified by, the coronavirus disease 2019 (“COVID-19”) crisis and the impact of varying private and governmental responses that affect our customers, employees, vendors and the economies and communities where they operate.

Important factors that could cause actual results to differ materially from those described in forward-looking statements include, but are not limited to:


•the integrationuncertainty of CSC's and HPES's businesses, operations, and culturethe magnitude, duration, geographic reach of the COVID-19 crisis, its impact on the global economy and the impact of current and potential travel restrictions, stay-at-home orders, and economic restrictions implemented to address the crisis;
•the effects of macroeconomic and geopolitical trends and events;
•our inability to succeed in our strategic objectives;
•our inability to succeed in our strategic transactions;
•the risk of liability or damage to our reputation resulting from security incidents, including breaches, cyber-attacks insider threats, disclosure of sensitive data or failure to comply with data protection laws and regulations in a rapidly evolving regulatory environment; in each case, whether deliberate or accidental;
•our inability to develop and expand our service offerings to address emerging business demands and technological trends, including our inability to sell differentiated services up the Enterprise Technology Stack;
•the risks associated with our international operations;
•our credit rating and ability to operate as effectivelymanage working capital, refinance and efficiently as expected,raise additional capital for future needs;
•the competitive pressures faced by our business;
•our inability to accurately estimate the cost of services, and the combined company's ability to successfully managecompletion timeline of contracts;
•execution risks by us and integrate acquisitions generally;our suppliers, customers, and partners;
the ability to realize the synergies and benefits expected to result from the Merger within the anticipated time frame or in the anticipated amounts;
other risks related to the Merger including anticipated tax treatment, unforeseen liabilities, and future capital expenditures;
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 abilityinability to retain and hire key personnel and maintain relationships with key business partners;
business interruptions in connection•our inability to comply with governmental regulations or the adoption of new laws or regulations;
•our technology systems;
inability to achieve 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 deliveryexpected benefits of our productsrestructuring plans;
•inadvertent infringement of third-party intellectual property rights or our inability to protect our own intellectual property assets;
•our inability to remediate any material weakness and services;maintain effective internal control over financial reporting;
the protection•potential losses due to asset impairment charges;
•our inability to pay dividends or repurchase shares of our intellectual property assets, including intellectual property licensed from third parties;common stock;
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;
the execution and performance of contracts by us and our suppliers, customers, clients and partners;
the resolution of •pending investigations, claims and disputes;disputes and any adverse impact on our profitability and liquidity;
risks relating•disruptions in the credit markets, including disruptions that reduce our customers’ access to credit and increase the respective abilitiescosts to our customers of the partiesobtaining credit;
•our failure to the USPS Separationbid on projects effectively;
•financial difficulties of our customers and Mergers (defined below)our inability to satisfy the conditionscollect receivables;
43

•our inability to maintain and grow our customer relationships over time and to otherwise consummate,comply with customer contracts or government contracting regulations or requirements;
•changes in tax laws and any adverse impact on our effective tax rate;
•risks following the USPS Separationmerger of Computer Sciences Corporation (“CSC”) and MergersEnterprise Services business of Hewlett Packard Enterprise Company’s (“HPES”) businesses, including anticipated tax treatment, unforeseen liabilities, and future capital expenditures;
•risks following the spin-off of our former U.S. Public Sector business and its related mergers with Vencore Holding Corp. and KeyPoint Government Solutions to achieve the expected results therefrom;form Perspecta Inc (the “USPS”); 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, 2021 and subsequent SEC filings, including Part II Item 1A “Risk Factors” 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. Any forward-looking statement made by us in this Quarterly Report on Form 10-Q speaks only as of the date on which this Quarterly Report on Form 10-Q was first filed. 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-Qreport or to reflect the occurrence of unanticipated events, except as required by law.



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


Introduction


The purpose of the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A&A”) is to present information that management believes is relevant to an assessment and understanding of DXC'sour results of operations and cash flows for the threefirst quarter of fiscal 2022 and nine months ended December 31, 2017.our financial condition as of June 30, 2021. 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 intoin the following sections:
•Background
•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 first quarters of fiscal 2022 and fiscal 2021.

Background
Segments
DXC Technology helps global companies run their mission critical systems and operations while modernizing IT, optimizing data architectures, and ensuring security and scalability across public, private and hybrid clouds. The world’s largest companies and public sector organizations trust DXC to deploy services across the Enterprise Technology Stack to drive new levels of performance, competitiveness, and customer experience.

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: Global Business Services (“GBS”) and Global Infrastructure Services (“GIS”). We market and sell our services directly to customers through our direct sales offices around the world. Our customers include commercial businesses of many sizes and in many industries and public sector enterprises.
45


Results of Operations
Liquidity
The following table sets forth certain financial data for the first quarters of fiscal 2022 and Capital Resourcesfiscal 2021:
Off-Balance Sheet Arrangements
Three Months Ended
(In millions, except per-share amounts)June 30, 2021June 30, 2020
Revenues$4,141 $4,502 
Income (loss), before income taxes424 (225)
Income tax expense (benefit)142 (26)
Net income (loss)$282 $(199)
Diluted earnings (loss) per share$1.07 $(0.81)
Contractual Obligations
Critical Accounting Policies

Fiscal 2022 First Quarter Highlights

Financial highlights for the first quarter of fiscal 2022 include the following:

•Revenues for the first quarter of fiscal 2022 were $4.1 billion, a decrease of 8.0% as compared to the first quarter of fiscal 2021. The decrease was primarily due to the disposition of the HHS business during the third quarter of fiscal 2021 and Estimatesdispositions of the HPS business and other insignificant businesses during the first quarter of fiscal 2022. Project completions, project terminations, and decreases in run-rate project volumes also contributed to the decrease in revenues. The decrease in revenues for the first quarter of fiscal 2022 was partially offset by increased pass-through revenue associated with the resale of hardware and software and additional services provided to new and existing customers.

•Net income and diluted earnings per share for the first quarter of fiscal 2022 were $282 million and $1.07, respectively. Net income increased by $481 million during the first quarter of fiscal 2022 as compared to the same period of prior fiscal year. The increase was primarily due to cost optimization realized in the current period, gain on disposition of the HPS business, and lower transaction, separation and integration-related costs partially offset by a reduction in revenue in the current period. Net income included the cumulative impact of certain items of $60 million, reflecting restructuring costs, transaction, separation and integration-related costs, amortization of acquired intangible assets, gains on dispositions, debt extinguishment costs, and a tax adjustment. This compares with net loss and diluted loss per share of $199 million and $0.81, respectively, for the first quarter of fiscal 2021.
•Our cash and cash equivalents were $2.5 billion as of June 30, 2021.
Background•We used $29 million of cash from operations during the first quarter of fiscal 2022, as compared to $119 million of cash generated from operating activities during the first quarter of fiscal 2021.


DXC is
46

Revenues

During the world's leading independent, end-to-end ITfirst quarters of fiscal 2022 and fiscal 2021, the distribution of our revenues across geographies was as follows:
dxc-20210630_g2.jpg

Three Months Ended
(in millions)June 30, 2021June 30, 2020ChangePercentage Change
GBS$1,887 $2,174 $(287)(13.2)%
GIS2,254 2,328 (74)(3.2)%
Total Revenues$4,141 $4,502 $(361)(8.0)%

The decrease in revenues for the first quarter of fiscal 2022, compared with fiscal 2021 of the same period, reflects the disposition of the HHS business during the third quarter fiscal 2021, in addition to dispositions of the HPS business and other insignificant businesses during the first quarter of fiscal 2022. Project completions, project terminations, and decreases in run-rate project volumes also contributed to the decrease in revenues. The decrease in revenues for the first quarter of fiscal 2022 was partially offset by increased pass-through revenue associated with the resale of hardware and software and additional services company, helping clients harness the powerprovided to new and existing customers. Fiscal 2022 revenues included a favorable foreign currency exchange rate impact of innovation to thrive on change. DXC was formed5.7%, primarily driven by the spin-off of HPES on March 31, 2017 and merger of CSC with a wholly owned subsidiary of DXC on April 1, 2017. As a resultstrengthening of the Merger, CSC became a wholly owned subsidiary of DXC. DXC's common stock began trading underU.S. dollar against the ticker symbol “DXC” onBritish Pound, Euro, and Australian Dollar.

For the New York Stock Exchange on April 3, 2017 and is part of Standard & Poor's (S&P) 500 Index.

Segments and Services

Our reportable segments are GBS, GIS, and USPS. Segment information is included in Note 17 - "Segment Information" to the financial statements. For a discussion of risks associated with our foreign operations, see Part II,1, Item 1A "Risk Factors"“Risk Factors” of this Quarterlyour 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 operations10-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, 2016.2021.

See "Unaudited Pro Forma Condensed Combined Statement of Operations" below for additional information.
47
  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%approximately 71% of our revenues have beenfor the first quarter of fiscal 2022 were earned internationally. As a result, the changes incomparison of revenues denominated in currencies other than the U.S. dollar, from period to period, are impacted, and we expect will continue to beis 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 allowsinformation is consistent with how management to evaluateviews our revenues and evaluates our operating performance separately from movements in foreign exchange rates.and trends. The table below summarizes our constant currency revenues:


On a GAAP basis, total
Three Months Ended
(in millions)Constant Currency
June 30, 2021		June 30, 2020ChangePercentage Change
GBS$1,784 $2,174 $(390)(17.9)%
GIS2,100 2,328 (228)(9.8)%
Total$3,884 $4,502 $(618)(13.7)%

Global Business Services

Our GBS revenues were $6.2$1.9 billion and $18.3 billionin the first quarter of fiscal 2022, a decrease of 13.2% compared to fiscal 2021. GBS revenue in constant currency decreased 17.9% compared to fiscal 2021. The decrease in GBS revenues was primarily due to the disposition of the HHS business during the threethird quarter fiscal 2021, the disposition of the HPS business at the beginning of the first quarter of fiscal 2022, and nine months ended December 31, 2017, respectively, an increaseproject completions. The decrease in revenue for the first quarter of $4.3 billion and $12.5fiscal 2022 was partially offset by additional services provided to existing customers.

For the first quarter of fiscal 2022, GBS contract awards were $2.4 billion, as compared to the comparable periods of the prior fiscal year. The revenue growth is attributed to the Merger.

On a GAAP basis, our GIS segment revenues$3.5 billion during the three and nine months ended December 31, 2017 were $3.1 billion and $9.3 billion, or 50.8% and 50.7%first quarter of total revenues, respectively. fiscal 2021.

Global Infrastructure Services

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 in the first quarter of fiscal 2022, a decrease of 3.2% compared to fiscal 2021. GIS revenue in constant currency decreased 9.8% compared to fiscal 2021. The decrease in GIS revenues reflects project completions, project terminations, a decrease in run-rate project volumes, and $6.9 billion, or 37.4% and 37.7% of total revenues, duringdecreases due to 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 consummationdispositions 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 infrastructureHHS business and other services similar to our GIS and GBS segments to all levelsinsignificant businesses. The decrease in revenue for the first quarter of government in the United States. 

On a pro forma basis, constant currency revenues decreased $518 million, or 7.9%, during the three months ended December 31, 2017 as compared to the three months ended December 30, 2016. The constant currency revenues decrease for both our GIS and GBS segmentsfiscal 2022 was driven by contracts that concluded or were renewed at a lower rate. These decreases were partially offset by an increase in revenues fromincreased pass-through revenue associated with the resale of hardware and software and additional services provided to 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 three 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.and existing customers.

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,first quarter of fiscal 2022, GIS GBS and USPS contract awards were $2.2 billion, $3.3as compared to $1.8 billion and $0.5 billion, respectively. Forduring 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.first quarter of fiscal 2021.



48

Costs and Expenses


Our total costs and expenses are shown in the tables below:
Three Months Ended
AmountPercentage of RevenuesPercentage Point Change
(in millions)June 30, 2021June 30, 2020June 30, 2021June 30, 2020
Costs of services (excludes depreciation and amortization and restructuring costs)$3,255 $3,629 78.7 %80.6 %(1.9)
Selling, general and administrative (excludes depreciation and amortization and restructuring costs)383 539 9.2 12.0 (2.8)
Depreciation and amortization422 492 10.2 10.9 (0.7)
Restructuring costs67 72 1.6 1.6 — 
Interest expense62 106 1.5 2.4 (0.9)
Interest income(20)(23)(0.5)(0.5)— 
Debt extinguishment costs28 — 0.7 — 0.7 
Gain on disposition of businesses(377)— (9.1)— (9.1)
Other income, net(103)(88)(2.5)(2.0)(0.5)
Total Costs and Expenses$3,717 $4,727 89.8 %105.0 %(15.2)
  Three Months Ended  
  AmountPercentage of Revenues Percentage of Revenue Change
(in millions) December 31, 2017 December 30, 2016 December 31, 2017 December 30, 2016 
Costs of services (excludes depreciation and amortization and restructuring costs) $4,521
 $1,347
 73.1 % 70.2 % 2.9 %
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs) 475
 333
 7.7
 17.4
 (9.7)
Depreciation and amortization 481
 161
 7.8
 8.4
 (0.6)
Restructuring costs 213
 3
 3.4
 0.2
 3.2
Interest expense 77
 33
 1.2
 1.7
 (0.5)
Interest income (27) (8) (0.4) (0.4) —
Other expense (income), net 8
 (2) 0.1
 (0.1) 0.2
Total costs and expenses $5,748
 $1,867
 92.9 % 97.4 % (4.5)%


The 15.2 point decrease in total costs and expenses as a percentage of revenue for the first quarter of fiscal 2022 primarily reflects gains on dispositions in the first quarter of fiscal 2022.

  Nine Months Ended  
  AmountPercentage of Revenues Percentage of Revenue Change
(in millions) December 31, 2017 December 30, 2016 December 31, 2017 December 30, 2016 
Costs of services (excludes depreciation and amortization and restructuring costs) $13,621
 $4,131
 74.5 % 72.2 % 2.3 %
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs) 1,557
 931
 8.5
 16.3
 (7.8)
Depreciation and amortization 1,379
 494
 7.6
 8.6
 (1.0)
Restructuring costs 595
 85
 3.3
 1.5
 1.8
Interest expense 231
 87
 1.3
 1.6
 (0.3)
Interest income (59) (26) (0.3) (0.5) 0.2
Other (income) expense, net (72) 3
 (0.4) 0.1
 (0.5)
Total costs and expenses $17,252
 $5,705
 94.5 % 99.8 % (5.3)%


Costs of Services


CostCosts of services, excluding depreciation and amortization and restructuring costs ("COS"(“COS”), was $4.5 billion and $13.6$3.3 billion for the three and nine months ended December 31, 2017, respectively. The $3.2 billion and $9.5 billion increase infirst quarter of fiscal 2022. COS decreased $374 million during the first quarter of fiscal 2022 as compared to the same periodsperiod of the prior fiscal year,year. The decrease was primarily due to cost optimization savings realized during the first quarter of fiscal 2022 and lower operational costs following the sale of our HPS business and HHS business. COS as a percentage of revenue decreased 1.9 points primarily driven by cost reductions exceeding the Merger and was partially offset by reductionassociated decline in costs associated with workforce and facilities optimization.revenue compared to the same period in the prior fiscal year.


Selling, General and Administrative


Selling, general and administrative expense, excluding depreciation and amortization and restructuring costs ("(“SG&A"&A”), was $475 million and $1,557$383 million for the three and nine months ended December 31, 2017, respectively. The $142first quarter of fiscal 2022, a decrease of $156 million and $626 million increase in SG&A, as compared to the same periodsperiod of the prior fiscal year,year. The decrease during the first three months of fiscal 2022 was primarily driven primarily by lower transaction, separation and integration-related costs and lower operational costs following the Merger. Additionally, integrationsale of our HPS business and transaction-relatedHHS business.

Transaction, separation and integration-related costs of $94 million and $284$9 million were included in SG&A for the three and nine months ended December 31, 2017, respectively,first quarter of fiscal 2022, as compared to $78 million and $187$110 million for the comparable periodsperiod of the prior fiscal year.

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Depreciation and Amortization


Depreciation expense increased $122 million and amortization expense increased $198was $158 million for the three months ended December 31, 2017,first quarter of fiscal 2022. Depreciation expense decreased $20 million during the first quarter of fiscal 2022 as compared to the three months ended December 30, 2016. For the nine months ended December 31, 2017, depreciation expense increased $359 million and amortization expense increased $526 million, compared to the nine months ended December 30, 2016. The increase in depreciation and amortization expense ("D&A") was attributed to acquired property and equipment and intangible assets associated with the Merger.

Restructuring Costs

During the nine months ended December 31, 2017, management approved the Fiscal 2018 Plan to optimize operations in response to a continuing business contraction. The additional restructuring initiatives are intended to reduce our core structure and related operating costs, improve our 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 rebalancing the pyramid structure. Additionally, this plan includes global facility restructuring, including a global datacenter restructuring program.

During the three and nine months ended December 31, 2017, restructuring costs, net of reversals, were $213 million and $595 million, respectively, as compared with $3 million and $85 million during the comparable periodssame period of the prior fiscal year. The year-over-year increasenet decrease in depreciation expense for the first quarter of fiscal 2022 was primarily due to impairment of undeployed assets and asset retirements.

Amortization expense was $264 million for the first quarter of fiscal 2022. Amortization expense decreased $50 million during the first quarter of fiscal 2022 as compared to the same period of the prior fiscal year. The decrease was primarily due to a reduction in customer related intangibles related to the disposition of the HHS business at the beginning of the third quarter of fiscal 2021. See Note 4 – “Divestitures” for additional information.

Restructuring Costs

During fiscal 2022, management approved global cost savings initiatives designed to better align our workforce and facility structures. During the first quarter of fiscal 2022, restructuring costs, net of reversals, was due$67 million. Restructuring costs decreased $5 million during the first quarter of fiscal 2022 as compared to the implementationsame period of the Fiscal 2018 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.prior fiscal year.


For an analysis of changes in our restructuring liabilities by restructuring plan,plans, see Note 11 - "Restructuring Costs"14 – “Restructuring Costs” to the financial statements.


Interest Expense and Interest Income


Interest expense for the three and nine months ended December 31, 2017 increased $44first quarter of fiscal 2022 was $62 million. Interest expense decreased $44 million and $144 million over during the first quarter of fiscal 2022 as compared to the same periodsperiod of the prior fiscal year, respectively.year. The increasedecrease was primarily due to a reduction in interest expense for the nine months ended December 31, 2017 includes interest expense associated with $5.6 billion of acquired debt; see Note 3 - "Acquisitions"bonds and term loans, decreased amounts drawn on our revolving credit facility, and decreases to finance leases and asset financing.


Interest income for the three and nine months ended December 31, 2017 increased $19first quarter of fiscal 2022 was $20 million. Interest income decreased $3 million and $33 million overduring the first quarter of fiscal 2022 as compared to the same periodsperiod of the prior fiscal year, respectively.year. The year-over-year increase in interestdecrease wasprimarily driven by lower income wasfrom our multicurrency cash pools and money market accounts.

Debt Extinguishment Costs

During the first quarter of fiscal 2022, we recorded $28 million of debt extinguishment costs within the consolidated statement of operations, which consists primarily of costs related to the full redemption of two series of 4.45% senior notes due to higher cash balancesfiscal 2023, partial redemption of 4.125% senior notes due fiscal 2026, and extinguishment of debt associated with asset financing. There were no debt extinguishment costs recorded during the three and nine months ended December 31, 2017 as comparedsame period in fiscal 2021.

Gain on Disposition of Businesses

During the first quarter of fiscal 2022, DXC sold its HPS business for $551 million which resulted in an estimated pre-tax gain on sale of $341 million, net of closing costs. Insignificant businesses were also sold during the first quarter of fiscal 2022 that resulted in a gain of $49 million. This was partially offset by $13 million in sales price adjustments related to the prior year periods.dispositions, which resulted from changes in projected closing net working capital.


50

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.

Other income for the first quarter of fiscal 2022 was $103 million. Other income increased $15 million during the first quarter of fiscal 2022 as compared to the same period of the prior fiscal year. The $10 millionincrease was primarily due to a year-over-year increase in other expensegains related to sales of operating assets.

Taxes

Our effective tax rate (“ETR”) was 33.5% and 11.6% for the three months ended December 31, 2017June 30, 2021 and June 30, 2020, respectively. For the three months ended June 30, 2021, the primary drivers of the ETR were the global mix of income, gain on sale of HPS business and tax rate changes in non-U.S. jurisdictions. For the three months ended June 30, 2020, the primary drivers of the ETR were the global mix of income, adjustment of the prior tax provisions due to the filing of tax returns in non-U.S. jurisdictions and generation of additional foreign tax credits in the U.S.

Earnings (Loss) Per Share

Diluted EPS for the first quarter of fiscal 2022 was $1.07. Diluted earnings per share increased $1.88 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 million increase in other income for the nine months ended December 31, 2017 over the comparablesame period of the prior fiscal year was primarily due to foreign currency gain related to a changean increase of $481 million in the functional currency of a European holding company.net income.



Taxes

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 recorded on the outside basis difference of HPES foreign subsidiaries, the accrual of a one-time transition tax on estimated unremitted foreign earnings and India DDT accrual due to 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.

Our accounting for the impact 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 of the Act is incomplete and we were not yet able to make reasonable estimates for the effects. Therefore, no provisional adjustments were recorded.

Except for the uncertain tax liabilities acquired as a result of the Merger, there were no material changes to uncertain tax positions during fiscal 2018. For further discussion of these uncertain tax positions, please refer to Note 13 - "Income Taxes."

Earnings per Share

Diluted EPS for the threefirst quarter of fiscal 2022 includes $0.22 per share of restructuring costs, $0.02 per share of transaction, separation and nine months ended December 31, 2017 increased $2.47integration-related costs, $0.33 per share of amortization of acquired intangible assets, $(0.98) per share of net gains on dispositions, $0.08 per share of debt extinguishment costs, and $3.94, respectively, from the same periods a year ago. The increase for the three and nine months ended December 31, 2017 was due to increases$0.11 per share of $0.7 billion and $1.2 billion, respectively, 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 Diluted EPS for the three months ended December 31, 2017, included an increase of $0.04 due to purchase price allocationtax adjustments related to six months ended September 30, 2017 that were recognized in the during the three months ended December 31, 2017; see Note 3 - "Acquisitions").

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 effectrelating to the Merger. See Note 1 - "Summarynet revaluation of Significant Accounting Policies" and Note 3 - "Acquisitions" to the financial statements for additional information.deferred taxes resulting from changes in non-US jurisdiction tax rates.

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
51
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"(“EBIT”), adjusted EBIT, non-GAAP income before income taxes, non-GAAP net income and non-GAAP EPS.EPS, and constant currency revenues.


We present thesebelieve EBIT, adjusted EBIT, non-GAAP financial measures toincome before income taxes, non-GAAP net income and non-GAAP EPS provide investors with meaningfuluseful supplemental financial information about our operating performance after excluding certain categories of expenses.

We believe constant currency revenues provides investors with useful supplemental information about our revenues after excluding the effect of currency exchange rate fluctuations for currencies other than U.S. dollars in additionthe periods presented. See below for a description of the methodology we use to the financial information presentedpresent constant currency revenues.

One category of expenses excluded from adjusted EBIT, non-GAAP income before tax, non-GAAP net income and non-GAAP EPS, 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 intangible assets as these non-cash amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or pro forma basis. These non-GAAP financial measures exclude certain items from GAAP results thatsize of acquisitions. Although DXC management believes are not indicativeexcludes amortization of core operating performance. DXC management believes theseacquired intangible assets primarily customer-related intangible assets, from its non-GAAP measures provideexpenses, we believe that it is important for investors supplemental information aboutto 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 financial performanceacquired intangible asset balances and associated amortization expense.

Another category of DXC exclusive of the impacts of 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 operationsexpenses excluded from adjusted EBIT, non-GAAP income before tax, non-GAAP net income and non-GAAP EPS is impairment losses, which may result in a significant difference in period over period expense on a comparable basis from periodGAAP basis. We exclude impairment losses as these non-cash amounts, reflect generally an acceleration of what would be multiple periods of expense and do not expect to period. DXC management believes the non-GAAP measures provided are also considered important measuresoccur frequently. Further assets such as goodwill may be significantly impacted 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.market conditions outside of management’s control.


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. Selected references are made on a “constant currency basis” so that certain financial results can be viewed without the impact of fluctuations in foreign currency rates, thereby providing comparisons of operating performance from period to period. Financial results on a “constant currency basis” are non-GAAP measures calculated by translating current period activity into U.S. dollars using the comparable prior period’s currency conversion rates. This approach is used for all results where the functional currency is not the U.S. dollar. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Fiscal 2022 First Quarter Highlights.”


Non-GAAP

Certain 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)June 30, 2021June 30, 2020ChangePercentage Change
Income (loss) before income taxes$424 $(225)$649 
NM(1)
Non-GAAP income before income taxes$290 $107 $183 171.0 %
Net income (loss)$282 $(199)$481 
NM(1)
Adjusted EBIT$332 $190 $142 74.7 %
  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 %
(1)Calculation is not meaningful.


52
  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 %



Reconciliation of Non-GAAP Financial Measures


Our non-GAAP adjustments include:
•Restructuring - reflectscosts – includes costs, net of reversals, related to workforce optimization and real estate chargesoptimization and other similar charges.
•Transaction, separation and integration-related (“TSI”) costs - reflects– includes costs related to integration, planning, financing and advisory fees and other similar charges associated with the Mergermergers, acquisitions, strategic investments, joint ventures, and dispositions and other acquisitions.similar transactions.(1)
•Amortization of acquired intangible assets - reflects– includes amortization of intangible assets acquired through business combinations.
•Gains and losses on dispositions – gains and losses related to dispositions of businesses, strategic assets and interests in less than wholly-owned entities.(2)
•Debt extinguishment costs – costs associated with early retirement, redemption, repayment or repurchase of debt and debt-like items including any breakage, make-whole premium, prepayment penalty or similar costs as well as solicitation and other legal and advisory expenses.(3)
•Pension and OPEB actuarial and settlement gains and losses - reflects– pension and OPEB actuarial mark to market adjustments and settlement gains and losses.
Certain overhead costs - reflects certain fiscal 2017 HPE costs allocated•Tax adjustments – adjustments to HPES that are expectedimpair tax assets, merger and divestiture related tax matters, restructuring charges and income tax expense of non-GAAP adjustments. Income tax expense of other non-GAAP adjustments is computed by applying the jurisdictional tax rate to be largely eliminatedthe pre-tax adjustments on a prospectivejurisdictional basis.(4)

(1) TSI-Related Costs include fees and other internal and external expenses associated with legal, accounting, consulting, due diligence, investment banking advisory, and other services, as well as financing fees, retention incentives, and resolution of transaction related claims in connection with, or resulting from, exploring or executing potential acquisitions, dispositions and strategic investments, whether or not announced or consummated.

The TSI-Related costs for the first quarter of fiscal 2022 include $11 million of costs to execute the strategic alternatives; $4 million legal costs and ($12 million) credit towards Perspecta Arbitration settlement, $4 million in expenses related to integration projects resulting from the CSC - HPE ES merger (including costs associated with continuing efforts to separate certain IT systems) and $2 million of costs incurred in connection with activities related to other acquisitions and divestitures.

(2) Gains and losses on dispositions for the first quarter of fiscal 2022 include a $341 million gain on sale of the HPS business, gains of $19 million on other dispositions and ($13 million) of adjustments relating to the sale of the HHS business.

(3) Debt extinguishment costs adjustments for fiscal 2022 include $18 million to fully redeem two series of our 4.45% senior notes due fiscal 2023, $3 million to partially redeem our 4.125% senior notes due fiscal 2026, and $7 million of debt associated with asset financing.

(4) Tax adjustment - reflects the estimated non-recurring benefit of the Tax Cuts and Jobs Act of 2017 for fiscal 2018 periods and the application2022 reflects net revaluation of an approximate 27.5% pro formadeferred taxes resulting from changes in non-US jurisdiction tax rate for fiscal 2017 periods, which is the midpoint of prospective targeted effective tax rate range of 25% to 30% and effectively excludes the impact of discrete tax adjustments for those periods.rates.






53

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

Three Months Ended June 30, 2021
(in millions, except per-share amounts)As ReportedRestructuring CostsTransaction, Separation and Integration-Related CostsAmortization of Acquired Intangible AssetsGains and Losses on DispositionsDebt Extinguishment CostsTax AdjustmentNon-GAAP Results
Income before income taxes$424 $67 $9 $109 $(347)$28 $— $290 
Income tax expense142 10 4 24 (91)7 (28)68 
Net income282 57 5 85 (256)21 28 222 
Less: net income attributable to non-controlling interest, net of tax4 — — — — — — 4 
Net income attributable to DXC common stockholders$278 $57 $5 $85 $(256)$21 $28 $218 
Effective Tax Rate33.5 %23.4 %
Basic EPS$1.09 $0.22 $0.02 $0.33 $(1.01)$0.08 $0.11 $0.86 
Diluted EPS$1.07 $0.22 $0.02 $0.33 $(0.98)$0.08 $0.11 $0.84 
Weighted average common shares outstanding for:
Basic EPS254.67 254.67 254.67 254.67 254.67 254.67 254.67 254.67 
Diluted EPS260.32 260.32 260.32 260.32 260.32 260.32 260.32 260.32 




Three Months Ended June 30, 2020
(in millions, except per-share amounts)As ReportedRestructuring CostsTransaction, Separation and Integration-Related CostsAmortization of Acquired Intangible AssetsPension and OPEB Actuarial and Settlement Gains and LossesNon-GAAP Results
(Loss) income before income taxes$(225)$72 $110 $148 $2 $107 
Income tax (benefit) expense(26)12 28 34 — 48 
Net (loss) income(199)60 82 114 2 59 
Less: net income attributable to non-controlling interest, net of tax6 — — — — 6 
Net (loss) income attributable to DXC common stockholders$(205)$60 $82 $114 $2 $53 
Effective Tax Rate11.6 %44.9 %
Basic EPS$(0.81)$0.24 $0.32 $0.45 $0.01 $0.21 
Diluted EPS$(0.81)$0.24 $0.32 $0.45 $0.01 $0.21 
Weighted average common shares outstanding for:
Basic EPS253.63 253.63 253.63 253.63 253.63 253.63 
Diluted EPS253.63 254.41 254.41 254.41 254.41 254.41 


54

  Three Months Ended December 31, 2017
(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
Costs of services (excludes depreciation and amortization and restructuring costs) $4,521
 $—
 $—
 $—
 $—
 $—
 $4,521
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs) 475
 —
 17
 (94) —
 —
 398
               
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
Less: net income attributable to non-controlling interest, net of tax 3
 —
 —
 —
 —
 —
 3
Net income attributable to DXC common stockholders $776
 $161
 $(14) $68
 $104
 $(473) $622
               
Effective Tax Rate (77.9)%           28.7%
               
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
               
Weighted average common shares outstanding for:              
Basic EPS 285.38
 285.38
 285.38
 285.38
 285.38
 285.38
 285.38
Diluted EPS 289.77
 289.77
 289.77
 289.77
 289.77
 289.77
 289.77


  Nine Months Ended December 31, 2017
(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
Costs of services (excludes depreciation and amortization and restructuring costs) $13,621
 $—
 $—
 $—
 $—
 $—
 $13,621
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs) 1,557
 —
 17
 (284) —
 —
 1,290
               
Income before income taxes 1,010
 595
 (17) 284
 438
 —
 2,310
Income tax (benefit) expense (207) 143
 (3) 90
 148
 473
 644
Net income 1,217
 452
 (14) 194
 290
 (473) 1,666
Less: net income attributable to non-controlling interest, net of tax 26
 —
 —
 —
 —
 —
 26
Net income attributable to DXC common stockholders $1,191
 $452
 $(14) $194
 $290
 $(473) $1,640
               
Effective Tax Rate (20.5)%           27.9%
               
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
               
Weighted average common shares outstanding for:              
Basic EPS 284.70
 284.70
 284.70
 284.70
 284.70
 284.70
 284.70
Diluted EPS 289.53
 289.53
 289.53
 289.53
 289.53
 289.53
 289.53


A reconciliationReconciliations of pro forma combined resultsnet income to pro forma non-GAAP results for the three and nine months ended December 30, 2016 isadjusted EBIT are as follows:
Three Months Ended
(in millions)June 30, 2021June 30, 2020
Net income (loss)$282 $(199)
Income tax expense (benefit)142 (26)
Interest income(20)(23)
Interest expense62 106 
EBIT466 (142)
Restructuring costs67 72 
Transaction, separation and integration-related costs9 110 
Amortization of acquired intangible assets109 148 
(Gains) and losses on dispositions(347)— 
Debt extinguishment costs28 — 
Pension and OPEB actuarial and settlement losses— 2 
Adjusted EBIT$332 $190 

55
  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



  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,June 30, 2021, our cash and cash equivalents (“cash”) were $2.9$2.5 billion, of which $1.5$0.9 billion was held outside of the U.S. A substantial portionAs of funds can be returned toMarch 31, 2021, our cash was $3.0 billion, of which $1.3 billion was held outside of the U.S. from funds advanced previouslyWe maintain various multi-currency, multi-entity, cross-border, physical and notional cash and pool arrangements with various counterparties to finance our foreign acquisition initiatives. As a result ofmanage liquidity efficiently that enable participating subsidiaries to draw on the Act and after the mandatory one-time income inclusion (deemed repatriation) of the historically untaxed earnings of our foreign subsidiaries, we expect aCompany’s pooled resources to meet liquidity needs.

A significant portion of the cash and cash equivalents held by our foreign subsidiaries will no longeris not expected to be subject toimpacted by U.S. federal income tax consequences upon a subsequent repatriation to the United States.repatriation. However, a portion of this cash may still be subject to foreign and U.S. state 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 not designated as indefinitely reinvested.

We have $0.2 billion in cash held by foreign subsidiaries used for local operations that is subject to country-specific limitations which may restrict or result in increased costs in the repatriation of these funds. Based onIn addition, other practical considerations may limit our use of consolidated cash. This includes cash of $0.7 billion held in a preliminary analysis, we have recorded a provisional estimate for foreign withholding taxes, state taxes,German financial services subsidiary subject to regulatory requirements, and India DDT of $115 million as described in Note 13 - "Income Taxes".$0.1 billion held by majority owned consolidated subsidiaries where third-parties or public shareholders hold minority interests.


Cash and cash equivalents ("cash")increased $1.7 billion during the first nine months of fiscal 2018 to $2.9 billion, primarily due to the Merger. The following table summarizes our cash flow activity:
Three Months Ended
(in millions)June 30, 2021June 30, 2020Change
Net cash (used in) provided by operating activities$(29)$119 $(148)
Net cash provided by (used in) investing activities311 (61)372 
Net cash (used in) provided by financing activities(866)1,786 (2,652)
Effect of exchange rate changes on cash and cash equivalents13 (14)27 
Cash classified within current assets held for sale63 — 63 
Net (decrease) increase in cash and cash equivalents$(508)$1,830 $(2,338)
Cash and cash equivalents at beginning of year2,968 3,679 
Cash and cash equivalents at the end of period$2,460 $5,509 

Operating cash flow

Net cash used in operating activities during the first quarter of fiscal 2022 was $(29) million as compared to cash provided by operating activities of $119 million during the comparable period of the prior fiscal year. The decrease of $148 million was primarily due to a $87 million unfavorable change in working capital due to higher working capital outflows during the first quarter of fiscal 2022.

The following table contains certain key working capital metrics:
As of
June 30, 2021June 30, 2020
Days of sales outstanding in accounts receivable69 68 
Days of purchases outstanding in accounts payable(44)(66)
Cash conversion cycle25 2 

56

  Nine Months Ended  
(in millions) December 31, 2017 December 30, 2016 Change
Net cash provided by operating activities $2,542
 $805
 $1,737
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)
Effect of exchange rate changes on cash and cash equivalents 44
 (119) 163
Net increase (decrease) in cash and cash equivalents $1,663
 $(67) $1,730
Cash and cash equivalents at beginning-of-year 1,263
 1,178
  
Cash and cash equivalents at the end-of-period $2,926
 $1,111
  
Investing cash flow


Net cash provided by operating(used in) investing activities during the nine months ended December 31, 2017first quarter of fiscal 2022 was $2,542$311 million as compared to $805$(61) million during the comparable period of the prior fiscal year. The increase of $1,737$372 million was predominatelyprimarily due to business dispositions of $513 million, an increase in net incomeproceeds from sale of $1,179assets of $61 million, and additional depreciation expensecash paid for acquisitions of $884 million. The cash provided by operating activities during the first nine months of$10 million in fiscal 20182021. This was partially offset by a decrease in working capital movementscash collections related to deferred purchase price receivables of $378$159 million and an increase in unrealized foreign currency exchange losscapital expenditures of $24 million, comprised of a $44 million loss in fiscal 2018 compared to a $20 million loss in fiscal 2017.$50 million.


Financing cash flow

Net cash (used in) provided by investingfinancing activities during the nine months ended December 31, 2017first quarter of fiscal 2022 was $213$(866) million as compared to net cash used by investing activities of $825$1,786 million during the comparable period of the prior fiscal year. The increase of $1,038$2,652 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 a decrease inborrowings under lines of credit, facility draws, net of repayments of $482$1,750 million additionalin fiscal 2021, a decrease in commercial paper borrowings, net of repayments of $409 million, an increase in payments on capitalized lease obligationscapital leases and borrowings for asset financing of $613$249 million, an increase in repayments on long term debt, net of borrowings of $242 million, share repurchases of $48 million, and additional payments on long-termfor debt obligationsextinguishment costs of $1,128$28 million. These cash outflows wereThis was partially offset by draws on long-term debtdividend payments of $464$53 million and cash proceeds from bond issuance of $647 million.in fiscal 2021.


Capital Resources


See Note 18 - "Commitments21 – “Commitments and Contingencies" to the financial statementsContingencies” 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."“Liquidity” subheading.
  As of
(in millions) December 31, 2017 March 31, 2017
Short-term debt and current maturities of long-term debt $2,173
 $738
Long-term debt, net of current maturities 6,367
 2,225
Total debt $8,540
 $2,963


The $5.6following table summarizes our total debt:
As of
(in millions)June 30, 2021March 31, 2021
Short-term debt and current maturities of long-term debt$817 $1,167 
Long-term debt, net of current maturities4,116 4,345 
Total debt$4,933 $5,512 

The $0.6 billion increasedecrease in total debt during the nine months ended December 31, 2017first quarter of fiscal 2022 was primarily attributed primarily to debt assumed in connection with the Merger.

Duringretirement of all the nine months ended December 31, 2017, we increased commitments under our revolving credit facility to approximately $3.8 billion from $3.0 billion pre-Merger and completed a senior bond offering in an aggregate principal amountremaining $319 million of $650 millionthe two series of 4.45% Senior notes due 2021,fiscal 2023 using the proceeds from the sale of whichour HPS Business, and the repurchase of the $33 million of the 4.125% Senior notes due fiscal 2026. Approximately $300 million of finance lease liabilities and borrowings for assets acquired under long-term financing were used to retirealso repaid during the outstanding USD term loan due 2021. Duringfirst quarter of fiscal 2022 using the nine months ended December 31, 2017, we entered into an unsecured €400 million term loan agreement maturing in 2018 and entered into amendments to its existing AUD term loan to increase total borrowings to AUD $275 million. The proceeds from these borrowings were used to make prepayments to term loans maturing in 2022the divestitures of other businesses and repay drawn revolving credit facilities.existing cash on hand.


We were in compliance with all financial covenants associated with our borrowings as of December 31, 2017June 30, 2021 and DecemberJune 30, 2016. For more information on our debt, see Note 10 - "Debt" to the financial statements.2020.


The following table summarizes our capitalization ratios:
  As of
(in millions) December 31, 2017 March 31, 2017
Total debt $8,540
 $2,963
Cash and cash equivalents 2,926
 1,263
Net debt(1)
 $5,614
 $1,700
     
Total debt $8,540
 $2,963
Equity 13,202
 2,166
Total capitalization $21,742
 $5,129
     
Debt-to-total capitalization 39% 58%
Net debt-to-total capitalization(1)
 26% 33%

(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 debt-to-total capitalization was primarily due to a $3.9 billion increase in net debt and a $11.0 billion increase in equity, which were primarily a result of the Merger.


As of December 31, 2017, ourOur credit ratings wereare as follows:

Rating AgencyRatingLong Term RatingsOutlookShort Term RatingsOutlook
FitchBBB+BBBStableF-2F-2Stable
Moody'sMoody’sBaa2StableP-2P-2Stable
S&PBBBBBB-Negative--Stable




57

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 useusing cash generated by operations as a primary source of 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 onraise capital through borrowing under 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 currently utilize, and will further utilize our cross currency cash pool for liquidity needs. However, there can beis no guarantee that we will be able to obtain debt financing, if required, on terms and conditions acceptable termsto 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 isare over the life of the contractcontracts and isare dependent upon our performance as well as customer acceptance.


The following table summarizes our total liquidity:
As of
(in millions)June 30, 2021
Cash and cash equivalents$2,460 
Available borrowings under our revolving credit facility4,000 
Total liquidity
$6,460 
  As of
(in millions) December 31, 2017
Cash and cash equivalents $2,926
Available borrowings under our revolving credit facility 3,422
Available borrowings under our lease credit facility 57
Total liquidity 
 $6,405


Share Repurchases


During the first three monthsquarter 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. This program became effective on April 3, 2017 andwith no end date was established. During the nine monthsfirst quarter ended December 31, 2017,June 30, 2021, we repurchased 841,5051,750,000 shares of our common stock at an aggregate cost of $66$67 million. See Note 17 – “Stockholders’ Equity” to the financial statements.


Dividends


During the first three monthsTo maintain our financial flexibility we continue to suspend payment of quarterly dividends for fiscal 2018, we announced a dividend policy targeting $0.18 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, 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. 2022.

58

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 sheetoff-balance-sheet arrangements reported under Part II, Item 7 of CSC'sour Annual Report on Form 10-K other than as disclosed below and in Note 5 - "Sale of Receivables"6 – “Receivables” and Note 18 - "Commitments21 – “Commitments and Contingencies"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 resultWith the exception of the Merger. Significant increases in debt included $1.8 billion inretirement of the remaining $319 million of the two series of 4.45% senior notes due fiscal 2023, the repurchase of $33 million of its 4.125% senior notes due fiscal 2026, and $2.0 billionthe retirement and prepayment of certain capital leases and equipment related financing which resulted in term loans, see Note 10 - "Debt" for further information.

The increasesthe net decrease in capital lease obligations, future minimum operating lease liabilities and purchase obligations primarily increased from March 31, 2017borrowings of about $260 million, there have been no material changes, outside the ordinary course of business, to December 31, 2017 as a result of the Merger. The following table summarizes our contractual obligations since March 31, 2021. For further information see “Contractual Obligations” in Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

For our minimum purchase commitments 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) IncludesJune 30, 2021, in connection with our 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 of the Merger. For changes due to the Merger, see Note 3 - "Acquisitions".21 – “Commitments and Contingencies.”


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 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 During 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 ofthree months ended June 30, 2021, 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 appropriatecritical accounting including whether the elements specified in a multiple-element arrangement should be treated as separate units of accounting for revenue recognition purposes,policies 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 incomefiscal 2021 Annual Report on Form 10-K except 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 disclosedmentioned in Note 1 – “Summary of CSC's Annual Report on Form10-K for the period ending March 31, 2017. Assessing the fair value 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 certainFor quantitative and qualitative disclosures about market risks such as changesrisk 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 valueItem 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, 2021. 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, havehas not changed materially as compared to prior fiscal year due to the Merger.since March 31, 2021.


Interest Rate Risk
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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


UnderOur management, under the directionsupervision and 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 thisthat evaluation, theour Chief Executive Officer and Chief Financial Officer have concluded that DXC'sour disclosure controls and procedures were not effective as of the endJune 30, 2021 because of the period covered by this reportmaterial weakness in our internal control over financial reporting described below.

Control Activities

As previously disclosed during the third quarter of fiscal 2020, Management concluded there was a material weakness in internal controls over financial reporting related to the design and implementation of effective control activities based on the criteria established in the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework. Management identified multiple deficiencies that constitute a material weakness in the aggregate related to the establishment and timely reassessment of policies and procedures for complex transactions and processes and the related impacts for control activities.

As a result, we have concluded that there is a reasonable possibility that a material misstatement to our condensed consolidatedCondensed Consolidated Financial Statements would not be prevented or detected on a timely basis and therefore we concluded that the aggregation of these deficiencies represents a material weakness in our internal control over financial statements forreporting as of June 30, 2021.

Notwithstanding the periods covered byidentified material weakness, management believes that the Condensed Consolidated Financial Statements and related financial information included in this Quarterly Report on Form 10-Q are fairly statedpresent, in all material respects, our balance sheets, statements of operations, comprehensive (loss) income and cash flows as of and for the periods presented.

Remediation Plan

Management has taken and continues to take significant and comprehensive actions to remediate the material weakness. With the addition of new operations and finance leadership working in accordanceconcert with generally accepted accounting principlesthe Audit Committee, Management assessed the root cause of the multiple deficiencies that aggregated to the material weakness.

The Audit Committee has been fully engaged and supportive of management’s efforts to remediate the Material Weakness. Beginning in the United Statesfourth quarter of America forfiscal 2020, the Audit Committee has received a remediation report at each regularly held meeting and had additional informal meetings specifically to review progress on the remediation. Participants have included the Chief Executive Officer, Chief Financial Officer, Corporate Controller, SOX Leader and Internal Audit to answer questions and take feedback from the Committee.
60


The following activities are designed as part of this remediation plan to (1) address the material weakness in the control activities component of the periods presented herein.COSO framework and (2) enhance and improve our control activities and processes:


Actions to remediate the material weakness in the controls activities component of COSO:

•We appointed a new Chief Financial Officer during the third quarter of fiscal 2021 with previous experience as a Chief Accounting Officer and substantial experience leading a finance organization through transformation including remediating material weaknesses. Our Chief Financial Officer is leading our remediation efforts and is focused on driving change in our finance organization, control environment and culture.
•We appointed a new Corporate Controller and Principal Accounting Officer during the first quarter of fiscal 2022 with previous experience as a Corporate Controller and Chief Accounting Officer remediating material weaknesses.
•We evaluated our finance organization and have and will augment our finance team with additional professionals with the appropriate levels of accounting, controls, finance oversight and tax experience.
•We hired a dedicated team of controls and process experts to standardize our processes and focus our key controls to address material risks.
•We are increasing communication and training to employees regarding internal control over financial reporting and disclosure controls and procedures.
•We are designing and implementing an enterprise wide process to timely identify, track and appropriately resolve and conclude on complex transactions and disclosures.

Additional enhancements to improve our control activities and processes:

•We are enhancing our financial cadence and discipline including increased reviews of the underlying performance of the business and related balance sheet accounts.
•We are enhancing key enterprise controls including financial operations reviews, working capital reviews, balance sheet reviews and assessment and monitoring of non-routine accounting transactions.
•We are assessing relevant policies focusing on ownership and accountability and reviewing and implementing changes to thresholds to focus on risk.
•We are refining the financial close process so it executes with the appropriate cadence and rigor to reduce the length of time it takes to close.
•We are standardizing processes and rationalizing and strengthening controls to mitigate significant risk, enhance control owner accountability and transparency to address deficiencies in a holistic and timely manner.

These additional remediation efforts have begun and are expected to be completed in the subsequent quarters. After management’s remediation efforts are complete, subsequent testing will be required to conclude that a material weakness no longer exists. Our goal is to have enhanced control policies, procedures, and processes in place as promptly as practicable, however, we are not in a position to complete our remediation plan and concluded that our internal control over financial reporting is not designed or operating effectively as of the quarter ended June 30,2021.

Changes in Internal Control Overover Financial Reporting


As previously disclosed in Item 4 of our Quarterly Report on Form 10-Q for the three months ended September 30, 2017, we implemented a new consolidation 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, and will continue to monitor and evaluate, our internal controls relating 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.

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, 2017June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART II




ITEM 1. LEGAL PROCEEDINGS


See Note 18 - "Commitments21 – “Commitments and Contingencies"Contingencies” to the financial statements under the caption “Contingencies” for information regarding legal proceedings in which we are involved.


Item 1A.RISK FACTORS

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, 2017which 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, the additional risks listed below, as well asand other variables and shouldrisks and uncertainties not currently known or that are currently expected to be relied upon to project future period results.

Risks Related to Our Business

Recent U.S. tax legislationimmaterial may also materially and adversely affect our business, financial condition, and results of operations and cash flows.

Recently enacted U.S. tax legislation has significantly changedor the U.S. federal income taxation of U.S. corporations, including by reducing the U.S. corporate income tax rate, limiting interest deductions, permitting immediate expensing of certain capital expenditures, adopting elements of a territorial tax system, imposing a one-time 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 and the rules governing foreign tax credits, and introducing new anti-base erosion provisions. Many of these changes are effective immediately, without any transition periods or grandfathering for existing transactions. The legislation is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury and Internal Revenue Service (“IRS”), any of which could lessen or increase certain impacts of the legislation. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities.

While our analysis and interpretation of this legislation is ongoing, based on our current evaluation, the reduction of the U.S. corporate income tax rate will require a write-downprice of our deferred income tax liabilities resulting in a material noncash benefit against earningscommon stock in the third quarterfuture. There have been no material changes in the three months ended June 30, 2021 to the risk factors described in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year 2018, the period in which the tax legislation was enacted, which may be subject to further adjustment in subsequent periods throughout fiscal years 2018 and 2019 in accordance with recent interpretive guidance issued by the SEC, and the repatriation tax will result in 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 resulting from the legislation that we have not yet identified.ended March 31, 2021.


While some of the changes made by the tax legislation may adversely affect the Company in one or more reporting periods and prospectively, other changes may be beneficial on a going forward basis. We continue to work with our tax advisors 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 investing in our securities.

62
Risks Related to the Proposed USPS Separation and Mergers (defined below)



The proposed USPS Separation and Mergers are contingent upon the satisfaction of a number of conditions, and the USPS Separation and Mergers may not be consummated on the terms or timeline currently contemplated.

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, 2017June 30, 2021, 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
PeriodTotal 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
April 1, 2021 to April 30, 2021— $——$—
May 1, 2021 to May 31, 2021— $——$—
June 1, 2021 to June 30, 20211,750,000 $38.521,750,000$1,720,284,564
    
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. 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.




ITEM 3. DEFAULTDEFAULTS 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.
63

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


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 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 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 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 Form 8-K (filed April 6, 2017) (file no. 001-38033))

2.10
10.1
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 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 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 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 andJuly 30, 2021, among DXC Technology Company, Ultra SCInc.Receivables LLC (f/k/a CSC Receivables LLC), 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 Form 8-K (filed October 13, 2017) (file no. 001-38033))

3.1
Articles of Incorporation ofas Seller, 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 Form 8-K (filed April 6, 2017) (file no. 001-38033))
3.2
Bylaws of DXC Technology Company, effective April 1, 2017 (incorporated by reference to Exhibit 3.4 to DXC Technology Company's Form 8-K (filed April 6, 2017) (file no. 001-38033))
4.1
Base Indenture, dated as of March 27, 2017, between Everett SpinCo, Inc. (now known as DXC Technology Company) and U.S.Servicer, PNC Bank, National Association, as trustee (incorporated by referenceAdministrative Agent, and the persons from time to Exhibit 4.1 to Everett SpinCo, Inc.'s Form 8-Ktime party thereto as Purchasers and Group Agents (filed March 27, 2017) (file no. 001-38033))herewith)
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 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 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 Form 8-K (filed August 17, 2017) (file no. 001-38033))
4.531.1*
4.6
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 Form 8-K (filed August 9, 2017) (file no. 001-38033))
4.7
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 Form 8-K (filed August 9, 2017) (file no. 001-38033))
4.8
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 Form 8-K (filed August 9, 2017) (file no. 001-38033))
4.9
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 Form 8-K (filed August 9, 2017) (file no. 001-38033))

4.10
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 Form 8-K (filed August 17, 2017) (file no. 001-38033))

4.11
Form of DXC Technology Company's 7.45% Senior Notes due 2029 (included in Exhibit 4.5)
4.12
Ninth Supplemental Indenture, dated January 22, 2018, between Enterprise Services LLC and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to DXC Technology Company’s Form 8-K (filed January 23, 2018) (file no. 001-38033))
31.1
Section 302 Certification of the Chief Executive Officer
31.231.2*
32.1**
32.2**
101.INSXBRL Instance

Interactive Data Files
101.SCH
101.SCHXBRL Taxonomy Extension Schema
101.CALXBRL Taxonomy Extension Calculation
101.LABXBRL Taxonomy Extension Labels
101.PREXBRL Taxonomy Extension Presentation
104
* Management contract or compensatory plan or agreement
** Furnished, not filed
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


    * Filed herewith
    ** Furnished herewith
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SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


DXC TECHNOLOGY COMPANY
Dated:August 4, 2021By:DXC TECHNOLOGY COMPANY/s/ Christopher A. Voci
Name:Christopher A. Voci
Dated:February 8, 2018By:Title:/s/ Neil A. Manna
Name:Neil A. Manna
Title:Senior Vice President, Corporate Controller and
Principal Accounting Officer



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