UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20192020
OR
☐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
downloada34.jpg
DXC TECHNOLOGY COMPANY
(Exact name of registrant as specified in its charter)
Nevada 61-1800317
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
       
1775 Tysons Boulevard    
                  Tysons,Virginia 22102
(Address of principal executive offices) (Zip Code)
       
Registrant's telephone number, including area code: (703) 245-9675
Securities registered pursuant to Section 12(b) of the Act:
       
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareDXCNew York Stock Exchange
2.750% Senior Notes Due 2025DXC 25New York Stock Exchange
1.750% Senior Notes Due 2026DXC 26New York Stock Exchange
       
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x Yes  o No  

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
       ☐ Yes  x   No

255,997,527254,194,590 shares of common stock, par value $0.01 per share, were outstanding on OctoberJuly 31, 2019.2020.


TABLE OF CONTENTS

Item Page Page
 
PART I - FINANCIAL INFORMATION
  
PART I - FINANCIAL INFORMATION
 
  
1. 
Financial Statements (unaudited)
1
 
Financial Statements (unaudited)
1
2. 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
54
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
47
3. 
Quantitative and Qualitative Disclosures About Market Risk
73
 
Quantitative and Qualitative Disclosures About Market Risk
61
4. 
Controls and Procedures
73
 
Controls and Procedures
61
  
 
PART II - OTHER INFORMATION
  
PART II - OTHER INFORMATION
 
  
1. 
Legal Proceedings
73
 
Legal Proceedings
64
1A. 
Risk Factors
74
 
Risk Factors
64
2. 
Unregistered Sales of Equity Securities and Use of Proceeds
78
 
Unregistered Sales of Equity Securities and Use of Proceeds
67
3. 
Defaults Upon Senior Securities
78
 
Defaults Upon Senior Securities
67
4. 
Mine Safety Disclosure
78
 
Mine Safety Disclosure
67
5. 
Other Information
79
 
Other Information
68
6. 
Exhibits
79
 
Exhibits
68




PART I

ITEM 1. FINANCIAL STATEMENTS

Index to Condensed Consolidated Financial Statements
  
 Page
Condensed Consolidated Statements of Operations for the Three and Six Months Ended SeptemberJune 30, 20192020 and SeptemberJune 30, 20182019 (unaudited)
2
  
Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended SeptemberJune 30, 20192020 and SeptemberJune 30, 20182019 (unaudited)
3
  
Condensed Consolidated Balance Sheets as of SeptemberJune 30, 20192020 and March 31, 20192020 (unaudited)
4
  
Condensed Consolidated Statements of Cash Flows for the SixThree Months Ended SeptemberJune 30, 20192020 and SeptemberJune 30, 20182019 (unaudited)
5
  
Condensed Consolidated Statements of Changes in Equity for the Three and Six Months Ended SeptemberJune 30, 20192020 and SeptemberJune 30, 20182019 (unaudited)
6
  
Notes to Condensed Consolidated Financial Statements (unaudited)
 
Note 1–Summary of Significant Accounting Policies
87
Note 2–Recent Accounting Pronouncements
129
Note 3–Acquisitions
1310
Note 4–DivestituresEarnings (Loss) Per Share
1711
Note 5–Earnings Per ShareReceivables
1912
Note 6–Sale of ReceivablesLeases
15
Note 7–Fair Value
18
Note 8–Derivative and Hedging Activities
20
Note 7–Leases9–Intangible Assets
2123
Note 8–Fair Value10–Goodwill
24
Note 9–Derivative and Hedging Activities11–Debt
25
Note 12–Revenue
26
Note 10–Intangible Assets13–Restructuring Costs
2928
Note 11–Goodwill14–Pension and Other Benefit Plans
30
Note 12–Debt15–Income Taxes
31
Note 13–Revenue16–Stockholders' Equity
32
Note 14–Restructuring Costs17–Stock Incentive Plans
33
Note 15–Pension and Other Benefit Plans18–Cash Flows
35
Note 19–Segment Information
36
Note 16–Income Taxes
37
Note 17–Stockholders' Equity20–Commitments and Contingencies
38
Note 18–Stock Incentive Plans21–Subsequent Events
40
Note 19–Cash Flows
42
Note 20–Segment Information
43
Note 21–Commitments and Contingencies
4644




DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

 Three Months Ended Six Months Ended Three Months Ended
(in millions, except per-share amounts) September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018 June 30, 2020 June 30, 2019
            
Revenues $4,851
 $5,013
 $9,741
 $10,295
 $4,502
 $4,890
            
Costs of services (excludes depreciation and amortization and restructuring costs) 3,679
 3,518
 7,301
 7,385
 3,629
 3,622
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs) 489
 569
 996
 1,009
 539
 507
Depreciation and amortization 467
 484
 937
 955
 492
 470
Goodwill impairment losses 2,887
 —
 2,887
 —
Restructuring costs 32
 157
 174
 342
 72
 142
Interest expense 104
 83
 195
 168
 106
 91
Interest income (67) (33) (97) (65) (23) (30)
Gain on arbitration award (632) —
 (632) —
Other income, net (109) (97) (227) (191) (88) (118)
Total costs and expenses 6,850
 4,681
 11,534
 9,603
 4,727
 4,684
            
(Loss) income from continuing operations before income taxes (1,999) 332
 (1,793) 692
Income tax expense 116
 73
 154
 202
(Loss) income from continuing operations (2,115) 259
 (1,947) 490
Income from discontinued operations, net of taxes —
 —
 —
 35
(Loss) income before income taxes (225) 206
Income tax (benefit) expense (26) 38
Net (loss) income (2,115) 259
 (1,947) 525
 (199) 168
Less: net income (loss) attributable to non-controlling interest, net of tax 4
 (3) 9
 4
Less: net income attributable to non-controlling interest, net of tax 6
 5
Net (loss) income attributable to DXC common stockholders $(2,119) $262
 $(1,956) $521
 $(205) $163
            
(Loss) income per common share:            
Basic:        
Continuing operations $(8.19) $0.93
 $(7.44) $1.72
Discontinued operations —
 —
 —
 0.12
 $(8.19) $0.93
 $(7.44) $1.84
Diluted:        
Continuing operations $(8.19) $0.92
 $(7.44) $1.69
Discontinued operations —
 —
 —
 0.12
 $(8.19) $0.92
 $(7.44) $1.81
Basic $(0.81) $0.61
Diluted $(0.81) $0.61



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






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

    Three Months Ended
(in millions) June 30, 2020 June 30, 2019
       
Net (loss) income $(199) $168
Other comprehensive income (loss), net of taxes:    
 Foreign currency translation adjustments, net of tax benefit of $7 and $12 (3) (135)
 Cash flow hedges adjustments, net of tax expense of $3 and $0 11
 4
 Available-for-sale securities, net of tax expense of $0 and $1 4
 1
 Pension and other post-retirement benefit plans, net of tax:    
  Amortization of prior service cost, net of tax benefit of $1 and $0 (9) (1)
 Pension and other post-retirement benefit plans, net of tax (9) (1)
Other comprehensive income (loss), net of taxes 3
 (131)
Comprehensive (loss) income (196) 37
 Less: comprehensive income (loss) attributable to non-controlling interest 5
 (19)
Comprehensive (loss) income attributable to DXC common stockholders $(201) $56
    Three Months Ended Six Months Ended
(in millions) September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
           
Net (loss) income $(2,115) $259
 $(1,947) $525
Other comprehensive (loss) income, net of taxes:        
 
Foreign currency translation adjustments, net of tax (1)
 (71) (66) (206) (408)
 
Cash flow hedges adjustments, net of tax (2) 
 (2) 2
 2
 (30)
 
Available-for-sale securities, net of tax (3)
 1
 —
 2
 (1)
 Pension and other post-retirement benefit plans, net of tax:        
  
Amortization of prior service cost, net of tax (4)
 (3) (5) (4) (6)
 Pension and other post-retirement benefit plans, net of tax (3) (5) (4) (6)
Other comprehensive loss, net of taxes (75) (69) (206) (445)
Comprehensive (loss) income (2,190) 190
 (2,153) 80
 Less: comprehensive income (loss) attributable to non-controlling interest 6
 (2) (13) (1)
Comprehensive (loss) income attributable to DXC common stockholders $(2,196) $192
 $(2,140) $81


(1) Tax expense related to foreign currency translation adjustments was $25 and $13 for the three and six months ended September 30, 2019, respectively. There was 0 tax expense related to foreign currency translation adjustments during the three and six months ended September 30, 2018.
(2) There was 0 tax benefit related to cash flow hedge adjustments during the three and six months ended September 30, 2019. Tax benefit related to cash flow hedge adjustments was $17 and $10 for the three and six months ended September 30, 2018, respectively.
(3) Tax expense related to available-for-sale securities was $0 and $1 for the three and six months ended September 30, 2019, respectively. There was 0 tax expense related to available-for-sale securities during the three and six months ended September 30, 2018.
(4) Tax benefit related to amortization of prior service costs was $1 and $1 for the three and six months ended September 30, 2019, respectively, and $1 and $1 for the three and six months ended September 30, 2018, respectively.


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



DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
 As of As of
(in millions, except per-share and share amounts) September 30, 2019 March 31, 2019 June 30, 2020 March 31, 2020
ASSETS   
   
Current assets:        
Cash and cash equivalents $2,880
 $2,899
 $5,509
 $3,679
Receivables and contract assets, net of allowance for doubtful accounts of $60 and $60 4,611
 5,181
Receivables and contract assets, net of allowance of $104 and $74 4,271
 4,392
Prepaid expenses 671
 627
 667
 646
Other current assets 328
 359
 261
 270
Total current assets 8,490
 9,066
 10,708
 8,987
        
Intangible assets, net of accumulated amortization of $3,916 and $3,399 6,293
 5,939
Intangible assets, net of accumulated amortization of $4,627 and $4,347 5,540
 5,731
Operating right-of-use assets, net 1,482
 —
 1,602
 1,428
Goodwill 5,784
 7,606
 2,057
 2,017
Deferred income taxes, net 330
 355
 285
 265
Property and equipment, net of accumulated depreciation of $4,182 and $3,958 3,555
 3,179
Property and equipment, net of accumulated depreciation of $4,072 and $3,818 3,503
 3,547
Other assets 3,582
 3,429
 4,199
 4,031
Total Assets $29,516
 $29,574
 $27,894
 $26,006
        
LIABILITIES and EQUITY        
Current liabilities:        
Short-term debt and current maturities of long-term debt 1,471
 1,942
 1,682
 1,276
Accounts payable 1,603
 1,666
 1,522
 1,598
Accrued payroll and related costs 684
 652
 766
 630
Current operating lease liabilities 489
 —
 488
 482
Accrued expenses and other current liabilities 2,943
 3,355
 2,756
 2,801
Deferred revenue and advance contract payments 1,571
 1,630
 1,030
 1,021
Income taxes payable 213
 208
 81
 87
Total current liabilities 8,974
 9,453
 8,325
 7,895
        
Long-term debt, net of current maturities 7,698
 5,470
 10,334
 8,672
Non-current deferred revenue 234
 256
 733
 735
Non-current operating lease liabilities 1,139
 —
 1,208
 1,063
Non-current income tax liabilities and deferred tax liabilities 1,269
 1,184
 1,075
 1,157
Other long-term liabilities 1,332
 1,486
 1,277
 1,355
Total Liabilities 20,646
 17,849
 22,952
 20,877
        
Commitments and contingencies 


 


 


 


        
DXC stockholders’ equity:        
Preferred stock, par value $.01 per share, 1,000,000 shares authorized, none issued as of September 30, 2019 and March 31, 2019 —
 —
Common stock, par value $.01 per share, 750,000,000 shares authorized, 257,626,331 issued as of September 30, 2019 and 270,213,891 issued as of March 31, 2019 3
 3
Preferred stock, par value $.01 per share, 1,000,000 shares authorized, none issued as of June 30, 2020 and March 31, 2020 —
 —
Common stock, par value $.01 per share, 750,000,000 shares authorized, 256,382,532 issued as of June 30, 2020 and 255,674,040 issued as of March 31, 2020 3
 3
Additional paid-in capital 10,793
 11,301
 10,729
 10,714
(Accumulated deficit) retained earnings (1,668) 478
Accumulated deficit (5,386) (5,177)
Accumulated other comprehensive loss (428) (244) (599) (603)
Treasury stock, at cost, 2,018,148 and 1,788,658 shares as of September 30, 2019 and March 31, 2019 (150) (136)
Treasury stock, at cost, 2,291,790 and 2,148,708 shares as of June 30, 2020 and March 31, 2020 (154) (152)
Total DXC stockholders’ equity 8,550
 11,402
 4,593
 4,785
Non-controlling interest in subsidiaries 320
 323
 349
 344
Total Equity 8,870
 11,725
 4,942
 5,129
Total Liabilities and Equity $29,516
 $29,574
 $27,894
 $26,006

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

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
 Six Months Ended Three Months Ended
(in millions) September 30, 2019 September 30, 2018 June 30, 2020 June 30, 2019
Cash flows from operating activities:        
Net (loss) income $(1,947) $525
 $(199) $168
Adjustments to reconcile net income to net cash provided by operating activities:    
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:    
Depreciation and amortization 946
 1,002
 496
 474
Goodwill impairment losses 2,887
 —
Operating right-of-use expense 340
 —
 156
 176
Pension & other post-employment benefits, actuarial & settlement losses 2
 —
Share-based compensation 48
 41
 16
 18
Gain on dispositions (4) (65)
Unrealized foreign currency exchange gains (50) (12)
Loss (gain) on dispositions 4
 (8)
Provision for losses on accounts receivable 35
 (4)
Unrealized foreign currency exchange gain (11) (14)
Other non-cash charges, net 2
 (18) 7
 (1)
Changes in assets and liabilities, net of effects of acquisitions and dispositions:        
Decrease (increase) in assets 167
 (483)
Increase in assets (100) (335)
Decrease in operating lease liability (340) —
 (156) (174)
Decrease in other liabilities (464) (141) (131) (366)
Net cash provided by operating activities 1,585
 849
Net cash provided by (used in) operating activities 119
 (66)
        
Cash flows from investing activities:        
Purchases of property and equipment (192) (133) (95) (105)
Payments for transition and transformation contract costs (158) (183) (82) (72)
Software purchased and developed (126) (125) (48) (63)
Payments for acquisitions, net of cash acquired (1,921) (43) (10) (1,911)
Business dispositions —
 (65)
Cash collections related to deferred purchase price receivable 371
 445
 159
 371
Proceeds from sale of assets 40
 57
 6
 21
Short-term investing (75) —
 —
 (75)
Other investing activities, net 14
 (1) 9
 12
Net cash used in investing activities (2,047) (48) (61) (1,822)
        
Cash flows from financing activities:        
Borrowings of commercial paper 2,879
 1,158
 748
 1,401
Repayments of commercial paper (2,866) (1,158) (317) (1,401)
Borrowings under lines of credit 2,500
 —
Repayment of borrowings under lines of credit (750) —
Borrowings on long-term debt, net of discount 2,198
 483
 993
 2,198
Principal payments on long-term debt (519) (2,036) (1,084) (509)
Payments on finance leases and borrowings for asset financing (421) (475) (245) (210)
Borrowings for USPS spin transaction —
 1,114
Proceeds from bond issuance —
 753
Proceeds from stock options and other common stock transactions 10
 36
 —
 7
Taxes paid related to net share settlements of share-based compensation awards (12) (20) (3) (12)
Repurchase of common stock and advance payment for accelerated share repurchase (650) (447) —
 (500)
Dividend payments (107) (105) (53) (51)
Other financing activities, net (32) 11
 (3) (36)
Net cash provided by (used in) financing activities 480
 (686)
Net cash provided by financing activities 1,786
 887
Effect of exchange rate changes on cash and cash equivalents (37) (64) (14) (30)
Net (decrease) increase in cash and cash equivalents (19) 51
Net increase (decrease) in cash and cash equivalents 1,830
 (1,031)
Cash and cash equivalents at beginning of year 2,899
 2,729
 3,679
 2,899
Cash and cash equivalents at end of period $2,880
 $2,780
 $5,509
 $1,868


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

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)
 Three Months Ended September 30, 2019
(in millions, except shares in thousands)Common Stock
Additional
Paid-in Capital
Retained Earnings (Accumulated Deficit)
Accumulated
Other
Comprehensive Loss
Treasury Stock (1)
Total
DXC Equity
Non-
Controlling Interest
Total Equity
Shares Amount
Balance at June 30, 2019263,709
 $3
$10,916
$494
$(351)$(149)$10,913
$304
$11,217
Net loss    (2,119)  (2,119)4
(2,115)
Other comprehensive loss     (77) (77)2
(75)
Share-based compensation expense   31
   31
 31
Acquisition of treasury stock      (1)(1) (1)
Share repurchase program(6,220)  (161)11
  (150) (150)
Stock option exercises and other common stock transactions137
  7
   7
 7
Dividends declared ($0.21 per share)    (54)  (54) (54)
Non-controlling interest distributions and other    —
  —
10
10
Balance at September 30, 2019257,626
 $3
$10,793
$(1,668)$(428)$(150)$8,550
$320
$8,870
           
 Three Months Ended September 30, 2018
(in millions, except shares in thousands)Common Stock
Additional
Paid-in Capital
Retained Earnings
Accumulated
Other
Comprehensive
Loss
Treasury Stock
Total
DXC Equity
Non-
Controlling Interest
Total Equity
Shares Amount
Balance at June 30, 2018282,829
 $3
$11,868
$—
$(312)$(87)$11,472
$342
$11,814
Net income    262
  262
(3)259
Other comprehensive loss     (70) (70)1
(69)
Share-based compensation expense   18
   18
 18
Acquisition of treasury stock      (18)(18) (18)
Share repurchase program(1,449)  (58)(69)  (127) (127)
Stock option exercises and other common stock transactions1,139
  20
   20
 20
Dividends declared ($0.19 per share)    (54)  (54) (54)
Non-controlling interest distributions and other    (3)  (3)(3)(6)
Balance at September 30, 2018282,519
 $3
$11,848
$136
$(382)$(105)$11,500
$337
$11,837





DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)
Six Months Ended September 30, 2019Three Months Ended June 30, 2020
(in millions, except shares in thousands)Common Stock
Additional
Paid-in Capital
Retained Earnings (Accumulated Deficit)
Accumulated
Other
Comprehensive
Loss
Treasury Stock (1)
Total
DXC Equity
Non-
Controlling Interest
Total EquityCommon Stock
Additional
Paid-in Capital
 Accumulated Deficit
Accumulated
Other
Comprehensive Loss
Treasury Stock (1)
Total
DXC Equity
Non-
Controlling Interest
Total Equity
Shares AmountShares Amount
Balance at March 31, 2019270,214
 $3
$11,301
$478
$(244)$(136)$11,402
$323
$11,725
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   (1,956) (1,956)9
(1,947)   (205) (205)6
(199)
Other comprehensive loss   (184) (184)(22)(206)
Other comprehensive income   4
 4
(1)3
Share-based compensation expense   49
 49
 49
   15
 15
 15
Acquisition of treasury stock   (14)(14) (14)   (2)(2) (2)
Share repurchase program(13,580) 

(571)(79) (650) (650)
Stock option exercises and other common stock transactions992
 

14
 
14
 14
709
  


 —
 —
Dividends declared ($0.42 per share)   (111) (111) (111)
Non-controlling interest distributions and other   —
 —
10
10
Balance at September 30, 2019257,626
 $3
$10,793
$(1,668)$(428)$(150)$8,550
$320
$8,870
Balance at June 30, 2020256,383
 $3
$10,729
$(5,386)$(599)$(154)$4,593
$349
$4,942
      
Six Months Ended September 30, 2018Three Months Ended June 30, 2019
(in millions, except shares in thousands)Common Stock
Additional
Paid-in Capital
Retained Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury Stock
Total
DXC Equity
Non-
Controlling Interest
Total EquityCommon Stock
Additional
Paid-in Capital
Retained Earnings
Accumulated
Other
Comprehensive
Loss
Treasury Stock
Total
DXC Equity
Non-
Controlling Interest
Total Equity
Shares AmountShares Amount
Balance at March 31, 2018286,393
 $3
$12,210
$1,301
$58
$(85)$13,487
$350
$13,837
Cumulative effect of adopting the new revenue standard   114
 114
 114
Balance at March 31, 2019270,214
 $3
$11,301
$478
$(244)$(136)$11,402
$323
$11,725
Net income   521
 521
4
525
   163
 163
5
168
Other comprehensive loss   (440) (440)(5)(445)   (107) (107)(24)(131)
Share-based compensation expense   40
 40
 40
   18
 18
 18
Acquisition of treasury stock   (20)(20) (20)   (13)(13) (13)
Share repurchase program(5,228) 

(251)(200) (451) (451)(7,360)  (410)(90) (500) (500)
Stock option exercises and other common stock transactions1,354
 


26
 26
 26
855
  7
 7
 7
Dividends declared ($0.38 per share)   (109) (109) (109)
Non-controlling interest distributions and other   

 —
(12)(12)
Divestiture of USPS   (177)(1,491) (1,668) (1,668)
Balance at September 30, 2018282,519
 $3
$11,848
$136
$(382)$(105)$11,500
$337
$11,837
Dividends declared ($0.21 per share)   (57) (57) (57)
Balance at June 30, 2019263,709
 $3
$10,916
$494
$(351)$(149)$10,913
$304
$11,217

        

(1) 2,018,1482,291,790 treasury shares as of SeptemberJune 30, 2019.2020.



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


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

Note 1 - Summary of Significant Accounting Policies

Business

DXC Technology Company ("DXC"DXC," the "Company," "we," "us," or the "Company""our"), a world leading independent, end-to-end helps global companies run their mission critical systems and operations while modernizing IT, services company, managesoptimizing data architectures, and modernizes mission-critical systems, integrating them with new digital solutions to produce better business outcomes.The Company’s global reachensuring security and talent, innovative platforms, technology independence and extensive partner network enable more than 6,000scalability across public, private and public-sector clientshybrid 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.

HHS Sale

On March 9, 2020, DXC entered into a definitive agreement to sell (the “HHS Sale”) its U.S. State and Local Health and Human Services business (the “HHS Business”) to Veritas Capital Fund Management, L.L.C. for $5.0 billion in approximately 70 countriescash. The HHS Business is an end-to-end provider of technology-enabled, mission critical solutions that are fundamental to thrive on change.the administration and operations of health programs throughout the United States. The transaction is expected to close by September 2020, but no later than December 2020, subject to the satisfaction of certain closing conditions. Following the transaction close, DXC will retain its remaining healthcare practice, servicing customers across the healthcare continuum, including payers, providers and life sciences firms.

Luxoft Acquisition

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

Separation of USPS

On May 31, 2018, DXC completed the separation of its U.S. Public Sector business ("USPS" or the "Separation"), and combination with Vencore Holding Corp. ("Vencore") and KeyPoint Government Solutions ("Keypoint") (the "Mergers") to form Perspecta Inc. ("Perspecta"), an independent public company (collectively, the "USPS Separation and Mergers"). Under the terms of the separation agreements, on May 31, 2018, stockholders who held DXC common stock at the close of business on May 25, 2018 (the “Record Date”), received a distribution of one share of Perspecta common stock for every two shares of DXC common stock held as of the Record Date (the "Distribution"). See Note 4 - "Divestitures" for more information.

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

Basis of Presentation

In order to make this report easier to read, DXC refers throughout to (i) the interim unaudited Condensed Consolidated Financial Statements as the “financial statements,” (ii) the Condensed Consolidated Statements of Operations as the “statements of operations,” (iii) the Condensed Consolidated StatementStatements of Comprehensive (Loss) 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 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 balance sheets. Net earnings attributable to the non-controlling interests are presented separately in the statements of operations and comprehensive income attributable to non-controlling interests are presented separately in the statements of comprehensive income. All intercompany transactions and balances have been eliminated. Certain amounts reported in the previous year have been reclassified to conform to the current year presentation.

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


The financial statements of the Company have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission for quarterly reports and accounting principles generally accepted in the United States ("GAAP"). Certain disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules. These financial statements should therefore be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 20192020 ("fiscal 2019"2020").
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Use of Estimates

The preparation of financial statements in conformity with GAAP, requires the Company's management to make estimates and assumptions that affect amounts reported in the financial statements. The Company bases its estimates on assumptions regarding historical experience, currently available information and anticipated developments that it believes are reasonable and appropriate. However, because the use of estimates involves an inherent degree of uncertainty, actual results could differ from those estimates. The severity, magnitude and duration, as well as the economic consequences of the coronavirus disease 2019 ("COVID-19") pandemic, are uncertain, rapidly changing and difficult to predict. Therefore, accounting estimates and assumptions may change over time in response to COVID-19 and may change materially in future periods. In the opinion of the Company's management, the accompanying financial statements of DXC contain all adjustments, including normal recurring adjustments, necessary to present fairly the Company's financial statements. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full fiscal year.

LeasesAllowance for Credit Losses

Effective April 1, 2019,2020, the Company adopted ASU 2016-02, "Leases, Topic ASC 842"2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” using the modified retrospective method. Refer to Note 2 - "Recent Accounting Pronouncements" and Note 75 - "Leases""Receivables" for further discussion of the impact of adoption and other required disclosures. The Company determines ifamendments in this update changed the guidance for credit losses to an arrangement is a lease at inception by evaluating whetherexpected loss model rather than an incurred loss model. Financial assets subject to impairment under an expected credit loss model include billed and unbilled receivables, other receivables, and contract assets. Certain off-balance sheet arrangements, such as financial guarantees associated with receivables securitization facilities, are also subject to the arrangement conveys the right to use an identified asset and whether DXC obtains substantially all economic benefits from and has the ability to direct the useguidance of the asset. Operating leases are included in operating right-of-use ("ROU") assets, net, current operating lease liabilities and non-current operating lease liabilities in DXC's balance sheets. Finance leases are included in property and equipment, net, short term debt and current maturities of long-term debt and long-term debt, net of current maturities in DXC's balance sheets.  ASU 2016-13.

ROU assets representUnder an expected credit loss model, the Company's rightCompany immediately recognizes an estimate of credit losses expected to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating ROU assets and operating lease liabilities are recognized at commencement date based on the present value of lease paymentsoccur over the lease term.

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

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

Lease expense for lease payments is recognized on a straight-line basis over the lease term. Variable lease expense is related to the Company's leased real estate for offices and primarily includes labor and operational costs. DXC subleases certain leased office space to third parties when it determines there is excess leased capacity. Sublease income was not material for all periods presented. The Company combines lease and non-lease components under its lease agreements.
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Goodwill Impairment Analysis

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

The Company initially conducts an assessment of qualitative factors in order to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. This qualitative assessmentASU 2016-13. DXC considers all available relevant factors specific to the reporting units,information when estimating expected credit losses, including macroeconomic conditions; industry and market considerations; overall financial performance and relevant entity-specific events.

If the Company determines that it is not more likely that the carrying amount for a reporting unit is less than its fair value, then subsequent quantitative goodwill impairment testing is not required. If the Company determines that it is more likely than not that the carrying amount for a reporting unit is greater than its fair value, then it proceeds with a subsequent quantitative goodwill impairment test.

The Company has the option to bypass the initial qualitative assessment stage and proceed directly to the quantitative goodwill impairment test. The quantitative goodwill impairment test compares each reporting unit’s fair value to its carrying value. If the reporting unit’s fair value exceeds its carrying value, no further procedures are required. However, if a reporting unit’s fair value is less than its carrying value, then an impairment charge is recorded in the amount of the excess.

When the Company performs the quantitative goodwill impairment test for a reporting unit, it estimates the fair value of the reporting unit using both the income approach and the market approach. The income approach incorporates the use of a discounted cash flow method in which the estimated future cash flows and terminal values for each reporting unit are discounted to present value using a discount rate. Cash flow projections are based on management's estimates of economic andpast events, current market conditions which drive key assumptions of revenue growth rates, operating margins, capital expenditures and working capital requirements. The discount rate is based on the specific risk characteristics of each reporting unit, the weighted-average cost of capitalforecasts and its underlying forecasts. The market approach estimates fair value by applying performance-metric multiples to the reporting unit's prior andtheir implications for expected operating performance. The multiples are derived from comparable publicly traded companies that have operating and investment characteristics similar to those of the reporting unit. If the fair value of the reporting unit derived using one approach is significantly different from the fair value estimate using the other approach, the Company reevaluates its assumptions used in the two models. Assumptions are modified as considered appropriate under the circumstances until the two models yield similar and reasonable results. The fair values determined by the market approach and income approach, as described above, are weighted to determine the fair value for each reporting unit. The weighting ascribed to the market approach fair value assigned to each reporting unit is influenced by two primary factors: 1) the number of comparable publicly traded companies used in the market approach, and 2) the similarity of the operating and investment characteristics of the reporting units to the comparable publicly traded companies used in the market approach.credit losses.

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


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

Property and Equipment

Property and equipment, which includes assets under capital leases, are stated at cost less accumulated depreciation. Depreciation is computed predominantly on a straight-line basis over the estimated useful lives of the assets or the remaining lease term, whichever is shorter. The estimated useful lives of DXC’s property and equipment are as follows:
BuildingsUp to 40 years
Computers and related equipment4 to 7 years
Furniture and other equipment3 to 15 years
Leasehold improvementsShorter of lease term or useful life up to 20 years


In accordance with its policy, the Company reviews the estimated useful lives of its property and equipment on an ongoing basis. As a result, effective April 1, 2019, the Company changed its estimate of the useful lives of its computers and related equipment from an average of four to five years to an average of four to seven years, which better reflects the estimated periods during which these assets will remain in service. This change resulted in a $56 million and $111 million decrease to depreciation expense for the three and six months ended September 30, 2019, respectively.

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



Note 2 - Recent Accounting Pronouncements

During the sixthree months ended SeptemberJune 30, 2019,2020, DXC adopted the following Accounting Standards Updates ("ASU") issued by the Financial Accounting Standards Board:
Date Issued and ASUDate Adopted and MethodDescriptionImpact
FebruaryJune 2016

ASU 2016-02 "Leases2016-13, “Financial Instruments - Credit Losses (Topic 842)"326): Measurement of Credit Losses on Financial Instruments”
April 1, 20192020
Modified retrospectiveRetrospective
This update is intendedrequires the measurement and recognition of expected credit losses using the current expected credit loss model for financial assets held at amortized cost, which includes the Company’s trade accounts receivable, certain financial instruments and contract assets. It replaces the existing incurred loss impairment model with an expected loss methodology. The recorded credit losses are adjusted each period for changes in expected lifetime credit losses. The standard requires a cumulative effect adjustment to increase transparency and comparability among organizations by recognizing virtually all lease assets and lease liabilities on the balance sheet and disclosing key information about lease arrangements. Early adoptionstatement of this update is permitted. This update must be adopted using a modified retrospective transition atfinancial position as of the beginning of the earliestfirst reporting period presented or atin which the adoption date recognizing a cumulative adjustment to the opening balance of retained earnings in the period of adoption and provides for certain practical expedients.guidance is effective.

The Company adopted this update utilizingstandard using the simplified transition method allowing the Company to not restate comparative periodsmodified retrospective approach and apply Topic 842 beginning on April 1, 2019. During adoption, the Company implemented changesrecorded an immaterial cumulative effect adjustment in its systems, including the implementation of new lease accounting software, internal controls, business processes, and accounting policies related to both the implementation of, and ongoing compliance with, the new guidance. The adoption resulted in following impacts.

The Company recorded increases of $1.7 billion in assets and $1.8 billion in liabilitiesretained earnings as of April 1, 2019, due to the recording of operating right-of-use assets and operating lease liabilities for lease obligations that were historically classified as operating leases. The Company's cumulative adjustment to the opening balance of retained earnings was not material. Additionally, the update did not have a material impact on the statements of operations or statements of cash flows.

DXC elected the practical expedient package permitted under Topic 842, which among other things, permits the Company not to reassess historical conclusions related to contracts that contain leases, lease classification and initial direct costs for leases that commenced prior to the adoption date. DXC applied the lessee component election, allowing the Company to account for lease and non-lease components as a single lease component. In addition, DXC made an accounting policy election to keep leases with an initial term of 12 months or less that do not contain a ‘reasonably certain’ purchase option off the balance sheets.
Refer to Note 7 - "Leases" for additional information.

2020.


FebruaryAugust 2018

ASU 2018-022018-15,
"Intangibles - "Income StatementGoodwill and Other - Reporting Comprehensive Income (Topic 220)Internal-Use Software (Subtopic 350-40): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income"Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract"


April 1, 20192020
RetrospectiveProspective

This update provides anhelps entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. Entities have the option to reclassify stranded tax effects within accumulated other comprehensive income ("AOCI")apply this standard prospectively to retained earnings in each period in whichall implementation costs incurred after the effect (or portion thereof)date of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recorded.adoption or retrospectively.

The Company adopted this updatestandard using the prospective method and opted to not elect to reclassify any stranded tax effects within AOCI to retained earnings, and as such,determined that the adoption of ASU 2018-02 did not have an effect on2018-15 had no material impact to its condensed consolidated financial statements. In accordance with its accounting policy, the Company uses the portfolio approach and will release income tax effects from AOCI once the reason the tax effects were established cease to exist (e.g., when available-for-sale debt securities are sold or if a pension plan is liquidated).
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


January 2017

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

DXC's impairment testing performed during the second quarter of fiscal 2020 resulted in a non-cash impairment charge of $2,887 million consisting of $2,625 million and $262 million in its GBS and GIS reporting units, respectively. See Note 11 - "Goodwill" for additional information.


The following ASUs were recently issued but have not yet been adopted by DXC:
Date Issued and ASUDXC Effective DateDescriptionImpact
June 2016December 2019

ASU 2016-13, “Financial Instruments - Credit Losses2019-12, "Income Taxes (Topic 326)740): Measurement of Credit Losses on Financial Instruments”

Simplifying the Accounting for Income Taxes"
Fiscal 20212022
This update is intended to provide financial statement users with more decision-useful information aboutsimplify the expected credit losses on financial instrumentsaccounting 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 commitments to extend credit heldareas of Topic 740 by a reporting entity at each reporting date. To achieve this objective, the amendments inclarifying and amending existing guidance. Early adoption of this update replace the existing incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This update must be adopted using a prospective transition approach for debt securities for which an other-than-temporary impairment has been recognized before the effective date.is permitted.
DXCThe Company is currently evaluating its trade receivables and financial arrangements for the potential impact this updatestandard may have on its financial statements in future reporting periods.




Other recently issued ASUs effective after SeptemberJune 30, 20192020 are not expected to have a material effect on DXC's consolidated financial statements.
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 3 - Acquisitions

Fiscal 2020 Acquisitions

Luxoft Acquisition

On June 14, 2019, DXC completed the acquisition of Luxoft, a digital service provider whose offerings encompass strategic consulting, custom software development services, and digital solution engineering for total consideration of $2.0 billion. The acquisition will combine Luxoft’s digital engineering capabilities with DXC’s expertise in IT modernization and integration. The purchase agreement (“Merger Agreement”) was entered into by DXC and Luxoft on January 6, 2019 and the transaction was closed on June 14, 2019.2019 (the "acquisition date.")

The transaction between DXC and Luxoft is an acquisition, with DXC as the acquirer and Luxoft as the acquiree, based on the fact that DXC acquired 100% of the equity interests and voting rights in Luxoft, and that DXC is the entity that transferred the cash consideration.

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


The Company's preliminary estimatesallocation of fair values ofthe purchase price to the assets acquired and the liabilities assumed are based on the information that was available as of the Luxoft acquisition date and the Company is continuing to evaluate the underlying inputs and assumptions used in its valuations. Accordingly, these preliminary estimates are subject to change during the measurement period, which is up to one year from the acquisition date. The preliminary estimated purchase price is allocated as follows:

(in millions) Estimated Fair Value Fair Value
Cash and cash equivalents $113
 $113
Accounts receivable 233
 233
Other current assets 15
 15
Total current assets 361
 361
Property and equipment 31
 31
Intangible assets 631
 577
Other assets 91
 99
Total assets acquired 1,114
 1,068
Accounts payable, accrued payroll, accrued expenses, and other current liabilities (119) (121)
Deferred revenue (8) (8)
Long-term deferred tax liabilities and income tax payable (86) (106)
Other liabilities (63) (72)
Total liabilities assumed (276) (307)
Net identifiable assets acquired 838
 761
Goodwill 1,185
 1,262
Total estimated consideration transferred $2,023
Total consideration transferred $2,023


Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed at the acquisition date. The goodwill recognized with the acquisition was attributable to the synergies expected to be achieved by combining the businesses of DXC and Luxoft, expected future contracts and the acquired workforce. The cost-saving opportunities are expected to include improved operating efficiencies and asset optimization. The total goodwill arising from the acquisition was allocated to Global Business Services ("GBS") and is not deductible for tax purposes. See Note 1110 - "Goodwill."

DXC TECHNOLOGY COMPANY
As of September 30, 2019, DXC has not finalized the determination of fair values allocated to various assets and liabilities, including, but not limited to, receivables; other current assets; property and equipment; intangible assets; other assets; deferred income taxes, net and other income tax liabilities; deferred revenue and advanced contract payments; accounts payable and accrued liabilities; other liabilities; loss contracts; non-controlling interest; and goodwill.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

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

Current assets and liabilities

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

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


Property and equipment

The Company valued acquired property and equipment are summarized in the following table:
(in millions) Amount
Land, buildings, and leasehold improvements $8
Computers and related equipment 12
Furniture and other equipment 11
Total $31


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

Identified intangible assets

The acquired identifiable intangible assets are summarized in the following table:
(in millions) Amount Estimated Useful Lives (Years)
Customer related intangibles $379
 10
Trade names 166
 10
Developed technology 75
 7
Third-party purchased software 11
 2 to 10 years
Total $631
  


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

The Company estimated the preliminary value ofvalued customer relationships using the multi-period excess earnings method under the income approach and the preliminary value ofvalued trade names and developed technology using a relief from royalty method under the income approach. For developed technology, the Company calculated the preliminary fair value based on an industry benchmarking analysis based on recent and relevant transactions and identified the percentage of the total consideration that should be allocated to the identified intangible assets categories and calculated the preliminary estimated value. The Company determined that the net book value of the purchased software represents the preliminary fair value.

Deferred tax liabilitiesBelow are the estimated useful lives of the acquired intangibles:
Estimated Useful Lives (Years)
Customer related intangibles10
Trade names20
Developed technology3
Third-party purchased software3


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

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


Unaudited Results

The Company's condensed consolidated statements of operations includes the following revenues and net income
attributable to Luxoft since the acquisition date:
(in millions) Three Months Ended September 30, 2019 
Six Months Ended September 30, 2019(1)
Revenues $214
 $259
Net loss $11
 $7

(1) Results for the six months ended September 30, 2019, reflect operations subsequent to the acquisition date of June 14, 2019, not the full six-month period.

Fiscal 2019 Acquisitions

Molina Medicaid Solutions Acquisition

On October 1, 2018, DXC completed its acquisition of Molina Medicaid Solutions ("MMS"), a Medicaid Management Information Systems business, from Molina Healthcare, Inc. for total consideration of $233 million. The combination of MMS with DXC expands DXC’s ability to provide services to state agencies in the administration of Medicaid programs, including business processing, information technology development and administrative services.

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

Other Acquisitions

In addition to the MMS acquisition, DXC completed 7 acquisitions to complement the Company's Microsoft Dynamics and ServiceNow offerings and to provide opportunities for future growth. The acquired businesses are included in the results of the GBS segment. The purchase consideration of $232 million includes contingent consideration with an estimated fair value of $41 million. For acquisitions within the measurement period, the Company's purchase price allocation is preliminary and subject to revision as additional information related to the fair value of assets and liabilities becomes available. The purchase price is allocated to assets acquired and liabilities assumed based upon determination of fair values at the dates of acquisition as follows: $74 million to current assets, $71 million to intangible assets other than goodwill, $9 million to other non-current assets, $63 million to current liabilities and $141 million to goodwill. The goodwill is associated with the Company's GBS segment, some of which is tax deductible.
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note4 - Divestitures

Separation of USPS

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

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

a Separation and Distribution Agreement;
an Employee Matters Agreement;
a Tax Matters Agreement;
an Intellectual Property Matters Agreement;
a Transition Services Agreement;
a Real Estate Matters Agreement;
an IT Services Agreement and,
a Non-US Agency Agreement.

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

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

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

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


The following is a summary of the operating results for USPS which have been reflected within income from discontinued operations, net of tax:
(in millions) 
Six Months Ended September 30, 2018(1)
Revenue $431
   
Costs of services 311
Selling, general and administrative 50
Depreciation and amortization 33
Restructuring costs 1
Interest expense 8
Other income, net (25)
Total costs and expenses 378
Total income from discontinued operations, before income taxes 53
Income tax expense 18
Total income from discontinued operations $35
(1) Results for the six months ended September 30, 2018 reflect operations through the Separation date of May 31, 2018, not the full six-month period.

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

The following selected financial information of USPS is included in the statements of cash flows:
(in millions) Six Months Ended September 30, 2018
Depreciation $16
Amortization $17
Capital expenditures $—
Significant operating non-cash items:  
Gain on dispositions $24

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



Note 54 - Earnings (Loss) per Share

Basic EPSearnings (loss) per share ("EPS") is computed using the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects the incremental shares issuable upon the assumed exercise of stock options and equity awards. The following table reflects the calculation of basic and diluted EPS:


Three Months Ended Six Months Ended
(in millions, except per-share amounts)
September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
Net (loss) income attributable to DXC common shareholders:        
From continuing operations $(2,119) $262
 $(1,956) $486
From discontinued operations $—
 $—
 $—
 $35
         
Common share information:        
Weighted average common shares outstanding for basic EPS 258.71
 281.37
 262.83
 282.89
Dilutive effect of stock options and equity awards —
 4.41
 —
 4.64
Weighted average common shares outstanding for diluted EPS 258.71
 285.78
 262.83
 287.53
         
Earnings (Loss) per share:        
Basic        
Continuing operations $(8.19) $0.93
 $(7.44) $1.72
Discontinued operations $—
 $—
 $—
 $0.12
Total $(8.19) $0.93
 $(7.44) $1.84
         
Diluted        
Continuing operations $(8.19) $0.92
 $(7.44) $1.69
Discontinued operations $—
 $—
 $—
 $0.12
Total $(8.19) $0.92
 $(7.44) $1.81


Three Months Ended
(in millions, except per-share amounts)
June 30, 2020 June 30, 2019
Net (loss) income attributable to DXC common shareholders: $(205) $163
     
Common share information:    
Weighted average common shares outstanding for basic EPS 253.63
 267.00
Dilutive effect of stock options and equity awards —
 1.97
Weighted average common shares outstanding for diluted EPS 253.63
 268.97
     
(Loss) Earnings per share:    
Basic $(0.81) $0.61
Diluted $(0.81) $0.61


For the three months ended September 30, 2019, stock options of 765,883, performance stock units of 434,862 and restricted stock units (RSUs) of 2,354,528Certain share-based equity awards were excluded from the computation of diluteddilutive EPS duebecause inclusion of these awards would have had an anti-dilutive effect. The number of awards excluded were as follows:
  Three Months Ended
  
June 30, 2020(1)
 June 30, 2019
Stock Options 1,749,189
 4,824
Restricted Stock Units 3,149,436
 589,569
Performance Stock Units 233,762
 —

(1)Due to the Company's net loss. Forloss for the three months ended SeptemberJune 30, 2018 RSUs of 1,419 were excluded in the computation of diluted EPS, which if included, would have been anti-dilutive.

For the six months ended September 30, 2019,2020, stock options, of 979,644,restricted stock units and performance stock units of 437,507 and RSUs of 1,180,177 were excluded from the computation of diluteddilutive EPS due to the Company's net loss. For the six months ended September 30, 2018 RSUs of 713 were excluded in the computation of diluted EPS, which if included,because they would have been anti-dilutive.had an anti-dilutive effect.
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 65 - Sale of Receivables

Receivables Facility

The Company has an accounts receivable sales facility (as amended, restated, supplemented or supplemented to date,otherwise modified as of June 30, 2020, the "Receivables Facility") with certain unaffiliated financial institutions (the "Purchasers") for the sale of commercial accounts receivable in the United States. Under the Receivables Facility, the Company and certain of itsthe Company's subsidiaries (the "Sellers") sell accounts receivable to DXC Receivables LLC ("Receivables SPV"), a wholly-ownedwholly owned bankruptcy-remote entity, in a true sale. Receivables SPV subsequently sells certain of the receivables in their entirety to the Purchasers pursuant to a receivables purchase agreement. The financial obligations of Receivables SPV to the Purchasers under the Receivables Facility are limited to the assets it owns and non-recourse to the Company. Sales of receivables by Receivables SPV occur continuously and are settled on a monthly basis. During the secondfirst quarter of fiscal 2020,2021, Receivables SPV amended the Receivables Facility (the "Amendment") to increasedecrease the investmentfacility limit from $600$750 million to $750$600 million and extend the termination date to August 19, 2020. Under the terms of the amended Receivables Facility, there is no longer any deferred purchase price receivable ("DPP") for receivables as the entire purchase price is paid in cash when the receivables are sold to the Purchasers. Prior DPP'sto the Amendment, DPPs were realized by Receivables SPV upon the ultimate collection of the underlying receivables sold to the Purchasers. Cash receipts on the DPP were classified as cash flows from investing activities. The DPP was $525 million before the amendment was executed. Upon execution of the amendment, the Purchasers extinguished the DPP and returned the related underlying receivables titles to Receivables SPV. The DPP extinguishment was classified as a non-cash investing activity, please refer to Note 19 - "Cash Flows."

The amount available under the Receivables Facility fluctuates over time based on the total amount of eligible receivables generated during the normal course of business after deducting excess concentrations. As of SeptemberJune 30, 2019,2020, the total availability under the Receivables Facility was $663$324 million, and the amount sold to the Purchasers was $650$403 million, which was derecognized from the Company's balance sheet. As of June 30, 2020, the Company recorded a $79 million liability within accounts payable because the amount of cash proceeds received by the Company under the Receivables Facility was more than the total availability. The Receivables Facility terminatesis scheduled to terminate on August 19, 2020, but provides for 1 or more optional one-year extensions, if agreed to by the Purchasers. The Company uses the proceeds from Receivables SPV'sthe sale of receivables under the Receivables Facility for general corporate purposes.

The fair value of the sold receivables approximated book value due to the short-term nature, and as a result, 0 gain or loss on sale of receivables was recorded.

While the Company guarantees certain non-financial performance obligations of the Sellers, the Purchasers bear customer credit risk associated with the receivables sold under the Receivables Facility and have recourse in the event of credit-related customer non-payment solely to the assets of the Receivables SPV.

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


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


FederalMilano Receivables Sales Facility

Since July 14, 2017,On June 5, 2020, the Company has given a parent guaranty in connection with a federal receivables salesentered into an accounts receivable securitization facility (the "Milano Facility") with certain unaffiliated financial institutions (the "Milano Purchasers") for the sale of commercial accounts receivable related to Medicaid Management Information Systems ("MMiS") contracts in the United States. The Milano Facility is scheduled to terminate on June 4, 2021, but provides for 1 or more optional one-year extensions, if agreed to by the Purchasers. The Milano Facility has a facility limit of $275 million. Under the Milano Facility, certain of the Company's subsidiaries (the "Milano Sellers") sell MMiS accounts receivable to Milano Receivables Funding LLC ("Milano Receivables SPV"), a wholly owned bankruptcy-remote entity, in a true sale. Milano Receivables SPV subsequently sells the receivables in their entirety to the Milano Purchasers pursuant to a receivables purchase agreement. The financial obligations of Milano Receivables SPV to the Milano Purchasers under the Milano Facility are limited to the assets it owns and non-recourse to the Company. Sales of MMiS receivables by Milano Receivables SPV occur continuously and are settled on a monthly basis.

The amount available under the Milano 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 June 30, 2020, the total availability under the Milano Facility was approximately $251 million, and the amount sold to the Milano Purchasers was $263 million, which was derecognized from the Company's balance sheet. As of June 30, 2020, the Company recorded a $12 million liability within accounts payable because the amount of cash proceeds received by the Company under the Milano Facility was more than the total availability. The Company uses the proceeds from the sale of receivables under the Milano Facility for general corporate purposes.

The fair value of the sold receivables approximated book value due to the short-term nature, and as a result, 0 gain or loss on sale of receivables was recorded.

While the Company guarantees certain non-financial performance obligations of the Milano Sellers, the Milano Purchasers bear customer credit risk associated with the receivables sold under the Milano Facility and have recourse in the event of credit-related customer non-payment solely to the assets of the Milano Receivables SPV.

German Receivables Facility

On October 1, 2019, the Company executed an accounts receivable securitization facility (as amended, restated, supplemented or otherwise modified as of June 30, 2020, the "DE Receivables Facility") with certain unaffiliated financial institutions (the "DE Purchasers") for the sale of commercial accounts receivable in Germany. The DE Receivables Facility has a facility limit of €200 million (approximately $225 million as of June 30, 2020). Under the DE Receivables Facility, certain subsidiaries of the Company previouslyorganized in Germany (the "DE Sellers") sell accounts receivable to DXC ARFacility Designated Activity Company ("DE Receivables SPV"), a trust-owned bankruptcy-remote entity, in a true sale. Pursuant to a receivables purchase agreement, DE Receivables SPV subsequently sells the receivables to the DE Purchasers in return for payments of capital. Sales of receivables by DE Receivables SPV occur continuously and are 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 is no longer any 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, please refer to Note 18 - "Cash Flows."

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


The amount available under the DE Receivables Facility fluctuates over time based on the total amount of eligible federal government obligor receivables including billedgenerated during the normal course of business after deducting excess concentrations. As of June 30, 2020, the total availability under the DE Receivables Facility was approximately $116 million, and the amount sold to the DE Purchasers was $123 million, which was derecognized from the Company's balance sheet. As of June 30, 2020, the Company recorded a $7 million liability within accounts payable because the amount of cash proceeds received by the Company under the DE Receivables Facility was more than the total availability. The DE Receivables Facility is scheduled to terminate on September 30, 2020, but provides for 1 or more optional one-year extensions, if agreed to by the DE Purchasers. The Company uses the proceeds from DE Receivables SPV's sale of receivables under the DE Receivables Facility for general corporate purposes.

The fair value of the sold receivables approximated book value due to the short-term nature, and as a result, no gain or loss on sale of receivables was recorded.

Certain obligations of DE Sellers under the DE Receivables Facility and certain unbilled receivables. In connection withDXC subsidiaries located in Germany, as initial servicers, are guaranteed by the Separation, the sellers and servicersCompany under a performance guaranty, made in favor of an administrative agent on behalf of the receivables sold underDE Purchasers. However, the Federalperformance guaranty does not cover DE Receivables Sales Facility were divested and, effective May 31, 2018,SPV’s obligations to pay yield, fees or invested amounts to the parent guaranty was terminated.administrative agent or any of the DE Purchasers.

The following table reflects activityis a reconciliation of the Federal Receivables Sales Facility, prior tobeginning and ending balances of the Separation:DPP:
(in millions) 
As of and for the
Six Months Ended
September 30, 2018(1)
 As of June 30, 2020
Beginning balance $103
Transfers of receivables $464
 417
Collections $521
 (420)
Operating cash flow effect $(57)
Change in funding availability 2
Facility amendments (102)
Ending balance $—



(1) ResultsAllowance 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 six months ended September 30, 2018 reflect operations throughcurrent market conditions and forecasts about future economic conditions. The following table presents the Separation date of May 31, 2018, notactivity in the full six-month period.allowance for doubtful accounts for trade accounts receivable:
(in millions) As of and for the Three Months Ended
  June 30, 2020
Beginning balance $74
Impact of adoption of the Credit Loss Standard 4
Provisions for expected credit losses 35
Write-offs charged against the allowance (9)
Ending balance $104


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



Note 76 - Leases

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

The components of lease expense were as follows:
(in millions) Three Months Ended September 30, 2019 Six Months Ended September 30, 2019 Three Months Ended June 30, 2020 Three Months Ended June 30, 2019
Operating lease cost $164
 $340
 $156
 $176
Short-term lease cost 14
 24
 15
 10
Variable lease cost 11
 26
 8
 15
Sublease income (10) (19) (12) (9)
Total operating costs $179
 $371
 $167
 $192
        
Finance lease cost:        
Amortization of right-of-use assets $140
 $249
 $116
 $109
Interest on lease liabilities 17
 34
 14
 17
Total finance lease cost $157
 $283
 $130
 $126


Cash payments made from variable lease costs and short-term leases are not included in the measurement of operating and finance lease liabilities, and as such, are excluded from the supplemental cash flow information stated below. In addition, for the supplemental non-cash information on operating and finance leases, please refer to Note 1918 - "Cash Flows."

(in millions) Six Months Ended September 30, 2019
Cash paid for amounts included in the measurement of:  
     Operating cash flows from operating leases $340
     Operating cash flows from finance leases $34
     Financing cash flows from finance leases $279
Supplemental Cash Flow information related to leases was as follows:
(in millions) Three Months Ended June 30, 2020 Three Months Ended June 30, 2019
Cash paid for amounts included in the measurement of:    
     Operating cash flows from operating leases $156
 $174
     Operating cash flows from finance leases $14
 $17
     Financing cash flows from finance leases $138
 $145


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



Supplemental Balance Sheet information related to leases was as follows:
 As of As of
(in millions) Balance Sheet Line Item September 30, 2019 Balance Sheet Line Item June 30, 2020 March 31, 2020
Assets:      
ROU operating lease assets Operating right-of-use assets, net $1,482
 Operating right-of-use assets, net $1,602
 $1,428
ROU finance lease assets Property and Equipment, net 1,291
 Property and Equipment, net 1,137
 1,220
Total $2,773
 $2,739
 $2,648
      
Liabilities:      
Current      
Operating lease Current operating lease liabilities $489
 Current operating lease liabilities $488
 $482
Finance lease Short-term debt and current maturities of long-term debt 488
 Short-term debt and current maturities of long-term debt 432
 444
Total $977
 $920
 $926
      
Non-current      
Operating lease Non-current operating lease liabilities $1,139
 Non-current operating lease liabilities $1,208
 $1,063
Finance lease Long-term debt, net of current maturities 688
 Long-term debt, net of current maturities 583
 602
Total $1,827
 $1,791
 $1,665

The following table provides information on the weighted average remaining lease term and weighted average discount rate for operating and finance leases:
Weighted Average remaining lease term:Years
     Operating leases4.8
     Finance leases2.9
Weighted average remaining discount rate:Rate
     Operating leases3.3%
     Finance leases5.4%
  As of
  June 30, 2020 March 31, 2020
Weighted Average remaining lease term: Years
     Operating leases 4.9
 4.8
     Finance leases 2.7
 2.7
     
Weighted average remaining discount rate: Rate
     Operating leases 4.1% 4.0%
     Finance leases 4.2% 6.4%


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


The following maturity analysis presents expected undiscounted cash payments for operating and finance leases on an annual basis as of SeptemberJune 30, 2019:2020:
Fiscal year Operating Leases  
(in millions) Real Estate Equipment Finance Leases
Remainder of 2020 $221
 $73
 $327
2021 366
 88
 391
2022 283
 37
 301
2023 213
 14
 169
2024 163
 9
 58
Thereafter 297
 14
 3
     Total lease payments 1,543
 235
 1,249
Less: imputed interest (138) (12) (73)
     Total payments $1,405
 $223
 $1,176


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


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

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


Prior to fiscal 2020, required disclosure under ASC 840 for future minimum lease payments to be made under finance leases as of March 31, 2019, was as follows:

Fiscal year   Operating Leases  
(in millions) Finance leases Real Estate Equipment Finance Leases
2020 $509
2021 310
Remainder of 2021 $356
 $51
 $345
2022 212
 403
 38
 370
2023 128
 321
 18
 223
2024 36
 248
 10
 99
2025 168
 5
 23
Thereafter —
 261
 3
 1
Total minimum lease payments 1,195
Less: Amount representing interest and executory costs (68)
Present value of net minimum lease payments $1,127
Total lease payments 1,757
 125
 1,061
Less: imputed interest (181) (5) (46)
Total payments $1,576
 $120
 $1,015

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



Note 87 - Fair Value

Fair Value Measurements on a Recurring Basis

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis, excluding pension assets and derivative assets and liabilities. See Note 98 - "Derivative and Hedging Activities" for information about the fair value of the Company's derivative assets and liabilities. There were no transfers between any of the levels during the periods presented.
 Fair Value Hierarchy Fair Value Hierarchy
(in millions) September 30, 2019 June 30, 2020
Assets: Fair Value Level 1 Level 2 Level 3 Fair Value Level 1 Level 2 Level 3
Money market funds and money market deposit accounts $6
 $6
 $—
 $—
 $706
 $706
 $—
 $—
U.S. treasury bills(1)
 500
 500
 —
 —
Time deposits(1)
 217
 217
 —
 —
 305
 305
 —
 —
Other debt securities(2)
 54
 —
 50
 4
 56
 —
 53
 3
Total assets $277
 $223
 $50
 $4
 $1,567
 $1,511
 $53
 $3
                
Liabilities:                
Contingent consideration $44
 $—
 $—
 $44
 $48
 $—
 $—
 $48
Total liabilities $44
 $—
 $—
 $44
 $48
 $—
 $—
 $48



 March 31, 2019 March 31, 2020
Assets: Fair Value Level 1 Level 2 Level 3 Fair Value Level 1 Level 2 Level 3
Money market funds and money market deposit accounts $6
 $6
 $—
 $—
 $156
 $156
 $—
 $—
Time deposits(1)
 194
 194
 —
 —
 595
 595
 —
 —
Other debt securities(2)
 53
 —
 49
 4
 51
 —
 48
 3
Deferred purchase price receivable 574
 —
 —
 574
 103
 —
 —
 103
Total assets $827
 $200
 $49
 $578
 $905
 $751
 $48
 $106
                
Liabilities:                
Contingent consideration $41
 $—
 $—
 $41
 $46
 $—
 $—
 $46
Total liabilities $41
 $—
 $—
 $41
 $46
 $—
 $—
 $46

        

(1) Cost basis approximated fair value due to the short period of time to maturity.
(2) Other debt securities include available-for-sale investments with Level 2 inputs that have a cost basis of $38 million and $38$37 million, and unrealized gains of $12$15 million and $11 million, as of SeptemberJune 30, 20192020 and March 31, 2019,2020, respectively.

The fair value of money market funds, money market deposit accounts, U.S. Treasury bills with less than three months maturity and time deposits, included in cash and cash equivalents, are based on quoted market prices. The fair value of other debt securities, included in other long-term assets, is based on actual market prices. FairThe fair value of the DPP,DPPs, included in receivables, net, wasis 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, included in other liabilities, is based on contractually defined targets of financial performance and other considerations.

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


Other Fair Value Disclosures

The carrying amounts of the Company’s financial instruments with short-term maturities, primarily accounts receivable, accounts payable, short-term debt, and financial liabilities included in other accrued liabilities, are deemed to approximate their market 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 partythird-party providers such as Bloomberg, and by using an expected present value technique that is based on observable market inputs for instruments with similar terms currently available to the Company. The estimated fair value of the Company's long-term debt, excluding finance lease liabilities, was $7.4$10.2 billion and $5.6$8.2 billion as of SeptemberJune 30, 20192020 and March 31, 2019,2020, respectively, as compared with carrying value of $7.3$10.0 billion and $5.6$8.4 billion as of SeptemberJune 30, 20192020 and March 31, 2019,2020, respectively. If measured at fair value, long-term debt, excluding finance lease liabilities would be 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 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. Other than3 within the goodwill impairment losses discussed in Note 11 - "Goodwill," therefair value hierarchy. There were no0 significant impairments recorded during the fiscal periodsperiod covered by this report.
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 98 - Derivative and Hedging Activities

In the normal course of business, the Company is exposed to interest rate and foreign exchange rate fluctuations. As part of its risk management strategy, the Company uses derivative instruments, primarily foreign currency forward and option contracts and interest rate swaps, to hedge certain foreign currency and interest rate exposures. The Company’s objective is to reduce earnings volatility by offsetting gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge 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 has designated certain foreign currency forward contracts as cash flow hedges to reduce foreign currency risk related to certain Indian Rupee, Euro and British Pound-denominatedRupee-denominated intercompany obligations and forecasted transactions. The notional amounts of foreign currency forward contracts designated as cash flow hedges as of SeptemberJune 30, 20192020 and March 31, 2019 was $5762020 were $450 million and $277$455 million, respectively. As of SeptemberJune 30, 2019,2020, the related forecasted transactions extend through March 2021.September 2022.

For the three and six months ended SeptemberJune 30, 2020 and June 30, 2019, and September 30, 2018,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. The Company performs an assessment of critical terms on an on-going basis throughout the hedging period. During the three and six months ended SeptemberJune 30, 2020 and June 30, 2019, and September 30, 2018,respectively, the Company had no cash flow hedges for which it was probable that the hedged transaction would not occur. As of SeptemberJune 30, 2019, $32020, $6 million of the existing amount of gainsloss related to the cash flow hedge reported in AOCIaccumulated other comprehensive loss is expected to be reclassified into earnings within the next 12 months.

Net investment hedges

During the fiscal year ended March 31, 2019, the Company designated certain foreign currency forward contracts as net investment hedges.hedges to protect its investment in certain foreign operations against adverse changes in exchange rates between the Euro and the U.S. dollar. These contracts were de-designated and settled during the six monthsfiscal year ended September 30, 2019,March 31, 2020, and as of SeptemberJune 30, 2019,2020, there were 0ne outstanding. As of September 30, 2018, there were no foreign currency forward contracts designated as net investment hedges.

TheDuring the three months ended June 30, 2020, the pre-tax gain on derivatives designated for hedge accounting recognized in income from continuing operations was $1 million and $3 million for the three and six months ended September 30, 2019. The pre-tax loss(loss) on derivatives designated for hedge accounting recognized in other comprehensive lossincome (loss) was $2$11 million and $12 million for the three and six months ended September 30, 2019, respectively.in loss from operations was $(4) million.

Derivatives Not Designated for Hedge Accounting

The derivative instruments not designated as hedges for purposes of hedge accounting include certain short-term foreign currency forward 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.relates to.

Foreign currency forward contracts

The Company manages the exposure to fluctuations in foreign currencies by using short-term foreign currency forward contracts to hedge certain foreign currency denominated assets and liabilities, including intercompany accounts and forecasted transactions. The notional amountamounts of the foreign currency forward contracts outstanding as of SeptemberJune 30, 20192020 and March 31, 20192020 were $2.5$2.1 billion and $2.5$2.2 billion, respectively.

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


The following table presents the pretax amounts impacting income related to designated and non-designated foreign currency forward contracts:
 For the Three Months Ended For the Six Months Ended For the Three Months Ended
(in millions) Statement of Operations Line Item September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018 Statement of Operations Line Item June 30, 2020 June 30, 2019
Foreign currency forward contracts Other expense (income), net $(41) $11
 $(22) $43
 Other expense (income), net $25
 $19


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


Fair Value of Derivative Instruments

All derivative instruments are recorded at fair value. The Company’s accounting treatment for these derivative instruments is based on its hedge designation. The following tables present the fair values of derivative instruments included in the balance sheets:
 Derivative Assets Derivative Assets
 As of As of
(in millions) Balance Sheet Line Item September 30, 2019 March 31, 2019 Balance Sheet Line Item June 30, 2020 March 31, 2020
        
Derivatives designated for hedge accounting:Derivatives designated for hedge accounting:  Derivatives designated for hedge accounting:  
Foreign currency forward contracts Other current assets $7
 $38
 Other current assets $2
 $—
Total fair value of derivatives designated for hedge accountingTotal fair value of derivatives designated for hedge accounting $7
 $38
Total fair value of derivatives designated for hedge accounting $2
 $—
     
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 $6
 $5
 Other current assets $3
 $16
Total fair value of derivatives not designated for hedge accountingTotal fair value of derivatives not designated for hedge accounting $6
 $5
Total fair value of derivatives not designated for hedge accounting $3
 $16

 Derivative Liabilities Derivative Liabilities
  As of  As of
(in millions) Balance Sheet Line Item September 30, 2019 March 31, 2019 Balance Sheet Line Item June 30, 2020 March 31, 2020
        
Derivatives designated for hedge accounting:Derivatives designated for hedge accounting:    Derivatives designated for hedge accounting:    
Foreign currency forward contracts Accrued expenses and other current liabilities $4
 $4
 Accrued expenses and other current liabilities $8
 $20
Total fair value of derivatives designated for hedge accounting:Total fair value of derivatives designated for hedge accounting: $4
 $4
Total fair value of derivatives designated for hedge accounting: $8
 $20
         
Derivatives not designated for hedge accounting:Derivatives not designated for hedge accounting:    Derivatives not designated for hedge accounting:    
Foreign currency forward contracts Accrued expenses and other current liabilities $2
 $9
 Accrued expenses and other current liabilities $5
 $12
Total fair value of derivatives not designated for hedge accountingTotal fair value of derivatives not designated for hedge accounting $2
 $9
Total fair value of derivatives not designated for hedge accounting $5
 $12


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 which are classified as Level 2 inputs.

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


Other Risks for Derivative Instruments

The Company is exposed to the risk of losses in the event of non-performance by the counterparties to its derivative contracts. The amount subject to credit risk related to derivative instruments is generally limited to the amount, if any, by which a counterparty's obligations exceed the obligations of the Company with that counterparty. To mitigate counterparty credit risk, the Company regularly reviews its credit exposure and the creditworthiness of the counterparties. With respect to its foreign currency derivatives, as of SeptemberJune 30, 2019,2020, there were 80 counterparties with concentration of credit risk, and based on gross fair value, the maximum amount of loss that the Company could incur is approximately $6 million.risk.

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

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


Non-Derivative Financial Instruments Designated for Hedge Accounting

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

Net Investment Hedges

DXC seeks to reduce the impact of fluctuations in foreign exchange rates on its net investments in certain non-U.S. operations with foreign currency-denominated debt. For foreign currency denominatedcurrency-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 (loss) incomeloss when such net investments are sold or substantially liquidated.

As of June 30, 2020, DXC had designated $1.9$1.4 billion as of September 30, 2019 and $0 billion as of March 31, 2019 of foreign currency-denominated debt designated as hedges of net investments in non-U.S. subsidiaries. TheFor the three months ended June 30, 2020, the pre-tax impact of gain (loss)loss on foreign currency-denominated debt designated for hedge accounting recognized in other comprehensive income (loss) were $76 million and $66 million for the three and six months ended September 30, 2019, respectively.loss was $27 million. As of March 31, 2020, DXC had $1.9 billion of foreign currency-denominated debt designated as hedges of net investments in non-U.S. subsidiaries.

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



Note 109 - Intangible Assets

Intangible assets consisted of the following:
 As of September 30, 2019 As of June 30, 2020
(in millions) Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value
Software $4,195
 $2,438
 $1,757
 $4,086
 $2,729
 $1,357
Customer related intangible assets 5,759
 1,445
 4,314
 5,843
 1,859
 3,984
Other intangible assets 255
 33
 222
 238
 39
 199
Total intangible assets $10,209
 $3,916
 $6,293
 $10,167
 $4,627
 $5,540
 As of March 31, 2019 As of March 31, 2020
(in millions) Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value
Software $3,864
 $2,235
 $1,629
 $4,048
 $2,614
 $1,434
Customer related intangible assets 5,389
 1,139
 4,250
 5,795
 1,697
 4,098
Other intangible assets 85
 25
 60
 235
 36
 199
Total intangible assets $9,338
 $3,399
 $5,939
 $10,078
 $4,347
 $5,731


The components of amortization expense were as follows:
 Three Months Ended Six Months Ended Three Months Ended
(in millions) September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018 June 30, 2020 June 30, 2019
Intangible asset amortization $239
 $214
 $475
 $440
 $253
 $236
Transition and transformation contract cost amortization(1)
 59
 73
 126
 129
 61
 67
Total amortization expense $298
 $287
 $601
 $569
 $314
 $303
        

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

Estimated future amortization related to intangible assets as of SeptemberJune 30, 20192020 is as follows:
Fiscal Year (in millions)
 (in millions)
Remainder of 2020 $568
2021 $997
Remainder of 2021 $743
2022 $915
 $940
2023 $853
 $860
2024 $780
 $753
2025 $668

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



Note 1110 - Goodwill

The following table summarizes the changes in the carrying amount of goodwill, by segment, as of SeptemberJune 30, 2019.2020.

(in millions) GBS GIS Total GBS GIS Total
Goodwill, gross $5,300
 $5,068
 $10,368
 $6,507
 $5,066
 $11,573
Accumulated impairment losses (701) (2,061) (2,762) (4,490) (5,066) (9,556)
Balance as of March 31, 2019, net $4,599
 $3,007
 $7,606
Balance as of March 31, 2020, net $2,017
 $—
 $2,017

            
Acquisitions 1,202
 —
 1,202
 16
 —
 16
Foreign currency translation (72) (65) (137) 24
 —
 24
Impairment losses (2,625) (262) (2,887)
            
Goodwill, gross 6,430
 5,003
 11,433
 6,547
 5,066
 11,613
Accumulated impairment losses (3,326) (2,323) (5,649) (4,490) (5,066) (9,556)
Balance as of September 30, 2019, net $3,104
 $2,680
 $5,784
Balance as of June 30, 2020, net $2,057
 $—
 $2,057


The additionsaddition to goodwill werewas due to the acquisitions described in Note 3 - "Acquisitions".an insignificant acquisition. The foreign currency translation amount reflects the impact of currency movements on non-U.S. dollar-denominated goodwill balances.

Goodwill Impairment Analyses

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

The Company performed its annual goodwill impairment assessment as As of July 1, 2019. Subsequent to the measurement date,June 30, 2020, the Company experienced a declineassessed whether there were events or changes in its stock price and market capitalizationcircumstances that represented an indicatorwould more likely than not reduce the fair value of impairment as the observed declines were substantial and sustained. As a result, the Company performed a quantitative goodwill impairment test for allany of its reporting units consistent withbelow its policy described in Note 1 - "Summary of Significant Accounting Policies.” As part of the reconciliationcarrying amount and require goodwill to the Company’s market capitalization, thebe tested for impairment. The Company concludeddetermined that the carrying values of it’s reporting units exceeded their estimated fair valuesthere have been no such indicators and recognized a non-cash impairment charge of $2,887 million, consisting of $2,625 million and $262 million in its GBS and GIS segments, respectively. Further declines in DXC’s share price or other impairment indicators could result in additional impairment charges in the future. Thetherefore, it was unnecessary to perform an interim goodwill impairment charge does not have an impact on the calculationtest as of the Company's financial covenants under the Company's debt arrangements.June 30, 2020.

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



Note 1211 - Debt

The following is a summary of the Company's debt:
(in millions) Interest Rates Fiscal Year Maturities September 30, 2019 March 31, 2019 Interest Rates Fiscal Year Maturities June 30, 2020 March 31, 2020
Short-term debt and current maturities of long-term debt        
Euro-denominated commercial paper(1)
 (0.21)% - 2.76% 2020 $687
 $694
Commercial paper(1)
 (0.22)% - 0.44% 2021 - 2022 $967
 $542
Current maturities of long-term debt Various 2020 - 2021 296
 766
 Various 2021 - 2022 283
 290
Current maturities of finance lease liabilities 1.06% - 17.70% 2020 - 2021 488
 482
 0.62% - 18.47% 2021 432
 444
Short-term debt and current maturities of long-term debt $1,471
 $1,942
 $1,682
 $1,276
        
Long-term debt, net of current maturities        
AUD term loan 
1.87% - 2.66%(2)
 2021 539
 567
 
0.94% - 0.96%(2)
 2022 344
 489
GBP term loan 
1.57 - 1.63%(3)
 2022 553
 583
 
1.46%(3)
 2022 369
 556
EUR term loan 
0.65%(4)
 2022 816
 —
 
0.65%(4)
 2022 - 2023 280
 822
EUR term loan 
0.80%(5)
 2023 816
 —
 
0.80%(5)
 2023 - 2024 839
 821
USD term loan 
3.29% - 3.67%(6)
 2025 492
 —
 
1.42% - 2.24%(6)
 2025 379
 480
$274 million Senior notes 4.45% 2023 276
 276
$171 million Senior notes 4.45% 2023 172
 172
$500 million Senior notes 2.88% 2020 —
 502
 4.25% 2025 505
 505
$500 million Senior notes 
3.08% - 3.69%(7)
 2021 498
 498
 4.00% 2024 497
 —
$274 million Senior notes 4.45% 2023 276
 277
$171 million Senior notes 4.45% 2023 172
 172
$500 million Senior notes 4.25% 2025 506
 506
 4.13% 2026 496
 —
£250 million Senior notes 2.75% 2025 305
 322
 2.75% 2025 306
 307
€650 million Senior notes 1.75% 2026 704
 725
 1.75% 2026 726
 709
$500 million Senior notes 4.75% 2028 508
 508
 4.75% 2028 507
 507
$234 million Senior notes 7.45% 2030 273
 273
 7.45% 2030 271
 271
Revolving credit facility 1.27% - 2.08% 2024 - 2025 3,250
 1,500
Lease credit facility 3.11% - 3.50% 2020 - 2023 18
 25
 1.17% - 1.99% 2021 - 2023 8
 11
Finance lease liabilities 1.06% - 17.70% 2020 - 2025 1,176
 1,127
 0.62% - 18.47% 2021 - 2027 1,015
 1,046
Borrowings for assets acquired under long-term financing 0.48% - 5.78% 2020 - 2025 697
 462
 0.48% - 6.39% 2021 - 2028 740
 802
Mandatorily redeemable preferred stock outstanding 6.00% 2023 62
 62
 6.00% 2023 62
 62
Other borrowings 0.50% - 7.40% 2020 - 2022 71
 109
 Various 2021 - 2022 7
 70
Long-term debt 8,482
 6,718
 11,049
 9,406
Less: current maturities 784
 1,248
 715
 734
Long-term debt, net of current maturities $7,698
 $5,470
 $10,334
 $8,672
        

(1) 
At DXC's option, DXC can borrow up to a maximum of €1 billion or its equivalent in U.S. dollars.€, £, and $. Under this existing €1.0 billion commercial paper program, the Company issued £600 million via direct sale to the Bank of England.
(2) Variable interest rate equal to the bank bill swap bid rate for a one-, two-, three- or six-month interest period plus 0.60% to 0.95% based on the published credit ratings of DXC.
(3) Three-month LIBOR rate plus 0.80%.
(4) At DXC's option, the EUR term loan bears interest at the Eurocurrency Rate for a one-, two-, three-, or six-month interest period, plus a margin between 0.40% and 0.9%, based on published credit ratings of DXC.
(5) At DXC's option, the EUR term loan bears interest at the Eurocurrency Rate for a one-, two-, three-, or six-month interest period, plus a margin between 0.55% and 1.05%, based on published credit ratings of DXC.
(6) 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 between 1.00% and 1.50%, based on published credit ratings of DXC or the Base Rate plus a margin between 0.00% and 0.50%, based on published credit ratings of DXC.
(7) Three-month LIBOR plus 0.95%.

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



Senior Notes and Term Loans

During the first quarter of fiscal 2021, the Company issued two senior notes with an aggregate principal of $1.0 billion, consisting of (i) $500 million of 4.00% Senior Notes due fiscal 2024, and (ii) $500 million of 4.13% Senior Notes due fiscal 2026. The proceeds from these notes were applied towards the early prepayment of our term loan facilities, including prepayment of €500 million of Euro Term Loan due fiscal 2023, £150 million of GBP Term Loan due fiscal 2022, A$300 million of AUD Term Loan due fiscal 2022, and $100 million of USD Term Loan due fiscal 2025.

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

Revolving Credit Facility

During the first quarter of fiscal 2021, the Company borrowed the remaining $2.5 billion under the $4.0 billion credit facility agreement ("Credit Agreement") as a precautionary measure to increase its cash position and increase financial flexibility in light of continuing uncertainty in the global economy and financial capital markets resulting from the COVID-19 pandemic. During the quarter, the Company repaid $750 million, which became available under the revolving credit facility for redraw at the request of the Company.

The Company expects to use the proceeds from the borrowings under the Credit Agreement for working capital, general corporate purposes or other purposes permitted under the Credit Agreement. Borrowings under the Credit Agreement will bear interest at a variable rate based on LIBOR or on a base rate, plus an individual margin based on DXC’s long-term debt rating.

Note 1312 - Revenue

Revenue Recognition

The following table presents ourDXC's revenues disaggregated by geography, based on the location of incorporation of the DXC entity providing the related goods or services:
 Three Months Ended Six Months Ended Three Months Ended
(in millions) September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018 June 30, 2020 June 30, 2019
United States $1,806
 $1,863
 $3,657
 $3,750
 $1,709
 $1,851
United Kingdom 678
 760
 1,393
 1,560
 573
 715
Australia 366
 391
 739
 845
 361
 373
Other Europe 1,260
 1,263
 2,490
 2,610
 1,205
 1,230
Other International 741
 736
 1,462
 1,530
 654
 721
Total Revenues $4,851
 $5,013
 $9,741
 $10,295
 $4,502
 $4,890

The revenue by geography pertains to both of the Company’s reportable segments. Refer to Note 2019 - "Segment Information" for the Company’s segment disclosures.
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



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 has not materialized and adjustments for currency. As of SeptemberJune 30, 20192020, approximately $25.923 billion of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 26%35% of these remaining performance obligations in fiscal 2020,2021, 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 As of
(in millions) September 30, 2019 March 31, 2019 June 30, 2020 March 31, 2020
Trade receivables, net $3,343
 $3,232
 $2,986
 $3,059
Contract assets $517
 $390
 $442
 $454
Contract liabilities $1,800
 $1,886
 $1,763
 $1,756

Change in contract liabilities were as follows:
  Three Months Ended
(in millions) June 30, 2020 June 30, 2019
Balance, beginning of period $1,756
 $1,886
Deferred revenue 698
 770
Recognition of deferred revenue (719) (717)
Currency translation adjustment 30
 (5)
Other (2) (16)
Balance, end of period $1,763
 $1,918

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


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


Note 1413 - Restructuring Costs

The Company recorded restructuring costs of $32$72 million and $157$142 million, net of reversals, for the three months ended SeptemberJune 30, 20192020 and SeptemberJune 30, 2018, respectively. For the six months ended September 30, 2019, and September 30, 2018, the Company recorded restructuring costs of $174 million and $342 million, net of reversals, respectively. The costs recorded during the three and six months ended SeptemberJune 30, 20192020 were largely a result of the Fiscal 20202021 Plan (defined below).

The composition of restructuring liabilities by financial statement line item is as follows:
 As of��As of
(in millions) September 30, 2019 June 30, 2020
Accrued expenses and other current liabilities $204
 $165
Other long-term liabilities 35
 33
Total $239
 $198


Summary of Restructuring Plans

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").

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 $287 million, comprising $270 million in employee severance and $17 million of facilities costs.

Fiscal 2019 Plan

During fiscal 2019, management approved global cost savings initiatives designed to better align the Company's organizational structure with its strategic initiatives and continue the integration of the Enterprise Services business of Hewlett Packard Enterprise Company ("HPES") and other acquisitions (the "Fiscal 2019 Plan"). The Fiscal 2019 Plan includes workforce optimization and rationalization of facilities and data center assets. Costs incurred to date under the Fiscal 2019 Plan total $497$477 million, comprising $353$336 million in employee severance and $144$141 million of facilities costs.

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


Fiscal 2018 PlanOther Prior Year Plans

In June 2017, management approved a post-HPES Merger (as defined below) restructuring plan to optimize the Company's operations in response to a continuing business contraction (the "Fiscal 2018 Plan"). The Fiscal 2018 Plan focuses mainly on optimizing specific aspects of global workforce, increasing the proportion of work performed in low cost offshore locations and re-balancing the pyramid structure. Additionally, this plan included global facility restructuring, including a global data center restructuring program. Costs incurred to date under the Fiscal 2018 Plan total $772$985 million, comprising $585$789 million in employee severance and $187 million of facilities costs.

Other Prior Year Plans

In May 2016, the Company initiated a restructuring plan to realign the Company's cost structure and resources to take advantage of operational efficiencies following recent acquisitions. During the fourth quarter of fiscal 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"). Costs incurred to date under the Fiscal 2017 Plan total $215 million, comprising $206 million in employee severance and $9$196 million of facilities costs.

Acquired Restructuring Liabilities

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

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


Restructuring Liability Reconciliations by Plan
 Restructuring Liability as of March 31, 2020 
Costs Expensed, Net of Reversals(1)
 
Costs Not Affecting Restructuring Liability(2)
 Cash Paid 
Other(3)
 Restructuring Liability as of June 30, 2020
Fiscal 2021 Plan            
Workforce Reductions $—
 $78
 $(2) $(20) $—
 $56
Facilities Costs —
 5
 (1) (2) —
 2
Total $—
 $83
 $(3) $(22) $—
 $58
 Restructuring Liability as of March 31, 2019 
Adoption of ASC 842(1)
 
Costs Expensed, Net of Reversals(2)
 
Costs Not Affecting Restructuring Liability(3)
 Cash Paid 
Other(4)
 Restructuring Liability as of September 30, 2019            
Fiscal 2020 Plan                          
Workforce Reductions $—
 $—
 $182
 $(7) $(100) $(4) $71
 $74
 $(1) $1
 $(25) $—
 $49
Facilities Costs —
 —
 16
 (8) (6) —
 2
 2
 (4) 4
 (1) —
 1
Total $—
 $—
 $198
 $(15) $(106) $(4) $73
 $76
 $(5) $5
 $(26) $—
 $50
                          
Fiscal 2019 Plan                          
Workforce Reductions $138
 $—
 $(10) $(5) $(59) $(3) $61
Facilities Costs 68
 (53) —
 (1) (7) —
 7
Total $206
 $(53) $(10) $(6) $(66) $(3) $68
              
Fiscal 2018 Plan              
Workforce Reductions $59
 $—
 $(9) $—
 $(17) $—
 $33
 $25
 $(2) $(1) $(4) $1
 $19
Facilities Costs 35
 (36) (1) —
 (2) 4
 —
 5
 (3) 2
 —
 —
 4
Total $94
 $(36) $(10) $—
 $(19) $4
 $33
 $30
 $(5) $1
 $(4) $1
 $23
                          
Other Prior Year Plans                          
Workforce Reductions $9
 $—
 $(1) $—
 $—
 $—
 $8
 $24
 $(1) $2
 $(8) $1
 $18
Facilities Costs 1
 (1) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Total $10
 $(1) $(1) $—
 $—
 $—
 $8
 $24
 $(1) $2
 $(8) $1
 $18
                          
Acquired Liabilities                          
Workforce Reductions $51
 $—
 $1
 $—
 $(5) $—
 $47
 $39
 $—
 $—
 $(1) $—
 $38
Facilities Costs $18
 —
 (4) —
 (1) (3) 10
 $11
 —
 —
 —
 —
 11
Total $69
 $—
 $(3) $—
 $(6) $(3) $57
 $50
 $—
 $—
 $(1) $—
 $49
        

(1) Represents restructuring liability recorded as an offset to right-of-use assets upon the adoption of ASC 842.
(2) Costs expensed, net of reversals include $14$6 million, $10$7 million, and $1$3 million of costs reversed from the Fiscal 20192020 Plan, Fiscal 20182019 Plan and Other Prior Year Plans, respectively.
(3)(2) Pension benefit augmentations recorded as a pension liability, asset impairments and restructuring costs associated with right-of-use assets.
(4)(3)Foreign currency translation adjustments.
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 1514 - Pension and Other Benefit Plans

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

Defined Benefit Plans

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

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

During the three and six months ended SeptemberJune 30, 2019,2020, the Company accrued $6remeasured plan assets and liabilities as of June 1, 2020 under certain U.K. pension plans due to the end of a public sector contract. The remeasurement resulted in a net loss of $2 million, comprising a curtailment gain of $9 million and $17 million, respectively,an actuarial loss of additional contractual termination benefits for certain employees as part of restructuring plans (see Note 14 - "Restructuring Costs"). These amounts are reflected in the projected benefit obligation and in the$11 million. The net periodic pension cost.loss was recognized within other income.

The components of net periodic pension income were:
 Three Months Ended Six Months Ended Three Months Ended
(in millions) September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018 June 30, 2020 June 30, 2019
Service cost $23
 $22
 $46
 $45
 $22
 $23
Interest cost 57
 63
 117
 128
 58
 60
Expected return on assets (154) (138) (315) (287) (153) (161)
Amortization of prior service costs (2) (6) (4) (7) (2) (2)
Contractual termination benefit 6
 —
 17
 —
 —
 11
Curtailment gain —
 —
 —
 (1) (9) —
Recognition of actuarial loss

 11
 —
Net periodic pension income $(70) $(59) $(139) $(122) $(73) $(69)


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

The weighted-average rates used to determine net periodic pension cost for the three and six months ended September 30, 2019 and September 30, 2018 were:
  September 30, 2019 September 30, 2018
Discount or settlement rates 2.4% 2.3%
Expected long-term rates of return on assets 5.8% 5.3%
Rates of increase in compensation levels 2.0% 2.1%


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


Deferred Compensation Plans

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

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

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


Non-employee directors are eligible to defer up to 100% of their cash compensation. The liability, which is included in other long-term liabilities in the Company's balance sheets, amounted to $55$49 million as of SeptemberJune 30, 20192020 and $59$48 million as of March 31, 2019.2020.

Note 1615 - Income Taxes

The Company's effective tax rate from continuing operations ("ETR") was (5.8)%11.6% and 22.0%18.4% for the three months ended SeptemberJune 30, 20192020 and SeptemberJune 30, 2018, respectively, and (8.6)% and 29.2% for the six months ended September 30, 2019, and September 30, 2018, respectively. For the three months ended SeptemberJune 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. For the three months ended June 30, 2019, the primary drivers of the ETR were the impact of the non-deductible goodwill impairment charge, the non-taxable gain on the arbitration award, the global mix of income an increase in prior year U.S. federal research and development income tax credits, and an increase in unrecognized tax benefits primarily related to the disallowance of certain legacy CSC foreign restructuring expenses deducted on the U.S. federal tax return for tax year March 31, 2013. For the six months ended September 30, 2019, the primary drivers of the ETR were the impact of the non-deductible goodwill impairment charge, the non-taxable gain on the arbitration award, the global mix of income, an increase in unrecognized tax benefits primarily related to the disallowance of certain legacy CSC foreign restructuring expenses deducted on the U.S. federal tax return for tax year March 31, 2013 and an increase in prior year U.S. federal research and development income tax credits. For the three and six months ended September 30, 2018, the primary unfavorable drivers of the ETR were the global mix of income, the increase in the provisional transition tax, an increase in state tax expense due to remeasurement of deferred taxes, and the impactreduction of U.S. proposed regulations on the ability to claim certain foreignour estimated fiscal 2019 base erosion anti-avoidance tax credits. The primary favorable drivers of the ETR were due to the filing of("BEAT") for the October 31, 20172019 tax year due to electing out of additional first year bonus depreciation.

The majority of unremitted foreign earnings have been taxed in the U.S. We expect a significant portion of the unremitted earnings of our foreign subsidiaries will no longer be subject to U.S. federal income tax returnupon repatriation to the U.S. However, a portion of these earnings may still be subject to foreign and a decreaseU.S. state tax consequences when remitted. Earnings in valuation allowances on certainIndia are indefinitely reinvested. Other foreign subsidiary deferred tax assets.
The tax expense associated with discontinued operationsearnings are not indefinitely reinvested except for approximately $501 million that could be taxable when repatriated to the six months ended September 30, 2019 was $0 million as compared to $18 million during the same period of the prior fiscal year. The primary driver of the variance in the tax expense for the six months ended September 30, 2019 and September 30, 2018 was the difference in income before tax for the respective periods.

As the result of the issuance of new U.S. under Treasury regulations inthat were issued during the first quarter of fiscal 2020, the Company changed its permanent reinvestment assertion in the first quarter of fiscal 2020 with respect to certain foreign corporations, reducing the amount that will ultimately be repatriated to the U.S. by approximately $506 million. With the exception of this change, DXC's prior permanent reinvestment assertion, that the Company will repatriate all current and accumulated earnings for all non-U.S. subsidiaries other than India, continues to apply. DXC does not believe this assertion change will have an adverse effect on the Company as U.S. cash needs will be satisfied from other sources of non-U.S. earnings.

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

2020.

In connection with the SeparationHPES Merger, the Company entered into a tax matters agreement with HPE. HPE generally will be responsible for pre-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-HPES Merger periods. Pursuant to the tax matters agreement, the Company recorded a net receivable of $16 million due to $44 million of tax indemnification receivable related to uncertain tax positions net of related deferred tax benefits, $86 million of tax indemnification receivable related to other tax payables and $114 million of tax indemnification payable related to other tax receivables.

In connection with the USPS Separation, the Company entered into a tax matters agreement with Perspecta. Pursuant to the tax matters agreement, the Company generally will be responsible for tax liabilities arising prior to the Separation of USPS.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 is alsoremains liable to HPE for tax receivables and refunds which it receives from Perspecta related to pre-HPES Merger periods that were transferred to Perspecta. Pursuant to the tax matters agreement, with Perspecta, the Company has recorded a tax indemnification receivable from Perspecta of $77$66 million and a tax indemnification payable to Perspecta of $64$45 million related to income tax and other tax liabilities. As a result of the HPES Merger, the Company continues to have a net receivable of $18 million from HPE, comprised of a $107 million tax indemnification receivable related to tax payables, a $43 million tax indemnification receivable related to uncertain tax positions (net of related deferred tax benefits), and $132 million of tax indemnification payable related to other tax receivables.

The IRS is examining CSC'sthe Company's federal income tax returns for fiscal 2008 through 2017.tax year ended October 31, 2019. With respect to CSC's fiscal 2008 through 2010 federal tax returns, the Company previously entered into negotiations for a resolution through settlement with the IRS Office of Appeals. The IRS examined several issues for this audit that resulted in various audit adjustments. The Company and the IRS Office of Appeals have an agreement in principle as to some, but not all of these adjustments.
The Company has agreed to extend the statute of limitations associated with this audit through June 30, 2020.
In the first quarter of fiscal 2020, we filed for competent authority relief relating to certain legacy CSC foreign restructuring expenses deducted for the U.S. federal tax return for tax year March 31, 2013. The Company has agreed to extend the statute of limitations associated with this audit through March 31, 2020. In the second quarter of fiscal 2020, the Company received a Revenue Agent's Report with proposed adjustments to CSC's fiscal 2014 through 2017 federal returns. 2021.

The Company has filed a protest for certainagreed to extend the statute of these adjustmentslimitations associated with the IRS Office of Appeals.fiscal years 2011 through 2013 through December 31, 2020. The Company has agreed to extend the statute of limitations for the fiscal years 2014 through fiscal 2016 through December 31, 2020.2020 and for the employment tax audit of fiscal years 2015 and 2016 until January 31, 2021. The Company expects to reach a resolution for all years no earlier than the thirdsecond quarter of fiscal 20212022 except agreed issues related to fiscal 2008 through 2010 and fiscal 2011 through 2013 federal tax returns, which are expected to be resolved within twelve months.

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


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 for unrecognized tax benefits. In the second quarter of fiscal 2020 the Company’s liability foras uncertain tax positions increased by $43 million (excluding interest and penalties and related tax attributes) largely due to additions for U.S. federal research and development credits and certain legacy CSC foreign restructuring expenses deducted in the U.S.positions. The Company may need to accrue and ultimately pay additional amounts for tax positions that previously met a more-likely-than-not standard if such positions are not upheld. Conversely, the Company could settle positions by payment with the tax authorities for amounts lower than those that have been accrued or extinguish a position through payment. The Company believes that the outcomes that are reasonably possible within the next 12 months may result in a reduction in liability for uncertain tax positions of $13$23 million to $17$28 million, excluding interest, penalties and tax carry-forwards.

Note 1716 - Stockholders' Equity

Share Repurchases

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

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


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

The shares repurchased are retired immediately and included in the category of authorized but unissued shares. The excess of purchase price over par value of the common shares is allocated between additional paid-in capital and retained earnings. 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, 2019 are shown below:
  Fiscal 2020
Fiscal Period Number of Shares Repurchased Average Price Per Share Amount (in millions)
1st Quarter      
Open market purchases 5,510,415
 $54.44
 $300
Accelerated stock repurchases 1,849,194
 54.08
 100
1st Quarter Total 7,359,609
 $54.35
 $400
  Fiscal 2020 Fiscal 2019
Fiscal Period Number of Shares Repurchased Average Price Per Share Amount (in millions) Number of Shares Repurchased Average Price Per Share 
Amount (in millions)(1)
1st Quarter            
Open market purchases 5,510,415
 $54.44
 $300
 3,779,194
 $85.86
 $324
ASR 1,849,194
 54.08
 100
 —
 —
 —
1st Quarter Total 7,359,609
 54.35
 400
 3,779,194
 85.86
 324
2nd Quarter            
Open market purchases 4,414,840
 33.96
 150
 1,448,729
 87.16
 127
ASR 1,805,350
 55.39
 100
 —
 —
 —
2nd Quarter Total 6,220,190
 40.18
 250
 1,448,729
 87.16
 127
Total 13,579,799
 $47.86
 $650
 5,227,923
 $86.22
 $451
(1)DXC recorded $9 million as an accrued liability for shares purchased but not yet settled in cash as of September 30, 2018.


Accumulated Other Comprehensive Income (Loss)Loss

The following table shows the changes in accumulated other comprehensive income (loss), net of taxes:
(in millions) Foreign Currency Translation Adjustments Cash Flow Hedges Available-for-sale Securities Pension and Other Post-retirement Benefit Plans Accumulated Other Comprehensive (Loss)
Balance at March 31, 2019 $(517) $(3) $9
 $267
 $(244)
Current-period other comprehensive loss (184) 2
 2
 —
 (180)
Amounts reclassified from accumulated other comprehensive income (loss) —
 —
 —
 (4) (4)
Balance at September 30, 2019 $(701) $(1) $11
 $263
 $(428)
(in millions) Foreign Currency Translation Adjustments Cash Flow Hedges Available-for-sale Securities Pension and Other Post-retirement Benefit Plans Accumulated Other Comprehensive Loss
Balance at March 31, 2020 $(851) $(20) $9
 $259
 $(603)
Current-period other comprehensive income (2) 7
 4
 —
 9
Amounts reclassified from accumulated other comprehensive loss —
 4
 —
 (9) (5)
Balance at June 30, 2020 $(853) $(9) $13
 $250
 $(599)

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


(in millions) Foreign Currency Translation Adjustments Cash Flow Hedges Available-for-sale Securities Pension and Other Post-retirement Benefit Plans Accumulated Other Comprehensive Income (Loss) Foreign Currency Translation Adjustments Cash Flow Hedges Available-for-sale Securities Pension and Other Post-retirement Benefit Plans Accumulated Other Comprehensive Loss
Balance at March 31, 2018 $(261) $9
 $9
 $301
 $58
Balance at March 31, 2019 $(517) $(3) $9
 $267
 $(244)
Current-period other comprehensive loss (408) (30) (1) —
 (439) (111) 6
 1
 


 (104)
Amounts reclassified from accumulated other comprehensive loss —
 5
 —
 (6) (1) 


 (2) 


 (1) (3)
Balance at September 30, 2018 $(669) $(16) $8
 $295
 $(382)
Balance at June 30, 2019 $(628) $1
 $10
 $266
 $(351)


Note 1817 - Stock Incentive Plans

Equity Plans

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

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

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

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 the fiscal 2021 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, per the director’s election. In addition, RSUs vest in full upon a change in control of DXC.

The DXC Share Purchase Plan allows DXC’s employees located in the United Kingdom to purchase shares of DXC’s common stock at the fair market value of such shares on the applicable purchase date. There were 5,581 and 10,48114,882 shares purchased under this plan during the three and six months ended SeptemberJune 30, 2019.2020.

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


The Board has reserved for issuance shares of DXC common stock, par value $0.01 per share, under each of the plans as detailed below:
 As of September 30, 2019 As of June 30, 2020
 Reserved for issuance Available for future grants Reserved for Issuance Available for Future Grants
DXC Employee Equity Plan 34,200,000
 19,790,522
 34,200,000
 14,648,697
DXC Director Equity Plan 230,000
 33,451
 230,000
 26,551
DXC Share Purchase Plan 250,000
 224,908
 250,000
 191,728
Total 34,680,000
 20,048,881
 34,680,000
 14,866,976


Stock Options
 
Number
of Option Shares
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value
(in millions)
 
Number
of Option Shares
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value
(in millions)
Outstanding as of March 31, 2019 2,318,768
 $30.40
 4.80 $79
Outstanding as of March 31, 2020 1,869,815
 $29.92
 4.27 $—
Granted —
 $—
   —
 $—
  
Exercised (301,909) $32.20
 $7
 (1,203) $11.77
 $—
Canceled/Forfeited (618) $48.60
   —
 $—
  
Expired (91,442) $33.37
   (48,980) $25.46
  
Outstanding as of September 30, 2019 1,924,799
 $29.97
 4.90 $8
Vested and expected to vest in the future as of September 30, 2019 1,924,648
 $29.97
 4.90 $8
Exercisable as of September 30, 2019 1,922,449
 $29.94
 4.90 $8
Outstanding as of June 30, 2020 1,819,632
 $30.05
 4.10 $1
Vested and exercisable as of June 30, 2020 1,819,632
 $30.05
 4.10 $1



Restricted Stock

 Employee Equity Plan Director Equity Plan Employee Equity Plan Director Equity Plan
 Number of
Shares		 Weighted
Average
Grant Date
Fair Value		 Number of
Shares		 
Weighted
Average
Grant Date
Fair Value
 Number of
Shares		 Weighted
Average
Grant Date
Fair Value		 Number of
Shares		 
Weighted
Average
Grant Date
Fair Value
Outstanding as of March 31, 2019 2,809,775
 $67.27
 75,750
 $46.31
Outstanding as of March 31, 2020 4,174,476
 $55.45
 114,615
 $37.69
Granted 2,656,777
 $48.56
 68,200
 $35.70
 7,135,966
 $16.23
 12,900
 $14.36
Settled (668,412) $49.70
 (21,971) $63.82
 (713,578) $59.26
 —
 $—
Canceled/Forfeited (486,330) $61.43
 —
 $—
 (392,495) $62.92
 —
 $—
Outstanding as of September 30, 2019 4,311,810
 $59.13
 121,979
 $37.23
Outstanding as of June 30, 2020 10,204,369
 $27.47
 127,515
 $35.33


     
Share-Based Compensation

  Three Months Ended
(in millions) June 30, 2020 June 30, 2019
Total share-based compensation cost $16
 $18
Related income tax benefit $1
 $4
Total intrinsic value of options exercised $—
 $6
Tax benefits from exercised stock options and awards $3
 $9

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


Share-Based Compensation

  Three Months Ended Six Months Ended
(in millions) September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
Total share-based compensation cost $30
 $19
 $48
 $41
Related income tax benefit $7
 $3
 $11
 $6
Total intrinsic value of options exercised $1
 $25
 $7
 $35
Tax benefits from exercised stock options and awards $1
 $14
 $10
 $19


As of SeptemberJune 30, 2019,2020, total unrecognized compensation expense related to unvested DXC stock options and unvested DXC RSUs, net of expected forfeitures was $1$0 million and $163$194 million, respectively. The unrecognized compensation expense for unvested RSUs is expected to be recognized over a weighted-average period of 2.172.33 years.

Note 1918 - Cash Flows

Cash payments for interest on indebtedness and income taxes and other select non-cash activities are as follows:
 Six Months Ended Three Months Ended
(in millions) September 30, 2019 September 30, 2018 June 30, 2020 June 30, 2019
Cash paid for:        
Interest $178
 $149
 $103
 $91
Taxes on income, net of refunds (1)
 $130
 $74
 $31
 $43
        
Non-cash activities:        
Operating:        
ROU assets obtained in exchange for lease, net (2)
 $142
 $—
 $275
 $(22)
Prepaid assets acquired under long-term financing $14
 $—
 $2
 $30
Investing:        
Capital expenditures in accounts payable and accrued expenses $92
 $28
 $11
 $13
Capital expenditures through finance lease obligations $380
 $396
 $88
 $253
Assets acquired under long-term financing $248
 $76
 $2
 $235
(Decrease) / increase in deferred purchase price receivable
 $(204) $818
(Decrease) increase in deferred purchase price receivable $(52) $321
Contingent consideration $3
 $—
Financing:        
Dividends declared but not yet paid $55
 $54
 $1
 $57

        
     
(1) Income tax refunds were $20$18 million and $157$13 million for the sixthree months ended SeptemberJune 30, 20192020 and SeptemberJune 30, 2018,2019, respectively.
(2) Net of $87 million change in lease classification from operating to finance lease.lease in fiscal 2020.
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 2019 - 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's chief operating decision maker ("CODM"), the chief executive officer, obtains, reviews, and manages the Company’s financial performance based on these segments. The CODM uses these results, in part, to evaluate the performance of, and allocate resources to, each of the segments.

As a result of the Separation, USPS is no longer included as a reportable segment and its results have been reclassified to discontinued operations, net of taxes, for all periods presented. See Note 4 - "Divestitures". DXC now operates in 2 reportable segments as described below:

Global Business Services ("GBS")

GBS provides innovative technology solutions that help its clientscustomers address key business challenges and accelerate digital transformations tailored to each client’scustomers industry and specific objectives. GBS enterprise technology stack offerings include:

•
Enterprise, Cloud ApplicationsAnalytics and Consulting.Engineering. GBS provides industry, business process systems integrationGBS's portfolio of analytics services and technical delivery experience to maximize value from enterprise application portfolios. GBS also helps clientsextensive partner ecosystem help customers gain rapid insights, automate operations, and accelerate their digital transformationstransformation journeys. GBS provides software engineering and business results with industry, business, technologysolutions that enable businesses to run and complex integration services.manage their mission-critical functions, transform their operations and develop new ways of doing business.
•
Application Services.Applications GBS's comprehensive services helps clients modernize, develop, test. GBS uses advanced technologies and manage their applications.
•
Analytics. GBS's portfoliomethods to accelerate the creation, modernization, delivery and maintenance of analytics serviceshigh-quality, secure applications allowing customers to innovate faster while reducing risk, time to market, and robust partner ecosystem helps clients gain rapid insights and accelerate their digital transformation journeys.
•
Business Process Services. GBS provides seamless digital integration and optimizationtotal cost of front and back office processes, including its Agile Process Automation approach.
•
Industry Software and Solutions. GBS's industry-specific solutions enable businesses to quickly integrate technology, transform their operations and develop new ways of doing business.ownership, across industries. GBS's vertical-specific IP includes insurance, healthcare and life sciences, travel and transportation, andsolutions for insurance; banking and capital markets solutions.markets; and automotive, among others.

GBS offerings also includes business process services, which include digital integration and optimization of front and back office processes, and agile process automation. This helps companies to reduce cost, and minimize business disruption, human error, and operational risk while improving customer experiences.

Global Infrastructure Services ("GIS")

GIS provides a portfolio of technology offerings that deliver predictable outcomes and measurable results, while reducing business risk and operational costs for clients.customers. GIS offeringsenterprise stack elements include:

•
Cloud and Platform Services.Security. GIS helps clients maximize their privatecustomers to rapidly modernize by adapting legacy apps to cloud, public cloudmigrate the right workloads, and legacy infrastructures, as well as securely manage their hybridmulti-cloud environments.
•
Workplace and Mobility. GIS's workplace, mobility and Internet of Things ("IoT") services provides a consumer-like experience with enterprise security and instant connectivity for its clients.
•
Security. GIS's security solutions help predict attacks, proactively respond to threats, ensure compliance and protect data, applications infrastructure and endpoints.infrastructure.
•
IT Outsourcing ("ITO"). GIS's ITO services support infrastructure, applications, and workplace IT operations, including hardware, software, physical/virtual end-user devices, collaboration tools, and IT support services. GIS helps customers securely optimize operations to ensure continuity of their systems and respond to new business and workplace demands, while achieving cost takeout, all with limited resources, expertise and budget.

GIS offerings also include workplace and mobility services to fit its 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 consumer-like, digital experience.

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


Segment Measures

The following table summarizes operating results regularly provided to the CODM by reportable segment and a reconciliation to the financial statements:
(in millions) GBS GIS Total Reportable Segments All Other Totals GBS GIS Total Reportable Segments All Other Totals
Three Months Ended September 30, 2019          
Three Months Ended June 30, 2020          
Revenues $2,285
 $2,566
 $4,851
 $—
 $4,851
 $2,174
 $2,328
 $4,502
 $—
 $4,502
Segment profit $359
 $243
 $602
 $(73) $529
 $215
 $23
 $238
 $(48) $190
Depreciation and amortization(1)
 $39
 $252
 $291
 $25
 $316
 $50
 $267
 $317
 $27
 $344
                    
Three Months Ended September 30, 2018          
Three Months Ended June 30, 2019          
Revenues $2,111
 $2,902
 $5,013
 $—
 $5,013
 $2,159
 $2,731
 $4,890
 $—
 $4,890
Segment profit $400
 $473
 $873
 $(74) $799
 $366
 $340
 $706
 $(54) $652
Depreciation and amortization(1)
 $16
 $305
 $321
 $31
 $352
 $29
 $275
 $304
 $28
 $332

(in millions) GBS GIS Total Reportable Segments All Other Totals
Six Months Ended September 30, 2019          
Revenues $4,444
 $5,297
 $9,741
 $—
 $9,741
Segment profit $725
 $583
 $1,308
 $(127) $1,181
Depreciation and amortization(1)
 $67
 $527
 $594
 $54
 $648
           
Six Months Ended September 30, 2018          
Revenues $4,324
 $5,971
 $10,295
 $—
 $10,295
Segment profit $803
 $947
 $1,750
 $(148) $1,602
Depreciation and amortization(1)
 $36
 $586
 $622
 $66
 $688
        
     
(1) Depreciation and amortization as presented excludes amortization of acquired intangible assets of $151$148 million and $132$138 million for the three months ended SeptemberJune 30, 2020 and 2019, and 2018, respectively and $289 million and $267 million for the six months ended September 30, 2019 and 2018 respectively.

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

.

Reconciliation of Reportable Segment Profit to Consolidated Total

The Company's management uses segment profit as the measure for assessing performance of its segments. Segment profit is defined as segment revenue less costscost of services, segment selling, general and administrative, depreciation and amortization, and other income (excluding the movement in foreign currency exchange rates on ourDXC'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 Six Months Ended Three Months Ended
(in millions) September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018 June 30, 2020 June 30, 2019
Profit            
Total profit for reportable segments $602
 $873
 1,308
 $1,750
 $238
 $706
All other loss (73) (74) (127) (148) (48) (54)
Interest income 67
 33
 97
 65
 23
 30
Interest expense (104) (83) (195) (168) (106) (91)
Restructuring costs (32) (157) (174) (342) (72) (142)
Transaction, separation and integration-related costs (53) (128) (158) (198) (110) (105)
Amortization of acquired intangible assets (151) (132) (289) (267) (148) (138)
Goodwill impairment losses (2,887) —
 (2,887) —
Gain on arbitration award 632
 —
 632
 —
(Loss) income from continuing operations before income taxes $(1,999) $332
 $(1,793) $692
Pension and OPEB actuarial and settlement losses (2) —
(Loss) income before income taxes $(225) $206

Management does not use total assets by segment to evaluate segment performance or allocate resources. As a result, assets are not tracked by segment and therefore, total assets by segment is not disclosed.
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 2120 - Commitments and Contingencies

Commitments

The Company signed long-term purchase agreements with certain software, hardware, telecommunication, and other service providers to obtain favorable pricing and terms for services, and products that are necessary for the operations of business activities. Under the terms of these agreements, the Company is contractually committed to purchase specified minimums over periods ranging from 1 to 65 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 SeptemberJune 30, 20192020 were as follows:
Fiscal year 
Minimum Purchase Commitment(1)
 
Minimum Purchase Commitment(1)
(in millions)  
Remainder of 2020 $967
2021 1,685
Remainder of 2021 $1,525
2022 565
 624
2023 454
 537
2024 261
 261
Thereafter 25
2025 25
Total $3,957
 $2,972

        

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

In the normal course of business, the Company may provide certain clients with financial performance guarantees, and at times performance letters of credit or surety bonds. In general, the Company would only be liable for the amounts of these guarantees in the event that non-performance by the Company permits termination of the related contract by the Company’s client. The Company believes it is in compliance with its performance obligations under all service contracts for which there is a financial performance guarantee, and the ultimate liability, if any, incurred in connection with these guarantees will not have a material adverse effect on its 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 SeptemberJune 30, 2019:2020:
(in millions)  Fiscal 2020 Fiscal 2021 Fiscal 2022 and Thereafter Totals  Remainder of Fiscal 2021 Fiscal 2022 Fiscal 2023 and Thereafter Totals
Surety bonds $30
 $326
 $151
 $507
 $105
 $195
 $86
 $386
Letters of credit 126
 55
 385
 566
 99
 109
 400
 608
Stand-by letters of credit 72
 101
 21
 194
 64
 11
 26
 101
Totals $228
 $482
 $557
 $1,267
 $268
 $315
 $512
 $1,095


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



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, based on a qui tam complaint originally filed under seal in 2012 by Vincent Forcier, a former employee of CSC. The complaints allege that from 2008 to 2012 New York City and CSC, in its role as fiscal agent for New York City’s Early Intervention Program ("EIP"), 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 lawsuits seek treble statutory damages, other civil penalties and attorneys’ fees and costs.

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 allowed the remaining claims to proceed. In September 2016, the United States and the State of New York each filed amended complaints-in-intervention, asserting additional claims that the compensation provisions of CSC’s contract with New York City rendered it ineligible to serve as a billing agent under state law. 

CSC filed motions to dismiss and in August 2017, the Court granted in part and denied in part CSC's motions. In January 2018, CSC asserted a counterclaim against the State of New York on a theory of contribution and indemnification. The court denied the State's motion to dismiss CSC's counterclaim with respect to liability for claims not arising under the Federal False Claims Act. The

In June 2020, the Parties participated inexecuted a non-binding mediation in November 2017. No settlement has been reached to date, but negotiations are ongoing. Discovery has now commenced.stipulation resolving the matter and dismissing the action. The Company believes that these claims are without meritagreed to pay a total of $1.85 million, to be split between the United States and intends to continue to defend itself vigorously.the State of New York. In July 2020, the stipulation was approved by the Court and the case was dismissed.

Strauch Fair Labor Standards Act Collective Action: On July 1, 2014, several plaintiffs filed an action in the U.S. District Court for the District of Connecticut on behalf of themselves and a putative nationwide collective of CSC system administrators, alleging CSC’s failure to properly classify these employees as non-exempt under the federal Fair Labor Standards Act ("FLSA"). Plaintiffs alleged similar state-law Rule 23 class claims pursuant to Connecticut and California statutes. Plaintiffs claimed double overtime damages, liquidated damages, and other amounts and remedies.

In 2015 the Court entered an order granting conditional certification under the FLSA of the collective of over 4,000 system administrators. Approximately 1,000 system administrators 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.

In June 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. CSC sought permission to appeal the Rule 23 decision to the Second Circuit Court of Appeals, which was denied.

In December 2017, a jury trial was held and a verdict was returned in favor of plaintiffs. On August 6, 2019, the Court issued an order awarding plaintiffs $18.75 million in damages. In September 2019, Plaintiffs filed a motion seeking $14.1 million in attorneys’ fees and costs. TheIn July 2020, the Court has yet to rule on this motion.issued an order awarding Plaintiffs $8.1 million in attorneys’ fees and costs. The Company disagrees with the jury verdict, the damages award, and the damagesfee award, and is appealing the judgment of the Court.

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


Computer Sciences Corporation v. Eric Pulier, et al.: On May 12, 2015, CSC filed a civil complaint in the Court of Chancery of the State of Delaware against Eric Pulier, the former CEO of Service Mesh Inc. ("SMI"), which CSC had acquired in November 2013. The complaint asserted claims for fraud, breach of contract and breach of fiduciary duty, based on allegations that Mr. Pulier had engaged in fraudulent transactions with two employees of the Commonwealth Bank of Australia Ltd. (“CBA”). 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, all of which the Court dismissed in whole or in part, except for claims for breach of Mr. Pulier’s retention agreement.

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

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

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

The Securities and Exchange Commission (“SEC”) has filed a complaint against Mr. Pulier alleging various claims, including for fraud and falsifying books and records (Securities and Exchange Commission v. Eric Pulier, Case No. 2:17-cv-07124). The Court has set a trial date of December 1, 2020.

In February 2016, Mr. Pulier filed a complaint in Delaware Chancery Court seeking advancement of his legal fees and costs in the civil and criminal actions, pursuant to the terms of his agreements with SMI. The Court ruled that CSC Agility Platform - as the successor to SMI - is liable for advancing 80% of Mr. Pulier’s fees and costs in the civil and criminal actions. Pursuant to agreements with SMI, Mr. Pulier is obligated to repay all amounts advanced to him if it should ultimately be determined that he is not entitled to indemnification.

The Company remains obligated to advance amounts for Mr. Pulier’s legal fees and costs to defend the SEC action against him.

Kemper Corporate Services, Inc. v. Computer Sciences 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. 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. In October 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 to confirm the award in federal district court in Texas.

CSC moved to vacate the award, and in August 2018, the Magistrate Judge issued its Report and Recommendation denying CSC's vacatur motion. In September 2018, the District Court summarily accepted the Report and Recommendation without further briefing and entered a Final Judgment in the case. The Company promptly filed a notice of appeal to the Fifth Circuit Court of Appeals. Following the submission of briefs, oral argument was held on September 5, 2019. AOn January 10, 2020, the Court of Appeals issued a decision is now pending.denying the Company’s appeal. On January 24, 2020, the Company filed a Petition for Rehearing, seeking review by the entire en banc Court of Appeals. On February 14, 2020, the Court of Appeals denied the Company's Petition.

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


The Company is alsohas been pursuing coverage for the full scope of the award, interest, and legal fees and expenses, under the Company's applicable insurance policies.
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued

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.


Forsyth, et al. v. HP Inc. and Hewlett Packard Enterprise:  On August 18, 2016, this purported class and collective action was filed 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 may be proportionately liable for any recovery by plaintiffs in this matter.

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 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.

In January 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 release agreements as part of their WFR packages. In September 2017, the Court denied the partial motion to dismiss without prejudice, but granted defendants’ motions to compel arbitration for those named and opt-in plaintiffs. The Court has stayed the entire action pending arbitration for these individuals, and administratively closed the case.

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 seven7 plaintiffs who were employed by former business units of HPE that are now owned by the Company. In June 2019, a second mediation was held with 145 additional opt-in plaintiffs who were compelled to arbitration pursuant to their release agreements. No agreementIn December 2019, a settlement was reached but settlement negotiationswith 142 of the opt-in plaintiffs, 35 of whom were employed by former business units of HPE that are ongoing.now owned by the Company, and for which the Company is liable.

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

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

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

On June 14, 2018, the court heard oral argument on the parties’ cross-motions for summary judgment. On January 29, 2019, the court granted HPE’s motion for summary judgment and denied Oracle’s motion for summary judgment, resolving the matter in HPE’s favor. Oracle has appealed the judgment to the U.S. Court of Appeals for the Ninth Circuit. The parties have submitted their initial briefs in the appellate case, and briefingoral argument was held on June 8, 2020. The case has been submitted and a decision is expected to conclude in November 2019.now pending.

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


In re DXC Technology Company Securities Litigation: On December 27, 2018, a purported class action lawsuit was filed in the United States District Court for the Eastern District of Virginia against the Company and two of its current officers. The lawsuit asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and is premised on allegedly false and/or misleading statements, and alleged non-disclosure of material facts, regarding the Company’s business, operations, prospects and performance during the proposed class period of February 8, 2018 to November 6, 2018. The Company has moved to dismiss the claims in their entirety. On July 26, 2019,entirety, and on June 2, 2020, the court heard oral argument ongranted 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 dismiss, and a decision is nowthe U.S. Court of Appeals for the Fourth Circuit. The appeal remains pending.

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


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 21 of the Company’s current officers and thea 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. The Company intends to file a motion to dismiss these actions.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 officers and directorsa 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 officers and directorsa 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 officers and directorsa former officer of the Company, among other defendants. The 3third 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. The Company intendsOn July 15, 2020, the Superior Court of California, County of Santa Clara, denied the Company’s motion to filestay 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 all claims asserted in these actions.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 permits plaintiffs to amend and refile their complaint within 60 days.

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 boardBoard 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 intendsmoved to filedismiss 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 this action.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 of the Eastern District of Virginia matter.
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.

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


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

Voluntary Disclosure of Certain Possible Sanctions Law Violations: On February 2, 2017, CSC submitted an initial notification of voluntary disclosure to the U.S. Department of Treasury, Office of Foreign Assets Control ("OFAC") regarding certain possible violations of U.S. sanctions laws pertaining to insurance premium data and claims data processed by 2 partially-owned joint ventures of Xchanging, which CSC acquired during the first quarter of fiscal 2017. A copy of the disclosure was also provided to Her Majesty’s Treasury Office of Financial Sanctions Implementation in the United Kingdom. The Company is finalizing its internal investigation and plans to provideprovided supplemental information to OFAC in earlyon January 31, 2020.

Perspecta-related disputes:Perspecta Arbitration: In October 2019, Perspecta Inc. (“Perspecta”) submitted a demand for arbitration claiming that in June 2018 DXC breached certain obligations under the Separation and Distribution Agreement ("SDA") between Perspecta and DXC and seeking at least $120 million in alleged damages. During the course of discovery, Perspecta increased the amount of its alleged damages, first to $500 million and then to over $800 million. Perspecta has since increased its damages calculations to include interest, bringing its total claim to $990 million. The Company believes there is no valid basis for Perspecta's claims for these amounts. In its arbitration demand, Perspecta also challenges $39 million in invoices issued by DXC in June 2019 under its IT Services Agreement with Perspecta. DXC believes the invoices were properly issued and the amounts are owed by Perspecta. DXC believes that Perspecta's claims are without merit and intends to vigorously defend itself.

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


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



Note 21 - Subsequent Events

Ransomware Attack

On July 5, 2020, the Company announced the ransomware attack of its subsidiary, Xchanging. DXC has confirmed containment of the incident in the immediate days following identification with minimal impact on Xchanging customers; no loss of DXC or Xchanging customer data; no impact on the wider Xchanging or DXC IT estates; and full restoration of Xchanging customer operations.

Proposed Sale of Healthcare Provider Software Business

On July 17, 2020, the Company entered into a purchase agreement with Dedalus Holding S.p.A. ("Dedalus"), a company organized under the laws of Italy, pursuant to which Dedalus will acquire DXC’s healthcare provider software business for a purchase price of €459 million (approximately $525 million), subject to certain adjustments. The closing of the transaction is subject to certain conditions for the benefit of DXC and Dedalus, including (i) receipt of certain regulatory consents, (ii) the absence of any injunction or other order from a governmental authority that prevents the closing, and (iii) subject to certain exceptions, the accuracy of the representations and warranties of, and compliance with covenants by, the other party. In addition, the closing is subject to certain conditions for the benefit of Dedalus, including (i) the absence of a material adverse effect on the business or the ability of DXC to consummate the transaction and (ii) receipt of certain customer consents.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

Forward-looking statements include, among other things, statements with respect to our financial condition, results of operations, cash flows, business strategies, operating efficiencies or synergies, divestitures, competitive position, growth opportunities, share repurchases, dividend payments, plans and objectives of management and other matters. Such statements are subject to numerous assumptions, risks, uncertainties and other factors that could cause actual results to differ materially from those described in such statements, many of which are outside of our control. 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”) pandemic 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 Computer Sciences Corporation's ("CSC")the magnitude, duration, geographic reach, impact on the global economy and Enterprise Services business of Hewlett Packard Enterprise Company's ("HPES") businesses, operations,current and culture andpotential travel restrictions, stay-at-home orders, economic restrictions implemented to address the ability to operate as effectively and efficiently as expected, and the combined company's ability to successfully manage and integrate acquisitions generally;COVID-19 pandemic;
the abilitycurrent, and uncertain future, impact of the COVID-19 pandemic, as well as other emerging developments and disruption to realize the synergieseconomic activity, and benefits expected to result from the HPES Merger within the anticipated time frame or in the anticipated amounts;
other risks related to the HPES Merger including anticipated tax treatment, unforeseen liabilities,their resulting impact on our clients that may affect our business, growth, prospects, financial condition, operating results, cash flows and future capital expenditures;
risks relating to the Luxoft Acquisition and the ability to achieve the expected results therefrom;
the U.S. Public Sector business ("USPS") Separation and Mergers as described in Note 1 - “Summary of Significant Accounting Policies”, could result in substantial tax liability to DXC and our stockholders;liquidity;
changes in governmental regulations or the adoption of new laws or regulations that may make it more difficult or expensive to operate our business;
changes in senior management, the loss of key employees or the ability to retain and hire key personnel and maintain relationships with key business partners;
the risk of liability or damage to our reputation resulting from security breaches, cyber-attacks or disclosure of sensitive data or failure to comply with data protection laws and regulations;regulations, including the ransomware attack recently experienced by our subsidiary, Xchanging;
business interruptions in connection with our technology systems;
the competitive pressures faced by our business;
the effects of macroeconomic and geopolitical trends and events;
the need to manage third-party suppliers and the effective distribution and delivery of our products and services;
the protection of our intellectual property assets, including intellectual property licensed from third parties;
the risks associated with international operations;
the development and transition of new products and services and the enhancement of existing products and services to meet customer needs, respond to emerging technological trends and maintain and grow our customer relationships over time;














the ability to succeed in our strategic objectives, including strategic alternatives material for our business;
the ability to achieve the expected benefits of our restructuring plans;
the ability to maintain and grow our customer relationships over time and to comply with customer contracts or government contracting regulations or requirements;
the execution and performance of contracts by us and our suppliers, customers, clients and partners;
our credit rating and the ability to manage working capital, refinance and raise additional capital for future needs;
our substantial amount of indebtedness;
our ability to remediate any material weakness and maintain effective internal control over financial reporting;
the resolution of pending investigations, claims and disputes;
the integration of Computer Sciences Corporation's ("CSC") and Enterprise Services business of Hewlett Packard Enterprise Company's ("HPES") businesses, operations, and culture and the ability to operate as effectively and efficiently as expected, and the combined company's ability to successfully manage and integrate acquisitions generally;
the ability to realize the synergies and benefits expected to result from the merger of CSC and HPES (the "HPES Merger") within the anticipated time frame or in the anticipated amounts;
other risks related to the HPES Merger including anticipated tax treatment, unforeseen liabilities, and future capital expenditures;
the spin-off of our former U.S. public sector business and its related mergers with Vencore Holding Corp. and KeyPoint Government Solutions to form Perspecta Inc. (the "USPS") Separation and Mergers could result in substantial tax liability to DXC and our stockholders;
risks relating to the respective abilities of the parties to our acquisition of Luxoft Holding, Inc. to achieve the expected results therefrom;
risks relating to the consummation of the HHS Sale and the sale of our healthcare provider software business to Dedalus, and the ability to achieve the expected results therefrom; and
the other factors described in Part I Item 1A "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended March 31, 20192020 and in Part II Item 1A of our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019 and"Risk Factors" of this Quarterly Report on Form 10-Q.

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


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

Introduction

The purpose of the MD&A is to present information that management believes is relevant to an assessment and understanding of our results of operations and cash flows for the secondfirst quarter and the first six months of fiscal 20202021 and our financial condition as of SeptemberJune 30, 2019.2020. The MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and accompanying notes.

The MD&A is organized in 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 secondfirst quarters and the first six months of fiscal 20202021 and fiscal 2019.2020.

Background

DXC Technology a world leading independent, end-to-endhelps global companies run their mission critical systems and operations while modernizing IT, services company, managesoptimizing data architectures, and modernizes mission-critical systems, integrating them with new digital solutions to produce better business outcomes. The Company’s global reachensuring security and talent, innovation platforms, technology independence and extensive partner network enable more than 6,000scalability across public, private and public-sector clients in 70 countrieshybrid clouds. With decades of driving innovation, the world’s largest companies trust DXC to thrive on change.deploy our enterprise technology stack to deliver new levels of performance, competitiveness and customer experiences.

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: GBSGlobal Business Services ("GBS") and GIS.Global Infrastructure Services ("GIS"). We market and sell our services directly to clients through our direct sales force operating out of sales offices around the world. Our clients include commercial businesses of many sizes and in many industries and public sector enterprises.


Results of Operations

The following table sets forth certain financial data for the secondfirst quarters and first six months of fiscal 20202021 and fiscal 2019:2020:
  Three Months Ended Six Months Ended
(In millions, except per-share amounts) September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
         
Revenues $4,851
 $5,013
 $9,741
 $10,295
         
(Loss) income from continuing operations, before taxes (1,999) 332
 (1,793) 692
Income tax expense 116
 73
 154
 202
(Loss) income from continuing operations (2,115) 259
 (1,947) 490
Income from discontinued operations, net of taxes —
 —
 —
 35
Net (loss) income $(2,115) $259
 $(1,947) $525
         
Diluted earnings per share:        
Continuing operations $(8.19) $0.92
 $(7.44) $1.69
Discontinued operations $—
 $—
 $—
 $0.12
  Three Months Ended
(In millions, except per-share amounts) June 30, 2020 June 30, 2019
     
Revenues $4,502
 $4,890
     
(Loss) income, before income taxes (225) 206
Income tax (benefit) expense (26) 38
Net (loss) income $(199) $168
     
Diluted earnings (loss) per share: $(0.81) $0.61

Fiscal 20202021 Highlights

Financial highlights for the second quarters and first six monthsquarter of fiscal 20202021 include the following:

Revenues for the secondfirst quarter and first six months of fiscal 20202021 were $4.9$4.5 billion, and $9.7 billion, respectively, a decrease of 3% and 5%, respectively,7.9% as compared to the same periods of the prior fiscal year.
Loss from continuing operations and diluted EPS from continuing operations for the secondfirst quarter of fiscal 20202020.
Net loss and diluted loss per share for the first quarter of fiscal 2021 were $2,115$199 million and $8.19,$0.81, respectively, including the cumulative impact of certain items of $(2,477)$258 million, reflecting restructuring costs, transaction, separation and integration-related costs, amortization of acquired intangible assets, goodwill impairment losses, gain on arbitration award and a tax adjustment related to U.S. tax reform.pension and other post-retirement benefit ("OPEB") actuarial and settlement losses. This compares with net income from continuing operations and diluted EPS from continuing operationsearnings per share of $259$168 million and $0.92,$0.61, respectively, for the same period of the prior fiscal year.
Loss from continuing operations and diluted EPS from continuing operations for the first six monthsquarter of fiscal 2020 were $1,947 million and $7.44, respectively, including the cumulative impact of certain items of $(2,781) million, reflecting restructuring costs, transaction, separation and integration-related costs, amortization of acquired intangible assets, goodwill impairment losses, gain on arbitration award and a tax adjustment related to U.S. tax reform. This compares with income from continuing operations and diluted EPS from continuing operations of $490 million and $1.69, respectively, for the same period of the prior fiscal year.2020.
Our cash and cash equivalents were $2.9$5.5 billion as of SeptemberJune 30, 2019.2020.
We generated $1,585$119 million of cash from operations during the first six monthsquarter of fiscal 2020,2021, as compared to cash generatedused of $849$66 million during the first six monthsquarter of fiscal 2019.
We returned $757 million to shareholders in the form of common stock dividends and share repurchases during the first six months of fiscal 2020, as compared to $552 million during the first six months of fiscal 2019.2020.


Revenues
  Three Months Ended    
(in millions) September 30, 2019 September 30, 2018 Change Percentage Change
GBS $2,285
 $2,111
 $174
 8.2 %
GIS 2,566
 2,902
 (336) (11.6)%
Total Revenues $4,851
 $5,013
 $(162) (3.2)%
 Six Months Ended     Three Months Ended    
(in millions) September 30, 2019 September 30, 2018 Change Percentage Change June 30, 2020 June 30, 2019 Change Percentage Change
GBS $4,444
 $4,324
 $120
 2.8 % $2,174
 $2,159
 $15
 0.7 %
GIS 5,297
 5,971
 (674) (11.3)% 2,328
 2,731
 (403) (14.8)%
Total Revenues $9,741
 $10,295
 $(554) (5.4)% $4,502
 $4,890
 $(388) (7.9)%

The decrease in revenues for the first six monthsquarter of fiscal 20202021, compared with fiscal 20192020 of the same period, reflects an ongoing decline interminations, price-downs, and demand weakness related to the COVID-19 pandemic. This was partially offset by contributions from our traditional application maintenance business and legacy infrastructure services.Luxoft acquisition. Fiscal 20202021 revenues included an unfavorable foreign currency exchange rate impact of 2.8%2.0%, primarily driven by the strengthening of the U.S. dollar against the Euro and British Pound.

During the second quarter and first six monthsquarters of fiscal 20202021 and fiscal 2019,2020, the distribution of our revenues across geographies was as follows:
chart-1167060f5144576e932.jpgchart-8d8fb8db0c8b5184b66.jpg

chart-6bb265a11bb04a575bd.jpg
For the discussion of risks associated with our foreign operations, see Part 1, Item 1A "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended March 31, 2019.2020.



As a global company, over 62% of our revenues for the first six monthsquarter of fiscal 20202021 were earned internationally. As a result, the comparison of revenues denominated in currencies other than the U.S. dollar, from period to period, is impacted, and we expect will continue to be impacted by fluctuations in foreign currency exchange rates. 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 information is consistent with how management views our revenues and evaluates our operating performance and trends. The table below summarizes our constant currency revenues:
  Three Months Ended    
(in millions) Constant Currency September 30, 2019 September 30, 2018 Change Percentage Change
GBS $2,333
 $2,111
 $222
 10.5 %
GIS 2,639
 2,902
 (263) (9.1)%
Total $4,972
 $5,013
 $(41) (0.8)%

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

  Three Months Ended    
(in millions) Constant Currency June 30, 2020 June 30, 2019 Change Percentage Change
GBS $2,212
 $2,159
 $53
 2.5 %
GIS 2,391
 2,731
 (340) (12.4)%
Total $4,603
 $4,890
 $(287) (5.9)%

Global Business Services

Our GBS revenue was $2,285revenues were $2,174 million in the second quarter and $4,444 million in the first six months of fiscal 2020, an increase of 8.2% and 2.8%, respectively, compared to $2,159 million for the corresponding periods in fiscal 2019.prior year. GBS revenue increased 0.7% year-over-year, including an unfavorable foreign currency exchange rate impact of 1.8%. GBS revenue in constant currency increased 10.5% and 5.4% in the second quarter and first six months2.5% year-over-year primarily as a result of fiscal 2020, respectively, as compared to the corresponding periods in fiscal 2019. The increase in GBS revenue in fiscal 2020 periods reflects the contributions from our Luxoft acquisition. This was partially offset by project run-offs, completions, and other acquisitions further discussed in Note 3 - "Acquisitions".terminations.

For the secondfirst quarter and first six months of fiscal 2020,2021, GBS contract awards were $1.9$3.5 billion and $4.3 billion, respectively, as compared to $2.2$2.4 billion and $4.2 billion induring the corresponding periodsfirst quarter of fiscal 2019.2020.

Global Infrastructure Services

Our GIS revenue was $2,566revenues were $2,328 million in the second quarter and $5,297 million in the first six months of fiscal 2020, a decrease of 11.6% and 11.3%, respectively, compared to $2,731 million for the corresponding periods in fiscal 2019.prior year. GIS revenue decreased 14.8% year-over-year, including an unfavorable foreign currency exchange rate impact of 2.4%. GIS revenue in constant currency decreased 9.1%12.4% year-over-year as a result of terminations, price-downs, and 8.3% in the second quarter and first six months of fiscal 2020, respectively, as compared to the corresponding periods in fiscal 2019. The decrease in GIS revenues in fiscal 2020 periods reflects declines in our traditional infrastructure businesses.project run-offs.

For the secondfirst quarter and first six months of fiscal 2020,2021, GIS contract awards were $1.9$1.8 billion and $3.7 billion, respectively, as compared to $2.5$1.8 billion and $5.1 billion induring the corresponding periodsfirst quarter of fiscal 2019.2020.


Costs and Expenses

Our total costs and expenses are shown in the tables below:
 Three Months Ended   Three Months Ended  
 AmountPercentage of Revenues Percentage of Revenue Change AmountPercentage of Revenues Percentage Point Change
(in millions) September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018  June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 
Costs of services (excludes depreciation and amortization and restructuring costs) $3,679
 $3,518
 75.8 % 70.1 % 5.7 % $3,629
 $3,622
 80.6 % 74.0 % 6.6
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs) 489
 569
 10.1
 11.4
 (1.3) 539
 507
 12.0
 10.4
 1.6
Depreciation and amortization 467
 484
 9.6
 9.7
 (0.1) 492
 470
 10.9
 9.6
 1.3
Goodwill impairment losses 2,887
 —
 59.5
 —
 59.5
Restructuring costs 32
 157
 0.7
 3.1
 (2.4) 72
 142
 1.6
 2.9
 (1.3)
Interest expense 104
 83
 2.1
 1.7
 0.4
 106
 91
 2.4
 1.9
 0.5
Interest income (67) (33) (1.4) (0.7) (0.7) (23) (30) (0.5) (0.6) 0.1
Gain on arbitration award (632) —
 (13.0) —
 (13.0)
Other income, net (109) (97) (2.2) (1.9) (0.3) (88) (118) (2.0) (2.4) 0.4
Total costs and expenses $6,850
 $4,681
 141.2 % 93.4 % 47.8 % $4,727
 $4,684
 105.0 % 95.8 % 9.2

  Six Months Ended  
  AmountPercentage of Revenues Percentage of Revenue Change
(in millions) September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018 
Costs of services (excludes depreciation and amortization and restructuring costs) $7,301
 $7,385
 75.0 % 71.8 % 3.2 %
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs) 996
 1,009
 10.2
 9.8
 0.4
Depreciation and amortization 937
 955
 9.6
 9.3
 0.3
Goodwill impairment losses 2,887
 —
 29.6
 —
 29.6
Restructuring costs 174
 342
 1.8
 3.3
 (1.5)
Interest expense 195
 168
 2.0
 1.6
 0.4
Interest income (97) (65) (1.0) (0.6) (0.4)
Gain on arbitration award (632) —
 (6.5) —
 (6.5)
Other income, net (227) (191) (2.3) (1.9) (0.4)
Total costs and expenses $11,534
 $9,603
 118.4 % 93.3 % 25.1 %

Total costs and expenses were consistent in the first quarter of fiscal 2021 compared to the same period in the prior fiscal year. The 47.8% and 25.1%9.2 point increase in total costs and expenses as a percentage of revenue for the secondfirst quarter and first six months of fiscal 2020, respectively,2021 was primarily reflects our goodwill impairment losses, which were partially offsetdriven by a reduction in revenue for the gain on arbitration award.first quarter of fiscal 2021 compared to the same period in the prior fiscal year.



Costs of Services

Cost of services, excluding depreciation and amortization and restructuring costs ("COS"), was $3.7 billion and $7.3$3.6 billion for the second quarter and first six months of fiscal 2020, respectively. COS increased $0.2 billion during the second quarter of fiscal 2020 and decreased $0.1 billion during2021, consistent with the first six months of fiscal 2020, as compared to the same periodscomparable period of the prior fiscal year.

Within COS for the first quarter of fiscal 2021 is a $26 million one-time accrual relating to the settlement of customer disputes. This was partially offset by cost optimization savings realized during the quarter. COS as a percentage of revenue increased 5.7% and 3.2% for the second quarter and first six months of fiscal 2020, respectively. These increases were6.6 points primarily driven by the declinea reduction in revenue exceeding associated cost reductionscompared to the same period in our traditional infrastructure businesses.the prior fiscal year.

Selling, General, and Administrative

Selling, general, and administrative expense, excluding depreciation and amortization and restructuring costs ("SG&A"), was $489 million and $996$539 million for the secondfirst quarter and first six months of fiscal 2020, respectively. SG&A decreased $80 million and $13 million during2021, consistent with the second quarter and first six months of fiscal 2020, respectively, as compared to the same periodscomparable period of the prior fiscal year. These decreases were driven by lower transaction, separation and integration-related costs.

Transaction, separation and integration-related costs of $53 million and $158$110 million were included in SG&A for the secondfirst quarter and first six months of fiscal 2020, respectively,2021, as compared to $128 million and $198$105 million for the comparable periodsperiod of the prior fiscal year.

Depreciation and Amortization

Depreciation expense decreased $28was $178 million and amortization expense increased $11was $314 million for the three months ended September 30, 2019, compared to the three months ended September 30, 2018. For the first six monthsquarter of fiscal 2020, depreciation expense decreased $50 million and amortization expense increased $32 million compared to2021, consistent with the first six monthscomparable period of fiscal 2019.

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

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

Goodwill Impairment Losses

DXC recognized goodwill impairment charges totaling $2,887 million for the second quarter and first six months of fiscal 2020. The impairment charge was primarily as a result of a decline in market capitalization during the fiscal 2020 second quarter. See Note 11, "Goodwill" for additional information.

Restructuring Costs

During fiscal 2020,2021, management approved global cost savings initiatives designed to reduce operating costs by re-balancingdesigned to better align the our workforce and facilitiesfacility structures. During the secondfirst quarter and first six months of fiscal 2020,2021, restructuring costs, net of reversals, were $32$72 million, and $174 million, respectively, as compared to $157 million and $342$142 million during the same periodsperiod of the prior fiscal year. Restructuring costs for the second quarter of fiscal 2020 included $23 million of reversals under the Fiscal 2020 Plan.

For an analysis of changes in our restructuring liabilities by restructuring plan, see Note 1413 - "Restructuring Costs" to the financial statements.



Interest Expense and Interest Income

Interest expense for the secondfirst quarter and first six months of fiscal 20202021 increased $2115 million and $27 million, respectively, over the same periodsperiod in the prior fiscal year. The increase in interest expense in the second quarter and first six months of fiscal 2020 versus the same periods in fiscal 2019 was primarilyyear due to an increase in borrowings and asset financing activities. See the "Capital Resources" caption below and Note 1211 - “Debt” for additional information.

Interest income for the secondfirst quarter and first six months of fiscal 2020 increased $342021 decreased $7 million and $32 million, respectively over the same periodsperiod in the prior fiscal year. The increase in interest income in the second quarter and first six months of fiscal 2020 versus the same periods in fiscal 2019 includes pre-award interest of $34 million and post-award interest of $2 million related to arbitration discussed below under the caption “Gain on Arbitration Award.”

Gain on Arbitration Award

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

Other Income, Net

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

The $12$30 million increasedecrease in other income, net for the secondfirst quarter of fiscal 20202021, as compared to the same period of the prior fiscal year, was due to a year-over-year increasedecrease of $20$9 million in other gains related to sales of non-operating assets, year-over-year decrease of $9 million in non-service components of net periodic pension income and a year-over-year favorableunfavorable foreign currency impact of $20$12 million. These increases were offset by a $28 million decrease in other gains related to sales of non-operating assets.

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

Taxes

Our ETR from continuing operationseffective tax rate ("ETR") was (5.8)%11.6% and 22.0%18.4% for the three months ended SeptemberJune 30, 20192020 and SeptemberJune 30, 2018, respectively, and (8.6)% and 29.2% for the six months ended September 30, 2019, and September 30, 2018, respectively. For the three months ended SeptemberJune 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. For the three months ended June 30, 2019, the primary drivers of the ETR were the impact of the non-deductible goodwill impairment charge, the non-taxable gain on the arbitration award, the global mix of income an increase in prior year U.S. federal research and development income tax credits, and an increase in unrecognized tax benefits primarily related to the disallowance of certain legacy CSC foreign restructuring expenses deducted on the U.S. federal tax return for tax year March 31, 2013. For the six months ended September 30, 2019, the primary drivers of the ETR were the impact of the non-deductible goodwill impairment charge, the non-taxable gain on the arbitration award, the global mix of income, an increase in unrecognized tax benefits primarily related to the disallowance of certain legacy CSC foreign restructuring expenses deducted on the U.S. federal tax return for tax year March 31, 2013 and an increase in prior year U.S. federal research and development income tax credits. For the three and six months ended September 30, 2018, the primary unfavorable drivers of the ETR were the global mix of income, the increase in the provisional transition tax, an
increase in state tax expense due to remeasurement of deferred taxes, and the impactreduction of U.S. proposed regulations on the ability to claim certain foreignour estimated fiscal 2019 base erosion anti-avoidance tax credits. The primary favorable drivers of the ETR were due to the filing of("BEAT") for the October 31, 2017 U.S. federal2019 tax return and a decrease in valuation allowances on certain foreign subsidiary deferred tax assets.


Income from Discontinued Operations

The $35 millionyear due to electing out of income from discontinued operations reflects the net income generated by USPS during theadditional first quarter of fiscal 2019.year bonus depreciation.
 
Earnings (Loss) Per Share

Diluted EPS from continuing operations for the secondfirst quarter and first six months of fiscal 20202021 decreased $9.11 and $9.13, respectively,$1.42 from the same periodsperiod in the prior fiscal year. This decrease reflectswas due to a decrease of $2,374 million and $2,437$367 million in income from continuing operations for the second quarter and first six months of fiscal 2020, respectively, over the same periods in the prior fiscal year.net income.

Diluted EPS from continuing operations for the secondfirst quarter of fiscal 20202021 includes $0.11$0.24 per share of restructuring costs, $0.18$0.32 per share of transaction, separation and integration-related costs, $0.45 per share of amortization of acquired intangible assets, $11.10and $0.01 per share of goodwill impairment losses, $(2.43) per share of arbitration award gains,pension and $0.11 per share of tax adjustment related to prior restructuring charges.

Diluted EPS from continuing operations for the first six months of fiscal 2020 includes $0.54 per share of restructuring costs, $0.50 per share of transaction, separationOPEB actuarial and integration-related costs, $0.85 per share of amortization of acquired intangible assets, $10.91 per share of goodwill impairment losses, $(2.39) per share of arbitration award gains, and $0.11 per share of tax adjustment relating to prior restructuring charges.settlement losses.


Non-GAAP Financial Measures

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

We present these non-GAAP financial measures to provide investors with meaningful supplemental financial information, in addition to the financial information presented on a GAAP basis. Non-GAAP financial measures exclude certain items from GAAP results which DXC management believes are not indicative of core operating performance. DXC management believes these non-GAAP measures allow investors to better understand the financial performance 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 operations on a comparable basis from period to period. DXC management believes the non-GAAP measures provided are also considered important measures by financial analysts covering DXC, as equity research analysts continue to publish estimates and research notes based on our non-GAAP commentary, including our guidance around non-GAAP EPS targets.

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

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

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



Non-GAAP financial measures and the respective most directly comparable financial measures calculated and presented in accordance with GAAP include:
  Three Months Ended    
(in millions) September 30, 2019 September 30, 2018 Change Percentage Change
(Loss) income from continuing operations before income taxes $(1,999) $332
 $(2,331) (702.1)%
Non-GAAP income from continuing operations before income taxes $492
 $749
 $(257) (34.3)%
Net (loss) income

 $(2,115) $259
 $(2,374) (916.6)%
Adjusted EBIT $529
 $799
 $(270) (33.8)%
 Six Months Ended     Three Months Ended  
(in millions) September 30, 2019 September 30, 2018 Change Percentage Change June 30, 2020 June 30, 2019 Change
(Loss) income from continuing operations before income taxes $(1,793) $692
 $(2,485) (359.1)%
Non-GAAP income from continuing operations before income taxes $1,083
 $1,499
 $(416) (27.8)%
(Loss) income before income taxes $(225) $206
 $(431)
Non-GAAP income before income taxes $107
 $591
 $(484)
Net (loss) income

 $(1,947) $525
 $(2,472) (470.9)% $(199) $168
 $(367)
Adjusted EBIT $1,181
 $1,602
 $(421) (26.3)% $190
 $652
 $(462)


Reconciliation of Non-GAAP Financial Measures

Our non-GAAP adjustments include:
Restructuring costs - reflects costs, net of reversals, related to workforce optimization and real estate charges.
Transaction, separation and integration-related costs - reflects costs to execute on strategic alternatives, costs related to integration planning, financing and advisory fees associated with the HPES Merger and other acquisitions and costs related to the separation of USPS.
Amortization of acquired intangible assets - reflects amortization of intangible assets acquired through business combinations.
Goodwill impairmentPension and OPEB actuarial and settlement gains and losses - reflects impairment losses on goodwill.pension and OPEB actuarial and settlement gains and losses.
Gain on arbitration award - reflects a gain related to the HPES merger arbitration award.
Tax adjustment - for fiscal 2020 periods, reflects the impact of tax entries related to prior restructuring charges, and for fiscal 2019 periods, reflects the estimated non-recurring benefit of the Tax Cuts and Jobs Act of 2017. Income tax expense of non-GAAP adjustments is computed by applying the jurisdictional tax rate to the pre-tax adjustments on a jurisdictional basis.




A reconciliation of reported results to non-GAAP results is as follows:
  Three Months Ended September 30, 2019
(in millions, except per-share amounts) As Reported Restructuring Costs Transaction, Separation and Integration-Related Costs Amortization of Acquired Intangible Assets Goodwill Impairment Losses Gain on Arbitration Award Tax Adjustment Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs) $3,679
 $—
 $—
 $—
 $—
 $—
 $—
 $3,679
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs) 489
 —
 (53) —
 —
 —
 —
 436
(Loss) income from continuing operations before income taxes (1,999) 32
 53
 151
 2,887
 (632) —
 492
Income tax expense 116
 4
 5
 34
 —
 —
 (29) 130
Net (loss) income (2,115) 28
 48
 117
 2,887
 (632) 29
 362
Less: net income attributable to non-controlling interest, net of tax 4
 —
 —
 —
 —
 —
 —
 4
Net (loss) income attributable to DXC common stockholders $(2,119) $28
 $48
 $117
 $2,887
 $(632) $29
 $358
                 
Effective Tax Rate (5.8)%             26.4%
                 
Basic EPS from continuing operations $(8.19) $0.11
 $0.19
 $0.45
 $11.16
 $(2.44) $0.11
 $1.38
Diluted EPS from continuing operations $(8.19) $0.11
 $0.18
 $0.45
 $11.10
 $(2.43) $0.11
 $1.38
                 
Weighted average common shares outstanding for:                
Basic EPS 258.71
 258.71
 258.71
 258.71
 258.71
 258.71
 258.71
 258.71
Diluted EPS 258.71
 260.03
 260.03
 260.03
 260.03
 260.03
 260.03
 260.03


 Six Months Ended September 30, 2019 Three Months Ended June 30, 2020
(in millions, except per-share amounts) As Reported Restructuring Costs Transaction, Separation and Integration-Related Costs Amortization of Acquired Intangible Assets Goodwill Impairment Losses Arbitration Award Gain Tax Adjustment Non-GAAP Results As Reported Restructuring Costs Transaction, Separation and Integration-Related Costs Amortization of Acquired Intangible Assets Pension and OPEB Actuarial and Settlement Losses Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs) $7,301
 $—
 $—
 $—
 $—
 $—
 $—
 $7,301
 $3,629
 $—
 $—
 $—
 $—
 $3,629
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs) 996
 —
 (158) —
 —
 —
 —
 838
 539
 —
 (110) —
 —
 429
(Loss) income from continuing operations before income taxes (1,793) 174
 158
 289
 2,887
 (632) —
 1,083
Income tax expense 154
 32
 27
 65
 —
 —
 (29) 249
(Loss) income before income taxes (225) 72
 110
 148
 2
 107
Income tax (benefit) expense (26) 12
 28
 34
 —
 48
Net (loss) income (1,947) 142
 131
 224
 2,887
 (632) 29
 834
 (199) 60
 82
 114
 2
 59
Less: net income attributable to non-controlling interest, net of tax 9
 —
 —
 —
 —
 —
 —
 9
 6
 —
 —
 —
 —
 6
Net (loss) income attributable to DXC common stockholders $(1,956) $142
 $131
 $224
 $2,887
 $(632) $29
 $825
 $(205) $60
 $82
 $114
 $2
 $53
                            
Effective Tax Rate (8.6)%             23.0% 11.6%         44.9%
                            
Basic EPS from continuing operations $(7.44) $0.54
 $0.50
 $0.85
 $10.98
 $(2.40) $0.11
 $3.14
Diluted EPS from continuing operations $(7.44) $0.54
 $0.50
 $0.85
 $10.91
 $(2.39) $0.11
 $3.12
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 EPS 262.83
 262.83
 262.83
 262.83
 262.83
 262.83
 262.83
 262.83
 253.63
 253.63
 253.63
 253.63
 253.63
 253.63
Diluted EPS 262.83
 264.61
 264.61
 264.61
 264.61
 264.61
 264.61
 264.61
 253.63
 254.41
 254.41
 254.41
 254.41
 254.41





  Three Months Ended September 30, 2018
(in millions, except per-share amounts) As Reported Restructuring Costs Transaction, Separation and Integration-Related Costs Amortization of Acquired Intangible Assets Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs) $3,518
 $—
 $—
 $—
 $3,518
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs) 569
 —
 (128) —
 $441
Income from continuing operations before income taxes 332
 157
 128
 132
 749
Income tax expense 73
 41
 30
 32
 176
Income from continuing operations 259
 116
 98
 100
 573
Income from discontinued operations, net of tax —
 —
 —
 —
 —
Net income 259
 116
 98
 100
 573
Less: net (loss) attributable to non-controlling interest, net of tax (3) —
 —
 —
 (3)
Net income attributable to DXC common stockholders $262
 $116
 $98
 $100
 $576
           
Effective Tax Rate 22.0%       23.5%
           
Basic EPS from continuing operations $0.93
 $0.41
 $0.35
 $0.36
 $2.05
Diluted EPS from continuing operations $0.92
 $0.41
 $0.34
 $0.35
 $2.02
           
Weighted average common shares outstanding for:          
Basic EPS 281.37
 281.37
 281.37
 281.37
 281.37
Diluted EPS 285.78
 285.78
 285.78
 285.78
 285.78



 Six Months Ended September 30, 2018 Three Months Ended June 30, 2019
(in millions, except per-share amounts) As Reported Restructuring Costs Transaction, Separation and Integration-Related Costs Amortization of Acquired Intangible Assets Tax Adjustment Non-GAAP Results As Reported Restructuring Costs Transaction, Separation and Integration-Related Costs Amortization of Acquired Intangible Assets Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs) $7,385
 $—
 $—
 $—
 $—
 $7,385
 $3,622
 $—
 $—
 $—
 $3,622
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs) 1,009
 —
 (198) —
 —
 $811
 507
 —
 (105) —
 $402
Income from continuing operations before income taxes 692
 342
 198
 267
 —
 1,499
Income tax expense (benefit) 202
 82
 46
 65
 (33) 362
Income from continuing operations 490
 260
 152
 202
 33
 1,137
Income from discontinued operations, net of tax 35
 —
 —
 —
 —
 35
Income before income taxes 206
 142
 105
 138
 591
Income tax expense 38
 28
 22
 31
 119
Net income 525
 260
 152
 202
 33
 1,172
 168
 114
 83
 107
 472
Less: net income attributable to non-controlling interest, net of tax 4
 —
 —
 —
 —
 4
 5
 —
 —
 —
 5
Net income attributable to DXC common stockholders $521
 $260
 $152
 $202
 $33
 $1,168
 $163
 $114
 $83
 $107
 $467
                      
Effective Tax Rate 29.2%         24.1% 18.4%       20.1%
                      
Basic EPS from continuing operations $1.72
 $0.92
 $0.54
 $0.71
 $0.12
 $4.01
Diluted EPS from continuing operations $1.69
 $0.90
 $0.53
 $0.70
 $0.11
 $3.94
Basic EPS $0.61
 $0.43
 $0.31
 $0.40
 $1.75
Diluted EPS $0.61
 $0.42
 $0.31
 $0.40
 $1.74
                      
Weighted average common shares outstanding for:                      
Basic EPS 282.89
 282.89
 282.89
 282.89
 282.89
 282.89
 267.00
 267.00
 267.00
 267.00
 267.00
Diluted EPS 287.53
 287.53
 287.53
 287.53
 287.53
 287.53
 268.97
 268.97
 268.97
 268.97
 268.97


A reconciliation of net income to adjusted EBIT is as follows:
 Three Months Ended Six Months Ended Three Months Ended
(in millions) September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018 June 30, 2020 June 30, 2019
Net (loss) income $(2,115) $259
 $(1,947) $525
 $(199) $168
Income from discontinued operations, net of taxes —
 —
 —
 (35)
Income tax expense 116
 73
 154
 202
Income tax (benefit) expense (26) 38
Interest income (67) (33) (97) (65) (23) (30)
Interest expense 104
 83
 195
 168
 106
 91
EBIT (1,962) 382
 (1,695) 795
 (142) 267
Restructuring costs 32
 157
 174
 342
 72
 142
Transaction, separation and integration-related costs 53
 128
 158
 198
 110
 105
Amortization of acquired intangible assets 151
 132
 289
 267
 148
 138
Goodwill impairment losses 2,887
 —
 2,887
 —
Gain on arbitration award (632) —
 (632) —
Pension and OPEB actuarial and settlement losses 2
 —
Adjusted EBIT $529
 $799
 $1,181
 $1,602
 $190
 $652


Liquidity and Capital Resources

Cash and Cash Equivalents and Cash Flows

As of SeptemberJune 30, 2019,2020, our cash and cash equivalents were $2.9("cash") was $5.5 billion, of which $1.6 billion was held outside of the U.S. As of March 31, 2020, our cash was $3.7 billion, of which $1.2 billion was held outside of the U.S. A substantial portion of funds can be returned to the U.S. from funds advanced previously to finance our foreign acquisition initiatives. As a result of the Tax Cuts and Jobs Act of 2017, and after the mandatory one-time income inclusion (deemed repatriation) of the historically untaxed earnings of our foreign subsidiaries and current income inclusions for global intangible low taxed income, we expect a significant portion of the cash and cash equivalents held by our foreign subsidiaries will no longer be subject to U.S. federal income tax consequences upon subsequent repatriation to the United States.U.S. 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.funds not designated as indefinitely reinvested.

Cash and cash equivalents ("cash")were $2.9 billion for March 31, 2019 and September 30, 2019. The following table summarizes our cash flow activity:
 Six Months Ended   Three Months Ended  
(in millions) September 30, 2019 September 30, 2018 Change June 30, 2020 June 30, 2019 Change
Net cash provided by operating activities $1,585
 $849
 $736
Net cash provided by (used in) operating activities $119
 $(66) $185
Net cash used in investing activities (2,047) (48) (1,999) (61) (1,822) 1,761
Net cash provided by (used in) financing activities 480
 (686) 1,166
Net cash provided by financing activities 1,786
 887
 899
Effect of exchange rate changes on cash and cash equivalents (37) (64) 27
 (14) (30) 16
Net decrease in cash and cash equivalents $(19) $51
 $(70) $1,830
 $(1,031) $2,861
Cash and cash equivalents at beginning-of-year 2,899
 2,729
   3,679
 2,899
  
Cash and cash equivalents at the end-of-period $2,880
 $2,780
   $5,509
 $1,868
  


Operating cash flow

Net cash provided by (used in) operating activities during the first six monthsquarter of fiscal 20202021 was $1,585$119 million as compared to $849$(66) million during the comparable period of the prior fiscal year. The year-over-year increase of $736$185 million was due to an increasea decrease in working capital cash outflows of $488 million offset by a decrease in net income, net of adjustments of $749 million, which includes$303 million.

Investing cash received on arbitration award of $668 million, offset by a decrease in working capital movements of $(13) million.flow

Net cash used in investing activities during the first six monthsquarter of fiscal 20202021 was $2,047$61 million as compared to $481,822 million during the comparable period of the prior fiscal year. The increasedecrease in cash used of $1,9991,761 million was predominatelyprimarily due to an increasea decrease in cash paid for acquisitions of $1,878 million, an increase in purchases of property and equipment of $59$1,901 million and short-term investing of $75 million. The increase is partiallymillion in fiscal 2020, offset by a decrease in cash paid for business dispositionscollections related to deferred purchase price receivable of $65 million in the second quarter of fiscal 2019.$212 million.

Financing cash flow

Net cash provided by (used in) financing activities during the first six monthsquarter of fiscal 20202021 was $480$1,786 million as compared to $(686)$887 million during the comparable period of the prior fiscal year. The $1,166899 million increase was primarily due to additional borrowings on long-term debtunder lines of $1,715credit of $2,500 million, and a decrease in payments on long-term debt of $1,517 million. This was partially offset by borrowings for the USPS spin transaction of $1,114 million and proceeds from bond issuance of $753 million in the prior fiscal year, and additional repurchaseabsence of common stock repurchases and advance payment for accelerated share repurchase of $203$500 million in fiscal 2020, and an increase of commercial paper borrowings, net of repayments of $431 million. This was partially offset by a decrease in borrowings on term loans and other long-term debt of $1,205 million, repayments of borrowings under lines of credit of $750 million, and an increase in payments on long-term debt of $575 million.




Capital Resources

See Note 2120 - "Commitments and Contingencies" for a discussion of the general purpose of guarantees and commitments. The anticipated sources of funds to fulfill such commitments are listed below and under the subheading "Liquidity."

The following table summarizes our total debt:
 As of As of
(in millions) September 30, 2019 March 31, 2019 June 30, 2020 March 31, 2020
Short-term debt and current maturities of long-term debt $1,471
 $1,942
 $1,682
 $1,276
Long-term debt, net of current maturities 7,698
 5,470
 10,334
 8,672
Total debt $9,169
 $7,412
 $12,016
 $9,948

The $1.8$2.1 billion increase in total debt during the first six monthsquarter of fiscal 20202021 was primarily attributed to the $1.8 billion net borrowing from the credit facility agreement ("Credit Agreement") and the new term loan credit agreement insenior notes with an aggregate principal of $2.1$1.0 billion, consisting of three tranches: (i) $500 million maturingof 4.00% Senior Notes due fiscal 2024, and (ii) $500 million of 4.13% Senior Notes due fiscal 2026. The purpose of the draw from the Credit Agreement was to secure liquidity as additional cash on fiscal 2025; (ii) €750 million maturinghand to support our liquidity resources during the COVID-19 pandemic and to mitigate the uncertainties caused by volatile capital markets, changing governmental policies, and evolving impact on fiscal 2022; and (iii) €750 million maturing on fiscal 2023.world economies. The proceeds from the new borrowingnotes were applied towards the early prepayment of our term loan facilities, including prepayment of €500 million of Euro Term Loan due fiscal 2023, £150 million of GBP Term Loan due fiscal 2022, A$300 million of AUD Term Loan due fiscal 2022, and $100 million of USD Term Loan due fiscal 2025.

During the quarter, we applied for and were confirmed eligible to participate in the Bank of England’s (“BOE”) COVID Corporate Funding Facility, a BOE program that provides term liquidity funding to investment grade corporate issuers with significant operations in the UK, in order to stabilize and facilitate continued access to sterling commercial paper markets. At our option, we can borrow up to a maximum of €1 billion or its equivalent in Euro, British Pound and U.S. dollar. On June 15, 2020, DXC Capital Funding DAC (previously named DXC Capital Funding Limited), an indirect subsidiary of the Company, issued £600 million in commercial paper maturing May 2021 under its existing €1.0 billion commercial paper program via direct sale to the BOE.

We also repaid $750 million on the previously drawn Credit Agreement that was used to finance the Luxoft acquisition. Additionally,mitigate our reliance on volatile short-term commercial paper markets during the first six monthsquarter. Thus, this amount became available under the revolving credit facility for redraw at the request of fiscal 2020, we repaid the $500 million Senior Notes due 2020. Company.

We were in compliance with all financial covenants associated with our borrowings as of SeptemberJune 30, 20192020 and SeptemberJune 30, 2018.2019.


The debt maturity chart below summarizes the future maturities of long-term debt principal for fiscal years subsequent to SeptemberJune 30, 20192020 and excludes maturities of borrowings for assets acquired under long-term financing and finance lease liabilities. For more information on our debt, seeSee Note 1211 - "Debt" to the financial statements.for more information.

chart-83819e133ccc536aa74.jpg




chart-7ae94beb73975f5e839.jpg
The following table summarizes our capitalization ratios:
 As of As of
(in millions) September 30, 2019 March 31, 2019 June 30, 2020 March 31, 2020
Total debt $9,169
 $7,412
 $12,016
 $9,948
Cash and cash equivalents 2,880
 2,899
 5,509
 3,679
Net debt(1)
 $6,289
 $4,513
 $6,507
 $6,269
        
Total debt $9,169
 $7,412
 $12,016
 $9,948
Equity 8,870
 11,725
 4,942
 5,129
Total capitalization $18,039
 $19,137
 $16,958
 $15,077
        
Debt-to-total capitalization 50.8% 38.7% 70.9% 66.0%
Net debt-to-total capitalization(1)
 34.9% 23.6% 38.4% 41.6%
        

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

Net debt-to-total capitalization as of September 30, 2019 increased as compared to March 31, 2019, due to the increase in total debt attributed to the Luxoft acquisition.

As of September 30, 2019, our
Our credit ratings wereare as follows:
Rating Agency RatingOutlookLong Term Ratings Short Term RatingsOutlook
Fitch BBB+BBBF-2 StableF-2
Moody's Baa2 StableP-2 P-2Negative
S&P BBBBBB-- Stable-

On June 10, Fitch downgraded DXC’s long-term credit ratings by one notch, to BBB from BBB+, and changed DXC’s outlook to Stable from Negative. Also, on July 2, S&P downgraded DXC’s long-term credit ratings by one notch, to BBB- from BBB, and changed DXC’s outlook to Stable from Negative.

See Note 2120 - "Commitments and Contingencies" for a discussion of the general purpose of guarantees and commitments. The anticipated sources of funds to fulfill such commitments are listed below.below at "Liquidity".

Liquidity

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


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

The following table summarizes our total liquidity:
 As of As of
(in millions) September 30, 2019 June 30, 2020
Cash and cash equivalents $2,880
 $5,509
Available borrowings under our revolving credit facility 4,000
 750
Total liquidity
 $6,880
 $6,259

Share Repurchases

During the first quarter of fiscal 2018, our Board of Directors authorized the repurchase of up to $2.0 billion of our common stock and during the third quarter of fiscal 2019, our Board of Directors approved an incremental $2.0 billion share repurchase authorization.repurchase. This program became effective on April 3, 2017 with no end date established. DuringThere were no share repurchases during the six monthsfirst quarter ended SeptemberJune 30, 2019, we repurchased 13,579,799 shares of our common stock at an aggregate cost of $650 million. The repurchase included 3,654,544 shares under the accelerated share repurchase ("ASR") agreement at an average price of $54.73 per share. See Note 17 - "Stockholders' Equity" to the financial statements.2020.

Dividends

During the six months ended September 30, 2019,To enhance our financial flexibility under current uncertain market conditions, we have elected to suspend payment of quarterly dividends. This decision will be reevaluated by our Board of Directors declared aggregate cash dividends to our stockholders of $0.42 per share, or approximately $111 million. Future dividends are subject to customary board review and approval prior to declaration.as market conditions stabilize.


Off-Balance Sheet Arrangements

In the normal course of business, we are party to arrangements that include guarantees, the receivables securitization facility and certain other financial instruments with off-balance sheet risk, such as letters of credit and surety bonds. We also use performance letters of credit to support various risk management insurance policies. No liabilities related to these arrangements are reflected in our condensed consolidated balance sheets. There have been no material changes to our off-balance-sheet arrangements reported under Part II, Item 7 of our Annual Report on Form 10-K other than as disclosed below and in Note 65 - "Sale of Receivables""Receivables" and Note 2120 - "Commitments and Contingencies" to the financial statements in this Quarterly Report on Form 10-Q.


Contractual Obligations

With the exception of the net borrowings under the Credit Agreement of $1.8 billion and the new term loan credit agreement insenior notes with an aggregate principal amount of $2.1$1.0 billion, consisting of three tranches: (i) $500 million maturing on fiscal 2025; (ii) €750 million maturing on fiscal 2022; and (iii) €750 million maturing on fiscal 2023, and repayment of the $500 million4.00% Senior Notes due 2020fiscal 2024; and (ii) $500 million of 4.13% Senior Notes due fiscal 2026 as discussed above under the subheading "Capital Resources," there have been no material changes, outside the ordinary course of business, to our contractual obligations since March 31, 2019.2020. 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, 2019.2020.


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. During the three months and six months ended SeptemberJune 30, 2019,2020, there were no changes to our accounting estimates from those described in our fiscal 20192020 Annual Report on Form 10-K except as mentioned in Note 1 - "Summary of Significant Accounting Policies".Policies."

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures about market risk affecting DXC, see "Quantitative and Qualitative Disclosures About Market Risk" in Item 7A of Part II of our Annual Report on Form 10-K for the fiscal year ended March 31, 2019.2020. Our exposure to market risk has not changed materially since March 31, 2019.2020.


ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and Chief OperatingFinancial Officer concluded that our disclosure controls and procedures were not effective as of SeptemberJune 30, 2019.

Changes in Internal Control Over Financial Reporting

During2020 because of the first quarter of fiscal 2020, we adopted ASC 842 effective April 1, 2019, as described in Note 2 - “Recent Accounting Pronouncements” and Note 7 - “Leases” to the financial statements. We implemented a new lease accounting system and redesigned certain processes and controls pertaining to our lease portfolio.

There were no changesmaterial weakness in our internal control over financial reporting described below.

Control Activities

As previously disclosed during the three monthsthird 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 COSO framework. These control deficiencies constituted a material weakness in the

aggregate related to reassessing policies and procedures, to determine their continued relevance, as impacted by complex transactions and processes.

Deficiencies that contributed to the aggregation included:

Management did not reassess in a timely manner the control activities related to goodwill impairment upon adoption of ASU 2017-04 which resulted in an immaterial out of period adjustment between quarters within fiscal 2020 related to the tax effect of the impairment recognized.
Management did not reassess the control and procedures related to the balance sheet classification of deferred revenue following a large and complex acquisition which resulted in an immaterial out of period adjustment to the balance sheets during the third quarter ended SeptemberDecember 31, 2019.

As a result, we have concluded that there is a reasonable possibility that a material misstatement to our Condensed 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 reporting as of June 30, 20192020.

Notwithstanding the identified material weakness, management believes that the Condensed Consolidated Financial Statements and related financial information included in this 10-Q fairly present, 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

Our remediation efforts are ongoing. Management continues to implement remediation actions to address the specific control deficiencies that, in the aggregate, led to a material weakness. Additionally, Management has completed a detailed root cause analysis which was designed to identify areas of focus where enhancements can be made to the internal control environment to support the continued timely reassessment of policies and procedures and reduce the occurrence of future deficiencies caused by complex transactions and processes. Management has remediated certain of the identified control deficiencies that lead to the material weakness.

The following activities are designed as part of this remediation plan:

Appointment of a new advisor reporting directly to our Chief Financial Officer with the appropriate level of knowledge and experience to help develop and execute the remediation plan.
•
Enhance periodic reviews by management and review existing documentation to determine if policies, procedures, and related control activities have continued relevance or need updating due to changes within the organization with a specific focus on the areas identified by the root cause analysis.
Align the Sarbanes-Oxley Act (“SOX") compliance function under the newly appointed Chief Risk Officer.
Establish periodic reporting of the remediation plan progress to the Audit Committee.
Expand SOX training and implementation of succession planning for SOX control owners.

Management continues to be actively engaged to take steps to remediate the material weakness noted above, including (1) appointment of an external advisor to lead the remediation activities (2) hiring a new Global SOX Director reporting to the Chief Risk Officer (3) establishment of progress reporting to the Audit Committee and (4) establishment of a control owner transition process. In additional to the items noted above, Management has developed expanded SOX training to be incorporated in the onboarding process and evaluated management level reporting to identify key performance indicators for monitoring.  These additional remediation efforts have materially affected, orbegun and are reasonably likelyexpected to materially affect, ourbe completed in the subsequent quarters. While we have made significant progress, there has not been sufficient time to resolve the material weakness in internal control over financial reporting.

As we continue to improve the effectiveness of our internal control over financial reporting, we may supplement our remediation activities as our work progresses where appropriate. Our goal is to have enhanced control policies, procedures, processes in place as promptly as practicable. However, due to the nature of the work and subsequent testing required to conclude that a material weakness no longer exists, 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 30,2020.

Changes in Internal Control over Financial Reporting

In addition to the remediation efforts described above, we adopted ASC 326 effective April 1, 2020, as described in Note 2 - “Recent Accounting Pronouncements” to the financial statements during the first quarter of fiscal 2021. We began using a new model and redesigned certain processes and controls relating to our reserves and expected losses.


PART II


ITEM 1. LEGAL PROCEEDINGS

See Note 2120 - "Commitments and Contingencies" to the financial statements under the caption “Contingencies” for information regarding legal proceedings in which we are involved.


Item 1A.RISK FACTORS
ITEM 1A. RISK FACTORS

Our operations and financial results are subject to various risks and uncertainties, which may materially and adversely affect our business, financial condition, and results of operations, 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 your investment. Past performance may not be a reliable indicator of future financial performance and historical trends should not be used to anticipate results or trends in future periods. Future performance and historical trends may be adversely affected by the aforementioned risks, and other variables and risks and uncertainties not currently known or that are currently expected to be immaterial may also materially and adversely affect our business, financial condition, and results of operations or the price of our common stock in the future. Other than as describedApart from the risk factors disclosed below, there have been no material changes in the three months ended SeptemberJune 30, 20192020 to the risk factors described in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2019 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019.

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

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

Strategic alternatives we are considering may not achieve the results we expect, could result in operating difficulties, harm to one or more of our businesses and negative impacts our financial condition, results of operations and cash flows.

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

the potential loss of key customers, suppliers, vendors and other key business partners;
declining employee morale and retention issues affecting employees, which may result from changes in compensation, or changes in management, reporting relationships, future prospects or perceived expectations;
difficulty making new and strategic hires of new employees;
diversion of management time and a shift of focus from operating the businesses to transaction execution considerations;
the need to provide transition services, which may result in stranded costs and the diversion of resources and focus;
the need to separate operations, systems (including accounting, management, information, human resource and other administrative systems), technologies, products and personnel, which is an inherently risky and potentially lengthy and costly process;
the inefficiencies and lack of control that may result if such separation is delayed or not implemented effectively, and unforeseen difficulties and expenditures that may arise as a result including potentially significant stranded costs;
our desire to maintain an investment grade credit rating may cause us to use cash proceeds if any from any divestitures or other strategic alternatives that we might otherwise have used for other purposes in order to reduce our financial leverage;
the inability to obtain necessary regulatory approvals or otherwise satisfy conditions required in order consummate any such transactions; and
our dependence on accounting, financial reporting, operating metrics and similar systems, controls and processes of divested businesses could lead to challenges in preparing our consolidated financial statements or maintaining effective financial control over financial reporting.2020.


At any given time,Our business and financial results have been adversely affected and could continue to be materially adversely affected by the COVID-19 pandemic.

The COVID-19 pandemic has caused disruptions in global economies, financial and commodities markets and rapid shifts in governmental and public health policies in the countries where we may be engagedoperate or our customers are located or the industries in discussions or negotiations with respect to one or more strategic alternatives,which we and any of these strategic alternatives could be material to our business, financial condition, results of operationscustomers compete. The COVID-19 pandemic and cash flows. In addition, we may explore a divestiture or spin-off or other transaction involving one or more of thesethe actions taken by governments, businesses and ultimately determine notindividuals to proceed with any transaction or other strategic alternative for commercial, financial, strategic or other reasons. As a result, we may not realize benefits expected from exploring one or more strategic alternatives or may realize benefits further incurtail the future and those benefits may ultimately be significantly smaller than anticipated, which could adversely affect our business, financial condition, operating results and cash flows. Any such transactions may also require us to amortize expenses related to intangible assets or write-off goodwill, which could adversely affect our financial condition and results of operations.

We could suffer additional losses due to asset impairment charges.

We acquired a substantial quantity of goodwill and other intangibles as a resultspread of the HPES Merger increasing our exposure to this risk.

We test our goodwill for impairment during the second quarter of every yeardisease have negatively impacted, and on an interim date should events or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is below its carrying amount. If the fair value of a reporting unit is revised downward due to declines in business performance or other factors, or if the Company suffers further declines in share price, an impairment could result and a non-cash charge could be required. We test intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. This assessment of the recoverability of finite-lived intangible assets could result in an impairment and a non-cash charge could be required. For example, during the three months ended September 30, 2019, we recorded a non-cash goodwill impairment charge of $2,887 million which is discussed in Note 11 - "Goodwill."
We also test certain equipment and deferred cost balances associated with contracts when the contract is materially underperforming or is are expected to materially underperform in the future, as comparedcontinue to the original bid model or budget. If the projected cash flows of a particular contract are not adequate to recover the unamortized cost balance of the asset group, the balance is adjusted in the tested period based on the contract's fair value. Either of these impairments could materially affectnegatively impact, our reported net earnings.

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

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

We also must manage leadership development and succession planning throughout our business. Any significant leadership change and accompanying senior management transition, such as our recent change in Chief Executive Officer, Chief Human Resources Officer and the hiring of new leaders in key roles, involves inherent risk and any failure to ensure a smooth transition could hinder our strategic planning, execution and future performance. While we strive to mitigate the negative impact associated with changes to our senior management team, such changes may cause uncertainty among investors, employees, customers, creditors and others concerning our future direction and performance. If we fail to effectively manage our leadership changes, including ongoing organizational and strategic changes, our business, financial condition, results of operations, cash flows and reputation,financial condition.

Negative impacts that have occurred, or may occur in the future, include disruptions or restrictions on our employees’ ability to work effectively, as well as temporary closures of our facilities or the facilities of our clients or our subcontractors, or the requirements to deliver our services by working remotely. This could potentially affect our ability to successfully attract, motivateperform under our contracts with customers. Cost increases may not be recoverable from customers or covered by insurance, which could impact our profitability. If a business interruption occurs and retain key employees,we are unsuccessful in our continuing efforts to minimize the impact of these events, our business, results of operations, financial position, and cash flows could be harmed.materially adversely affected.

In addition, uncertainty around future employment opportunities, facility locations, organizationalthe COVID-19 pandemic has resulted in a widespread global health crisis that is adversely affecting the economies and reporting structures,financial markets of many countries, which could result in an economic downturn that may negatively affect demand for our services, including the financial failure of some of our clients. This economic downturn, depending upon its severity and other related concerns may impairduration, could also lead to the deterioration of worldwide credit and financial markets that could limit our customers’ ability or willingness to pay us in a timely manner and our ability to attractobtain external financing to fund our operations and retain qualified personnel. If employee attrition iscapital expenditures, result in losses on our holdings of cash and investments due to failures of financial institutions and other parties, and result in a higher than,rate of losses on our accounts receivables due to credit defaults.

Our financial results may also be materially and adversely impacted by a variety of factors related to COVID-19 that have not yet been determined, including potential impairments of goodwill and other assets, and changes to our contingent liabilities, for which actual amounts may materially exceed management estimates, and our calculation of global tax liabilities. Even after the COVID-19 pandemic has subsided, depending upon its duration and potential recurrence, and the governmental policies in response thereto, we may continue to experience materially adverse impacts to our business as a result of its global economic impact, including any recession that may occur or be continuing as a result.


We continue to evaluate the extent to which COVID-19 has impacted us and our employees, customers and suppliers and the extent to which it and other emerging developments will impact us and our employees, customers and suppliers in the future. We caution investors that any of the items mentioned above could have material and adverse impacts on our current and future business, results of operations, cash flows and financial condition.

To the extent the COVID-19 pandemic and the resulting economic disruption continue to adversely affect our business and financial results, it may adverselyalso have the effect of heightening many of the other risks described in the “Risk Factors” section of our Annual Report on Form 10-K, such as those relating to our level of indebtedness, our ability to generate sufficient cash flows to service our indebtedness and to comply with the covenants contained in the agreements that govern our indebtedness and our counterparty credit risk.

We have identified a material weakness in our internal control over financial reporting. Without effective internal control over financial reporting, we may fail to detect or prevent a material misstatement in our financial statements, which could materially harm our business, our reputation and our stock price. 
While we have not identified any material misstatements in our previously reported consolidated financial statements, as previously disclosed in our Quarterly Report for the quarterly period ended December 31, 2019, our management identified a material weakness in our internal control over financial reporting as of December 31, 2019related to reassessing policies and procedures to determine their continued relevance, as impacted by complex transactions and processes. See "Item 4. Controls and Procedures." Without effective internal control over financial reporting, we may fail to detect or prevent a material misstatement in our financial statements. In that event, we may be required to restate our financial statements. A restatement or an unremediated material weakness could result in a loss of confidence in us by our investors, customers, regulators and/or counterparties. In addition, our remediation efforts are still ongoing and if we are unable to promptly remediate the material weakness identified above, or if we were to conclude in the future that we have one or more additional weaknesses, our investors, regulators, customers and/or counterparties may lose confidence in our reported financial information. Additionally, management may be required to devote significant time and incur significant expense to remediate the material weakness, and management may not be able to complete such remediation in a timely manner. Any of the foregoing could materially harm our business, our reputation and the market price of our common stock.

We could be held liable for damages, our reputation could suffer, or we may experience service interruptions from security breaches, cyber-attacks or disclosure of confidential information or personal data, which could cause significant financial loss.

As a provider of IT services to private and public sector customers operating in a number of regulated industries and countries, we store and process increasingly large amounts of data for our clients, including sensitive and personally identifiable information. We also manage IT infrastructure of our own and of clients. We possess valuable proprietary information, including copyrights, trade secrets and other intellectual property and, we collect and store certain personal and financial information from customers and employees. Our security measures designed to identify and protect against security breaches and cyber-attacks may fail to detect, prevent or adequately respond to a future threat incident.

The continued occurrence of high-profile data breaches and cyber-attacks, including by state actors, reflects an external environment that is increasingly hostile to information and corporate security. Cybersecurity incidents can result from unintentional events or deliberate attacks by insiders or third parties, including criminals, competitors, nation-states, and hacktivists. Like other companies, we face an evolving array of cybersecurity and data security threats that pose risks to us and our clients. We can also be harmed by attacks on third parties, such as denial-of-service attacks. We see regular unauthorized efforts to access our systems, which we evaluate for severity and frequency. For example, in July 2020, certain systems of our subsidiary, Xchanging, experienced a ransomware attack. See Note 21 - "Subsequent Events" to the financial statements. While incidents experienced thus far have not resulted in significant disruption to our business, it is possible that we could suffer a severe attack or incident, with potentially material and adverse effects on our business, reputation, customer relations, results of operations or financial condition. We could be exposed to regulatory actions, client attrition due to reputational concerns or otherwise, containment and remediation expenses, and claims brought by our clients or others for breaching contractual confidentiality and security provisions or data protection laws. We must expend capital and other resources to protect against attempted security breaches and cyber-attacks and to alleviate problems caused by successful breaches or attacks. The cost, potential monetary damages and operational consequences of responding to breaches and cyber-attacks and implementing remediation measures could be significant and may be in excess of insurance policy limits or be not covered by our insurance at all.


We rely on internal and external information and technological systems to manage our operations and are exposed to risk of loss resulting from breaches in the security or other failures of these systems. Security breaches such as through an advanced persistent threat attack, or the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data about us, our clients or our customers, could expose us to risk of loss of this information, regulatory scrutiny, actions and penalties, extensive contractual liability and other litigation, reputational harm, and a loss of customer confidence which could potentially have an adverse impact on future business with current and potential customers. Moreover, failure to maintain effective internal accounting controls related to data security breaches and cybersecurity in general could impact our ability to realizeproduce timely and accurate financial statements and could subject us to regulatory scrutiny.

Advances in computer capabilities, new discoveries in the anticipated benefitsfield of cryptography or other events or developments may result in a compromise or breach of the algorithms that we use to protect our data and that of clients, including sensitive customer transaction data. A party who is able to circumvent our security measures or those of our strategic priorities.contractors, partners or vendors could access our systems and misappropriate proprietary information, the confidential data of our customers, employees or business partners or cause interruption in our or their operations.


If we do not hire, train, motivate,Experienced computer programmers and effectively utilize employeeshackers may be able to penetrate our network security and misappropriate or compromise our confidential information or that of third parties, create system disruptions or cause shutdowns. Computer programmers and hackers have deployed and may continue to develop and deploy ransomware, malware and other malicious software programs through phishing and other methods that attack our products or otherwise exploit any security vulnerabilities of these products. In addition, sophisticated hardware and operating system software and applications produced or procured from third parties may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the right mixsecurity and operation of skillsour systems, or harm those of third parties with whom we may interact. The costs to eliminate or alleviate cyber or other security problems, including ransomware, malware, bugs, malicious software programs and experienceother security vulnerabilities, could be significant, and our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service and loss of existing or potential customers, which may impede our sales, distribution or other critical functions.

Increasing cybersecurity, data privacy and information security obligations around the right geographic regionsworld could also impose additional regulatory pressures on our customers’ businesses and, indirectly, on our operations, or lead to inquiries or enforcement actions. In the United States, we are seeing increasing obligations and expectations from federal and non-federal customers. In response, some of our customers have sought, and may continue to seek, to contractually impose certain strict data privacy and information security obligations on us. Some of our customer contracts may not limit our liability for the right offerings to meet the needsloss of our clients, our financial performance and cash flows could suffer. For example, if our employee utilization rate is too low, our profitability, and the level of engagement of our employees could decrease. If that utilization rate is too high, it could have an adverse effect on employee engagement and attrition and the quality of the work performed, as well as our ability to staff projects.confidential information. If we are unable to hire and retain enough employees with the skills or backgrounds needed to meet current demand, we may need to redeploy existing personnel, increase our reliance on subcontractors or increase employee compensation levels, all of which could also negatively affect our profitability. In addition, if we have more employees than necessary with certain skill sets or in certain geographies, we may incur increased costs as we work to rebalance our supply of skills and resources with client demand in those geographies.

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

We devote significant resources to establish relationships with our customers and implement our offerings and related services, particularly in the case of large enterprises that often request or require specific features or functions specific to their particular business profile. Accordingly, our operating results depend in substantial part on our ability to deliver a successful customer experience and persuade customers to maintain and grow our relationship with us over time. If we are not successful in implementing an offering or delivering a successful customer experience, including achieving cost and staffing levels that meet our customers’ expectations, customers could terminate or elect not to renew their agreements with us and our operating results may suffer.

Contracts with customers may include unique and specialized performance requirements. In particular, our contracts with federal, state, provincial, and local governmental customers are generally subject to various procurement regulations, contract provisions, and other requirements relating to their formation, administration, and performance, including the maintenance of necessary security clearances. Contracts with U.S. government agencies are also subject to audits and investigations, which may include a review of performance on contracts, pricing practices, cost structure, and compliance with applicable laws and regulations.

Any failure on our part to comply with the specific provisions in customer contracts or any violation of government contracting regulations or other requirements could result in the imposition of various civil and criminal penalties, which may include termination of contracts, forfeiture of profits, suspension of payments, and, in the case of government contracts, fines and suspension from future government contracting. Such failures could also cause reputational damage to our business. In addition, we may be subject to qui tam litigation brought by private individuals on behalf of the government relating to government contracts, which could include claims for treble damages. Further, any negative publicity with respect to customer contracts or any related proceedings, regardless of accuracy, may damage our business by harming our ability to compete for new contracts.

If our customer contracts are terminated, or our ability to compete for new contracts is adversely affected, our financial performance could suffer.

We are defendantsCompliance with new privacy and security laws, requirements and regulations, such as the European Union General Data Protection Regulation, which became effective in pending litigation that may have a material and adverse impact on our profitability and liquidity.

As noted in Note 21 - “Commitments and Contingencies”, we are currently party to a number of disputes that involveMay 2018, where required or may involve litigation or arbitration, including securities class actions and other lawsuits in which we and certain of our officers and directors have been named as defendants. The result of these lawsuits and any other future legal proceedings cannot be predicted with certainty. Regardless of their subject matter or merits, such legal proceedingsundertaken by us, may result in significant cost increases due to expanded compliance obligations, potential systems changes, the development of additional administrative processes and increased enforcement actions, fines and penalties. While we strive to comply with all applicable data protection laws and regulations, as well as internal privacy policies, any failure or perceived failure to comply or any misappropriation, loss or other unauthorized disclosure of sensitive or confidential information may result in proceedings or actions against us by government or other entities, private lawsuits against us (including class actions) or the loss of customers, which may not be covered by insurance, may divert the attention of management or may otherwisecould potentially have an adverse effect on our business, financial conditionreputation and results of operations. Negative publicity

Portions of our infrastructure also may experience interruptions, delays or cessations of service or produce errors in connection with systems integration or migration work that takes place from litigation, whethertime to time. We may not be successful in implementing new systems and transitioning data, which could cause business disruptions and be expensive, time-consuming, disruptive and resource intensive. Such disruptions could adversely impact our ability to fulfill orders and respond to customer requests and interrupt other processes. Delayed sales, lower margins or notlost customers resulting in a substantial cost,from these disruptions could materiallyreduce our revenues, increase our expenses, damage our reputation, and could have a material adverse effect onadversely affect our business, financial condition, results of operations, and the price of our common stock. In addition, such legal proceedings may make it more difficult to finance our operations.stock price.


Our credit rating and ability to manage working capital, refinance and raise additional capital for future needs may impact our ability to compete, results of operations and cash flows.

We currently maintain investment grade credit ratings with Moody's Investors Service, Fitch Rating Services, and Standard & Poor's Ratings Services. Our credit ratings are based upon information furnished by us or obtained by a rating agency from its own sources and are subject to revision, suspension or withdrawal by one or more rating agencies at any time. Rating agencies may review the ratings assigned to us due to developments that in some cases are beyond our control, including potential new standards requiring the agencies to reassess rating practices and methodologies. Ratings agencies may consider changes in credit ratings based on changes in expectations about future profitability and cash flows even if short-term liquidity expectations are not negatively impacted. If changes in our credit ratings were to occur, it could result in higher interest costs under certain of our credit facilities. It would also cause our future borrowing costs to increase and limit our access to capital markets. For example, we currently fund a portion of our working capital requirements in the U.S. and European commercial paper markets. Any downgrade below our current rating would, absent changes to current market liquidity, substantially reduce or eliminate our ability to access that source of funding and could otherwise negatively impact the perception of our company by lenders and other third parties. In addition, certain of our major contracts provide customers with a right of termination in certain circumstances in the event of a rating downgrade below investment grade.






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 September 30, 2019, with respect to the Company’s purchase of equity securities:

Period 
Total Number
of Shares
Purchased
 
Average Price
Paid Per Share
 
Total Number
of Shares
Purchased as
Part of Publicly
Announced Plans or Programs
 
Approximate
Dollar Value
of Shares that
May Yet be Purchased
Under the Plans or Programs
July 1, 2019 to July 31, 2019 —
 $— — $2,123,936,464
August 1, 2019 to August 31, 2019 6,220,190
 $40.18 6,220,190 $1,874,024,787
September 1, 2019 to September 30, 2019 —
 $— — $1,874,024,787
    
On April 3, 2017, DXC announced the establishment of a share repurchase plan approved by the Board of Directors with an initial authorization of $2.0 billion for future repurchases of outstanding shares of DXC common stock. On November 8, 2018, DXC's Board of Directors approved an incremental $2.0 billion share repurchase authorization.repurchase. An expiration date has not been established for this repurchase plan.

On June 13, 2019, DXC entered into an ASR agreement with a third-party financial institution by advancing $200 million including a $100 million prepayment. At inception, the ASR was initially settled by delivery of 1,849,194 shares of common stock to the Company. During the second quarter of fiscal 2020, DXC received an additional 1,805,350 shares of common stock. In total, 3,654,544 shares of common stock were repurchased under the ASR for $200 million.

Share repurchases may be made from time to time through various means, including in open market purchases, 10b5-1 plans, privately-negotiated transactions, accelerated stock repurchases, block trades and other transactions, in compliance with Rule 10b-18 under the Exchange Act, as well as, to the extent applicable, other federal and state securities laws and other legal requirements. The timing, volume, and nature of share repurchases pursuant to the share repurchase plan are at the discretion of management and may be suspended or discontinued at any time.

There was no share repurchase activity during the three months ended June 30, 2020.


ITEM 3. DEFAULT UPON SENIOR SECURITIES

None.


ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.



ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following exhibits are filed with this report.
Exhibit
Number		Description of Exhibit
2.1
Agreement and Plan of Merger, dated as of May 24, 2016, by and among Computer Sciences Corporation, Hewlett Packard Enterprise Company, Everett SpinCo, Inc. (now known as DXC Technology Company) and Everett Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 to Hewlett Packard Enterprise Company's Current Report on Form 8-K (filed May 26, 2016) (file no. 001-37483))
2.2
First Amendment to Agreement and Plan of Merger, dated as of November 2, 2016, by and among Computer Sciences Corporation, Hewlett Packard Enterprise Company, Everett SpinCo, Inc. (now known as DXC Technology Company), New Everett Merger Sub Inc. and Everett Merger Sub Inc. (incorporated by reference to Exhibit 2.1 to Hewlett Packard Enterprise Company's Current Report on Form 8-K (filed November 2, 2016) (file no. 001-37483))
2.3
Second Amendment to Agreement and Plan of Merger, dated as of December 6, 2016, by and among Hewlett Packard Enterprise Company, Computer Sciences Corporation, Everett SpinCo, Inc. (now known as DXC Technology Company), Everett Merger Sub Inc. and New Everett Merger Sub Inc. (incorporated by reference to Exhibit 2.3 to Amendment No. 1 to Form 10 of Everett SpinCo, Inc. (filed December 7, 2016) (file no. 000-55712))
2.4
Separation and Distribution Agreement, dated May 24, 2016, between Hewlett Packard Enterprise Company and Everett SpinCo, Inc. (now known as DXC Technology Company) (incorporated by reference to Exhibit 2.2 to Hewlett Packard Enterprise Company's Current Report on Form 8-K (filed May 26, 2016) (file no. 001-37483))
2.5
First Amendment to the Separation and Distribution Agreement, dated November 2, 2016, by and between Hewlett Packard Enterprise Company and Everett SpinCo, Inc. (now known as DXC Technology Company) (incorporated by reference to Exhibit 2.2 to Hewlett Packard Enterprise Company's Current Report on Form 8-K (filed November 2, 2016) (file no. 001-37483))
2.6
Second Amendment to the Separation and Distribution Agreement, dated December 6, 2016, by and between Hewlett Packard Enterprise Company and Everett SpinCo, Inc. (now known as DXC Technology Company)(incorporated by reference to Exhibit 2.6 to Everett SpinCo, Inc.'s Amendment No. 1 to Form 10 (filed December 7, 2016) (file no. 000-55712))
2.7
Third Amendment to the Separation and Distribution Agreement, dated January 27, 2017, by and between Hewlett Packard Enterprise Company and Everett SpinCo, Inc. (now known as DXC Technology Company) (incorporated by reference to Exhibit 2.7 to Everett SpinCo Inc.'s Form 10 (filed February 14, 2017) (file no. 000-55712))
2.8
Fourth Amendment to the Separation and Distribution Agreement, dated March 31, 2017, by and between Hewlett Packard Enterprise Company and Everett SpinCo, Inc. (now known as DXC Technology Company) (incorporated by reference to Exhibit 2.6 to DXC Technology Company's Current Report on Form 8-K (filed April 6, 2017) (file no. 001-38033))
2.9
Employee Matters Agreement, dated as of March 31, 2017, by and among the Computer Sciences Corporation, Hewlett Packard Enterprise Company and Everett SpinCo, Inc. (now known as DXC Technology Company) (incorporated by reference to Exhibit 2.1 to DXC Technology Company's Current Report on Form 8-K (filed April 6, 2017) (file no. 001-38033))
2.10
Tax Matters Agreement, dated as of March 31, 2017, by and among the Computer Sciences Corporation, Hewlett Packard Enterprise Company and Everett SpinCo, Inc. (now known as DXC Technology Company) (incorporated by reference to Exhibit 2.2 to DXC Technology Company's Current Report on Form 8-K (filed April 6, 2017) (file no. 001-38033))
2.11
Intellectual Property Matters Agreement, dated as of March 31, 2017, by and among Hewlett Packard Enterprise Company, Hewlett Packard Enterprise Development LP and Everett SpinCo, Inc. (now known as DXC Technology Company) (incorporated by reference to Exhibit 2.3 to DXC Technology Company's Current Report on Form 8-K (filed April 6, 2017) (file no. 001-38033))
2.12
Transition Services Agreement, dated as of March 31, 2017, by and between Hewlett Packard Enterprise Company and Everett SpinCo, Inc. (now known as DXC Technology Company) (incorporated by reference to Exhibit 2.4 to DXC Technology Company's Current Report on Form 8-K (filed April 6, 2017) (file no. 001-38033))
2.13
Real Estate Matters Agreement, dated as of March 31, 2017, by and between Hewlett Packard Enterprise Company and Everett SpinCo, Inc. (now known as DXC Technology Company) (incorporated by reference to Exhibit 2.5 to DXC Technology Company's Current Report on Form 8-K (filed April 6, 2017) (file no. 001-38033))
2.14
Agreement and Plan of Merger, dated as of October 11, 2017, by and among DXC Technology Company, Ultra SCInc., Ultra First VMS Inc., Ultra Second VMS LLC, Ultra KMS Inc., Vencore Holding Corp., KGS Holding Corp., The SI Organization Holdings LLC and KGS Holding LLC (incorporated by reference to Exhibit 2.1 to DXC Technology Company's Current Report on Form 8-K (filed October 13, 2017) (file no. 001-38033))
2.15
Separation and Distribution Agreement dated as of May 31, 2018, by and between DXC Technology Company and Perspecta Inc. (incorporated by reference to Exhibit 2.1 to DXC Technology Company's Current Report on Form 8-K (filed June 6, 2018) (file no. 001-38033))

2.16
Employee Matters Agreement dated as of May 31, 2018, by and between DXC Technology Company and Perspecta Inc. (incorporated by reference to Exhibit 2.2 to DXC Technology Company's Current Report on Form 8-K (filed June 6, 2018) (file no. 001-38033))
2.17
Tax Matters Agreement dated as of May 31, 2018, by and between DXC Technology Company and Perspecta Inc. (incorporated by reference to Exhibit 2.3 to DXC Technology Company's Current Report on Form 8-K (filed June 6, 2018) (file no. 001-38033))
2.18
Intellectual Property Matters Agreement dated as of May 31, 2018, by and between DXC Technology Company and Perspecta Inc. (incorporated by reference to Exhibit 2.4 to DXC Technology Company's Current Report on Form 8-K (filed June 6, 2018) (file no. 001-38033))
2.19
Transition Services Agreement dated as of May 31, 2018, by and between DXC Technology Company and Perspecta Inc. (incorporated by reference to Exhibit 2.5 to DXC Technology Company's Current Report on Form 8-K (filed June 6, 2018) (file no. 001-38033))
2.20
Real Estate Matters Agreement dated as of May 31, 2018, by and between DXC Technology Company and Perspecta Inc. (incorporated by reference to Exhibit 2.6 to DXC Technology Company's Current Report on Form 8-K (filed June 6, 2018) (file no. 001-38033))
2.21
Non-U.S. Agency Agreement dated as of May 31, 2018, by and between DXC Technology Company and Perspecta Inc. (incorporated by reference to Exhibit 2.7 to DXC Technology Company's Current Report on Form 8-K (filed June 6, 2018) (file no. 001-38033))
2.22
Merger Agreement, dated January 6, 2019, by and among DXC Technology Company, Luna Equities, Inc. and Luxoft Holding, Inc (incorporated by reference to Exhibit 99.1 to Luxoft Holding, Inc's Report of Foreign Private Issuer on Form 6-K (filed January 7, 2019) (file no. 001-35976))
3.1
Articles of Incorporation of DXC Technology Company, as filed with the Secretary of State of the State of Nevada on March 31, 2017 (incorporated by reference to Exhibit 3.3 to DXC Technology Company's Current Report on Form 8-K (filed April 6, 2017) (file no. 001-38033))
3.2
Amended and Restated Bylaws of DXC Technology Company, effective March 15, 2018 (incorporated by reference to Exhibit 3.1 to DXC Technology Company's Current Report on Form 8-K (filed March 15, 2018) (file no. 001-38033))
4.1
FirstEighth Supplemental Indenture, dated as of March 27, 2017, between Everett SpinCo, Inc. (now known as DXC Technology Company) and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to DXC Technology Company’s Current Report on Form 8-K (filed March 27, 2017) (file no. 001-38033))
4.2
Second Supplemental Indenture, dated as of August 9, 2017,April 21, 2020, between DXC Technology Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to DXC Technology Company'sCompany’s Current Report on Form 8-K (filed August 9, 2017)April 21, 2020) (file no. 001-38033))
4.34.2
Third Supplemental Indenture, dated asForm of August 9, 2017, between DXC Technology Company and U.S. Bank National Association, as trustee (incorporated by reference toCompany’s 4.000% Senior Notes due 2023 (included in Exhibit 4.2 to DXC Technology Company's Current Report on Form 8-K (filed August 9, 2017) (file no. 001-38033))
4.4
Fourth Supplemental Indenture, dated as of August 17, 2017, between DXC Technology Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to DXC Technology Company's Current Report on Form 8-K (filed August 17, 2017) (file no. 001-38033))
4.5
Fifth Supplemental Indenture, dated as of February 7, 2018, between DXC Technology Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.5 to DXC Technology Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2017 (filed February 9, 2018) (file no. 001-38033))
4.6
Sixth Supplemental Indenture, dated March 15, 2018, among DXC Technology Company, U.S. Bank National Association, as trustee, and Elavon Financial Services DAC, UK Branch, as paying agent (incorporated by reference to Exhibit 4.1 to DXC Technology Company's Current Report on Form 8-K (filed March 15, 2018) (file no. 001-38033))
4.7
Seventh Supplemental Indenture, dated September 26, 2018, among DXC Technology Company, U.S. Bank National Association, as trustee, and Elavon Financial Services DAC, UK Branch, as paying agent4.1) (incorporated by reference to Exhibit 4.1 to DXC Technology Company’s Current Report on Form 8-K (filed September 26, 2018)April 21, 2020) (file no. 001-38033))
4.8
Form of DXC Technology Company's 4.750% Senior Notes due 2027 (included in Exhibit 4.2) (incorporated by reference to Exhibit 4.2 to DXC Technology Company's Current Report on Form 8-K (filed March 27, 2017) (file no. 001-38033))
4.9
Form of DXC Technology Company's 2.875% Senior Notes due 2020 (included in Exhibit 4.3) (incorporated by reference to Exhibit 4.2 to DXC Technology Company's Current Report on Form 8-K (filed August 9, 2017) (file no. 001-38033))
4.10
Form of DXC Technology Company's 4.45% Senior Notes due 2022 (included in Exhibit 4.2) (incorporated by reference to Exhibit 4.1 to DXC Technology Company's Current Report on Form 8-K (filed August 9, 2017) (file no. 001-38033))
4.11
Form of DXC Technology Company's 4.250% Senior Notes due 2024 (included in Exhibit 4.3) (incorporated by reference to Exhibit 4.2 to DXC Technology Company's Current Report on Form 8-K (filed August 9, 2017) (file no. 001-38033))
4.12
Form of DXC Technology Company's 4.750% Senior Notes due 2027 (included in Exhibit 4.3) (incorporated by reference to Exhibit 4.2 to DXC Technology Company's Current Report on Form 8-K (filed August 9, 2017) (file no. 001-38033))
4.13
Form of DXC Technology Company's Senior Floating Rate Notes due 2021 (included in Exhibit 4.4) (incorporated by reference to Exhibit 4.2 to DXC Technology Company's Current Report on Form 8-K (filed August 17, 2017) (file no. 001-38033))

4.14
Form of DXC Technology Company's 7.45% Senior Notes due 2029 (included in Exhibit 4.5) (incorporated by reference to Exhibit 4.5 to DXC Technology Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2017 (filed February 9, 2018) (file no. 001-38033))
4.15
Form of DXC Technology Company's 2.750% Senior Notes due 2025 (included in Exhibit 4.6) (incorporated by reference to Exhibit 4.1 to DXC Technology Company's Current Report on Form 8-K (filed March 15, 2018) (file no. 001-38033))
4.164.3
Form of DXC Technology Company’s 1.750%4.125% Senior Notes due 20262025 (included in Exhibit 4.7)4.1) (incorporated by reference to Exhibit 4.1 to DXC Technology Company’s Current Report on Form 8-K (filed September 26, 2018)April 21, 2020) (file no. 001-38033))
4.17
Indenture dated as of September 18, 2012, between Computer Sciences Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to Computer Sciences Corporation's Current Report on Form 8-K (filed September 19, 2012) (file no. 001-04850))

4.18
First Supplemental Indenture dated as of September 18, 2012, between Computer Sciences Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 to Computer Sciences Corporation's Current Report on Form 8-K (filed September 19, 2012) (file no. 001-04850))

4.19
Form of Computer Sciences Corporation’s 4.450% Senior Notes due 2022 (included in Exhibit 4.19) (incorporated by reference to Exhibit 4.2 to Computer Sciences Corporation's Current Report on Form 8-K (filed September 19, 2012) (file no. 001-04850))
10.1
Third Amendment to the Purchase and Sale Agreement dated as of August 21, 2019, among DXC Technology Company, as Servicer, DXC Technology Services LLC, as Existing Originator, Alliance-One Services, Inc., Computer Sciences Corporation, CSC Consulting, Inc., CSC Cybertek Corporation, Mynd Corporation, and PDA Software Services LLC, as New Originators, and DXC Receivables LLC (f/k/a CSC Receivables LLC), as Buyer
10.2
SixthNinth Amendment to the Receivables Purchase Agreement dated as of August 21, 2019,May 29, 2020, among DXC Receivables LLC (f/k/a CSC Receivables LLC), as Seller, DXC Technology Company, as Servicer, PNC Bank, National Association, as Administrative Agent, and the persons from time to time party thereto as Purchasers and Group Agents (filed herewith)
10.310.2
Second AmendedFifth Amendment to the Purchase and Restated Performance GuarantySale Agreement dated as of August 21, 2019, made byMay 29, 2020, among DXC Technology Company, as Servicer, DXC MS LLC as exiting Originator, DXC Receivables LLC (f/k/a CSC Receivables LLC), as Buyer and the various parties listed as remaining Originators (filed herewith)
10.3*
Form of Performance Guarantor, in favor of PNC Bank, National Association, as Administrative Agent, forBased Restricted Stock Unit Award under the benefit of the PurchasersDXC Technology Company 2017 Omnibus Incentive Plan (filed herewith)
10.4*
Employment Agreement with Michael J. Salvino (incorporated by reference to Exhibit 10.1 toForm of Service Based Restricted Stock Unit Award under the DXC Technology Company’s Current Report on Form 8-KCompany 2017 Omnibus Incentive Plan (filed September 12, 2019) (file no. 001-38033))herewith)
10.5*
Addendum to Employment Agreement with J. Michael Lawrie (incorporated by reference to Exhibit 10.2 to DXC Technology Company’s Current Report on Form 8-K (filed September 12, 2019) (file no. 001-38033))
10.6*
Retention Agreement with Paul N. Saleh
31.131.1**
Section 302 Certification of the Chief Executive Officer
31.231.2**
Section 302 Certification of the Chief Financial Officer
32.132.1***
Section 906 Certification of Chief Executive Officer
32.232.2***
Section 906 Certification of Chief Financial Officer
101101.INSInteractive Data Files
101.SCHXBRL Taxonomy Extension Schema
101.CALXBRL Taxonomy Extension Calculation
101.LABXBRL Taxonomy Extension Labels
101.PREXBRL Taxonomy Extension Presentation
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*Management contract or compensatory plan or agreement

** Filed herewith
*** Furnished herewith


SIGNATURES

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

   DXC TECHNOLOGY COMPANY
    
Dated:November 12, 2019August 7, 2020By:/s/ Neil A. Manna
  Name:Neil A. Manna
  Title:Senior Vice President, Corporate Controller Principal Accounting Officer
 


8269