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 September 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
dxc-20200930_g1.jpg
DXC TECHNOLOGY COMPANY
(Exact name of registrant as specified in its charter)
Nevada61-1800317
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1775 Tysons Boulevard
                      Tysons,Virginia22102
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (703) 245-9675
Registrant's telephone number, including area code: (703) 245-9675
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per 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 FilerxAccelerated Filero
Large Accelerated FilerxAccelerated Filero
Non-accelerated FileroSmaller 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

255,997,527254,412,158 shares of common stock, par value $0.01 per share, were outstanding on October 31, 2019.30, 2020.




TABLE OF CONTENTS
ItemPage
1.
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2.
50
3.
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4.
69
1.
72
1A.
72
2.
73
3.
74
4.
74
5.
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6.
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Item  Page
  
PART I - FINANCIAL INFORMATION
 
    
1. 
Financial Statements (unaudited)
1
2. 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
54
3. 
Quantitative and Qualitative Disclosures About Market Risk
73
4. 
Controls and Procedures
73
    
  
PART II - OTHER INFORMATION
 
    
1. 
Legal Proceedings
73
1A. 
Risk Factors
74
2. 
Unregistered Sales of Equity Securities and Use of Proceeds
78
3. 
Defaults Upon Senior Securities
78
4. 
Mine Safety Disclosure
78
5. 
Other Information
79
6. 
Exhibits
79





PART I

ITEM 1. FINANCIAL STATEMENTS

Index to Condensed Consolidated Financial Statements
Page
2
3
4
5
6
Note 1–Summary of Significant Accounting Policies
8
Note 2–Recent Accounting Pronouncements
1210
Note 3–Acquisitions
1311
Note 4–DivestituresAssets Held for Sale
1713
Note 5–EarningsLoss Per Share
1914
Note 6–Sale of Receivables
2014
Note 7–7–Leases
2117
Note 8–8–Fair Value
2421
Note 9–9–Derivative and Hedging Activities
2622
Note 10–10–Intangible Assets
2926
Note 11–11–Goodwill
3027
Note 12–12–Debt
3128
Note 13–13–Revenue
3229
Note 14–14–Restructuring Costs
3331
Note 15–15–Pension and Other Benefit Plans
3633
Note 16–16–Income Taxes
3734
Note 17–Stockholders' Equity
3835
Note 18–18–Stock Incentive Plans
4036
Note 19–19–Cash Flows
4238
Note 20–20–Segment Information
4339
Note 21–21–Commitments and Contingencies
4641
Note 22–Subsequent Events
47



1

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

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


Three Months EndedSix Months Ended
(in millions, except per-share amounts)September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Revenues$4,554 $4,851 $9,056 $9,741 
Costs of services (excludes depreciation and amortization and restructuring costs)3,563 3,679 7,192 7,301 
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)539 489 1,078 996 
Depreciation and amortization525 467 1,017 937 
Goodwill impairment losses0 2,887 0 2,887 
Restructuring costs265 32 337 174 
Interest expense96 104 202 195 
Interest income(25)(67)(48)(97)
Gain on arbitration award0 (632)0 (632)
Other income, net(103)(109)(191)(227)
Total costs and expenses4,860 6,850 9,587 11,534 
Loss before income taxes(306)(1,999)(531)(1,793)
Income tax (benefit) expense(60)116 (86)154 
Net loss(246)(2,115)(445)(1,947)
Less: net (loss) income attributable to non-controlling interest, net of tax(2)4 4 9 
Net loss attributable to DXC common stockholders$(244)$(2,119)$(449)$(1,956)
Loss per common share:
Basic$(0.96)$(8.19)$(1.77)$(7.44)
Diluted$(0.96)$(8.19)$(1.77)$(7.44)


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




2


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

    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) $81
Three Months EndedSix Months Ended
(in millions)September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Net loss$(246)$(2,115)$(445)$(1,947)
Other comprehensive loss, net of taxes:
Foreign currency translation adjustments, net of tax (1)
33 (71)30 (206)
Cash flow hedges adjustments, net of tax (2)
7 (2)18 2 
Available-for-sale securities, net of tax (3)
1 1 5 2 
Pension and other post-retirement benefit plans, net of tax:
Amortization of prior service cost, net of tax (4)
(1)(3)(10)(4)
Pension and other post-retirement benefit plans, net of tax(1)(3)(10)(4)
Other comprehensive income (loss), net of taxes40 (75)43 (206)
Comprehensive loss(206)(2,190)(402)(2,153)
Less: comprehensive income (loss) attributable to non-controlling interest1 6 6 (13)
Comprehensive loss attributable to DXC common stockholders$(207)$(2,196)$(408)$(2,140)
        

(1)Tax (benefit) expense related to foreign currency translation adjustments was $(15) and $(22) for the three and six months ended September 30, 2020, respectively, and $25 and $13 for the three and six months ended September 30, 2019, respectively. There was 0 tax
(2) Tax expense related to foreign currency translationcash flow hedge adjustments duringwas $3 and $6 for the three and six months ended September 30, 2018.
(2)2020, respectively. There was 0 tax benefitexpense related to cash flow hedge adjustments during the three and six months ended September 30, 2019. Tax benefit
(3) There was 0 tax expense related to cash flow hedge adjustments was $17 and $10 foravailable-for-sale securities during the three and six months ended September 30, 2018, respectively.
(3)2020. 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$2 for the three and six months ended September 30, 2019,2020, respectively, and $1 and $1 for the three and six months ended September 30, 2018,2019, respectively.


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



DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
  As of
(in millions, except per-share and share amounts) September 30, 2019 March 31, 2019
ASSETS   
Current assets:    
Cash and cash equivalents $2,880
 $2,899
Receivables and contract assets, net of allowance for doubtful accounts of $60 and $60 4,611
 5,181
Prepaid expenses 671
 627
Other current assets 328
 359
Total current assets 8,490
 9,066
     
Intangible assets, net of accumulated amortization of $3,916 and $3,399 6,293
 5,939
Operating right-of-use assets, net 1,482
 —
Goodwill 5,784
 7,606
Deferred income taxes, net 330
 355
Property and equipment, net of accumulated depreciation of $4,182 and $3,958 3,555
 3,179
Other assets 3,582
 3,429
Total Assets $29,516
 $29,574
     
LIABILITIES and EQUITY    
Current liabilities:    
Short-term debt and current maturities of long-term debt 1,471
 1,942
Accounts payable 1,603
 1,666
Accrued payroll and related costs 684
 652
Current operating lease liabilities 489
 —
Accrued expenses and other current liabilities 2,943
 3,355
Deferred revenue and advance contract payments 1,571
 1,630
Income taxes payable 213
 208
Total current liabilities 8,974
 9,453
     
Long-term debt, net of current maturities 7,698
 5,470
Non-current deferred revenue 234
 256
Non-current operating lease liabilities 1,139
 —
Non-current income tax liabilities and deferred tax liabilities 1,269
 1,184
Other long-term liabilities 1,332
 1,486
Total Liabilities 20,646
 17,849
     
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
Additional paid-in capital 10,793
 11,301
(Accumulated deficit) retained earnings (1,668) 478
Accumulated other comprehensive loss (428) (244)
Treasury stock, at cost, 2,018,148 and 1,788,658 shares as of September 30, 2019 and March 31, 2019 (150) (136)
Total DXC stockholders’ equity 8,550
 11,402
Non-controlling interest in subsidiaries 320
 323
Total Equity 8,870
 11,725
Total Liabilities and Equity $29,516
 $29,574

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

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
  Six Months Ended
(in millions) September 30, 2019 September 30, 2018
Cash flows from operating activities:    
Net (loss) income $(1,947) $525
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 946
 1,002
Goodwill impairment losses 2,887
 —
Operating right-of-use expense 340
 —
Share-based compensation 48
 41
Gain on dispositions (4) (65)
Unrealized foreign currency exchange gains (50) (12)
Other non-cash charges, net 2
 (18)
Changes in assets and liabilities, net of effects of acquisitions and dispositions:    
Decrease (increase) in assets 167
 (483)
Decrease in operating lease liability (340) —
Decrease in other liabilities (464) (141)
Net cash provided by operating activities 1,585
 849
     
Cash flows from investing activities:    
Purchases of property and equipment (192) (133)
Payments for transition and transformation contract costs (158) (183)
Software purchased and developed (126) (125)
Payments for acquisitions, net of cash acquired (1,921) (43)
Business dispositions —
 (65)
Cash collections related to deferred purchase price receivable 371
 445
Proceeds from sale of assets 40
 57
Short-term investing (75) —
Other investing activities, net 14
 (1)
Net cash used in investing activities (2,047) (48)
     
Cash flows from financing activities:    
Borrowings of commercial paper 2,879
 1,158
Repayments of commercial paper (2,866) (1,158)
Borrowings on long-term debt, net of discount 2,198
 483
Principal payments on long-term debt (519) (2,036)
Payments on finance leases and borrowings for asset financing (421) (475)
Borrowings for USPS spin transaction —
 1,114
Proceeds from bond issuance —
 753
Proceeds from stock options and other common stock transactions 10
 36
Taxes paid related to net share settlements of share-based compensation awards (12) (20)
Repurchase of common stock and advance payment for accelerated share repurchase (650) (447)
Dividend payments (107) (105)
Other financing activities, net (32) 11
Net cash provided by (used in) financing activities 480
 (686)
Effect of exchange rate changes on cash and cash equivalents (37) (64)
Net (decrease) increase in cash and cash equivalents (19) 51
Cash and cash equivalents at beginning of year 2,899
 2,729
Cash and cash equivalents at end of period $2,880
 $2,780

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


3

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITYBALANCE SHEETS (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, 2019
(in millions, except shares in thousands)Common Stock
Additional
Paid-in Capital
Retained Earnings (Accumulated Deficit)
Accumulated
Other
Comprehensive
Loss
Treasury Stock (1)
Total
DXC Equity
Non-
Controlling Interest
Total Equity
Shares Amount
Balance at March 31, 2019270,214
 $3
$11,301
$478
$(244)$(136)$11,402
$323
$11,725
Net loss    (1,956)  (1,956)9
(1,947)
Other comprehensive loss     (184) (184)(22)(206)
Share-based compensation expense   49
   49
 49
Acquisition of treasury stock      (14)(14) (14)
Share repurchase program(13,580) 

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

14
  
14
 14
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
           
 Six Months Ended September 30, 2018
(in millions, except shares in thousands)Common Stock
Additional
Paid-in Capital
Retained Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury Stock
Total
DXC Equity
Non-
Controlling Interest
Total Equity
Shares Amount
Balance at March 31, 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
Net income    521
  521
4
525
Other comprehensive loss     (440) (440)(5)(445)
Share-based compensation expense   40
   40
 40
Acquisition of treasury stock      (20)(20) (20)
Share repurchase program(5,228) 

(251)(200)  (451) (451)
Stock option exercises and other common stock transactions1,354
 


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

  —
(12)(12)
Divestiture of USPS   (177)(1,491)  (1,668) (1,668)
Balance at September 30, 2018282,519
 $3
$11,848
$136
$(382)$(105)$11,500
$337
$11,837


As of
(in millions, except per-share and share amounts)September 30, 2020March 31, 2020
ASSETS
Current assets:
Cash and cash equivalents$3,079 $3,679 
Receivables and contract assets, net of allowance of $162 and $744,194 4,392 
Prepaid expenses604 646 
Other current assets335 270 
Assets held for sale125 0 
Total current assets8,337 8,987 
Intangible assets, net of accumulated amortization of $4,364 and $4,3474,146 5,731 
Operating right-of-use assets, net1,555 1,428 
Goodwill725 2,017 
Deferred income taxes, net292 265 
Property and equipment, net of accumulated depreciation of $4,198 and $3,8183,417 3,547 
Other assets4,360 4,031 
Assets held for sale - non-current2,838 0 
Total Assets$25,670 $26,006 
LIABILITIES and EQUITY
Current liabilities:
Short-term debt and current maturities of long-term debt$1,622 $1,276 
Accounts payable1,345 1,598 
Accrued payroll and related costs756 630 
Current operating lease liabilities461 482 
Accrued expenses and other current liabilities3,203 2,801 
Deferred revenue and advance contract payments974 1,021 
Income taxes payable111 87 
Liabilities related to assets held for sale184 0 
Total current liabilities8,656 7,895 
Long-term debt, net of current maturities8,046 8,672 
Non-current deferred revenue697 735 
Non-current operating lease liabilities1,192 1,063 
Non-current income tax liabilities and deferred tax liabilities917 1,157 
Other long-term liabilities1,325 1,355 
Liabilities related to assets held for sale - non-current86 0 
Total Liabilities20,919 20,877 
Commitments and contingencies
DXC stockholders’ equity:
Preferred stock, par value $.01 per share, 1,000,000 shares authorized, NaN issued as of September 30, 2020 and March 31, 20200 0 
Common stock, par value $.01 per share, 750,000,000 shares authorized, 256,521,547 issued as of September 30, 2020 and 255,674,040 issued as of March 31, 20203 3 
Additional paid-in capital10,746 10,714 
Accumulated deficit(5,631)(5,177)
Accumulated other comprehensive loss(562)(603)
Treasury stock, at cost, 2,327,868 and 2,148,708 shares as of September 30, 2020 and March 31, 2020(155)(152)
Total DXC stockholders’ equity4,401 4,785 
Non-controlling interest in subsidiaries350 344 
Total Equity4,751 5,129 
Total Liabilities and Equity$25,670 $26,006 
(1)
 2,018,148 treasury shares as of September 30, 2019.



The accompanying notes are an integral part of these condensed consolidated financial statements.
4

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Six Months Ended
(in millions)September 30, 2020September 30, 2019
Cash flows from operating activities:
Net loss$(445)$(1,947)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization1,025 946 
Goodwill impairment losses0 2,887 
Operating right-of-use expense307 340 
Pension & other post-employment benefits, actuarial & settlement losses2 0 
Share-based compensation36 48 
Loss (gain) on dispositions14 (4)
Provision for losses on accounts receivable45 0 
Unrealized foreign currency exchange gain(43)(50)
Impairment losses and contract write-offs42 11 
Other non-cash charges, net(5)(9)
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Decrease in assets57 167 
Decrease in operating lease liability(307)(340)
Decrease in other liabilities(137)(464)
Net cash provided by operating activities591 1,585 
Cash flows from investing activities:
Purchases of property and equipment(156)(192)
Payments for transition and transformation contract costs(136)(158)
Software purchased and developed(102)(126)
Payments for acquisitions, net of cash acquired(10)(1,921)
Cash collections related to deferred purchase price receivable159 371 
Proceeds from sale of assets8 40 
Short-term investing0 (75)
Other investing activities, net3 14 
Net cash used in investing activities(234)(2,047)
Cash flows from financing activities:
Borrowings of commercial paper830 2,879 
Repayments of commercial paper(508)(2,866)
Borrowings under lines of credit2,500 0 
Repayment of borrowings under lines of credit(2,750)0 
Borrowings on long-term debt, net of discount993 2,198 
Principal payments on long-term debt(1,476)(519)
Payments on finance leases and borrowings for asset financing(487)(421)
Proceeds from stock options and other common stock transactions0 10 
Taxes paid related to net share settlements of share-based compensation awards(3)(12)
Repurchase of common stock and advance payment for accelerated share repurchase0 (650)
Dividend payments(53)(107)
Other financing activities, net(9)(32)
Net cash (used in) provided by financing activities(963)480 
Effect of exchange rate changes on cash and cash equivalents9 (37)
Net decrease in cash and cash equivalents including cash classified within current assets held for sale(597)(19)
Less: cash classified within current assets held for sale(3)0 
Net decrease in cash and cash equivalents(600)(19)
Cash and cash equivalents at beginning of year3,679 2,899 
Cash and cash equivalents at end of period$3,079 $2,880 

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

5

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

Three Months Ended September 30, 2020
(in millions, except shares in thousands)Common Stock
Additional
Paid-in Capital
 Accumulated Deficit
Accumulated
Other
Comprehensive Loss
Treasury Stock (1)
Total
DXC Equity
Non-
Controlling Interest
Total Equity
SharesAmount
Balance at June 30, 2020256,383 $3 $10,729 $(5,386)$(599)$(154)$4,593 $349 $4,942 
Net loss(244)(244)(2)(246)
Other comprehensive income37 37 3 40 
Share-based compensation expense17 17 17 
Acquisition of treasury stock(1)(1)(1)
Stock option exercises and other common stock transactions139 0 0 
Non-controlling interest distributions and other(1)(1)(1)
Balance at September 30, 2020256,522$3 $10,746 $(5,631)$(562)$(155)$4,401 $350 $4,751 
Three Months Ended September 30, 2019
(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
SharesAmount
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 expense31 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 other0 10 10 
Balance at September 30, 2019257,626 $3 $10,793 $(1,668)$(428)$(150)$8,550 $320 $8,870 




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












6


DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)
Six Months Ended September 30, 2020
(in millions, except shares in thousands)Common Stock
Additional
Paid-in Capital
 Accumulated Deficit
Accumulated
Other
Comprehensive Loss
Treasury Stock (1)
Total
DXC Equity
Non-
Controlling Interest
Total Equity
SharesAmount
Balance at March 31, 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(449)(449)4 (445)
Other comprehensive income41 41 2 43 
Share-based compensation expense32 32 32 
Acquisition of treasury stock(3)(3)(3)
Stock option exercises and other common stock transactions848 0 0 
Non-controlling interest distributions and other(1)(1)(1)
Balance at September 30, 2020256,522$3 $10,746 $(5,631)$(562)$(155)$4,401 $350 $4,751 
Six Months Ended September 30, 2019
(in millions, except shares in thousands)Common Stock
Additional
Paid-in Capital
Retained Earnings (Accumulated Deficit)
Accumulated
Other
Comprehensive
Loss
Treasury Stock
Total
DXC Equity
Non-
Controlling Interest
Total Equity
SharesAmount
Balance at March 31, 2019270,214 $3 $11,301 $478 $(244)$(136)$11,402 $323 $11,725 
Net loss(1,956)(1,956)9 (1,947)
Other comprehensive loss(184)(184)(22)(206)
Share-based compensation expense49 49 49 
Acquisition of treasury stock(14)(14)(14)
Share repurchase program(13,580)(571)(79)(650)(650)
Stock option exercises and other common stock transactions992 14 14 14 
Dividends declared ($0.42 per share)(111)(111)(111)
Non-controlling interest distributions and other0 10 10 
Balance at September 30, 2019257,626 $3 $10,793 $(1,668)$(428)$(150)$8,550 $320 $8,870 

    (1) 2,327,868 treasury shares as of September 30, 2020.



The accompanying notes are an integral part of these condensed consolidated financial statements.
7
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 "our") helps global companies run their mission critical systems and operations while modernizing IT, optimizing data architectures, and ensuring security and scalability across public, private and hybrid clouds. With decades of driving innovation, the world’s largest companies trust DXC to deploy its enterprise technology stack to deliver new levels of performance, competitiveness and customer experiences.

HHS Sale

On October 1, 2020, DXC completed the sale of its U.S. State and Local Health and Human Services business ("HHS" or the "Company""HHS Business"), to Veritas Capital Fund Management, L.L.C. ("Veritas Capital") to form Gainwell Technologies. The sale was accomplished by the cash purchase of all equity interests and assets attributable to the HHS Business together with future services to be provided by the Company for a world leading independent, end-to-end IT services company, managestotal enterprise value of $5.0 billion, subject to net working capital adjustments and modernizes mission-critical systems, integrating them with new digital solutions to produce better business outcomes.The Company’s global reachassumed liabilities. See Note 4 - Assets Held for Sale and talent, innovative platforms, technology independence and extensive partner network enable more than 6,000 private and public-sector clients in approximately 70 countries to thrive on change.Note 22 - "Subsequent Events" for further information.

HPS Sale

On July 17, 2020, DXC entered into a purchase agreement to sell (the "HPS Sale") its healthcare provider software business ("HPS" or the "HPS Business") to Dedalus Holding S.p.A. ("Dedalus") for €459 million (approximately $525 million), subject to certain adjustments. The HPS Sale is expected to close by March 2021, subject to meeting certain closing conditions.

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.

8
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED 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").

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.

Leases

Allowance 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 76 - "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.remaining life of financial assets that are in the scope of ASU 2016-13. DXC considers all available relevant information when estimating expected credit losses, including past events, current market conditions and forecasts and their implications for expected credit losses.

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

9
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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Goodwill Impairment Analysis

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

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

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

The Company has 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 and market conditions, which drive key assumptions of revenue growth rates, operating margins, capital expenditures and working capital requirements. The discount rate is based on the specific risk characteristics of each reporting unit, the weighted-average cost of capital and its underlying forecasts. The market approach estimates fair value by applying performance-metric multiples to the reporting unit's prior and expected operating performance. The multiples are derived from comparable publicly traded companies that have operating and investment characteristics similar to those of the reporting unit. If the fair value of the reporting unit derived using one approach is significantly different from the fair value estimate using the other approach, the Company reevaluates its assumptions used in the two models. Assumptions are modified as considered appropriate under the circumstances until the two models yield similar and reasonable results. The fair values determined by the market approach and income approach, as described above, are weighted to determine the fair value for each reporting unit. The weighting ascribed to the market approach fair value assigned to each reporting unit is influenced by two primary factors: 1) the number of comparable publicly traded companies used in the market approach, and 2) the similarity of the operating and investment characteristics of the reporting units to the comparable publicly traded companies used in the market approach.

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


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

Property and Equipment

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



Note 2 - Recent Accounting Pronouncements

During the six months ended September 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
February 2016

ASU 2016-02 "Leases (Topic 842)"
April 1, 2019
Modified retrospective
This update is intended to increase transparency and comparability among organizations by recognizing virtually all lease assets and lease liabilities on the balance sheet and disclosing key information about lease arrangements. Early adoption of this update is permitted. This update must be adopted using a modified retrospective transition at the beginning of the earliest period presented or at the adoption date recognizing a cumulative adjustment to the opening balance of retained earnings in the period of adoption and provides for certain practical expedients.

The Company adopted this update utilizing the simplified transition method allowing the Company to not restate comparative periods and apply Topic 842 beginning on April 1, 2019. During adoption, the Company implemented changes in its systems, including the implementation of new lease accounting software, internal controls, business processes, and accounting policies related to both the implementation of, and ongoing compliance with, the new guidance. The adoption resulted in following impacts.

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

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



February 2018

ASU 2018-02 - "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income"

April 1, 2019
Retrospective

This update provides an option to reclassify stranded tax effects within accumulated other comprehensive income ("AOCI") to retained earnings in each period in which the effect (or portion thereof) of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recorded.The Company adopted this update and opted to not elect to reclassify any stranded tax effects within AOCI to retained earnings, and as such, the adoption of ASU 2018-02 did not have an effect on its condensed consolidated financial statements. In accordance with its accounting policy, the Company uses the portfolio approach and will release income tax effects from AOCI once the reason the tax effects were established cease to exist (e.g., when available-for-sale debt securities are sold or if a pension plan is liquidated).
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


January 2017

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

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


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

ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”

April 1, 2020
Modified Retrospective
Fiscal 2021This update is intended to provide financial statement users with more decision-useful information aboutrequires the measurement and recognition of expected credit losses onusing 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 other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this update replacecontract assets. It replaces the existing incurred loss impairment methodologymodel with a methodology that reflectsan 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 the statement of financial position as of the beginning of the first reporting period in which the guidance is effective.
The Company adopted this standard using the modified retrospective approach and requires considerationrecorded an immaterial cumulative effect adjustment in retained earnings as of April 1, 2020.


August 2018

ASU 2018-15,
"Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a broader range of reasonable and supportable information to inform credit loss estimates. Cloud Computing Arrangement That Is a Service Contract"


April 1, 2020
Prospective

This update must behelps 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 apply this standard prospectively to all implementation costs incurred after the date of adoption or retrospectively.

The Company adopted this standard using athe prospective transition approachmethod and determined that the adoption of ASU 2018-15 had no material impact to its condensed consolidated financial statements.


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

ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for debt securities for which an other-than-temporary impairment has been recognized before the effective date.Income Taxes"
Fiscal 2022
DXCThis update is intended tosimplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. Early adoption of this update is permitted.
The 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 September 30, 20192020 are not expected to have a material effect on DXC's consolidated financial statements.
10

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

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.$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)Fair Value
Cash and cash equivalents$113 
Accounts receivable233 
Other current assets15 
Total current assets361 
Property and equipment31 
Intangible assets577 
Other assets99 
Total assets acquired1,068 
Accounts payable, accrued payroll, accrued expenses, and other current liabilities(121)
Deferred revenue(8)
Long-term deferred tax liabilities and income tax payable(106)
Other liabilities(72)
Total liabilities assumed(307)
Net identifiable assets acquired761 
Goodwill1,262 
Total consideration transferred$2,023 
(in millions) Estimated Fair Value
Cash and cash equivalents $113
Accounts receivable 233
Other current assets 15
Total current assets 361
Property and equipment 31
Intangible assets 631
Other assets 91
Total assets acquired 1,114
Accounts payable, accrued payroll, accrued expenses, and other current liabilities (119)
Deferred revenue (8)
Long-term deferred tax liabilities and income tax payable (86)
Other liabilities (63)
Total liabilities assumed (276)
Net identifiable assets acquired 838
Goodwill 1,185
Total estimated consideration transferred $2,023


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 11 - "Goodwill."

11
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)

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.

12
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Note 4 - 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

Assets Held for Sale
(1)
 Results
On March 9, 2020, DXC entered into a definitive agreement to sell its HHS Business to Veritas Capital for a cash consideration of enterprise value of $5.0 billion (including $85 million related to future services to be provided by the six months endedCompany). The HHS Business is an end-to-end provider of technology-enabled, mission critical solutions that are fundamental to the administration and operations of health programs throughout the United States. The transaction closed on October 1, 2020. See Note 22 - "Subsequent Events."

As of September 30, 2019, reflect operations subsequent to2020 the acquisition datedisposition of June 14, 2019, not the full six-month period.HHS Business, reported as part of the GBS segment, met the requirements for presentation as assets held for sale under GAAP.


Assets held for sale are reported at carrying value, which is less than fair value. Assets held for sale and related liabilities as of September 30, 2020 were as follows:
Fiscal 2019 Acquisitions

Molina Medicaid Solutions Acquisition
(in millions)September 30, 2020
Assets:
Cash and cash equivalents$3 
Accounts receivable, net74 
Prepaid expenses38 
Other current assets2 
Total current assets held for sale117 
Intangible assets, net1,308 
Operating right-of-use assets, net74 
Goodwill1,354 
Property and equipment, net43 
Other assets53 
Total non-current assets held for sale2,832 
Total assets acquired$2,949 
Liabilities:
Accounts payable$79 
Accrued payroll and related costs13 
Current operating lease liabilities27 
Accrued expenses and other current liabilities38 
Deferred revenue and advance contract payments20 
Total current liabilities related to assets held for sale177 
Non-current deferred revenue32 
Long-term operating lease liabilities48 
Other long term liabilities2 
Total long-term liabilities related to assets held for sale82 
 Total liabilities related to assets held for sale$259 

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 duringDuring the second quarter of fiscal 2020. The purchase price allocation was based upon2021, the current determination of fair values at the date of acquisition as follows: $87 millionCompany entered into a definitive agreement 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 withsell 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 ofinsignificant business, which is tax deductible.also classified as held for sale.

13
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED 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 5 - Earnings (Loss)Loss per Share


Basic EPSand diluted net loss per share is computed using the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflectsAs the incrementalCompany had net losses for the periods presented, diluted net loss per share is the same as basic net loss per share because the inclusion of all potentially dilutive shares issuable upon the assumed exercise of common stock options and equity awards.would have been anti-dilutive. The following table reflects the calculation of basic and diluted EPS:net loss per share:


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 EndedSix Months Ended
(in millions, except per-share amounts)September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Net loss attributable to DXC common shareholders:$(244)$(2,119)$(449)$(1,956)
Common share information:
Weighted average common shares outstanding for basic and diluted net loss per share254.13 258.71 253.88 262.83 
Net loss per share:
Basic and diluted$(0.96)$(8.19)$(1.77)$(7.44)
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 2,354,528
The following share-based equity awards were excluded from the computation of diluted EPS due to the Company's net loss. For the three months ended September 30, 2018 RSUsloss per share because inclusion of 1,419 were excluded in the computation of diluted EPS, which if included,these awards would have been anti-dilutive.had an anti-dilutive effect. The number of awards excluded were as follows:

For the six months ended September 30, 2019, stock options of 979,644, performance stock units of 437,507 and RSUs of 1,180,177 were excluded from the computation of diluted EPS due to the Company's net loss. For the six months ended September 30, 2018 RSUs of 713 were excluded in the computation of diluted EPS, which if included, would have been anti-dilutive.
Three Months EndedSix Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Stock Options1,625,591 765,883 1,735,395 979,644 
Restricted Stock Units2,598,301 2,354,528 2,554,090 1,180,177 
Performance-based Restricted Stock Units83,125 434,862 158,444 437,507 


14
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 6 - 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 September 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 second quarter of fiscal 2020,2021, Receivables SPV amended the Receivables Facility (the "Amendment") to increasedecrease the investmentfacility limit from $600 million to $750$500 million and extend the termination date to August 19, 2020. Under the terms5, 2021. As of the amended Receivables Facility,the second quarter of fiscal 2020, there is no longer0 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'sDPPs were previously 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 September 30, 2019,2020, the total availability under the Receivables Facility was $663$371 million, and the amount sold to the Purchasers was $650$452 million, which was derecognized from the Company's balance sheet. As of September 30, 2020, the Company recorded a $81 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, 2020,5, 2021, 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 balance of the DPP for the Receivables Facility:

(in millions)As of and for the Three Months EndedAs of and for the Six Months Ended
September 30, 2019September 30, 2019
Beginning balance$525 $574 
    Transfers of receivables0 1,214 
Collections0 (1,265)
Change in funding availability0 2 
Facility amendments(525)(525)
Ending balance$0 $0 

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

On June 5, 2020, the Company entered 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 HHS 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 HHS 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 certain of 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 HHS 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 September 30, 2020, the amount sold to the Milano Purchasers was approximately $272 million. On October 1, 2020, and in connection with the consummation of the sale of the HHS Business, and at the direction of the purchaser of the HHS Business, the Milano Facility was terminated. For more information, refer to Note 22 - "Subsequent Events."

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 September 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 €150 million (approximately $175 million as of September 30, 2020). Under the DE Receivables Facility, certain of the Company's subsidiaries organized 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. DE Receivables SPV subsequently sells certain of the receivables in their entirety to the DE Purchasers pursuant to a receivables purchase agreement. 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 19 - "Cash Flows."

The amount available under the DE 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 September 30, 2020, the total availability under the DE Receivables Facility was approximately $120 million, and the amount sold to the DE Purchasers was $124 million, which was derecognized from the Company's balance sheet. As of September 30, 2020, the Company recorded a $4 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, 2021, 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.
16
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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 DXC subsidiaries located in Germany, as initial servicers, are guaranteed by the Company under a performance guaranty, made in favor of an administrative agent on behalf of the DE Purchasers. However, the performance guaranty does not cover DE Receivables SPV’s obligations to pay yield, fees or invested amounts to the administrative agent or any of the DE Purchasers.

The following table is a reconciliation of the beginning and ending balances of the DPP:DPP for the DE Receivables Facility:
(in millions)As of and for the Six Months Ended September 30, 2020
Beginning balance$103 
Transfers of receivables417 
Collections(420)
Change in funding availability2 
Facility amendments(102)
Ending balance$0 
(in millions) As of and for the Three Months Ended As of and for the Six Months Ended
  September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
Beginning balance $525
 $207
 $574
 $233
    Transfers of receivables —
 2,436
 1,214
 2,976
Collections —
 (1,378) (1,265) (1,900)
Change in funding availability —
 (295) 2
 (310)
Facility amendments (525) (457) (525) (457)
Fair value adjustment —
 27
 —
 (2)
Ending balance $—
 $540
 $—
 $540


Allowance

The Company calculates expected credit losses for trade accounts receivable based on historical credit loss rates for each aging category as adjusted for the current market conditions and forecasts about future economic conditions. The following table presents the activity in the allowance for doubtful accounts for trade accounts receivable:
(in millions)As of and for the Six Months Ended
September 30, 2020
Beginning balance$74 
Impact of adoption of the Credit Loss Standard4 
Provisions for losses on accounts receivable45 
Other adjustments to allowance and write-off's39 
Ending balance$162 



17
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Note 7 - continuedLeases


Federal Receivables Sales Facility

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

The following table reflects activity of the Federal Receivables Sales Facility, prior to the Separation:
(in millions) 
As of and for the
Six Months Ended
September 30, 2018(1)
Transfers of receivables $464
Collections $521
Operating cash flow effect $(57)


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

Note 7 - 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 1one to 1312 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 1one to 3three years.

The components of lease expense were as follows:
Three Months EndedSix Months Ended
(in millions)September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Operating lease cost$151 $164 $307 $340 
Short-term lease cost11 14 26 24 
Variable lease cost15 11 23 26 
Sublease income(10)(10)(22)(19)
     Total operating costs$167 $179 $334 $371 
Finance lease cost:
     Amortization of right-of-use assets$99 $140 $215 $249 
     Interest on lease liabilities11 17 25 34 
     Total finance lease cost$110 $157 $240 $283 
(in millions) Three Months Ended September 30, 2019 Six Months Ended September 30, 2019
Operating lease cost $164
 $340
Short-term lease cost 14
 24
Variable lease cost 11
 26
Sublease income (10) (19)
     Total operating costs $179
 $371
     
Finance lease cost:    
     Amortization of right-of-use assets $140
 $249
     Interest on lease liabilities 17
 34
     Total finance lease cost $157
 $283


Cash payments made from variable lease costs and 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 19 - "Cash Flows."
(in millions) Six Months Ended September 30, 2019
Cash paid for amounts included in the measurement of:  
     Operating cash flows from operating leases $340
     Operating cash flows from finance leases $34
     Financing cash flows from finance leases $279

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



Supplemental Balance Sheetcash flow information related to leases was as follows:
(in millions)Six Months Ended September 30, 2020Six Months Ended September 30, 2019
Cash paid for amounts included in the measurement of:
     Operating cash flows used in operating leases$307 $340 
     Operating cash flows used in finance leases$25 $34 
     Financing cash flows used in finance leases$285 $279 

18
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
    As of
(in millions) Balance Sheet Line Item September 30, 2019
Assets:    
ROU operating lease assets Operating right-of-use assets, net $1,482
ROU finance lease assets Property and Equipment, net 1,291
Total   $2,773
     
Liabilities:    
Current    
Operating lease Current operating lease liabilities $489
Finance lease Short-term debt and current maturities of long-term debt 488
Total   $977
     
Non-current    
Operating lease Non-current operating lease liabilities $1,139
Finance lease Long-term debt, net of current maturities 688
Total   $1,827
Supplemental balance sheet information related to leases was as follows:
As of
(in millions)Balance Sheet Line ItemSeptember 30, 2020March 31, 2020
Assets:
ROU operating lease assetsOperating right-of-use assets, net$1,555 $1,428 
ROU finance lease assetsProperty and Equipment, net1,098 1,220 
Total$2,653 $2,648 
Liabilities:
Current
Operating leaseCurrent operating lease liabilities$461 $482 
Finance leaseShort-term debt and current maturities of long-term debt440 444 
Total$901 $926 
Non-current
Operating leaseNon-current operating lease liabilities$1,192 $1,063 
Finance leaseLong-term debt, net of current maturities568 602 
Total$1,760 $1,665 

On September 30, 2020, in conjunction with the classification of the HHS Business' assets being held for sale, $74 million in ROU operating lease assets and $75 million in operating lease liabilities were transferred to assets held for sale and liabilities related to assets held for sale on the Consolidated Balance Sheet.

The following table provides information on the weighted average remaining lease term and weighted average discount rate for operating and finance leases:
As of
September 30, 2020March 31, 2020
Weighted Average remaining lease term:Years
     Operating leases4.74.8
     Finance leases2.72.7
Weighted average remaining discount rate:Rate
     Operating leases4.0 %4.0 %
     Finance leases4.0 %6.4 %
Weighted Average remaining lease term:Years
     Operating leases4.8
     Finance leases2.9
Weighted average remaining discount rate:Rate
     Operating leases3.3%
     Finance leases5.4%


19
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The following maturity analysis presents expected undiscounted cash payments for operating and finance leases on an annual basis as of September 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

Fiscal yearOperating Leases
(in millions)Real EstateEquipmentFinance Leases
Remainder of 2021$244 $28 $246 
2022419 34 393 
2023340 17 250 
2024262 9 121 
2025188 5 35 
Thereafter279 3 3 
     Total lease payments1,732 96 1,048 
Less: imputed interest(171)(4)(40)
     Total payments$1,561 $92 $1,008 


20
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED 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  
(in millions) Finance leases
2020 $509
2021 310
2022 212
2023 128
2024 36
Thereafter —
Total minimum lease payments 1,195
Less: Amount representing interest and executory costs (68)
     Present value of net minimum lease payments $1,127

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



Note 8 - 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 9 - "Derivative and Hedging Activities" for information about the fair value of the Company's derivative assets and liabilities. There were no transfers between any of the levels during the periods presented.
Fair Value Hierarchy
(in millions)September 30, 2020
Assets:Fair ValueLevel 1Level 2Level 3
Money market funds and money market deposit accounts$5 $5 $0 $0 
Time deposits(1)
367 367 0 0 
Other debt securities(2)
59 0 56 3 
Total assets$431 $372 $56 $3 
Liabilities:
Contingent consideration$51 $0 $0 $51 
Total liabilities$51 $0 $0 $51 
  Fair Value Hierarchy
(in millions) September 30, 2019
Assets: Fair Value Level 1 Level 2 Level 3
Money market funds and money market deposit accounts $6
 $6
 $—
 $—
Time deposits(1)
 217
 217
 —
 —
Other debt securities(2)
 54
 —
 50
 4
Total assets $277
 $223
 $50
 $4
         
Liabilities:        
Contingent consideration $44
 $—
 $—
 $44
Total liabilities $44
 $—
 $—
 $44


March 31, 2020
Assets:Fair ValueLevel 1Level 2Level 3
Money market funds and money market deposit accounts$156 $156 $0 $0 
Time deposits(1)
595 595 0 0 
Other debt securities(2)
51 0 48 3 
Deferred purchase price receivable103 0 0 103 
Total assets$905 $751 $48 $106 
Liabilities:
Contingent consideration$46 $0 $0 $46 
Total liabilities$46 $0 $0 $46 

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


(1) Cost basis approximated fair value due to the short period of time to maturity.
(2) Other debt securities include available-for-sale investments with Level 2 inputs that have a cost basis of $38$40 million and $38$37 million, and unrealized gains of $12$16 million and $11 million, as of September 30, 20192020 and March 31, 2019,2020, respectively.

The fair value of money market funds, money market deposit accounts 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 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.
21
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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$8.0 billion and $5.6$8.2 billion as of September 30, 20192020 and March 31, 2019,2020, respectively as compared with carrying value of $7.3$7.8 billion and $5.6$8.4 billion as of September 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.


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



Note 9 - 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 September 30, 20192020 and March 31, 2019 was $5762020 were $460 million and $277$455 million, respectively. As of September 30, 2019,2020, the related forecasted transactions extend through March 2021.2023.

For the three and six months ended September 30, 20192020 and September 30, 2018,2019, 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 September 30, 20192020 and September 30, 2018,2019, respectively, the Company had no cash flow hedges for which it was probable that the hedged transaction would not occur. As of September 30, 2019, $32020, $1 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 September 30, 2019,2020, there were 0nenone outstanding. As of September 30, 2018, there were no foreign currency forward contracts designated as net investment hedges.

The pre-tax gain (loss) on derivatives designated for hedge accounting recognized in incomeloss from continuing operationsoperation was $1$(2) million and $3$(6) million for the three and six months ended September 30, 2019.2020. The pre-tax lossgain (loss) on derivatives designated for hedge accounting recognized in other comprehensive loss was $2$7 million and $12$18 million for the three and six months ended September 30, 2019,2020, respectively.

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 September 30, 20192020 and March 31, 20192020 were $2.5$1.5 billion and $2.5$2.2 billion, respectively.

23
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED 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 EndedFor the Six Months Ended
(in millions)Statement of Operations Line ItemSeptember 30, 2020September 30, 2019September 30, 2020September 30, 2019
Foreign currency forward contractsOther expense (income), net$33 $(41)$58 $(22)
    For the Three Months Ended For the Six Months Ended
(in millions) Statement of Operations Line Item September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
Foreign currency forward contracts Other expense (income), net $(41) $11
 $(22) $43


Fair Value of Derivative Instruments

All 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
As of
(in millions)Balance Sheet Line ItemSeptember 30, 2020March 31, 2020
Derivatives designated for hedge accounting:
Foreign currency forward contractsOther current assets$5 $0 
Total fair value of derivatives designated for hedge accounting$5 $0 
Derivatives not designated for hedge accounting:
Foreign currency forward contractsOther current assets$3 $16 
Total fair value of derivatives not designated for hedge accounting$3 $16 
  Derivative Assets
    As of
(in millions) Balance Sheet Line Item September 30, 2019 March 31, 2019
       
Derivatives designated for hedge accounting:  
Foreign currency forward contracts Other current assets $7
 $38
Total fair value of derivatives designated for hedge accounting $7
 $38
   
Derivatives not designated for hedge accounting:  
Foreign currency forward contracts Other current assets $6
 $5
Total fair value of derivatives not designated for hedge accounting $6
 $5

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

Derivative Liabilities
As of
(in millions)Balance Sheet Line ItemSeptember 30, 2020March 31, 2020
Derivatives designated for hedge accounting:
Foreign currency forward contractsAccrued expenses and other current liabilities$2 $20 
Total fair value of derivatives designated for hedge accounting:$2 $20 
Derivatives not designated for hedge accounting:
Foreign currency forward contractsAccrued expenses and other current liabilities$7 $12 
Total fair value of derivatives not designated for hedge accounting$7 $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.

24
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED 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 September 30, 2019,2020, there were 86 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$1 million.

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.

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.

DXC had designated $1.9 billion asAs of September 30, 2019 and $02020, DXC had $1.5 billion as of March 31, 2019 of foreign currency-denominated debt designated as hedges of net investments in non-U.S. subsidiaries. TheAs 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. For the three and six months ended September 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 $76loss was $(61) million and $66$(89) million, for the three and six months ended September 30, 2019, respectively.

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



Note 10 - Intangible Assets

Intangible assets consisted of the following:
As of September 30, 2020
(in millions)Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Software$4,006 $2,819 $1,187 
Customer related intangible assets4,246 1,502 2,744 
Other intangible assets258 43 215 
Total intangible assets$8,510 $4,364 $4,146 
  As of September 30, 2019
(in millions) Gross Carrying Value Accumulated Amortization Net Carrying Value
Software $4,195
 $2,438
 $1,757
Customer related intangible assets 5,759
 1,445
 4,314
Other intangible assets 255
 33
 222
Total intangible assets $10,209
 $3,916
 $6,293
  As of March 31, 2019
(in millions) Gross Carrying Value Accumulated Amortization Net Carrying Value
Software $3,864
 $2,235
 $1,629
Customer related intangible assets 5,389
 1,139
 4,250
Other intangible assets 85
 25
 60
Total intangible assets $9,338
 $3,399
 $5,939

On September 30, 2020, in conjunction with the classification of the HHS Business' assets being held for sale, $1,308 million in customer related intangible assets, software, and related accumulated amortization were transferred to assets held for sale on the Consolidated Balance Sheet. Amortization of intangible assets ceased upon being classified as held for sale.

As of March 31, 2020
(in millions)Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Software$4,048 $2,614 $1,434 
Customer related intangible assets5,795 1,697 4,098 
Other intangible assets235 36 199 
Total intangible assets$10,078 $4,347 $5,731 

The components of amortization expense were as follows:
 Three Months Ended Six Months EndedThree Months EndedSix Months Ended
(in millions) September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018(in millions)September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Intangible asset amortization $239
 $214
 $475
 $440
Intangible asset amortization$258 $239 $511 $475 
Transition and transformation contract cost amortization(1)
 59
 73
 126
 129
Transition and transformation contract cost amortization(1)
67 59 128 126 
Total amortization expense $298
 $287
 $601
 $569
Total amortization expense$325 $298 $639 $601 
        

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

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

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

Fiscal Year(in millions)
Remainder of 2021$458 
2022$820 
2023$755 
2024$625 
2025$573 
26
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 11 - Goodwill

The following table summarizes the changes in the carrying amount of goodwill, by segment, as of September 30, 2019.2020.
(in millions)GBSGISTotal
Goodwill, gross$6,507 $5,066 $11,573 
Accumulated impairment losses(4,490)(5,066)(9,556)
Balance as of March 31, 2020, net$2,017 $0 $2,017 
Acquisition related adjustments23 0 23 
Foreign currency translation39 0 39 
Assets held for sale(1,354)0 (1,354)
Goodwill, gross5,215 5,066 10,281 
Accumulated impairment losses(4,490)(5,066)(9,556)
Balance as of September 30, 2020, net$725 $0 $725 
(in millions) GBS GIS Total
Goodwill, gross $5,300
 $5,068
 $10,368
Accumulated impairment losses (701) (2,061) (2,762)
Balance as of March 31, 2019, net $4,599
 $3,007
 $7,606

      
Acquisitions 1,202
 —
 1,202
Foreign currency translation (72) (65) (137)
Impairment losses (2,625) (262) (2,887)
       
Goodwill, gross 6,430
 5,003
 11,433
Accumulated impairment losses (3,326) (2,323) (5,649)
Balance as of September 30, 2019, net $3,104
 $2,680
 $5,784


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

On September 30, 2020, in conjunction with the classification of the HHS Business' assets being held for sale, $1,354 million in goodwill was transferred to assets held for sale on the Consolidated Balance Sheet.

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 concluded that as a result of its qualitative assessment performed its annual goodwill impairment assessment as ofon July 1, 2019. Subsequent to2020, it remained more likely than not that the measurement date,fair value of the GBS reporting unit exceeds its carrying amount.

As of September 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.September 30, 2020.

27
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Note 12 - continued



Debt
Note
12 - Debt

The following is a summary of the Company's debt:
(in millions)Interest RatesFiscal Year MaturitiesSeptember 30, 2020March 31, 2020
Short-term debt and current maturities of long-term debt
Commercial paper(1)
(0.22)% - 0.44%2021 - 2022$900 $542 
Current maturities of long-term debtVarious2021 - 2022282 290 
Current maturities of finance lease liabilities0.62% - 18.47%2021 - 2022440 444 
Short-term debt and current maturities of long-term debt$1,622 $1,276 
Long-term debt, net of current maturities
AUD term loan
0.94% - 0.96%(2)
2022358 489 
GBP term loan0.88% - 1.46%20220 556 
EUR term loan
0.65%(3)
2022 - 2023292 822 
EUR term loan
0.80%(4)
2023 - 2024876 821 
USD term loan
1.40% - 2.24%(5)
2025380 480 
$274 million Senior notes4.45%2023276 276 
$171 million Senior notes4.45%2023172 172 
$500 million Senior notes4.25%2025504 505 
$500 million Senior notes4.00%2024497 0 
$500 million Senior notes4.13%2026496 0 
£250 million Senior notes2.75%2025320 307 
€650 million Senior notes1.75%2026758 709 
$500 million Senior notes4.75%2028507 507 
$234 million Senior notes7.45%2030270 271 
Revolving credit facility1.26% - 2.08%2024 - 20251,250 1,500 
Lease credit facility1.15% - 1.99%2021 - 20236 11 
Finance lease liabilities0.62% - 18.47%2021 - 20271,008 1,046 
Borrowings for assets acquired under long-term financing0.00% - 6.39%2021 - 2028730 802 
Mandatorily redeemable preferred stock outstanding6.00%202363 62 
Other borrowingsVarious2021 - 20225 70 
Long-term debt8,768 9,406 
Less: current maturities722 734 
Long-term debt, net of current maturities$8,046 $8,672 
(in millions) Interest Rates Fiscal Year Maturities September 30, 2019 March 31, 2019
Short-term debt and current maturities of long-term debt        
Euro-denominated commercial paper(1)
 (0.21)% - 2.76% 2020 $687
 $694
Current maturities of long-term debt Various 2020 - 2021 296
 766
Current maturities of finance lease liabilities 1.06% - 17.70% 2020 - 2021 488
 482
Short-term debt and current maturities of long-term debt     $1,471
 $1,942
         
Long-term debt, net of current maturities        
AUD term loan 
1.87% - 2.66%(2)
 2021 539
 567
GBP term loan 
1.57 - 1.63%(3)
 2022 553
 583
EUR term loan 
0.65%(4)
 2022 816
 —
EUR term loan 
0.80%(5)
 2023 816
 —
USD term loan 
3.29% - 3.67%(6)
 2025 492
 —
$500 million Senior notes 2.88% 2020 —
 502
$500 million Senior notes 
3.08% - 3.69%(7)
 2021 498
 498
$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
£250 million Senior notes 2.75% 2025 305
 322
€650 million Senior notes 1.75% 2026 704
 725
$500 million Senior notes 4.75% 2028 508
 508
$234 million Senior notes 7.45% 2030 273
 273
Lease credit facility 3.11% - 3.50% 2020 - 2023 18
 25
Finance lease liabilities 1.06% - 17.70% 2020 - 2025 1,176
 1,127
Borrowings for assets acquired under long-term financing 0.48% - 5.78% 2020 - 2025 697
 462
Mandatorily redeemable preferred stock outstanding 6.00% 2023 62
 62
Other borrowings 0.50% - 7.40% 2020 - 2022 71
 109
Long-term debt     8,482
 6,718
Less: current maturities     784
 1,248
Long-term debt, net of current maturities     $7,698
 $5,470


(1)(1)At DXC's option, DXC can borrow up to a maximum of €1 billion or its equivalent in €, £, and $. Under this existing €1.0 billion commercial paper program, the Company issued £600 million via direct sale to the Bank of England.
At DXC's option, DXC can borrow up to a maximum of €1 billion or its equivalent in U.S. dollars.
(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%0.90%, based on published credit ratings of DXC.
(5)(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 0.55% and 1.05%, based on published credit ratings of DXC.
(6)(5) 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%.
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.
28
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


Senior Notes andDuring the second quarter of fiscal 2021, the Company repaid the remaining £300 million GBP Term LoansLoan due fiscal 2022.

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£250 million Senior Notes due 2021 which is payable quarterly in arrears, and interest on the £250 million Senior Notes duefiscal 2025 and the €650 million Senior Notes due fiscal 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 COVID-19.

The Company repaid $2,750 million during the first six months of fiscal 2021, 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.

In connection with the completion of the HHS Sale in October 2020, DXC used the proceeds from the sale to pay down additional debt. See Note 22 - "Subsequent Events" for details.


29
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Note 13 - 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
(in millions) September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
United States $1,806
 $1,863
 $3,657
 $3,750
United Kingdom 678
 760
 1,393
 1,560
Australia 366
 391
 739
 845
Other Europe 1,260
 1,263
 2,490
 2,610
Other International 741
 736
 1,462
 1,530
Total Revenues $4,851
 $5,013
 $9,741
 $10,295

Three Months EndedSix Months Ended
(in millions)September 30, 2020September 30, 2019September 30, 2020September 30, 2019
United States$1,666 $1,806 $3,375 $3,657 
United Kingdom579 678 1,152 1,393 
Other Europe1,244 1,260 2,449 2,490 
Australia390 366 751 739 
Other International675 741 1,329 1,462 
Total Revenues$4,554 $4,851 $9,056 $9,741 

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

Remaining Performance Obligations

Remaining performance obligations represent the aggregate amount of the transaction price in contracts allocated to performance obligations not delivered, or partially undelivered, as of the end of the reporting period. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustments for revenue that hashave not materialized and adjustments for currency. As of September 30, 2019,2020, approximately $25.9$23 billion of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 26%25% of these remaining performance obligations in fiscal 2020,2021, with the remainder of the balance recognized thereafter.

Contract Balances
Contract Balances

The following table provides information about the balances of the Company's trade receivables and contract assets and contract liabilities:
As of
(in millions)September 30, 2020March 31, 2020
Trade receivables, net$2,950 $3,059 
Contract assets$413 $454 
Contract liabilities$1,671 $1,756 
  As of
(in millions) September 30, 2019 March 31, 2019
Trade receivables, net $3,343
 $3,232
Contract assets $517
 $390
Contract liabilities $1,800
 $1,886

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


Change in contract liabilities were as follows:
Six Months Ended
(in millions)September 30, 2020September 30, 2019
Balance, beginning of period$1,756 $1,886 
Deferred revenue1,355 1,400 
Recognition of deferred revenue(1,432)(1,416)
Currency translation adjustment80 (48)
Other(1)
(88)(22)
Balance, end of period$1,671 $1,800 
(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
(1) Other includes $51 million of contract liabilities reclassified as liabilities related to assets held for sale on the Consolidated Balance Sheet,
in conjunction with HHS Business classified as assets held for sale.
30
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 14 - Restructuring Costs


The Company recorded restructuring costs of $32$265 million and $157$32 million, net of reversals, for the three months ended September 30, 20192020 and September 30, 2018,2019, respectively. For the six months ended September 30, 20192020 and September 30, 2018,2019, the Company recorded restructuring costs of $174$337 million and $342$174 million,, net of reversals, respectively. The costs recorded during the three and six months ended September 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
(in millions) September 30, 2019
Accrued expenses and other current liabilities $204
Other long-term liabilities 35
Total $239
As of
(in millions)September 30, 2020
Accrued expenses and other current liabilities$289 
Other long-term liabilities76 
Total$365 


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 $283 million, comprising $266 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$476 million, comprising $353$335 million in employee severance and $144$141 million of facilities costs.

DXC TECHNOLOGY COMPANYOther Prior Year Plans
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


Fiscal 2018 Plan

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 pyramidorganizational 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$986 million, comprising $585$790 million in employee severance and $187$196 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 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.

31
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 September 30, 2020
Fiscal 2021 PlanFiscal 2021 Plan
Workforce ReductionsWorkforce Reductions$0 $340 $(4)$(89)$0 $247 
Facilities CostsFacilities Costs0 13 (4)(6)0 3 
TotalTotal$0 $353 $(8)$(95)$0 $250 
 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              Fiscal 2020 Plan
Workforce Reductions $—
 $—
 $182
 $(7) $(100) $(4) $71
Workforce Reductions$74 $(5)$2 $(38)$4 $37 
Facilities Costs —
 —
 16
 (8) (6) —
 2
Facilities Costs2 (4)4 (2)0 0 
Total $—
 $—
 $198
 $(15) $(106) $(4) $73
Total$76 $(9)$6 $(40)$4 $37 
              
Fiscal 2019 Plan              Fiscal 2019 Plan
Workforce Reductions $138
 $—
 $(10) $(5) $(59) $(3) $61
Workforce Reductions$25 $(3)$(2)$(9)$1 $12 
Facilities Costs 68
 (53) —
 (1) (7) —
 7
Facilities Costs5 (3)2 0 1 5 
Total $206
 $(53) $(10) $(6) $(66) $(3) $68
Total$30 $(6)$0 $(9)$2 $17 
              
Fiscal 2018 Plan              
Workforce Reductions $59
 $—
 $(9) $—
 $(17) $—
 $33
Facilities Costs 35
 (36) (1) —
 (2) 4
 —
Total $94
 $(36) $(10) $—
 $(19) $4
 $33
              
Other Prior Year Plans              Other Prior Year Plans
Workforce Reductions $9
 $—
 $(1) $—
 $—
 $—
 $8
Workforce Reductions$24 $0 $3 $(11)$2 $18 
Facilities Costs 1
 (1) —
 —
 —
 —
 —
Facilities Costs0 0 0 0 0 0 
Total $10
 $(1) $(1) $—
 $—
 $—
 $8
Total$24 $0 $3 $(11)$2 $18 
              
Acquired Liabilities              Acquired Liabilities
Workforce Reductions $51
 $—
 $1
 $—
 $(5) $—
 $47
Workforce Reductions$39 $0 $0 $(3)$0 $36 
Facilities Costs $18
 —
 (4) —
 (1) (3) 10
Facilities Costs11 (1)1 (2)(2)7 
Total $69
 $—
 $(3) $—
 $(6) $(3) $57
Total$50 $(1)$1 $(5)$(2)$43 
        

(1) Represents restructuring liability recorded as an offset to right-of-use assets upon the adoption of ASC 842.
(2)(1) Costs expensed, net of reversals include $14$11 million, $10 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 Costs Not Affecting Restructuring Liability include pension benefit augmentations recorded as a pension liability, asset impairments and restructuring costs associated with right-of-use assets.
(4)(3)ForeignOther include foreign currency translation adjustments.
32
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 15 - 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;participants, except where locally required; therefore, changes to pension liabilities are primarily due to market fluctuations of investments for existing participants and changes in interest rates.

Defined Benefit Plans

The Company sponsors a number of defined benefit and post-retirement medical benefit plans for the benefit of eligible employees. The benefit obligations of the Company'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 EndedSix Months Ended
(in millions)September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Service cost$23 $23 $45 $46 
Interest cost61 57 119 117 
Expected return on assets(161)(154)(314)(315)
Amortization of prior service costs(2)(2)(4)(4)
Contractual termination benefit3 6 3 17 
Curtailment gain0 0 (9)0 
Recognition of actuarial loss0 0 11 0 
Net periodic pension income$(76)$(70)$(149)$(139)
  Three Months Ended Six Months Ended
(in millions) September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
Service cost $23
 $22
 $46
 $45
Interest cost 57
 63
 117
 128
Expected return on assets (154) (138) (315) (287)
Amortization of prior service costs (2) (6) (4) (7)
Contractual termination benefit 6
 —
 17
 —
Curtailment gain —
 —
 —
 (1)
Net periodic pension income $(70) $(59) $(139) $(122)


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.

33
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Certain management and highly compensated employees are eligible to defer all, or a portion of, their regular salary that exceeds the limitation set forth in Internal Revenue Section 401(a)(17) and all or a portion of their incentive compensation. Non-employee directors are eligible to defer up to 100% of their cash compensation. The liability, which is included in other long-term liabilities in the Company's balance sheets, amounted to $55$45 million as of September 30, 20192020 and $59$48 million as of March 31, 2019.2020.


Note 16 - Income Taxes

The Company's effective tax rate from continuing operations ("ETR") was 19.6% and (5.8)% and 22.0% for the three months ended September 30, 20192020 and September 30, 2018,2019, respectively, and 16.2% and (8.6)% and 29.2% for the six months ended September 30, 20192020 and September 30, 2018,2019, respectively. For the three and six months ended September 30, 2019,2020, 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 incomeforeign tax credits and an increase in unrecognizedadjustment of the prior tax benefits primarily relatedprovisions due to the disallowancefiling of certain legacy CSC foreign restructuring expenses deducted ontax returns in the U.S. federal tax return for tax year March 31, 2013.U.S and the non-U.S. jurisdictions. For the three and 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 majority of unremitted foreign earnings have been taxed in the three and six months ended September 30, 2018, the primary unfavorable driversU.S. We expect a significant portion of the ETR wereunremitted earnings of our foreign subsidiaries will no longer be subject to U.S. federal income tax upon repatriation to the global mixU.S. However, a portion of income, the increase in the provisional transition tax, an increase inthese earnings may still be subject to foreign and U.S. state tax expense due to remeasurement of deferred taxes, and the impact of U.S. proposed regulations on the ability to claim certainconsequences when remitted. Earnings in India are indefinitely reinvested. Other foreign tax credits. The primary favorable drivers of the ETR were dueearnings are not indefinitely reinvested except for approximately $521 million that could be taxable when repatriated to the filing of the October 31, 2017 U.S. federal tax return and a decrease in valuation allowances on certain foreign subsidiary deferred tax assets.
The tax expense associated with discontinued operations for the six months ended September 30, 2019 was $0 million as compared to $18 million during the same period of the prior fiscal year. The primary driver of the variance in the tax expense for the six months ended September 30, 2019 and September 30, 2018 was the difference in income before tax for the respective periods.

As the result of the issuance of new U.S.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.2020.

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


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 payable of $6 million due to $44 million of tax indemnification receivable related to uncertain tax positions net of related deferred tax benefits, $91 million of tax indemnification receivable related to other tax payables and $141 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$92 million and a tax indemnification payable to Perspecta of $64$49 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 March 31, 2021. The Company has agreed to extend the statute of limitations for the fiscal years 2014 through fiscal 2017 through October 31, 2021 and for the employment tax audit of fiscal years 2015 and 2016 throughuntil December 31, 2020.2021. The Company expects to reach a resolution for all years no earlier than the third 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.
34
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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 unrecognizedas uncertain tax benefits.positions. In the second quarter of fiscal 20202021 the Company’s liability for uncertain tax positions increaseddecreased by $43$3 million (excluding interest and penalties and related tax attributes) largely dueprimarily related to additions for U.S. federal research and development credits andthe disallowance of certain legacy CSC foreign restructuring expenses deducted in the U.S. The Company may need to accrue and ultimately pay additional amounts for tax positions that previously met a more-likely-than-not standard if such positions are not upheld. Conversely, the Company could settle positions by payment with the tax authorities for amounts lower than those that have been accrued or extinguish a position through payment. The Company believes 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$34 million to $17$39 million, excluding interest, penalties and tax carry-forwards.

Note 17 - 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 six months ended September 30, 2020. The details of shares repurchased during the six months ended September 30, 2019 are shown below:
Fiscal 2020
Fiscal PeriodNumber of Shares RepurchasedAverage Price Per ShareAmount (in millions)
1st Quarter
Open market purchases5,510,415 $54.44 $300 
Accelerated stock repurchases1,849,194 54.08 100 
1st Quarter Total7,359,609 $54.35 $400 
2nd Quarter
Open market purchases4,414,840 $33.96 $150 
Accelerated stock repurchases1,805,350 $55.39 $100 
2nd Quarter Total6,220,190 $40.18 $250 
Total13,579,799 $47.86 $650 
35
DXC TECHNOLOGY COMPANY
  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
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(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 AdjustmentsCash Flow HedgesAvailable-for-sale SecuritiesPension and Other Post-retirement Benefit PlansAccumulated Other Comprehensive Loss
Balance at March 31, 2020$(851)$(20)$9 $259 $(603)
Current-period other comprehensive income28 12 5 0 45 
Amounts reclassified from accumulated other comprehensive loss0 6 0 (10)(4)
Balance at September 30, 2020$(823)$(2)$14 $249 $(562)
(in millions)Foreign Currency Translation AdjustmentsCash Flow HedgesAvailable-for-sale SecuritiesPension and Other Post-retirement Benefit PlansAccumulated Other Comprehensive Loss
Balance at March 31, 2019$(517)$(3)$9 $267 $(244)
Current-period other comprehensive loss(184)2 2 0 (180)
Amounts reclassified from accumulated other comprehensive income (loss)0 0 0 (4)(4)
Balance at September 30, 2019$(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, 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)

DXC TECHNOLOGY COMPANY
NOTES TO 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)
Balance at March 31, 2018 $(261) $9
 $9
 $301
 $58
Current-period other comprehensive loss (408) (30) (1) —
 (439)
Amounts reclassified from accumulated other comprehensive loss —
 5
 —
 (6) (1)
Balance at September 30, 2018 $(669) $(16) $8
 $295
 $(382)


Note 18 - 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.

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

36
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
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 5,58114,311 and 10,48129,193 shares purchased under this plan during the three and six months ended September 30, 2019.

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


2020.

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, 2019As of September 30, 2020
 Reserved for issuance Available for future grantsReserved for IssuanceAvailable for Future Grants
DXC Employee Equity Plan 34,200,000
 19,790,522
DXC Employee Equity Plan51,200,000 31,705,400 
DXC Director Equity Plan 230,000
 33,451
DXC Director Equity Plan745,000 435,951 
DXC Share Purchase Plan 250,000
 224,908
DXC Share Purchase Plan250,000 177,417 
Total 34,680,000
 20,048,881
Total52,195,000 32,318,768 


Stock Options
Number
of Option Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
(in millions)
Outstanding as of March 31, 20201,869,815 $29.92 4.27$0 
Granted0 $0 
Exercised(4,328)$12.30 $0 
Canceled/Forfeited0 $0 
Expired(71,930)$31.05 
Outstanding as of September 30, 20201,793,557 $29.91 3.89$1 
Vested and exercisable as of September 30, 20201,793,557 $29.91 3.89$1 
  
Number
of Option Shares
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value
(in millions)
Outstanding as of March 31, 2019 2,318,768
 $30.40
 4.80 $79
Granted —
 $—
    
Exercised (301,909) $32.20
   $7
Canceled/Forfeited (618) $48.60
    
Expired (91,442) $33.37
    
Outstanding as of September 30, 2019 1,924,799
 $29.97
 4.90 $8
Vested and expected to vest in the future as of September 30, 2019 1,924,648
 $29.97
 4.90 $8
Exercisable as of September 30, 2019 1,922,449
 $29.94
 4.90 $8



Restricted Stock

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


Restricted Stocks
Employee Equity PlanDirector Equity Plan
Number of
Shares		Weighted
Average
Grant Date
Fair Value		Number of
Shares
Weighted
Average
Grant Date
Fair Value
Outstanding as of March 31, 20204,174,476 $55.45 114,615 $37.69 
Granted7,447,198 $17.05 118,500 $18.82 
Settled(802,392)$57.46 (47,090)$27.28 
Canceled/Forfeited(755,601)$36.90 0 $0 
Outstanding as of September 30, 202010,063,681 $27.55 186,025 $28.31 

37
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


Share-Based Compensation

Three Months EndedSix Months Ended
(in millions)September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Total share-based compensation cost$20 $30 $36 $48 
Related income tax benefit$3 $7 $5 $11 
Total intrinsic value of options exercised$0 $1 $0 $7 
Tax benefits from exercised stock options and awards$1 $1 $4 $10 
  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 September 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$177 million, respectively. The unrecognized compensation expense for unvested RSUs is expected to be recognized over a weighted-average period of 2.172.20 years.

Note 19 - Cash Flows

Cash payments for interest on indebtedness and income taxes and other select non-cash activities are as follows:
Six Months Ended
(in millions)September 30, 2020September 30, 2019
Cash paid for:
Interest$168 $178 
Taxes on income, net of refunds (1)
$84 $130 
Non-cash activities:
Operating:
ROU assets obtained in exchange for lease, net (2)
$410 $142 
   Prepaid assets acquired under long-term financing$43 $14 
Investing:
Capital expenditures in accounts payable and accrued expenses$46 $92 
Capital expenditures through finance lease obligations$205 $380 
Assets acquired under long-term financing$10 $248 
(Decrease) increase in deferred purchase price receivable$(52)$(204)
Contingent consideration$3 $0 
Financing:
Dividends declared but not yet paid$0 $55 
  Six Months Ended
(in millions) September 30, 2019 September 30, 2018
Cash paid for:    
Interest $178
 $149
Taxes on income, net of refunds (1)
 $130
 $74
     
Non-cash activities:    
Operating:    
ROU assets obtained in exchange for lease, net (2)
 $142
 $—
   Prepaid assets acquired under long-term financing $14
 $—
Investing:    
Capital expenditures in accounts payable and accrued expenses $92
 $28
Capital expenditures through finance lease obligations $380
 $396
Assets acquired under long-term financing $248
 $76
(Decrease) / increase in deferred purchase price receivable
 $(204) $818
Financing:    
Dividends declared but not yet paid $55
 $54

    
(1) Income tax refunds were $20$25 million and $157$20 million for the six months ended September 30, 20192020 and September 30, 2018,2019, respectively.
(2) Net of $87 million change in lease classification from operating to finance lease.lease in fiscal 2020.
38
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 20 - Segment Information

DXC has a matrix form of organization and is managed in several different and overlapping groupings including services, industryindustries and geographic region.regions. As a result, and in accordance with accounting standards, operating segments are organized by the type of services provided. DXC'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’scustomer's industry and specific objectives. GBS enterprise technology stack offerings include:

•
Enterprise, Cloud Applications and Consulting.
•Analytics and Engineering. GBS's portfolio of analytics services and extensive partner ecosystem help customers gain rapid insights, automate operations, and accelerate their digital transformation journeys. GBS provides software engineering and solutions that enable businesses to run and manage their mission-critical functions, transform their operations and develop new ways of doing business.
•Applications. GBS uses advanced technologies and methods to accelerate the creation, modernization, delivery and maintenance of high-quality, secure applications allowing customers to innovate faster while reducing risk, time to market, and total cost of ownership, across industries. GBS's vertical-specific IP includes solutions for insurance; banking and capital 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.

 GBS provides industry, business process systems integration and technical delivery experience to maximize value from enterprise application portfolios. GBS also helps clients accelerate their digital transformations and business results with industry, business, technology and complex integration services.
•
Application Services. GBS's comprehensive services helps clients modernize, develop, test and manage their applications.
•
Analytics. GBS's portfolio of analytics services and robust partner ecosystem helps clients gain rapid insights and accelerate their digital transformation journeys.
•
Business Process Services. GBS provides seamless digital integration and optimization of front and back office processes, including its Agile Process Automation approach.
•
Industry Software and Solutions. GBS's industry-specific solutions enable businesses to quickly integrate technology, transform their operations and develop new ways of doing business. GBS's vertical-specific IP includes insurance, healthcare and life sciences, travel and transportation, and banking and capital markets solutions.

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 enterprise stack elements include:

•Cloud and Security. GIS helps customers to rapidly modernize by adapting legacy apps to cloud, migrate the right workloads, and securely manage their multi-cloud environments. GIS's security solutions help predict attacks, proactively respond to threats, ensure compliance and protect data, applications and 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 include: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.

•
Cloud and Platform Services. GIS helps clients maximize their private cloud, public cloud and legacy infrastructures, as well as securely manage their hybrid environments.
•
Workplace and Mobility. GIS's workplace, mobility and Internet of Things ("IoT") services provides a consumer-like experience with enterprise security and instant connectivity for its clients.
•
Security. GIS's security solutions help predict attacks, proactively respond to threats, ensure compliance and protect data, applications, infrastructure and endpoints.

39
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)GBSGISTotal Reportable SegmentsAll OtherTotals
Three Months Ended September 30, 2020
Revenues$2,242 $2,312 $4,554 $0 $4,554 
Segment profit$317 $36 $353 $(70)$283 
Depreciation and amortization(1)
$59 $291 $350 $23 $373 
Three Months Ended September 30, 2019
Revenues$2,285 $2,566 $4,851 $0 $4,851 
Segment profit$359 $243 $602 $(73)$529 
Depreciation and amortization(1)
$39 $252 $291 $25 $316 
(in millions) GBS GIS Total Reportable Segments All Other Totals
Three Months Ended September 30, 2019          
Revenues $2,285
 $2,566
 $4,851
 $—
 $4,851
Segment profit $359
 $243
 $602
 $(73) $529
Depreciation and amortization(1)
 $39
 $252
 $291
 $25
 $316
           
Three Months Ended September 30, 2018          
Revenues $2,111
 $2,902
 $5,013
 $—
 $5,013
Segment profit $400
 $473
 $873
 $(74) $799
Depreciation and amortization(1)
 $16
 $305
 $321
 $31
 $352


(in millions) GBS GIS Total Reportable Segments All Other Totals(in millions)GBSGISTotal Reportable SegmentsAll OtherTotals
Six Months Ended September 30, 2020Six Months Ended September 30, 2020
RevenuesRevenues$4,416 $4,640 $9,056 $0 $9,056 
Segment profitSegment profit$532 $59 $591 $(118)$473 
Depreciation and amortization(1)
Depreciation and amortization(1)
$109 $558 $667 $50 $717 
Six Months Ended September 30, 2019          Six Months Ended September 30, 2019
Revenues $4,444
 $5,297
 $9,741
 $—
 $9,741
Revenues$4,444 $5,297 $9,741 $0 $9,741 
Segment profit $725
 $583
 $1,308
 $(127) $1,181
Segment profit$725 $583 $1,308 $(127)$1,181 
Depreciation and amortization(1)
 $67
 $527
 $594
 $54
 $648
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$152 million and $132$151 million for the three months ended September 30, 20192020 and 2018,2019, respectively, and $289$300 million and $267$289 million for the six months ended September 30, 20192020 and 20182019, respectively.

40
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED 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 EndedSix Months Ended
(in millions)September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Profit
Total profit for reportable segments$353 $602 591 $1,308 
All other loss(70)(73)(118)(127)
Interest income25 67 48 97 
Interest expense(96)(104)(202)(195)
Restructuring costs(265)(32)(337)(174)
Transaction, separation and integration-related costs(101)(53)(211)(158)
Amortization of acquired intangible assets(152)(151)(300)(289)
Pension and OPEB actuarial and settlement losses0 0 (2)0 
Goodwill impairment losses0 (2,887)0 (2,887)
Gain on arbitration award0 632 0 632 
Loss before income taxes$(306)$(1,999)$(531)$(1,793)
  Three Months Ended Six Months Ended
(in millions) September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
Profit        
Total profit for reportable segments $602
 $873
 1,308
 $1,750
All other loss (73) (74) (127) (148)
Interest income 67
 33
 97
 65
Interest expense (104) (83) (195) (168)
Restructuring costs (32) (157) (174) (342)
Transaction, separation and integration-related costs (53) (128) (158) (198)
Amortization of acquired intangible assets (151) (132) (289) (267)
Goodwill impairment losses (2,887) —
 (2,887) —
Gain on arbitration award 632
 —
 632
 —
(Loss) income from continuing operations before income taxes $(1,999) $332
 $(1,793) $692

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.



41
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 21 - 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 September 30, 20192020 were as follows:
Fiscal yearMinimum Purchase Commitment
(in millions)
Remainder of 2021$1,558 
20221,047 
2023860 
2024269 
202525 
     Total$3,759 
Fiscal year 
Minimum Purchase Commitment(1)
(in millions) 
Remainder of 2020 $967
2021 1,685
2022 565
2023 454
2024 261
Thereafter 25
     Total $3,957


(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 September 30, 2019:2020:
(in millions)  Fiscal 2020 Fiscal 2021 Fiscal 2022 and Thereafter Totals
Surety bonds $30
 $326
 $151
 $507
Letters of credit 126
 55
 385
 566
Stand-by letters of credit 72
 101
 21
 194
Totals $228
 $482
 $557
 $1,267

(in millions) Remainder of Fiscal 2021Fiscal 2022Fiscal 2023 and ThereafterTotals
Surety bonds$38 $262 $86 $386 
Letters of credit58 135 462 655 
Stand-by letters of credit61 15 24 100 
Totals$157 $412 $572 $1,141 

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



Contingencies

Vincent Forcier v. Computer Sciences Corporation and The City of New York: 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 Parties participated in a non-binding mediation in November 2017. No settlement has been reached to date, but negotiations are ongoing. Discovery has now commenced. The Company believes that these claims are without merit and intends to continue to defend itself vigorously.

Strauch Fair Labor Standards Act Collective Action: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.

42
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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$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.


In October 2020, the Company reached an agreement in principle with the plaintiffs to resolve the matter.The Company plans to execute a settlement agreement and submit it to the Court for approval in November 2020.
DXC TECHNOLOGY COMPANY
NOTES TO 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.

43
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
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.

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



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.

44
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
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. Circuit and in August 2020, the court granted Oracle’s appeal in part.The parties have submitted their initial briefs incase has been remanded to the appellate case, and briefing is expected to conclude in November 2019.District Court for further proceedings.

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. On July 15, 2020, the Superior Court of California, County of Santa Clara, denied the Company’s motion to stay the state court case but extended the Company’s deadline to seek dismissal of the state action, until after a decision on the Company’s motion to dismiss the federal action. On July 27, 2020, the United States District Court for the Northern District of California granted the Company’s motion to dismiss the federal action. The Court’s order permitted plaintiffs to amend and refile their complaint within 60 days, and on September 25, 2020, the plaintiffs filed an amended complaint.The Company intendsplans to file a motion to dismiss all claims asserted in these actions.the amended complaint.

45
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
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.

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.Perspecta ("ITSA"). Perspecta subsequently challenged an additional $31 million sought by DXC in August 2020 under the ITSA. DXC believes the invoices were properly issued and the amounts are owed by Perspecta. DXC believes that Perspecta's

In October 2020, a hearing was held before an arbitration panel, during which the Company and Perspecta each presented evidence on the claims are without meritat issue.Closing arguments will take place in November 2020, after which the case will be submitted and intends to vigorously defend itself.the parties will await the decision of the arbitration panel.

46
DXC TECHNOLOGY COMPANY
NOTES TO CONDENSED 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.

Note 22 - Subsequent Events

HHS Sale

On October 1, 2020, DXC completed the sale of its HHS Business to Veritas Capital. The sale was accomplished by the cash purchase of all equity interests and assets attributable to the HHS Business together with future services to be provided by the Company for a total enterprise value of $5.0 billion, subject to net working capital adjustments and assumed liabilities. The sale was not subject to any financing condition or shareholder approval. Following the transaction close, DXC retains its remaining healthcare practice, relating to the pending HPS sale.

Debt Repayments

DXC used the proceeds from the sale of the HHS Business to further strengthen its balance sheet and repaid approximately $3.5 billion of outstanding debt as of September 30, 2020. Except for £600 million (approximately $775 million) related to commercial paper, almost all of the remainder repayment related to bank debt including both remaining amounts drawn on the revolving credit facility and other outstanding term loans.

Termination of Milano Receivables Facility

On October 1, 2020, and in connection with the consummation of the sale of the HHS Business, the Milano Facility was terminated at the request of the buyer of the HHS Business. In connection with the termination, DXC paid the Milano Purchasers approximately $272 million on behalf of Milano Receivables SPV to repurchase HHS Business related commercial accounts receivable previously sold under the program as of the termination date. The Milano Receivables SPV, which owned all the accounts receivables of the HHS Business, including the repurchased accounts receivables, were part of the HHS Business that were transferred to Veritas Capital as part of the sale of the HHS Business.
47

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 uncertainty of the magnitude, duration, geographic reach, impact on the global economy and current and potential travel restrictions, stay-at-home orders, economic restrictions implemented to address the COVID-19 pandemic;
•the current, and uncertain future, impact of the COVID-19 pandemic, as well as other emerging developments and disruption to economic activity, and their resulting impact on our clients that may affect our business, growth, prospects, financial condition, operating results, cash flows and 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, 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;
48

•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 Merger(the "HPES Merger") within the anticipated time frame or in the anticipated amounts;
•other risks related to the HPES Merger including anticipated tax treatment, unforeseen liabilities, and future capital expenditures;
risks relating•the spin-off of our former U.S. public sector business and its related mergers with Vencore Holding Corp. and KeyPoint Government Solutions to the Luxoft Acquisition and the ability to achieve the expected results therefrom;
the U.S. Public Sector business ("USPS"form Perspecta Inc. (the "USPS") Separation and Mergers as described in Note 1 - “Summary of Significant Accounting Policies”, could result in substantial tax liability to DXC and our stockholders;
changes in governmental regulations or•risks relating to the adoptionrespective abilities 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 damageparties to our reputation resulting from security breaches or disclosureacquisition of sensitive data or failureLuxoft Holding, Inc. to comply with data protection laws and regulations;achieve the expected results therefrom;
business interruptions in connection with our technology systems;
•risks relating to the competitive pressures faced by our business;
the effectsconsummation of macroeconomic and geopolitical trends and events;
the need to manage third-party suppliers and the effective distribution and deliverysale 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 serviceshealthcare provider software business 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 execution and performance of contracts by us and our suppliers, customers, clients and partners;
our credit ratingDedalus, and the ability to manage working capital, refinanceachieve the expected results therefrom; and raise additional capital for future needs;
the resolution of pending investigations, claims and disputes; 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 "Risk Factors" of our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 20192020 and 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.

49

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 second quarter and the first six months of fiscal 20202021 and our financial condition as of September 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 ininto 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 second 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.
50


Results of Operations

The following table sets forth certain financial data for the second quarters and first six months of fiscal 20202021 and fiscal 2019:2020:
Three Months EndedSix Months Ended
(In millions, except per-share amounts)September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Revenues$4,554 $4,851 $9,056 $9,741 
Loss before income taxes(306)(1,999)(531)(1,793)
Income tax (benefit) expense(60)116 (86)154 
Net loss$(246)$(2,115)$(445)$(1,947)
Diluted loss per share:$(0.96)$(8.19)$(1.77)$(7.44)
  Three Months Ended Six Months Ended
(In millions, except per-share amounts) September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
         
Revenues $4,851
 $5,013
 $9,741
 $10,295
         
(Loss) income from continuing operations, before taxes (1,999) 332
 (1,793) 692
Income tax expense 116
 73
 154
 202
(Loss) income from continuing operations (2,115) 259
 (1,947) 490
Income from discontinued operations, net of taxes —
 —
 —
 35
Net (loss) income $(2,115) $259
 $(1,947) $525
         
Diluted earnings per share:        
Continuing operations $(8.19) $0.92
 $(7.44) $1.69
Discontinued operations $—
 $—
 $—
 $0.12

Fiscal 20202021 Highlights

Financial highlights for the second quartersquarter and first six months of fiscal 20202021 include the following:

•Revenues for the second quarter and first six months of fiscal 20202021 were $4.9$4.6 billion and $9.7$9.1 billion, respectively, a decrease of 3%6.1% and 5%7.0%, respectively, as compared to the same periodssecond quarter and first six months of fiscal 2020. These decreases were primarily due to prior terminations and price-downs along with customer settlements that were actioned in the priorquarter. The decrease in revenue for the first six months of fiscal year.2021 was partially offset by contributions from our Luxoft acquisition which was executed during the first quarter of fiscal 2020. Refer to the section below captioned "Revenues."
Loss from continuing operations•Net loss and diluted EPS from continuing operationsloss per share for the second quarter of fiscal 20202021 were $2,115$246 million and $8.19, respectively, including$0.96, respectively. Net loss decreased by $1,869 million during the second quarter of fiscal 2021 as compared to the same period of the prior fiscal year. The reduction was primarily due to goodwill impairment recognized in the prior year and cost optimization realized in the current year offset by a reduction in revenue previously mentioned and gain on arbitration in the prior year. Refer to the section below captioned "Cost and Expenses." Net loss included the cumulative impact of certain items of $(2,477)$407 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.adjustment. This compares with income from continuing operationsnet loss and diluted EPS from continuing operationsloss per share of $259$2,115 million and $0.92,$8.19, respectively, for the second quarter of fiscal 2020.
•Net loss and diluted loss per share for the first six months of fiscal 2021 were $445 million and $1.77, respectively. Net loss decreased by $1,502 million during the first six months of fiscal 2021 as compared to the same period of the prior fiscal year.
Loss from continuing operations The reduction was primarily due to goodwill impairment recognized in the prior year and diluted EPS from continuing operations forcost optimization realized in the first six months of fiscal 2020 were $1,947 millioncurrent year offset by a reduction in revenue previously mentioned and $7.44, respectively, includinggain on arbitration in the prior year. Refer to the section below captioned "Cost and Expenses." Net loss included the cumulative impact of certain items of $(2,781)$665 million, reflecting restructuring costs, transaction, separation and integration-related costs, amortization of acquired intangible assets, goodwill impairmentpension and other post-retirement benefit ("OPEB") actuarial and settlement losses, gain on arbitration award and a tax adjustment related to U.S. tax reform.adjustment. This compares with income from continuing operationsnet loss and diluted EPS from continuing operationsloss per share of $490$1,947 million and $1.69,$7.44, respectively, for the same periodfirst six months of the prior fiscal year.2020.
•Our cash and cash equivalents were $2.9$3.1 billion as of September 30, 2019.2020.
•We generated $1,585$591 million of cash from operations during the first six months of fiscal 2020,2021, as compared to cash generated of $849$1,585 million during the first six months of fiscal 2019.2020.
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.

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Revenues
Three Months Ended
(in millions)September 30, 2020September 30, 2019ChangePercentage Change
GBS$2,242 $2,285 $(43)(1.9)%
GIS2,312 2,566 (254)(9.9)%
Total Revenues$4,554 $4,851 $(297)(6.1)%
  Three Months Ended    
(in millions) September 30, 2019 September 30, 2018 Change Percentage Change
GBS $2,285
 $2,111
 $174
 8.2 %
GIS 2,566
 2,902
 (336) (11.6)%
Total Revenues $4,851
 $5,013
 $(162) (3.2)%

Six Months Ended
(in millions)September 30, 2020September 30, 2019ChangePercentage Change
GBS$4,416 $4,444 $(28)(0.6)%
GIS4,640 5,297 (657)(12.4)%
Total Revenues$9,056 $9,741 $(685)(7.0)%
  Six Months Ended    
(in millions) September 30, 2019 September 30, 2018 Change Percentage Change
GBS $4,444
 $4,324
 $120
 2.8 %
GIS 5,297
 5,971
 (674) (11.3)%
Total Revenues $9,741
 $10,295
 $(554) (5.4)%

The decrease in revenues for the second quarter and first six months of fiscal 20202021, compared with fiscal 20192020 of the same period, reflects an ongoing declineprior terminations and price-downs along with customer settlements that were actioned in the quarter. The decrease in revenue for the first six months of fiscal 2021 was partially offset by contributions from our traditional application maintenance businessLuxoft acquisition which was executed during the first quarter of fiscal 2020. Revenues for the second quarter included a favorable foreign currency exchange rate impact of 1.6% and legacy infrastructure services. Fiscal 2020 revenues included an unfavorable foreign currency exchange rate impact of 2.8%,0.2% for the first six months of fiscal 2021. These impacts were primarily driven by the weakening of the U.S. dollar against the Australian Dollar, Euro, and British Pound during the second quarter of fiscal 2021 and an overall strengthening of the U.S. dollar against those currencies for the Euro and British Pound.first six months of fiscal 2021.
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During the second quarter and first six months of fiscal 20202021 and fiscal 2019,2020, the distribution of our revenues across geographies was as follows:
chart-1167060f5144576e932.jpgdxc-20200930_g2.jpg

chart-6bb265a11bb04a575bd.jpg
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dxc-20200930_g3.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%approximately 63% of our revenues for the first six months 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    Three Months Ended
(in millions) Constant Currency September 30, 2019 September 30, 2018 Change Percentage Change(in millions)Constant Currency September 30, 2020September 30, 2019ChangePercentage Change
GBS $2,333
 $2,111
 $222
 10.5 %GBS$2,207 $2,285 $(78)(3.4)%
GIS 2,639
 2,902
 (263) (9.1)%GIS2,269 2,566 (297)(11.6)%
Total $4,972
 $5,013
 $(41) (0.8)%Total$4,476 $4,851 $(375)(7.7)%

Six Months Ended
(in millions)Constant Currency September 30, 2020September 30, 2019ChangePercentage Change
GBS$4,419 $4,444 $(25)(0.6)%
GIS4,660 5,297 (637)(12.0)%
Total$9,079 $9,741 $(662)(6.8)%

54
  Six Months Ended    
(in millions) Constant Currency September 30, 2019 September 30, 2018 Change Percentage Change
GBS $4,558
 $4,324
 $234
 5.4 %
GIS 5,474
 5,971
 (497) (8.3)%
Total $10,032
 $10,295
 $(263) (2.6)%



Global Business Services

Our GBS revenue was $2,285revenues were $2,242 million in the second quarter and $4,444$4,416 million in the first six months of fiscal 2020, an increase2021, a decrease of 8.2%1.9% and 2.8%0.6%, respectively, compared to the corresponding periods in fiscal 2019.2020. GBS revenue in constant currency increased 10.5%decreased 3.4% and 5.4%0.6% in the second quarter and first six months of fiscal 2020,2021, respectively, as compared to the corresponding periods in fiscal 2019.2020. The increasedecrease in GBS revenues for the second quarter and first six months of fiscal 2021 were primarily due to prior terminations and price-downs along with customer settlements that we actioned in the quarter. The decrease in revenue infor the first six months of fiscal 2020 periods reflects the2021 was partially offset by contributions from our Luxoft and other acquisitions further discussed in Note 3 - "Acquisitions".acquisition which was executed during the first quarter of fiscal 2020.

For the second quarter and first six months of fiscal 2020,2021, GBS contract awards were $1.9$2.4 billion and $4.3$5.9 billion, respectively, as compared to $2.2$1.9 billion and $4.2$4.3 billion in the corresponding periods of fiscal 2019.2020.

Global Infrastructure Services

Our GIS revenue was $2,566revenues were $2,312 million in the second quarter and $5,297$4,640 million in the first six months of fiscal 2020,2021, a decrease of 11.6%9.9% and 11.3%12.4%, respectively, compared to the corresponding periods in fiscal 2019.2020. GIS revenue in constant currency decreased 9.1%11.6% and 8.3%12.0% in the second quarter and first six months of fiscal 2020,2021, respectively, as compared to the corresponding periods in fiscal 2019.2020. The decrease in GIS revenues for the second quarter and first six months of fiscal 2021 reflects prior terminations and price-downs along with customer settlements that we actioned in fiscal 2020 periods reflects declines in our traditional infrastructure businesses.the quarter.

For the second quarter and first six months of fiscal 2020,2021, GIS contract awards were $1.9$2.5 billion and $3.7$4.3 billion, respectively, as compared to $2.5$1.9 billion and $5.1$3.7 billion in the corresponding periods of fiscal 2019.2020.

55

Costs and Expenses

Our total costs and expenses are shown in the tables below:
Three Months Ended
AmountPercentage of RevenuesPercentage Point Change
(in millions)September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Costs of services (excludes depreciation and amortization and restructuring costs)$3,563 $3,679 78.3 %75.8 %2.5 
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)539 489 11.8 10.1 1.7 
Depreciation and amortization525 467 11.5 9.6 1.9 
Goodwill impairment losses— 2,887 — 59.5 (59.5)
Restructuring costs265 32 5.8 0.7 5.1 
Interest expense96 104 2.1 2.1 — 
Interest income(25)(67)(0.5)(1.4)0.9 
Gain on arbitration award— (632)— (13.0)13.0 
Other income, net(103)(109)(2.3)(2.2)(0.1)
Total costs and expenses$4,860 $6,850 106.7 %141.2 %(34.5)
  Three 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) $3,679
 $3,518
 75.8 % 70.1 % 5.7 %
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs) 489
 569
 10.1
 11.4
 (1.3)
Depreciation and amortization 467
 484
 9.6
 9.7
 (0.1)
Goodwill impairment losses 2,887
 —
 59.5
 —
 59.5
Restructuring costs 32
 157
 0.7
 3.1
 (2.4)
Interest expense 104
 83
 2.1
 1.7
 0.4
Interest income (67) (33) (1.4) (0.7) (0.7)
Gain on arbitration award (632) —
 (13.0) —
 (13.0)
Other income, net (109) (97) (2.2) (1.9) (0.3)
Total costs and expenses $6,850
 $4,681
 141.2 % 93.4 % 47.8 %


Six Months Ended
AmountPercentage of RevenuesPercentage Point Change
(in millions)September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Costs of services (excludes depreciation and amortization and restructuring costs)$7,192 $7,301 79.5 %75.0 %4.5 
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)1,078 996 11.9 10.2 1.7 
Depreciation and amortization1,017 937 11.2 9.6 1.6 
Goodwill impairment losses— 2,887 — 29.6 (29.6)
Restructuring costs337 174 3.7 1.8 1.9 
Interest expense202 195 2.2 2.0 0.2 
Interest income(48)(97)(0.5)(1.0)0.5 
Gain on arbitration award— (632)— (6.5)6.5 
Other income, net(191)(227)(2.1)(2.3)0.2 
Total costs and expenses$9,587 $11,534 105.9 %118.4 %(12.5)
  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 %

The 47.8%34.5 and 25.1% increase12.5 point decrease in total costs and expenses as a percentage of revenue for the second quarter and first six months of fiscal 2020, respectively,2021 primarily reflects our goodwill impairment losses which wereincurred during the second quarter and first six months of fiscal 2020 partially offset by the gain on arbitration award.during the same periods in fiscal 2020 that didn’t occur in fiscal 2021.



Costs of Services

Cost of services, excluding depreciation and amortization and restructuring costs ("COS"), was $3.7$3.6 billion and $7.3$7.2 billion for the second quarter and first six months of fiscal 2020,2021, respectively. COS increased $0.2 billiondecreased $116 million and $109 million during the second quarter of fiscal 2020 and decreased $0.1 billion during the first six months of fiscal 2020,2021, respectively, as compared to the same periods of the prior fiscal year.

These decreases were primarily due to cost optimization savings realized during fiscal 2021. COS as a percentage of revenue increased 5.7%2.5 and 3.2% for4.5 points, respectively, as compared to the second quarter and first six monthssame periods of the prior fiscal 2020, respectively.year. These point increases were driven by the declinea reduction in revenue exceeding associated cost reductions in our traditional infrastructure businesses.during the same periods of the previous fiscal year.

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Selling, General, and Administrative

Selling, general, and administrative expense, excluding depreciation and amortization and restructuring costs ("SG&A"), was $489$539 million and $996$1,078 million for the second quarter and first six months of fiscal 2020,2021, respectively. SG&A decreased $80increased $50 million and $13$82 million during the second quarter and first six months of fiscal 2020,2021, respectively, as compared to the same periods of the prior fiscal year. These decreasesincreases were driven by lowerhigher transaction, separation and integration-related costs.costs and SG&A related to the Luxoft Acquisition, which we acquired during the first quarter of fiscal 2020.

Transaction, separation and integration-related costs of $53$101 million and $158$211 million were included in SG&A for the second quarter and first six months of fiscal 2020,2021, respectively, as compared to $128$53 million and $198$158 million for the comparable periodsperiod of the prior fiscal year.

Depreciation and Amortization

Depreciation expense decreased $28was $200 million and amortization expense increased $11$378 million for the three months ended September 30, 2019, compared to the three months ended September 30, 2018. For the first six months of fiscal 2020, depreciation expense decreased $50 million and amortization expense increased $32 million compared to the first six months of fiscal 2019.

The net decrease in depreciation for the second quarter and first six months of fiscal 2020 was primarily due to a $562021, respectively. Depreciation expense increased $31 million and $111$42 million benefit,during the second quarter and first six months of fiscal 2021, respectively, from a change in estimated useful livesas compared to the same periods of certain equipment described in Note 1 - "Summary of Significant Accounting Policies", offset by anthe prior fiscal year. The net 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 were2021 was primarily due to increasesan increase in amortization related softwareassets placed into service.

Amortization expense was $325 million and $639 million for the second quarter and first six months of fiscal 2021, respectively. Amortization expense increased $27 million and $38 million during the second quarter and first six months of fiscal 2021, respectively, as compared to the same periods inof the prior fiscal year. The increase in amortization expense was primarily due to an increase in amortization related to software and customer related intangibles.

Goodwill Impairment Losses

DXC recognized goodwill impairment charges totaling $2,887 million for the second quarter and first six months of fiscal 2020. The2020.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-balancingbetter align our workforce and facilitiesfacility structures. During the second quarter and first six months of fiscal 2020,2021, restructuring costs, net of reversals, were $32$265 million and $174$337 million, respectively, as compared to $157$32 million and $342$174 million during the same periods 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 14 - "Restructuring Costs" to the financial statements.




Interest Expense and Interest Income

Interest expense was $96 million and $202 million for second quarter and first six months of fiscal 2021, respectively. Interest expense decreased $8 million during the second quarter of fiscal 2021 and increased $7 million during the first six months of fiscal 2021, as compared to the same periods of the prior fiscal year. The decrease during the second quarter of fiscal 2021 was primarily driven by decrease in term loans. The increase during the first six months of fiscal 2021 was primarily driven by increased amounts drawn on our revolving credit facilities partially offset by a decrease in term loans. See the "Capital Resources" caption below and Note 12 - “Debt” for additional information.

Interest income was $25 million and $48 million for second quarter and first six months of fiscal 2021, respectively. Interest income decreased $42 million and $49 million during the second quarter and first six months of fiscal 2020 increased $21 million and $27 million,2021, respectively, overas compared to the same periods inof 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 wasThese decreases were primarily due to an increase in borrowings and asset financing activities. See the "Capital Resources" caption below and Note 12 - “Debt” for additional information.

Interest income for the second quarter and first six months of fiscal 2020 increased $34 million and $32 million, respectively over the same periods in the prior fiscal year. The increase indriven by interest income in the second quarter and first six months of fiscal year 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.”"

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Gain on Arbitration Award

In September 2019,During the second quarter of fiscal 2020, DXC received final arbitration award proceeds of $666 million related to the HPE Enterprise Services merger completed in fiscal 2018. The arbitration award included $632 million in damages that were recorded as a gain. The remaining $34 million of the award related to pre-award interest. Dispute details are subject to confidentiality obligations.

Other 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.

Other income was $103 million and $191 million for the second quarter and first six months of fiscal 2021, respectively, as compared to $109 million and $227 million during the same periods of the prior fiscal year.

The $12$6 million increasedecrease in other income, net for the second quarter of fiscal 20202021, as compared to the same period of the prior fiscal year, was primarily due to foreign exchange hedging and revaluations offset by a year-over-year increase of $20$2 million in other gains related to sales of non-operating assets and a year-over-year increase of $2 million in non-service components of net periodic pension income and a year-over-year favorable foreign currency impact of $20 million. These increases were offset by a $28 million decrease in other gains related to sales of non-operating assets.income.

The $36 million increasedecrease in other income, net for the first six months of fiscal 20202021, as compared to the same period of the prior fiscal year, was primarily due to foreign exchange hedging and revaluations and a year-over-year increasedecrease of $42$7 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.income.


Taxes

Our ETR from continuing operationseffective tax rate ("ETR") was 19.6% and (5.8)% and 22.0% for the three months ended September 30, 20192020 and September 30, 2018,2019, respectively, and 16.2% and (8.6)% and 29.2% for the six months ended September 30, 20192020 and September 30, 2018,2019, respectively. For the three and six months ended September 30, 2019,2020, 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 incomeforeign tax credits and an increase in unrecognizedadjustment of the prior tax benefits primarily relatedprovisions due to the disallowancefiling of certain legacy CSC foreign restructuring expenses deducted ontax returns in the U.S. federal tax return for tax year March 31, 2013.U.S and non-U.S. jurisdictions. For the three and 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 impact of U.S. proposed regulations on the ability to claim certain foreign tax credits. The primary favorable drivers of the ETR were due to the filing of the October 31, 2017 U.S. federal tax return and a decrease in valuation allowances on certain foreign subsidiary deferred tax assets.


Income from Discontinued Operations

The $35 million of income from discontinued operations reflects the net income generated by USPS during the first quarter of fiscal 2019.
Earnings (Loss)Loss Per Share

Diluted EPS from continuing operationsloss per share for the second quarter and first six months of fiscal 2020 decreased $9.112021 was $(0.96) and $9.13,$(1.77), respectively. Diluted loss per share increased $7.23 and $5.67 during the second quarter and first six months of fiscal 2021, respectively, fromas compared to the same periods inof the prior fiscal year. This decrease reflectsincrease was due to a decreasereduction of $2,374$1,869 million and $2,437$1,502 million in income from continuing operationsnet loss for the second quarter and first six months of fiscal 2020,2021, respectively, over the same periods in the prior fiscal year.

Diluted EPS from continuing operationsloss per share for the second quarter of fiscal 20202021 includes $0.11$0.83 per share of restructuring costs, $0.18$0.29 per share of transaction, separation and integration-related costs, $0.45$0.46 per share of amortization of acquired intangible assets, $11.10 per share of goodwill impairment losses, $(2.43) per share of arbitration award gains, and $0.11$0.01 per share of tax adjustment related to prior restructuring charges.adjustment.

Diluted EPS from continuing operationsloss per share for the first six months of fiscal 20202021 includes $0.54$1.07 per share of restructuring costs, $0.50$0.62 per share of transaction, separation and integration-related costs, $0.85$0.91 per share of amortization of acquired intangible assets, $10.91$0.01 per share of goodwill impairmentpension and OPEB actuarial and settlement losses, $(2.39) per share of arbitration award gains, and $0.11 per share$0.01 of tax adjustment relating to prior restructuring charges.adjustment.

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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 diluted 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.

Selected references are made on a “constant currency basis” so that certain financial results can be viewed without the impact of fluctuations in foreign currency rates, thereby providing comparisons of operating performance from period to period. Financial results on a “constant currency basis” are non GAAP measures calculated by translating current period activity into U.S. dollars using the comparable prior period’s currency conversion rates. This approach is used for all results where the functional currency is not the U.S. dollar. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Fiscal 2021 Highlights.”

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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, 2020September 30, 2019Change
Loss before income taxes$(306)$(1,999)$1,693 
Non-GAAP income before income taxes$212 $492 $(280)
Net loss$(246)$(2,115)$1,869 
Adjusted EBIT$283 $529 $(246)
  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
(in millions)September 30, 2020September 30, 2019Change
Loss before income taxes$(531)$(1,793)$1,262 
Non-GAAP income before income taxes$319 $1,083 $(764)
Net loss$(445)$(1,947)$1,502 
Adjusted EBIT$473 $1,181 $(708)
  Six Months Ended    
(in millions) September 30, 2019 September 30, 2018 Change Percentage Change
(Loss) income from continuing operations before income taxes $(1,793) $692
 $(2,485) (359.1)%
Non-GAAP income from continuing operations before income taxes $1,083
 $1,499
 $(416) (27.8)%
Net (loss) income

 $(1,947) $525
 $(2,472) (470.9)%
Adjusted EBIT $1,181
 $1,602
 $(421) (26.3)%


Reconciliation of Non-GAAP Financial Measures

Our non-GAAP adjustments include:
•Restructuring costs - reflects costs, net of reversals, related to workforce optimization and real estate charges.
•Transaction, separation and integration-related (“TSI”) 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.USPS and other divestitures.(1)
•Amortization of acquired intangible assets - reflects amortization of intangible assets acquired through business combinations.
•Pension and OPEB actuarial and settlement gains and losses - reflects pension and OPEB actuarial and settlement gains and losses.
•Goodwill impairment losses - reflects impairment losses on goodwill.
•Gain on arbitration award - reflects a gain related to the HPES merger arbitration award.
•Tax adjustment - for fiscal 2021 periods, reflects the impact of tax entries related to prior restructuring charges and an adjustment to the tax expense relating to USPS, and 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.charges. Income tax expense of non-GAAP adjustments is computed by applying the jurisdictional tax rate to the pre-tax adjustments on a jurisdictional basis.


(1) TSI costs for all periods presented include fees and other expenses associated with legal, accounting, consulting, due diligence, investment banking advisory, and other services, as well as financing fees, retention incentives, and resolution of transaction related claims in connection with, or resulting from, exploring or executing potential acquisitions, dispositions and strategic alternatives, whether or not announced or consummated.


60

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

Three Months Ended September 30, 2020
(in millions, except per-share amounts)As ReportedRestructuring CostsTransaction, Separation and Integration-Related CostsAmortization of Acquired Intangible AssetsTax AdjustmentNon-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)$3,563 $— $— $— $— $3,563 
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)539 — (108)— — 431 
(Loss) income before income taxes(306)265 101 152 — 212 
Income tax (benefit) expense(60)52 26 35 (2)51 
Net (loss) income(246)213 75 117 2 161 
Less: net loss attributable to non-controlling interest, net of tax(2)— — — — (2)
Net (loss) income attributable to DXC common stockholders$(244)$213 $75 $117 $2 $163 
Effective Tax Rate19.6 %24.1 %
Basic EPS$(0.96)$0.84 $0.30 $0.46 $0.01 $0.64 
Diluted EPS$(0.96)$0.83 $0.29 $0.46 $0.01 $0.64 
Weighted average common shares outstanding for:
Basic EPS254.13 254.13 254.13 254.13 254.13 254.13 
Diluted EPS254.13 255.18 255.18 255.18 255.18 255.18 


Six Months Ended September 30, 2020
(in millions, except per-share amounts)As ReportedRestructuring CostsTransaction, Separation and Integration-Related CostsAmortization of Acquired Intangible AssetsPension and OPEB Actuarial and Settlement LossesTax AdjustmentNon-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)$7,192 $— $— $— $— $— $7,192 
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)1,078 — (218)— — — 860 
(Loss) income before income taxes(531)337 211 300 2 — 319 
Income tax (benefit) expense(86)64 54 69 — (2)99 
Net (loss) income(445)273 157 231 2 2 220 
Less: net income attributable to non-controlling interest, net of tax4 — — — — — 4 
Net (loss) income attributable to DXC common stockholders$(449)$273 $157 $231 $2 $2 $216 
Effective Tax Rate16.2 %31.0 %
Basic EPS$(1.77)$1.08 $0.62 $0.91 $0.01 $0.01 $0.85 
Diluted EPS$(1.77)$1.07 $0.62 $0.91 $0.01 $0.01 $0.85 
Weighted average common shares outstanding for:
Basic EPS253.88 253.88 253.88 253.88 253.88 253.88 253.88 
Diluted EPS253.88 254.76 254.76 254.76 254.76 254.76 254.76 
61

 Three Months Ended September 30, 2019Three 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(in millions, except per-share amounts)As ReportedRestructuring CostsTransaction, Separation and Integration-Related CostsAmortization of Acquired Intangible AssetsGoodwill Impairment LossesGain on Arbitration AwardTax AdjustmentNon-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs) $3,679
 $—
 $—
 $—
 $—
 $—
 $—
 $3,679
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
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
(Loss) income before income taxes(Loss) income before income taxes(1,999)32 53 151 2,887 (632)— 492 
Income tax expense (benefit)Income tax expense (benefit)116 4 5 34 — — (29)130 
Net (loss) income (2,115) 28
 48
 117
 2,887
 (632) 29
 362
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
Less: net income attributable to non-controlling interest, net of tax4 — — — — — — 4 
Net (loss) income attributable to DXC common stockholders $(2,119) $28
 $48
 $117
 $2,887
 $(632) $29
 $358
Net (loss) income attributable to DXC common stockholders$(2,119)$28 $48 $117 $2,887 $(632)$29 $358 
                
Effective Tax Rate (5.8)%             26.4%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
 $1.38
Basic EPSBasic EPS$(8.19)$0.11 $0.19 $0.45 $11.16 $(2.44)$0.11 $1.38 
Diluted EPSDiluted EPS$(8.19)$0.11 $0.18 $0.45 $11.10 $(2.43)$0.11 $1.38 
                
Weighted average common shares outstanding for:                Weighted average common shares outstanding for:
Basic EPS 258.71
 258.71
 258.71
 258.71
 258.71
 258.71
 258.71
 258.71
Basic EPS258.71 258.71 258.71 258.71 258.71 258.71 258.71 258.71 
Diluted EPS 258.71
 260.03
 260.03
 260.03
 260.03
 260.03
 260.03
 260.03
Diluted EPS258.71 260.03 260.03 260.03 260.03 260.03 260.03 260.03 


Six Months Ended September 30, 2019
(in millions, except per-share amounts)As ReportedRestructuring CostsTransaction, Separation and Integration-Related CostsAmortization of Acquired Intangible AssetsGoodwill Impairment LossesGain on Arbitration AwardTax AdjustmentNon-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)$7,301 $— $— $— $— $— $— $7,301 
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)996 — (158)— — — — $838 
(Loss) income before income taxes(1,793)174 158 289 2,887 (632)— 1,083 
Income tax expense (benefit)154 32 27 65 — — (29)249 
Net (loss) income(1,947)142 131 224 2,887 (632)29 834 
Less: net income attributable to non-controlling interest, net of tax9 — — — — — — 9 
Net (loss) income attributable to DXC common stockholders$(1,956)$142 $131 $224 $2,887 $(632)$29 $825 
Effective Tax Rate(8.6)%23.0 %
Basic EPS$(7.44)$0.54 $0.50 $0.85 $10.98 $(2.40)$0.11 $3.14 
Diluted EPS$(7.44)$0.54 $0.50 $0.85 $10.91 $(2.39)$0.11 $3.12 
Weighted average common shares outstanding for:
Basic EPS262.83 262.83 262.83 262.83 262.83 262.83 262.83 262.83 
Diluted EPS262.83 264.61 264.61 264.61 264.61 264.61 264.61 264.61 



62
  Six 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 Arbitration Award Gain Tax Adjustment Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs) $7,301
 $—
 $—
 $—
 $—
 $—
 $—
 $7,301
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs) 996
 —
 (158) —
 —
 —
 —
 838
(Loss) income from continuing operations before income taxes (1,793) 174
 158
 289
 2,887
 (632) —
 1,083
Income tax expense 154
 32
 27
 65
 —
 —
 (29) 249
Net (loss) income (1,947) 142
 131
 224
 2,887
 (632) 29
 834
Less: net income attributable to non-controlling interest, net of tax 9
 —
 —
 —
 —
 —
 —
 9
Net (loss) income attributable to DXC common stockholders $(1,956) $142
 $131
 $224
 $2,887
 $(632) $29
 $825
                 
Effective Tax Rate (8.6)%             23.0%
                 
Basic EPS from continuing operations $(7.44) $0.54
 $0.50
 $0.85
 $10.98
 $(2.40) $0.11
 $3.14
Diluted EPS from continuing operations $(7.44) $0.54
 $0.50
 $0.85
 $10.91
 $(2.39) $0.11
 $3.12
                 
Weighted average common shares outstanding for:                
Basic EPS 262.83
 262.83
 262.83
 262.83
 262.83
 262.83
 262.83
 262.83
Diluted EPS 262.83
 264.61
 264.61
 264.61
 264.61
 264.61
 264.61
 264.61






  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
(in millions, except per-share amounts) As Reported Restructuring Costs Transaction, Separation and Integration-Related Costs Amortization of Acquired Intangible Assets Tax Adjustment Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs) $7,385
 $—
 $—
 $—
 $—
 $7,385
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs) 1,009
 —
 (198) —
 —
 $811
Income from continuing operations before income taxes 692
 342
 198
 267
 —
 1,499
Income tax expense (benefit) 202
 82
 46
 65
 (33) 362
Income from continuing operations 490
 260
 152
 202
 33
 1,137
Income from discontinued operations, net of tax 35
 —
 —
 —
 —
 35
Net income 525
 260
 152
 202
 33
 1,172
Less: net income attributable to non-controlling interest, net of tax 4
 —
 —
 —
 —
 4
Net income attributable to DXC common stockholders $521
 $260
 $152
 $202
 $33
 $1,168
             
Effective Tax Rate 29.2%         24.1%
             
Basic EPS from continuing operations $1.72
 $0.92
 $0.54
 $0.71
 $0.12
 $4.01
Diluted EPS from continuing operations $1.69
 $0.90
 $0.53
 $0.70
 $0.11
 $3.94
             
Weighted average common shares outstanding for:            
Basic EPS 282.89
 282.89
 282.89
 282.89
 282.89
 282.89
Diluted EPS 287.53
 287.53
 287.53
 287.53
 287.53
 287.53


A reconciliation of net income to EBIT and adjusted EBIT is as follows:
Three Months EndedSix Months Ended
(in millions)September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Net loss$(246)$(2,115)$(445)$(1,947)
Income tax (benefit) expense(60)116 (86)154 
Interest income(25)(67)(48)(97)
Interest expense96 104 202 195 
EBIT(235)(1,962)(377)(1,695)
Restructuring costs265 32 337 174 
Transaction, separation and integration-related costs101 53 211 158 
Amortization of acquired intangible assets152 151 300 289 
Pension and OPEB actuarial and settlement losses— — 2 — 
Goodwill impairment losses— 2,887 — 2,887 
Gain on arbitration award— (632)— (632)
Adjusted EBIT$283 $529 $473 $1,181 

63
  Three Months Ended Six Months Ended
(in millions) September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
Net (loss) income $(2,115) $259
 $(1,947) $525
Income from discontinued operations, net of taxes —
 —
 —
 (35)
Income tax expense 116
 73
 154
 202
Interest income (67) (33) (97) (65)
Interest expense 104
 83
 195
 168
EBIT (1,962) 382
 (1,695) 795
Restructuring costs 32
 157
 174
 342
Transaction, separation and integration-related costs 53
 128
 158
 198
Amortization of acquired intangible assets 151
 132
 289
 267
Goodwill impairment losses 2,887
 —
 2,887
 —
Gain on arbitration award (632) —
 (632) —
Adjusted EBIT $529
 $799
 $1,181
 $1,602


Liquidity and Capital Resources

Cash and Cash Equivalents and Cash Flows

As of September 30, 2019,2020, our cash and cash equivalents were $2.9("cash") was $3.1 billion, of which $1.2 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
(in millions)September 30, 2020September 30, 2019Change
Net cash provided by operating activities$591 $1,585 $(994)
Net cash used in investing activities(234)(2,047)1,813 
Net cash (used in) provided by financing activities(963)480 (1,443)
Effect of exchange rate changes on cash and cash equivalents9 (37)46 
Cash classified within current assets held for sale(3)— (3)
Net decrease in cash and cash equivalents$(600)$(19)$(581)
Cash and cash equivalents at beginning-of-year3,679 2,899 
Cash and cash equivalents at the end-of-period$3,079 $2,880 

Operating cash flow
  Six Months Ended  
(in millions) September 30, 2019 September 30, 2018 Change
Net cash provided by operating activities $1,585
 $849
 $736
Net cash used in investing activities (2,047) (48) (1,999)
Net cash provided by (used in) financing activities 480
 (686) 1,166
Effect of exchange rate changes on cash and cash equivalents (37) (64) 27
Net decrease in cash and cash equivalents $(19) $51
 $(70)
Cash and cash equivalents at beginning-of-year 2,899
 2,729
  
Cash and cash equivalents at the end-of-period $2,880
 $2,780
  



Net cash provided by operating activities during the first six months of fiscal 20202021 was $1,585$591 million as compared to $849$1,585 million during the comparable period of the prior fiscal year. The year-over-year increasedecrease of $736$994 million was due to an increase ofa decrease in net income, net of adjustments of $749$1,244 million, which includespartially offset by a decrease in working capital cash outflows of $250 million. Net loss, net of adjustments include cash received on arbitration award of $668 million offset by a decrease in working capital movements of $(13) million.

the prior fiscal year.

Investing cash flow

Net cash used in investing activities during the first six months of fiscal 20202021 was $2,047$234 million as compared to $48 million during the comparable period of the prior fiscal year. The increase of $1,999 million was predominately due to an increase in cash paid for acquisitions of $1,878 million, an increase in purchases of property and equipment of $59 million, and short-term investing of $75 million. The increase is partially offset by cash paid for business dispositions of $65 million in the second quarter of fiscal 2019.

Net cash provided by (used in) financing activities during the first six months of fiscal 2020 was $480 million as compared to $(686)$2,047 million during the comparable period of the prior fiscal year. The $1,166decrease in cash used of $1,813 million increase was primarily due to additionala decrease in cash paid for acquisitions of $1,911 million, short-term investing of $75 million during fiscal 2020 that didn’t occur during fiscal 2021, and a decrease in purchases of property and equipment of $36 million. This was partially offset by a decrease in cash collections related to deferred purchase price receivable of $212 million.

Financing cash flow

Net cash (used in) provided by financing activities during the first six months of fiscal 2021 was $(963) million as compared to $480 million during the comparable period of the prior fiscal year. The $1,443 million increase in cash used was primarily due to a decrease in borrowings on term loans and other long-term debt of $1,715$1,205 million, repayments of borrowings under lines of credit of $2,750 million, and a decreasean increase in payments on long-term debt of $1,517$957 million. This was partially offset by borrowings for the USPS spin transactionunder lines of $1,114credit of $2,500 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$650 million in fiscal 2020, and an increase of commercial paper borrowings, net of repayments of $309 million.
64




Capital Resources

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

The following table summarizes our total debt:
As of
(in millions)September 30, 2020March 31, 2020
Short-term debt and current maturities of long-term debt$1,622 $1,276 
Long-term debt, net of current maturities8,046 8,672 
Total debt$9,668 $9,948 
  As of
(in millions) September 30, 2019 March 31, 2019
Short-term debt and current maturities of long-term debt $1,471
 $1,942
Long-term debt, net of current maturities 7,698
 5,470
Total debt $9,169
 $7,412

The $1.8$0.3 billion increasedecrease in total debt during the first six months of fiscal 20202021 was primarily attributed to the newprepayment of our term loan credit agreement infacilities of €500 million of Euro Term Loan due fiscal 2023, £450 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, offset by the issuance of new senior notes with an aggregate principal of $2.1$1.0 billion, consisting of three tranches: (i) $500 million of 4.00% Senior Notes due fiscal 2024 and (ii) $500 million of 4.13% Senior Notes due fiscal 2026.

During the first quarter of fiscal 2021, 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 on fiscal 2025; (ii) €750 million maturing on fiscal 2022; and (iii) €750 million maturing on fiscal 2023. The proceeds fromMay 2021 under its existing €1.0 billion commercial paper program via direct sale to the new borrowing was used to finance the Luxoft acquisition. Additionally, duringBOE.

During the first six months of fiscal 2021, we borrowed the remaining $2.5 billion under the $4.0 billion credit facility agreement and repaid $2.75 billion on the same. The purpose of the borrowing was to mitigate our reliance on volatile short-term commercial paper markets and to strengthen our cash and liquidity position given the uncertainties related to COVID-19 pandemic and its potential impact on our clients and our business. The credit facility repayment resulted from accessing other liquidity resources. The repaid credit facility amounts became available under the revolving credit facility for redraw at the request of the Company. Subsequent to September 30, 2020, we repaid the $500 million Senior Notes due 2020. entire $1.25 billion outstanding on our credit facility, making the entire $4.0 billion available for redraw at the request of the Company.

We were in compliance with all financial covenants associated with our borrowings as of September 30, 20192020 and September 30, 2018.

2019.

65

The debt maturity chart below summarizes the future maturities of long-term debt principal for fiscal years subsequent to September 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 12 - "Debt" to the financial statements.for more information.

chart-83819e133ccc536aa74.jpg




dxc-20200930_g4.jpg
The following table summarizes our capitalization ratios:
 As ofAs of
(in millions) September 30, 2019 March 31, 2019(in millions)September 30, 2020March 31, 2020
Total debt $9,169
 $7,412
Total debt$9,668 $9,948 
Cash and cash equivalents 2,880
 2,899
Cash and cash equivalents3,079 3,679 
Net debt(1)
 $6,289
 $4,513
Net debt(1)
$6,589 $6,269 
    
Total debt $9,169
 $7,412
Total debt$9,668 $9,948 
Equity 8,870
 11,725
Equity4,751 5,129 
Total capitalization $18,039
 $19,137
Total capitalization$14,419 $15,077 
    
Debt-to-total capitalization 50.8% 38.7%Debt-to-total capitalization67.1 %66.0 %
Net debt-to-total capitalization(1)
 34.9% 23.6%
Net debt-to-total capitalization(1)
45.7 %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.
66

As of September 30, 2019, ourOur credit ratings wereare as follows:
Rating AgencyRatingLong Term RatingsOutlookShort Term RatingsOutlook
FitchBBB+BBBStableF-2F-2Stable
Moody'sBaa2StableP-2P-2Negative
S&PBBBBBB-Stable--Stable

See Note 21 - "Commitments and Contingencies" for a discussion of the general purpose of guarantees and commitments. The anticipated sources of funds to fulfill such commitments are listed below.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
(in millions)September 30, 2020
Cash and cash equivalents$3,079 
Available borrowings under our revolving credit facility2,750 
Total liquidity
$5,829 

67

  As of
(in millions) September 30, 2019
Cash and cash equivalents $2,880
Available borrowings under our revolving credit facility 4,000
Total liquidity 
 $6,880
In October 2020 subsequent to the end of the current quarter, the company used the proceeds from the sale of HHS Business to prepay the following debt: $1,250 million of Revolver Credit Facility, £600 million of GBP commercial paper, €350 million of Euro Term Loan due fiscal 2024, $381 million of USD Term loan due fiscal 2025, A$500 million of AUD Term Loan due fiscal 2022, and €250 million of Euro Term Loan due fiscal 2022 and 2023.

The debt maturity chart below summarizes the future maturities of long-term debt principal taking into effect of prepayments as mentioned above for fiscal years subsequent to November 5, 2020 and excludes maturities of borrowings for assets acquired under long-term financing and capitalized lease liabilities.

dxc-20200930_g5.jpg

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 monthssecond quarter ended September 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 Boardfinancial flexibility we elected to suspend payment 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.quarterly dividends.

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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 6 - "Sale of Receivables""Receivables" and Note 21 - "Commitments and Contingencies" to the financial statements in this Quarterly Report on Form 10-Q.



Contractual Obligations

With the exception of 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 onof 4.00% Senior Notes due fiscal 2025;2024; and (ii) €750$500 million maturing onof 4.13% Senior Notes due fiscal 2022; and (iii) €750 million maturing on fiscal 2023,2026; and repayment of the $500term loan facilities consisting of (i) €500 million Senior Notesof Euro Term Loan due 2020fiscal 2023, (ii) £450 million of GBP Term Loan due fiscal 2022, (iii) A$300 million of AUD Term Loan due fiscal 2022, and (iv) $100 million of USD Term Loan due fiscal 2025 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 September 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.


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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 September 30, 2019.2020 because of the material weakness in our internal control over financial reporting described below.

Control Activities

As previously disclosed during the third quarter of fiscal 2020, Management concluded there was a material weakness in internal controls over financial reporting related to the design and implementation of effective control activities based on the criteria established in the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013). 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 December 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 September 30, 2020.

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.
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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 begun and are expected to be 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 September 30, 2020.

Changes in Internal Control Overover Financial Reporting

DuringIn 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 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.2021. We implementedbegan using a new lease accounting systemmodel and redesigned certain processes and controls pertainingrelating to our lease portfolio.reserves and expected losses.

There were no changes in our internal control over financial reporting during the three months ended September 30, 20192020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II


ITEM 1. LEGAL PROCEEDINGS

See Note 21 - "Commitments and Contingencies" to the financial statements under the caption “Contingencies” for information regarding legal proceedings in which we are involved.



Item 1A.
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 September 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, 20192020 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019.2020, which are hereby incorporated by reference herein other than the updated risk factors below. 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.

WeRisks Relating to Our Business

Our inability to procure third-party license required for the operation of our products and service offerings may result in decreased revenue or increased costs.

Many of our products and service offerings depends on the continued performance and availability of software licensed from third-party vendors under our contractual arrangements. Because of the nature of these licenses and arrangements, we cannot assure you that we would be able to retain all of these intellectual property rights upon renewal, expiration or termination of such licenses or that we will be able to procure, renew or extend such licenses on commercially reasonable terms which may result in increased costs.Certain of our licenses are concentrated in one or more third-party licensors where multiple licenses are up for renewal at the same time, which could decrease our ability to negotiate reasonable license fees and could result in our loss of rights under such licenses.

Risks Related to the proposed sale of the healthcare provider software business to Dedalus

The sale of the healthcare provider software business is contingent upon the satisfaction of a number of conditions, and the transaction may not succeed in our strategic objectives,be consummated on the terms or timeline currently contemplated, or at all.

On July 17, 2020, we entered into a Purchase Agreement with Dedalus. Pursuant to the Purchase Agreement, Dedalus will acquire DXC’s healthcare provider software business for total cash consideration of approximately €459.4 million (approximately $525 million) (the “HPS Sale”). We currently expect the transaction to close by March 2021 and plan to use the after-tax proceeds from the HPS Sale to repay outstanding indebtedness.

The closing of the HPS Sale is subject to certain conditions, 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 of the HPS sale is subject to certain conditions for the benefit of Dedalus, including (a) the absence of a material adverse effect on the business or the ability of DXC to consummate the transaction and (b) receipt of certain customer consents. For these and other reasons, the HPS Sale may not be completed by the end of March 2021 or otherwise on the terms or timeline contemplated, if at all. In the event that the HPS Sale is not completed, we will not be able to use the after-tax sale proceeds to repay outstanding indebtedness, which could adversely affectwould have an adverse effect on our business, financial condition, results of operations andand/or cash flows.

We recently announced a number of senior leadership changes as well as updatesThe proposed transaction may result in disruptions to our strategic priorities including an initiative to assist DXCrelationships with 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 costsand other business partners 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 resultsintended results.

If we expect,complete the proposed HPS Sale, there can be no assurance that we will be able to realize the intended benefits of the transaction. Specifically, the proposed HPS Sale could resultcause disruptions in operating difficulties, harmour remaining businesses, including by disrupting operations or causing customers to onedelay 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 alternativesdefer decisions or to end their relationships, or otherwise limiting the ability to compete 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 significantor perform certain contracts or services. Other challenges and risks including:

to our remaining businesses include the potential loss of key customers, suppliers, vendors and other key business partners;
declining employee morale and employee retention issues affecting employees, which may result from changesissues; difficulty 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;result. Other challenges and
our dependence on accounting, financial reporting, operating metrics and similar systems, controls and processes of divested businesses could lead to challenges in preparing our consolidated financial statements or maintaining effective financial control over financial reporting.


At any given time, we may be engaged in discussions or negotiations with respect to one or more strategic alternatives, and any of these strategic alternatives could be material risks to our remaining businesses include the potential loss of key suppliers, vendors and other key business partners; declining employee morale and employee retention issues; difficulty in making new and strategic hires of new employees; the need to separate operations, systems (including accounting, management, information, human resource and other administrative systems), technologies, products and personnel, and 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. Any of the foregoing could adversely affect our remaining businesses, the financial condition of such businesses and their results of operations and cash flows. In addition, we may explore a divestiture or spin-off or other transaction involving one or moreprospects. The HPS business is accounted for as part of these businessesthe GBS segment.

The actions required to implement the HPS Sale will take significant management time and ultimately determine not to proceed with any transaction or other strategic alternative for commercial, financial, strategic or other reasons. As a result, we may not realize benefits expected from exploring one or more strategic alternatives or may realize benefits further in the futureattention 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 alsowill require us to amortize expenses relatedincur significant costs.

The HPS Sale will require significant amounts of management’s time and resources, which will be in addition to intangible assets or write-off goodwill, which could adversely affectand may divert management’s time and attention from the operation of our financial conditionremaining businesses and resultsthe execution of operations.

We could suffer additional losses due to asset impairment charges.

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

We test our goodwill for impairment during the second quarter of every year and on an interim date should events or changesstrategic initiatives. Additionally, we will incur costs 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 expected to materially underperform in the future, as compared to the original bid model or budget. If the projected cash flows of a particular contract are not adequate to recover the unamortized cost balance of the asset group, the balance is adjusted in the tested period based on the contract's fair value. Either of these impairments could materially affect our reported net earnings.

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

Our ability to grow and provide our customers with competitive services is partially dependent on our ability to attract and retain highly motivated peopleconnection 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 alsoHPS Sale. These costs 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, as well as our ability to successfully attract, motivate and retain key employees, could be harmed.

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


If we do not hire, train, motivate, and effectively utilize employees with the right mix of skills and experience in the right geographic regions and for the right offerings to meet the needs of our clients, our financial performance and cash flows could suffer. For example, if our employee utilization rate is too low, our profitability, and the level of engagement of our employees could decrease. If that utilization rate is too high, it could have an adverse effect on employee engagement and attrition and the quality of the work performed, as well as our ability to staff projects. If we are unable to hire and retain enough employees with the skills or backgrounds needed to meet current demand, we may need to redeploy existing personnel, increase our reliance on subcontractors or increase employee compensation levels, all of which could 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 affect our business, results of operations and cash flows.

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

Contracts with customers may include unique and specialized performance requirements. In particular, our contracts with federal, 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,paid regardless of accuracy, may damage our business by harming our ability to compete for new contracts.whether the HPS Sale is consummated.

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

We are defendants in 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 involve or may involve litigation or arbitration, including securities class actions and other lawsuits in which we and certain of our officers and directors have been named as defendants. The result of these lawsuits and any other future legal proceedings cannot be predicted with certainty. Regardless of their subject matter or merits, such legal proceedings may result in significant cost to us, which may not be covered by insurance, may divert the attention of management or may otherwise have an adverse effect on our business, financial condition and results of operations. Negative publicity from litigation, whether or not resulting in a substantial cost, could materially damage our reputation and could have a material adverse effect on our business, financial condition, results of operations, and the price of our common stock. In addition, such legal proceedings may make it more difficult to finance our operations.


Our credit rating and ability to manage working capital, refinance and raise additional capital for future needs may impact our ability to compete, results of operations and cash flows.
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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 and six months ended September 30, 2020.


ITEM 3. DEFAULT UPON SENIOR SECURITIES

None.


ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.



ITEM 5. OTHER INFORMATION

None.


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ITEM 6. EXHIBITS

The following exhibits are filed with this report.
Exhibit
Number		Description of Exhibit
2.110.1
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
First Supplemental Indenture, dated as of March 27, 2017, between Everett SpinCo, Inc. (now known as DXC Technology Company) and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 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, between DXC Technology Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to DXC Technology Company's Current Report on Form 8-K (filed August 9, 2017) (file no. 001-38033))
4.3
Third Supplemental Indenture, dated as of August 9, 2017, between DXC Technology Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to DXC Technology Company's Current Report on Form 8-K (filed August 9, 2017) (file no. 001-38033))
4.4
Fourth Supplemental Indenture, dated as of August 17, 2017, between DXC Technology Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to DXC Technology Company's Current Report on Form 8-K (filed August 17, 2017) (file no. 001-38033))
4.5
Fifth Supplemental Indenture, dated as of February 7, 2018, between DXC Technology Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.5 to DXC Technology Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2017 (filed February 9, 2018) (file no. 001-38033))
4.6
Sixth Supplemental Indenture, dated March 15, 2018, among DXC Technology Company, U.S. Bank National Association, as trustee, and Elavon Financial Services DAC, UK Branch, as paying agent (incorporated by reference to Exhibit 4.1 to DXC Technology Company's Current Report on Form 8-K (filed March 15, 2018) (file no. 001-38033))
4.7
Seventh Supplemental Indenture, dated September 26, 2018, among DXC Technology Company, U.S. Bank National Association, as trustee, and Elavon Financial Services DAC, UK Branch, as paying agent (incorporated by reference to Exhibit 4.1 to DXC Technology Company’s Current Report on Form 8-K (filed September 26, 2018) (file no. 001-38033))
4.8
Form of DXC Technology Company's 4.750% Senior Notes due 2027 (included in Exhibit 4.2) (incorporated by reference to Exhibit 4.2 to DXC Technology Company's Current Report on Form 8-K (filed March 27, 2017) (file no. 001-38033))
4.9
Form of DXC Technology Company's 2.875% Senior Notes due 2020 (included in Exhibit 4.3) (incorporated by reference to Exhibit 4.2 to DXC Technology Company's Current Report on Form 8-K (filed August 9, 2017) (file no. 001-38033))
4.10
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))
4.16
Form of DXC Technology Company’s 1.750% Senior Notes due 2026 (included in Exhibit 4.7) (incorporated by reference to Exhibit 4.1 to DXC Technology Company’s Current Report on Form 8-K (filed September 26, 2018) (file no. 001-38033))
4.17
Indenture dated 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
SixthTenth Amendment to the Receivables Purchase Agreement dated as of August 21, 2019,10, 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
10.4*10.3*
10.5*31.1**
10.6*
Retention Agreement with Paul N. Saleh
31.1
Section 302 Certification of the Chief Executive Officer
31.231.2**
32.132.1***
32.232.2***
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
74




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 5, 2020By:DXC TECHNOLOGY COMPANY
Dated:November 12, 2019By:/s/ Neil A. Manna
Name:Neil A. Manna
Title:Interim CFO, Senior Vice President, Corporate Controller Principal Accounting Officer


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