DXC Technology Co ARS, filed Jul 6, 2021

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DXC Technology Co (DXC)

ARS 2021-07-06 For: 2021-03-31

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Added on October 23, 2026

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Nevada		61-1800317
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1775 Tysons Boulevard Tysons, Virginia		22102
(Address of principal executive offices)		(zip code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	DXC	The New York Stock Exchange
2.750% Senior Notes Due 2025	DXC 25	The New York Stock Exchange
1.750% Senior Notes Due 2026	DXC 26	The New York Stock Exchange


Item		Page
	PART I

1.	Business		2

1A.	Risk Factors		10

1B.	Unresolved Staff Comments		34

2.	Properties		34

3.	Legal Proceedings		34

4.	Mine Safety Disclosures		34

	PART II

5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		35

6.	Selected Financial Data		36

7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		37

7A.	Quantitative and Qualitative Disclosures about Market Risk		63

8.	Financial Statements and Supplementary Data		65

9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		150

9A.	Controls and Procedures		150

9B.	Other Information		155

	PART III

10.	Directors, Executive Officers and Corporate Governance		155

11.	Executive Compensation		155

12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		155

13.	Certain Relationships and Related Transactions, and Director Independence		156

14.	Principal Accountant Fees and Services		156

	PART IV

15.	Exhibits, Financial Statement Schedules		156

16.	Form 10-K Summary		162


Name	Age	Year First Elected as Officer	Term as an Officer	Position Held with the Registrant as of the filing date	Family Relationship
Michael J. Salvino	55	2019	Indefinite	President and Chief Executive Officer	None
Kenneth P. Sharp	50	2020	Indefinite	Executive Vice President and Chief Financial Officer	None
William L. Deckelman, Jr.	63	2017	Indefinite	Executive Vice President and General Counsel	None
Mary E. Finch	51	2019	Indefinite	Executive Vice President and Chief Human Resources Officer	None
Vinod Bagal	55	2019	Indefinite	Executive Vice President, Global Delivery and Transformation	None
Neil A. Manna	58	2017	Indefinite	Senior Vice President, Corporate Controller and Principal Accounting Officer	None


	Approximate Square Feet (in millions)
Geographic Area	Owned		Leased		Total
United States		5		1		6
International		4		13		17

Total		9		14		23


	Indexed Return 2018*			Return 2019			Return 2020			Return 2021
DXC Technology Company		48.9	%		(25.0	)%		(76.9	)%		121.5	%
S&P 500 Index		14.2	%		9.5	%		(7.0	)%		56.4	%
S&P North American Technology Index		31.4	%		15.7	%		3.8	%		72.0	%


	Fiscal Years Ended
(In millions, except per-share amounts)	March 31, 2021			March 31, 2020
Revenues	$	17,729		$	19,577

Income (loss) from continuing operations, before taxes		654			(5,228	)
Income tax expense		800			130

Net loss	$	(146	)	$	(5,358	)

Diluted loss per common share:	$	(0.59	)	$	(20.76	)


	Fiscal Years Ended
(in millions)	March 31, 2021		March 31, 2020		Change			Percent Change
GBS	$	8,336	$	9,111	$	(775	)		(8.5	)%
GIS		9,393		10,466		(1,073	)		(10.3	)%

Total Revenues	$	17,729	$	19,577	$	(1,848	)		(9.4	)%


	Fiscal Years Ended
(in millions)	Constant Currency March 31, 2021		March 31, 2020		Change			Percentage Change
GBS	$	8,188	$	9,111	$	(923	)		(10.1	)%
GIS		9,224		10,466		(1,242	)		(11.9	)%

Total Revenues	$	17,412	$	19,577	$	(2,165	)		(11.1	)%


	Fiscal Years Ended												Percentage Point Change
	Amount						Percentage of Revenues
(in millions)	March 31, 2021			March 31, 2020			March 31, 2021			March 31, 2020
Costs of services (excludes depreciation and amortization and restructuring costs)	$	14,086		$	14,901			79.5	%		76.0	%		3.5
Selling, general and administrative (excludes depreciation and amortization and restructuring costs)		2,066			2,050			11.7			10.5			1.2
Depreciation and amortization		1,970			1,942			11.1			9.9			1.2
Goodwill impairment losses		—			6,794			—			34.7			(34.7	)
Restructuring costs		551			252			3.1			1.3			1.8
Interest expense		361			383			2.0			2.0			—
Interest income		(98	)		(165	)		(0.6	)		(0.8	)		0.2
Debt extinguishment costs		41			—			0.2			—			0.2
Gain on disposition of businesses		(2,004	)		—			(11.3	)		—			(11.3	)
Gain on arbitration award		—			(632	)		—			(3.2	)		3.2
Other expense (income), net		102			(720	)		0.6			(3.7	)		4.3

Total costs and expenses	$	17,075		$	24,805			96.3	%		126.7	%		(30.4	)


	Fiscal Year Ended March 31, 2021
(in millions, except per- share amounts)	As Reported			Restructuring Costs		Transaction, Separation and Integration- Related Costs			Amortization of Acquired Intangible Assets		Impairment Losses			Gains and Losses on Dispositions			Pension and OPEB Actuarial and Settlement Gains and Losses		Debt Extinguishment Costs		Tax Adjustment			Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)	$	14,086		$	—	$	(2	)	$	—	$	(190	)	$	—		$	—	$	—	$	—		$	13,894
Selling, general and administrative (excludes depreciation and amortization and restructuring costs)		2,066			—		(363	)		—		—			—			—		—		—			1,703
Income from continuing operations, before taxes		654			551		358			530		190			(2,004	)		519		41		—			839
Income tax expense (benefit)		800			92		87			121		49			(920	)		115		10		(142	)		212

Net (loss) income		(146	)		459		271			409		141			(1,084	)		404		31		142			627
Less: net income attributable to non-controlling interest, net of tax		3			—		—			—		—			—			—		—		—			3

Net (loss) income attributable to DXC common stockholders	$	(149	)	$	459	$	271		$	409	$	141		$	(1,084	)	$	404	$	31	$	142		$	624

Effective Tax Rate		122.3	%																						25.3	%

Basic EPS	$	(0.59	)	$	1.81	$	1.07		$	1.61	$	0.55		$	(4.27	)	$	1.59	$	0.12	$	0.56		$	2.46
Diluted EPS	$	(0.59	)	$	1.79	$	1.06		$	1.59	$	0.55		$	(4.22	)	$	1.57	$	0.12	$	0.55		$	2.43

Weighted average common shares outstanding for:
Basic EPS		254.14			254.14		254.14			254.14		254.14			254.14			254.14		254.14		254.14			254.14
Diluted EPS		254.14			256.86		256.86			256.86		256.86			256.86			256.86		256.86		256.86			256.86


	Fiscal Year Ended March 31, 2020
(in millions, except per- share amounts)	As Reported			Restructuring Costs		Transaction, Separation and Integration- Related Costs			Amortization of Acquired Intangible Assets		Impairment Losses		Gain on Arbitration Award			Pension and OPEB Actuarial and Settlement Gains			Tax Adjustment			Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)	$	14,901		$	—	$	—		$	—	$	—	$	—		$	—		$	—		$	14,901
Selling, general and administrative (excludes depreciation and amortization and restructuring costs)		2,050			—		(318	)		—		—		—			—			—			1,732
(Loss) income from continuing operations, before taxes		(5,228	)		252		318			583		6,794		(632	)		(244	)		—			1,843
Income tax expense (benefit)		130			44		63			133		95		—			(51	)		(33	)		381

Net (loss) income		(5,358	)		208		255			450		6,699		(632	)		(193	)		33			1,462
Less: net income attributable to non-controlling interest, net of tax		11			—		—			—		—		—			—			—			11

Net (loss) income attributable to DXC common stockholders	$	(5,369	)	$	208	$	255		$	450	$	6,699	$	(632	)	$	(193	)	$	33		$	1,451

Effective Tax Rate		(2.5	)%																				20.7	%

Basic EPS	$	(20.76	)	$	0.80	$	0.99		$	1.74	$	25.91	$	(2.44	)	$	(0.75	)	$	0.13		$	5.61
Diluted EPS	$	(20.76	)	$	0.80	$	0.98		$	1.73	$	25.78	$	(2.43	)	$	(0.74	)	$	0.13		$	5.58

Weighted average common shares outstanding for:
Basic EPS		258.57			258.57		258.57			258.57		258.57		258.57			258.57			258.57			258.57
Diluted EPS		258.57			259.81		259.81			259.81		259.81		259.81			259.81			259.81			259.81


	Fiscal Year Ended
(in millions)	March 31, 2021			March 31, 2020			March 31, 2019
Net cash provided by operating activities	$	124		$	2,350		$	1,783
Net cash provided by (used in) investing activities		4,665			(2,137	)		69
Net cash (used in) provided by financing activities		(5,476	)		657			(1,663	)
Effect of exchange rate changes on cash and cash equivalents		39			(90	)		(19	)
Cash classified within current assets held for sale		(63	)		—			—

Net (decrease) increase in cash and cash equivalents		(711	)		780			170
Cash and cash equivalents at beginning of year		3,679			2,899			2,729

Cash and cash equivalents at end of year	$	2,968		$	3,679		$	2,899


	As of
	March 31, 2021			March 31, 2020			March 31, 2019
Days of sales outstanding in accounts receivable		67			65			64
Days of purchases outstanding in accounts payable		(41	)		(66	)		(69	)

Cash conversion cycle		26			(1	)		(5	)


Rating Agency	Long Term Ratings	Short Term Ratings	Outlook
Fitch	BBB	F-2	Stable
Moody’s	Baa2	P-2	Negative
S&P	BBB-	—	Stable


(in millions)	As of March 31, 2021
Cash and cash equivalents	$	2,968
Available borrowings under our revolving credit facility		4,000

Total liquidity	$	6,968


(in millions)	Less than 1 year		2-3 years		4-5 years		More than 5 years		Total
Debt⁽¹⁾	$	555	$	908	$	2,173	$	737	$	4,373
Finance lease liabilities		398		425		71		—		894
Operating Leases⁽²⁾		452		629		305		208		1,594
Purchase Obligations⁽³⁾		1,487		1,650		352		15		3,504
U.S. Tax Reform - Transition Tax⁽⁴⁾		23		43		109		—		175
U.S. FICA payroll tax deferral		33		33		—		—		66
U.K. VAT deferral		66		—		—		—		66
Interest and preferred dividend payments⁽⁵⁾		132		241		162		104		639

Total⁽⁶⁾	$	3,146	$	3,929	$	3,172	$	1,064	$	11,311


	March 31, 2021			March 31, 2020			March 31, 2019
Discount rates		2.4	%		2.4	%		2.5	%
Expected long-term rates of return on assets		5.6	%		5.8	%		5.3	%


(in millions)	Change			Approximate Change in Net Periodic Pension Expense			Approximate Change in Settlement, Contractual Termination, and Mark-to-Market Charges
Expected long-term return on plan assets		0.5	%	$	(58	)	$	61
Expected long-term return on plan assets		(0.5	)%	$	58		$	(61	)

Discount rate		0.5	%	$	25		$	(1,001	)
Discount rate		(0.5	)%	$	(29	)	$	1,246


	Page
Report of Independent Registered Public Accounting Firm		66

Consolidated Balance Sheets as of March 31, 2021 and March 31, 2020		68

Consolidated Statements of Operations for the Fiscal Years Ended March 31, 2021, March 31, 2020 and March 31, 2019		69

Consolidated Statements of Comprehensive Income (Loss) for the Fiscal Years Ended March 31, 2021, March 31, 2020 and March 31, 2019		70

Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31, 2021, March 31, 2020 and March 31, 2019		71

Consolidated Statements of Changes in Equity for the Fiscal Years Ended March 31, 2021, March 31, 2020 and March 31, 2019		72

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies		74

Note 2 - Acquisitions		85

Note 3 - Divestitures		88

Note 4 - Assets Held For Sale		92

Note 5 - Earnings (Loss) Per Share		94

Note 6 - Receivables		95

Note 7 - Leases		98

Note 8 - Fair Value		101

Note 9 - Derivative Instruments		102

Note 10 - Property and Equipment		105

Note 11 - Intangible Assets		106

Note 12 - Goodwill		107

Note 13 - Income Taxes		109

Note 14 - Debt		117

Note 15 - Pension and Other Benefit Plans		120

Note 16 - Stockholders’ Equity		127

Note 17 - Stock Incentive Plans		130

Note 18 - Cash Flows		134

Note 19 - Other Expense (Income)		134

Note 20 - Segment and Geographic Information		135

Note 21 - Revenue		138

Note 22 - Restructuring Costs		140

Note 23 - Commitments and Contingencies		143

Note 24 - Subsequent Events		149


	As of
(in millions, except per share and share amounts)	March 31, 2021			March 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	2,968		$	3,679
Receivables and contract assets, net of allowance for doubtful accounts of $91 and $74		4,156			4,392
Prepaid expenses		567			646
Other current assets		357			270
Assets held for sale		160			—

Total current assets		8,208			8,987
Intangible assets, net of accumulated amortization of $4,422 and $4,347		4,043			5,731
Operating right-of-use assets, net		1,366			1,428
Goodwill		641			2,017
Deferred income taxes, net		289			265
Property and equipment, net of accumulated depreciation of $4,121 and $3,818		2,946			3,547
Other assets		4,192			4,031
Assets held for sale - non-current		353			—

Total Assets	$	22,038		$	26,006

LIABILITIES and EQUITY
Current liabilities:
Short-term debt and current maturities of long-term debt	$	1,167		$	1,276
Accounts payable		914			1,598
Accrued payroll and related costs		698			630
Current operating lease liabilities		418			482
Accrued expenses and other current liabilities		3,358			2,801
Deferred revenue and advance contract payments		1,079			1,021
Income taxes payable		398			87
Liabilities related to assets held for sale		118			—

Total current liabilities		8,150			7,895
Long-term debt, net of current maturities		4,345			8,672
Non-current deferred revenue		622			735
Non-current operating lease liabilities		1,038			1,063
Non-current pension obligations		793			761
Non-current income tax liabilities and deferred tax liabilities		854			1,157
Other long-term liabilities		908			594
Liabilities related to assets held for sale - non-current		20			—

Total Liabilities		16,730			20,877
Commitments and contingencies
DXC stockholders’ equity:
Preferred stock, par value $0.01 per share; authorized 1,000,000 shares; none issued as of March 31, 2021 and March 31, 2020		—			—
Common stock, par value $0.01 per share; authorized 750,000,000 shares; issued 257,052,533 as of March 31, 2021 and 255,674,040 as of March 31, 2020		3			3
Additional paid-in capital		10,761			10,714
Accumulated deficit		(5,331	)		(5,177	)
Accumulated other comprehensive loss		(302	)		(603	)
Treasury stock, at cost, 2,458,027 and 2,148,708 shares as of March 31, 2021 and March 31, 2020		(158	)		(152	)

Total DXC stockholders’ equity		4,973			4,785
Non-controlling interest in subsidiaries		335			344

Total Equity		5,308			5,129

Total Liabilities and Equity	$	22,038		$	26,006


(in millions, except shares in thousands)	Common Stock					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock⁽¹⁾			Total DXC Equity			Non- Controlling Interest			Total Equity
(in millions, except shares in thousands)	Shares			Amount		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock⁽¹⁾			Total DXC Equity			Non- Controlling Interest			Total Equity
Balance at March 31, 2018		286,393		$	3	$	12,210		$	1,301		$	58		$	(85	)	$	13,487		$	350		$	13,837

Cumulative effect of adopting the new revenue standard										114									114						114
Net income										1,257									1,257			5			1,262
Other comprehensive loss													(302	)					(302	)		(3	)		(305	)
Share-based compensation expense							74												74						74
Acquisition of treasury stock																(51	)		(51	)					(51	)
Share repurchase program		(19,343	)				(845	)		(494	)								(1,339	)					(1,339	)
Stock option exercises and other common stock transactions		3,164					37												37						37
Dividends declared ($0.76 per share)										(209	)								(209	)					(209	)
Non-controlling interest distributions and other																			—			(29	)		(29	)
Divestiture of USPS							(175	)		(1,491	)								(1,666	)					(1,666	)

Balance at March 31, 2019		270,214		$	3	$	11,301		$	478		$	(244	)	$	(136	)	$	11,402		$	323		$	11,725


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


Software		2 to 10 years
Customer related intangibles		Expected customer service life
Acquired contract related intangibles		Contract life and first contract renewal, where applicable


(in millions)	Fair Value
Cash and cash equivalents	$	113
Accounts receivable		233
Other current assets		15

Total current assets		361
Property and equipment		31
Intangible assets		577
Other assets		99

Total assets acquired		1,068

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 acquired		761
Goodwill		1,262

Total consideration transferred	$	2,023


	Estimated Useful Lives (Years)
Customer related intangibles		10
Trade names		20
Developed technology		3
Third-party purchased software		3


(in millions)	Twelve Months Ended March 31, 2020⁽¹⁾
(in millions)	Twelve Months Ended March 31, 2020⁽¹⁾
Revenues	$	695
Net income (loss)	$	(25	)


(in millions)	As of October 1, 2020
Assets:
Cash and cash equivalents	$	8
Accounts receivable, net		295
Prepaid expenses		39
Other current assets		2

Total current assets		344
Intangible assets, net		1,308
Operating right-of-use assets, net		74
Goodwill		1,354
Property and equipment, net		46
Other assets		54

Total non-current assets		2,836

Total assets	$	3,180

Liabilities:
Accounts payable	$	79
Accrued payroll and related costs		13
Current operating lease liabilities		27
Accrued expenses and other current liabilities		36
Deferred revenue and advance contract payments		20

Total current liabilities		175
Non-current deferred revenue		32
Long-term operating lease liabilities		48
Other long term liabilities		2

Total long-term liabilities		82

Total liabilities	$	257


(in millions)	As of May 31, 2018
(in millions)	As of May 31, 2018
Assets:
Cash and cash equivalents	$	95
Receivables, net		458
Prepaid expenses		82
Other current assets		35

Total current assets of discontinued operations		670
Intangible assets, net⁽¹⁾		870
Goodwill		2,029
Property and equipment, net		294
Other assets⁽¹⁾		169

Total non-current assets of discontinued operations		3,362

Total assets	$	4,032

Liabilities:
Short-term debt and current maturities of long-term debt	$	161
Accounts payable		165
Accrued payroll and related costs		17
Accrued expenses and other current liabilities		358
Deferred revenue and advance contract payments		53
Income tax payable		18

Total current liabilities of discontinued operations		772
Long-term debt, net of current maturities		1,320
Non-current deferred revenue		5
Non-current income tax liabilities and deferred tax liabilities		196
Other long-term liabilities		71

Total long-term liabilities of discontinued operations		1,592

Total liabilities	$	2,364


(in millions)	Fiscal Year Ended March 31, 2019⁽¹⁾
(in millions)	Fiscal Year Ended March 31, 2019⁽¹⁾
Revenue	$	431
Costs of services		311
Selling, general and administrative		50
Depreciation and amortization		33
Restructuring costs		1
Interest expense		8
Other (income) expense, 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


(in millions)	HPS Business		Other		Total
Assets:
Cash and cash equivalents	$	28	$	35	$	63
Accounts receivable, net		64		17		81
Prepaid expenses		6		5		11
Other current assets		—		5		5

Total current assets held for sale		98		62		160
Intangible assets, net		101		16		117
Operating right-of-use assets, net		5		18		23
Goodwill		80		9		89
Deferred income taxes, net		43		—		43
Property and equipment, net		4		52		56
Other assets		16		9		25

Total non-current assets held for sale		249		104		353

Total assets held for sale	$	347	$	166	$	513

Liabilities:
Accounts payable	$	4	$	8	$	12
Accrued payroll and related costs		7		2		9
Current operating lease liabilities		2		17		19
Accrued expenses and other current liabilities		13		13		26
Deferred revenue and advance contract payments		46		6		52

Total current liabilities related to assets held for sale		72		46		118
Non-current deferred revenue		10		—		10
Long-term operating lease liabilities		3		1		4
Income tax liabilities and deferred tax liabilities		1		—		1
Other long term liabilities		3		2		5

Total long-term liabilities related to assets held for sale		17		3		20

Total liabilities related to assets held for sale	$	89	$	49	$	138


	Fiscal Years Ended
	March 31, 2021⁽¹⁾		March 31, 2020⁽¹⁾		March 31, 2019
Stock Options		1,596,985		1,075,901		—
RSUs		2,768,022		2,029,567		46,051
PSUs		1,463,872		289,972		25,086