2021 Annual Report
Delivering
eXcellence for our
Customers and Colleagues
Message from the CEO
“Our transformation journey is
well underway with clear results
that illustrate our commitment to
delivering excellence.”
Mike Salvino
President and CEO
DXC Technology
1
I hope you and your families are doing well.
Let me start by thanking our DXC customers and colleagues
for the trust they have placed in us. Our transformation
journey is well underway with clear results that illustrate
our commitment to delivering excellence.
We are proud to have launched our new brand, which gives
clear meaning to the letters “DXC”: “Delivering eXcellence
for our Customers and Colleagues.”
Our brand is innovative. Our new logo has two arrows
pointing to the X, reminding us to deliver excellence in
everything we do for our customers and colleagues. We
also introduced our new core values: Deliver, Collaborate,
Community, Care, and Do the right thing. This is truly a
“new DXC.”
We have been running a structured playbook, which is our
proven methodology for how we transform a company to
deliver sustainable growth. The stabilization phase was
completed in FY21.
In FY21, starting with our colleagues, we moved from
a workforce that was not engaged to one that is now
engaged and inspired. Concerning our customers, we
went from challenged accounts to building a level of
customer intimacy where we are delivering, building strong
partnerships and being proactive. We have simplified
our operating model and changed the direction of our
revenues and margins from declining to improving. We are
winning in the market, and we significantly decreased our
debt, taking our balance sheet from highly leveraged to
strengthened. These efforts are leading to stable revenue
growth, improved margins and continued success in the
market. We are on the right trajectory.
As the world witnesses the ongoing impact of the COVID-19
pandemic, our focus continues to be on our people. I am
proud of the dedication and perseverance of our team as
they continue to take care of themselves, each other and
their families, and deliver for our customers.
Our Progress
People / Culture
Customers
Revenue / Margin Trajectory
Marketplace
Balance Sheet
Past
Attrition
Today
Inspired / Engaged
Challenged
Positive
Declining
Losing
Improving
Winning
Highly Leveraged
Strengthened
At the beginning of the outbreak, we enabled 99% of our
people worldwide to work virtually and opened a COVID-19
Command Center that still runs 24/7. Employees have access
to virtual mental health services and other resources. We
have conducted mental health awareness and resiliency
sessions and augmented our Employee Assistance Program
globally. Where possible, in severely impacted geographies,
we have increased health insurance benefits and deployed
other specific support. And where necessary and permitted,
we are facilitating access to vaccines in support of
government roll-outs.
In closing, I am pleased with the momentum that we have
achieved and confident we will continue to deliver excellence
for our customers and colleagues in FY22 and the longer
term. FY22 will be the year we build the foundation for
growth. We will retain and continue to attract talent, and
we will build on our customer intimacy to deliver revenue
stability and continue to win in the market, all while we
expand margins and deliver increased free cash flow.
Thank you for your trust and commitment to DXC.
Regards,
Mike Salvino
President and Chief Executive Officer
Recognition Highlights
152
2021 Fortune 500 List
2
Our Transformation Journey
We have delivered on our commitments, executing each phase
of our playbook through a series of steps that we define as
our transformation journey. Looking ahead, we will continue
to execute against these five priorities to build a foundation
for growth.
Inspire and Take Care
of Our Colleagues
Focus on Customers
Optimize Costs
Seize the Market
Build the Financial
Foundation
3
51234 Inspire and Take Care of Our Colleagues
Our mission and values set high expectations
for delivering excellence
In FY21, DXC launched our
People First strategy to attract
and retain top talent. We have a
new leadership team and have
significantly increased employee
engagement by listening, seeking to
understand and acting at pace.
Our Mission
Be an IT services company using the power of technology
to build better futures for our customers, colleagues,
environment and communities, helping our customers
deliver business impact, and be the employer of choice.
Our Values
Employee Engagement
72%
56%
FY20
FY21
We significantly improved our employee
engagement score as measured by two
sentiments: “I would recommend DXC as
a great place to work” and “I am happy to
work at DXC.”
Deliver
We do what we say we are going to do.
Collaborate
We work as a team — globally and locally.
Community
We believe in stewardship and building
a sustainable company that supports
our communities.
Care
We take care of each other and foster a
culture of inclusion and belonging.
Do the right thing
We act with integrity.
4
1 Focus on Customers
Entrusted to deliver for
our customers worldwide
Customers in more than 70
countries trust DXC to run their
mission critical systems and
operations while modernizing IT,
optimizing data architectures, and
ensuring security and scalability
across public, private and hybrid
clouds. By applying our innovations
across the Enterprise Technology
Stack, we help customers improve
business outcomes, manage
disruptions, develop greater
resiliency and lower costs.
Net Promoter Score
+44
points
Q1 FY21
Q4 FY21
AMERICAS
Delivering for Our Customers
Developing the digital insurance marketplace
Lloyd’s is the world’s leading insurance and reinsurance
marketplace. DXC supports this marketplace, which
processes 3.5 million transactions annually with close
to £100 billion transferred each year between insurers,
brokers, loss adjusters and partners. Now DXC, Lloyd’s
and London Market Insurance Companies are partnering
to create the world’s most advanced technology-led
insurance marketplace — where complex technical
accounting will take place in just seconds.
Running mission critical systems and
cloud migrations
Sabre, a leading travel technology company, turned to
DXC to unlock value across its business by transforming
Sabre’s mission critical operations. Sabre extended its
long-term partnership with DXC to provide outsourcing
The Net Promoter Score (NPS) is a measure
and IT modernization capabilities in a multi-year
of customer intimacy. Since June of 2020,
agreement. In addition to securely and effectively running
our NPS has increased by 44 points.
and maintaining Sabre’s systems, DXC is also assisting
Sabre in migrating workloads to the cloud.
5
2 EUROPE,
MIDDLE EAST
AND AFRICA
ASIA
PACIFIC
Driving major transformation and savings
Nissan Motor Co. doesn’t want its business disrupted
by outages as it drives toward maintaining leadership
in an industry being transformed by innovations such
as autonomous and connected vehicles. So, Nissan is
exiting its data center and renewing and expanding its
outsourcing contract with DXC. DXC will help Nissan
move its workloads to the cloud and a co-location site,
delivering to Nissan a 23% overall savings over five years.
Transforming across the Enterprise
Technology Stack
Zurich Insurance, a leading multi-line insurer in more than
215 countries and territories, has extended its successful
partnership with DXC, a relationship that began more
than 15 years ago. DXC will provide IT and security
services over the next five years as a vital component
of the company’s IT transformation. Zurich will leverage
DXC capabilities across the Enterprise Technology Stack
to gain the ability to deploy applications faster through
automation and improve operational resiliency.
70+
countries
250+
customers in the
Fortune 500
130,000+
employees
60+
years of innovation
6
Optimize Costs
Improving delivery while expanding margins
We are proud of how we have improved
and scaled global delivery and simplified
our operations. Through these efforts,
we have achieved $550 million in savings,
without disruption.
DXC manages many of the largest
mission critical enterprise applications in
a complex IT environment encompassing:
650,000
servers
Nearly
700,000
MIPS (million instructions per second)
3,000
petabytes of storage
More than
7 million
devices
7
Improving Delivery
Customers
We are making it easier for our customers to do business with
us, simplifying processes and removing friction and cost.
We have improved the customer experience by focusing
on providing stable, predictable operations with agility and
velocity. Our seamless and silent-running technology
services drive greater automation and flexibility into
operations. We have reduced the number of “Priority One”
critical operational incidents by 54% per quarter and have
reduced the average time to recovery by 17%, minimizing
customer impact.
We are introducing DXC Platform X™, an artificial intelligence
platform for IT operations. Platform X is our proprietary
data-driven intelligent automation platform that enables
customers to detect and resolve issues quickly and
automatically predict and prevent future problems before
they happen.
Colleagues
We are giving our colleagues the right tools, technology and
processes to deliver excellence for our customers. We have
empowered our colleagues by leveraging collaboration,
automation, robotics and complex services.
We have gone to a virtual-first environment, enabled by
new technology tools and a next generation, highly secure
3 network. This has allowed us to optimize our real estate
footprint. Our internal processes and operations have also
been simplified to unlock value and address overhead costs.
This includes a number of one-touch tools to reduce the
number of systems, such as payroll and enterprise
resource planning.
Expanding Margins
Optimize Costs
In addition to driving down costs, we have increased
operational efficiency and enhanced productivity by
simplifying our customer delivery footprint and internal
operations. We have done this by:
Adjusted EBIT Margin
7.5%
Establishing Global Innovation and Delivery
Centers (GIDCs) in India, the Philippines,
Eastern Europe and Vietnam, delivering
greater scale and driving cost advantages.
Reducing our real estate footprint
and costs.
4.2%
~2.0%
2.2%
Decreasing the number of contractors to
optimize the ratio of employees to contractors
to be in line with the industry standard.
Q1 FY21
Q4 FY21
Impact of U.S. State and
Local Health and Human
Services business
Leveraging automation at scale globally.
simplifying the organization. We delivered $550
We are scaling our delivery footprint and
million of cost savings and improved adjusted
EBIT margin in each quarter.
8
Seize the Market
Delivering excellence across the
Enterprise Technology Stack
DXC helps our customers run, modernize
and continuously optimize their mission
critical IT systems across the Enterprise
Technology Stack. For a long time to come, IT
will be hybrid — a combination of traditional
and digital. Digital alone will not satisfy
the business case, or the desire for speed,
agility and lower costs that customers seek.
Whether through on-premises infrastructure
or a hybrid cloud model, customers partner
with DXC to realize better performance,
achieve more agility, optimize costs and
enable a better overall user experience.
Bridging traditional IT and digital services is an opportunity
for DXC. Customers are asking us to help strengthen and
modernize their IT systems and build a bridge to digital.
We are uniquely positioned to help our customers
modernize their IT systems and move to a hybrid model
in a secure manner:
1. Our capabilities across the Enterprise Technology Stack
mirror how our customers think about their business
needs both now and for the future.
2. We are one of the few IT services players with the
scope, scale and relevance across the full Enterprise
Technology Stack.
3. We deliver traditional IT services, such as IT outsourcing
and applications, and digital IT, such as cloud, security,
analytics and engineering.
Book-to-Bill Ratio
1.12
0.90
FY20
FY21
We are winning in the market with a
book-to-bill ratio of over 1.0 for four
straight quarters in FY21.
9
4 The Enterprise Technology Stack
Insurance Business Process as a Service and
Business Process Outsourcing
Cloud
DXC builds, optimizes and runs hybrid IT that is integrated
With DXC, companies can achieve tangible growth, optimize
with traditional IT systems and works across all cloud models.
costs and deliver the best experiences for their customers
Our “cloud right” strategy helps our customers to move the
and employees. We modernize and run companies’ IT
right systems in the right sequence to the hybrid cloud so
systems, provide proprietary modular insurance software
that they can operate in a cost-effective and secure way, with
and platforms, and operate the full spectrum of insurance
scale, speed, agility and resiliency across public and private
business process services. We also help operate and
cloud environments. We have transformed more than 15,000
continuously improve bank cards, payment and lending
applications, and we move 65,000 workloads to the cloud annually.
processes and operations, and customer experience
operations. DXC administers 13 million insurance policies
IT Outsourcing
and contracts, and manages 250 million customer
DXC provides reliable and secure mission critical systems for
interactions each year across industries.
better performance, greater resiliency and lower costs in a
Analytics and Engineering
hybrid IT world. We manage and simplify existing infrastructure
investments and provide customers with a way forward to
DXC helps customers gain data-driven insights, automate
modernize IT, including moving portions to the cloud. DXC runs,
operations, design and build effective products and services,
maintains and protects IT estates for more than 1,300 medium
and leverage complex software at scale. We help customers
and large enterprises.
to architect, engineer, clean and manage data to unlock its
value and then develop analytics and artificial intelligence
Modern Workplace
algorithms to produce proprietary insights, provide better
DXC helps customers reimagine the workplace with a personalized,
experiences to their customers and better grow and manage
intelligent, secure and modern experience that fosters employee
their business.
Applications
collaboration and productivity on any device, anytime and
anywhere. We help track, support and secure our customers’
IT estates and assist with acquiring intelligence on employee
To help customers modernize their applications to be
sentiment and utilization. As the world’s largest workplace
future-ready for the hybrid technology world, we help
services provider, we serve 1,000 customers in 67 countries and
them simplify, manage, optimize and modernize enterprise
manage over 7 million devices globally.
and cloud applications to lower cost, enable growth, and
improve business agility and resiliency. DXC customers gain
up to 40% cost savings through intelligent automation and
speed-to-market improvements of up to 50%. More than
DXC Partner Ecosystem
2,200 customers leverage DXC’s intellectual property and
Together with our curated ecosystem of over 200 industry-
our ecosystem of partners to accelerate their modernization
leading companies, we help our customers harness the
journey through better applications and improved
power of the Enterprise Technology Stack to transform their
performance.
Security
businesses. The deep and comprehensive relationships we
hold with our partners enable us to deliver innovative, mission
critical solutions with agility, speed and scale. Below are some
To help customers secure IT systems and business
of our partners.
operations against risk and attacks, we weave cybersecurity
and resiliency into enterprise IT systems, operations and
culture. Whether modernizing and operating IT systems,
migrating to the hybrid cloud, protecting data with a zero-
trust strategy or managing security operations, DXC makes
security and resiliency the foundation of a customer’s
enterprise technology so they can focus on their business
goals and success.
10
Strategic Priorities
Focus on Customers
Optimize Costs
We have built a level of customer intimacy where
We are scaling our delivery footprint and
we are delivering, building strong partnerships and
simplifying the organization. We delivered $550
being proactive with our customers. We delivered
million of cost savings and improved adjusted
sequential revenue stabilization in each quarter of
EBIT margin in each quarter.
FY21, and increased revenues (excluding dispositions)
in each quarter.
Quarterly Revenues (billions)
Adjusted EBIT Margin
$4.4
$4.3
$4.6
$0.4
$4.2
$4.5
$0.4
$4.1
7.5%
7.0%
6.2%
~2.0%
4.2%
4.2%
~2.0%
2.2%
Q1 FY21
Q2 FY21
Q3 FY21
Q4 FY21
Q1 FY21
Q2 FY21
Q3 FY21
Q4 FY21
Impact of U.S. S&L HHS
Impact of U.S. S&L HHS
Seize the Market
Strengthen the Balance Sheet
We continue to win in the market and achieved a
We delivered a $6.5 billion debt reduction,
book-to-bill ratio of greater than 1.0 in each quarter.
strengthening our balance sheet. We are
For FY21 we achieved a book-to-bill of 1.12 compared
committed to an investment grade credit profile,
to 0.90 in FY20.
and our actions demonstrate our commitment.
Book-to-Bill Ratio
1.18
1.08
1.13
1.08
FY21
1.12
Debt (billions)
$12.0
$9.7
$6.2
$5.5
Q1 FY21
Q2 FY21
Q3 FY21
Q4 FY21
Q1 FY21
Q2 FY21
Q3 FY21
Q4 FY21
12
Environmental, Social and Governance
Creating a sustainable future
UN Sustainable Development Goals
and DXC’s Achievements
UN SDG 13
Reduced greenhouse gas emissions
by 21% in FY20, reaching our target
two years early
UN SDG 7
Reduced energy consumption by 11%
and increased purchase of renewable
energy by 32% in FY20
UN SDG 8
Contributed to 24 community
development projects in India,
benefiting more than 100,000 people
UN SDG 4
94% of our people have
completed training programs
through DXC University
UN SDG 12
99% of e-waste recycled; goal is
zero e-waste to landfill through
the promotion of reuse
DXC is committed to being a
responsible corporate citizen,
with a focus on environmental,
social and governance (ESG)
performance. We set and exceed
ambitious targets that align closely
with UN Sustainable Development
Goals (SDGs). We support our
customers on their own corporate
responsibility and sustainability
journeys. Our active involvement
in our communities produces
beneficial outcomes for society.
In 2021, DXC intends to report on the
Sustainability Disclosure Topics and Accounting
Metrics specified by the Sustainability
Accounting Standards Board (SASB) for
the software and IT services industry, and
the recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD).
13
Partnerships for a Better World
Awards and Recognition
Bayernwerk AG
Shrinking the carbon footprint
Bayernwerk AG, which provides electricity, heating and
water across southern Germany, has set high-priority
Awarded Prime status by ISS ESG in 2021
targets around sustainability and environmental protection.
to recognize DXC for fulfilling ambitious
To help meet these goals, DXC created a digital platform
absolute performance requirements
for Bayernwerk to launch energy-efficient products like
the EnergyPortal, which makes data more accessible to
administrators of the municipalities Bayernwerk serves.
It also provides a single source for advanced analytics,
which the utility’s customers can use to shrink their carbon
footprint and meet their green energy goals.
DXC Dandelion Program
Boosting talent with a neurodiverse workforce
Recognized by the Carbon Disclosure
Project (CDP) for transparently
providing our environmental strategy,
data and impact, contributing to a
The DXC Dandelion Program helps organizations access the
truly sustainable global economy
wealth of talent in the neurodiverse space, while providing
opportunities for people on the autism spectrum to gain
long-term viable employment. The program’s unique
recruitment process is tailored to encourage individuals who
have struggled in the past, and provides ongoing support
throughout their placement. Committed to continue building
a workplace that is as diverse as it is dynamic, National
Achieved 100% in the Disability Equality
Australia Bank (NAB) partnered with DXC to establish the
Index – Best Place to Work for Disability
Neurodiversity at NAB program.
Inclusion
Year Up
Helping young adults reach their potential
Every year, DXC welcomes students for internship programs.
Interns from across the United States now have joined DXC
as part of a partnership with Year Up Inc., an organization
that is committed to closing the Opportunity Divide by
helping young adults reach their potential through higher
education and careers. The interns receive support, guidance
and hands-on training while serving in roles in technology,
marketing and communications and other business functions.
14
DISCLOSURE INSIGHT ACTION
Executive Leadership
Mike Salvino
President and
Chief Executive Officer
Vinod Bagal
Executive Vice President,
Global Delivery
Jim Brady
President, Americas
Mary Finch
Executive Vice President and
Chief Human Resources Officer
Zafar Hasan
Vice President and Head of Corporate
Legal, Corporate Secretary
Mark Hughes
President, Security
Tom Pettit
President, Americas
Ken Sharp
Executive Vice President
and Chief Financial Officer
Kristin Slattery
Vice President and
Chief of Staff
Steve Turpie
President, Europe,
Middle East and Africa
15
Tim Weir
Vice President, Global Asset
Protection
Michael Corcoran
Executive Vice President,
Strategy
Bill Deckelman
Executive Vice President
and General Counsel
Chris Drumgoole
Executive Vice President and
Chief Information Officer
Dmitry Loschinin
President, Analytics
and Engineering
Mike McDaniel
President, Modern
Workplace
Seelan Nayagam
President, Asia Pacific
Jim Smith
Executive Vice President,
Sales
David Swift
President, Insurance and Business
Process Outsourcing
Brenda Tsai
Executive Vice President
and Chief Marketing and
Communications Officer
16
Board of Directors
Ian Read
Chairman of DXC Technology, Executive
Chairman of Population Health Investment
and former Executive Chairman and
CEO of Pfizer; member of Kimberly-Clark
Corporation and Viatris boards
Mike Salvino
President and CEO
of DXC Technology
Mukesh Aghi
President and CEO of US-
India Strategic Partnership
Forum; member of Hindustan
Media Ventures Ltd board
Amy Alving
Former CTO of Leidos;
member of Fannie Mae and
Howmet Aerospace boards
David Barnes
Former SVP, Chief Information and
Global Business Services Officer of
UPS; member of Hertz board
Raul Fernandez
Vice Chairman and co-owner of
Monumental Sports & Entertainment;
member of Broadcom and Capitol
Investment Corp. V boards
David Herzog
Former CFO of AIG; member of
MetLife, AMBAC Financial Group
and PCCW Limited boards
ML Krakauer
Former EVP and CIO of Dell
Corporation; member of Mercury
Systems and Xilinx boards
Dawn Rogers
Director of Human Capital at
American Securities and former
EVP and CHRO of Pfizer
Manoj Singh
Former COO for Deloitte Global
(Deloitte Touche Tohmatsu Ltd.);
member of ReNew Energy Global board
and trustee of The Putnam Funds
Akihiko Washington
Former EVP of Worldwide
Human Resources for Warner
Bros. Entertainment
Robert Woods
Former SVP and CFO at
Sungard Data Systems Inc.
17
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2021
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.: 1-4850
DXC TECHNOLOGY COMPANY
(Exact name of registrant as specified in its charter)
Nevada
61-1800317
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification
No.)
1775 Tysons Boulevard
Tysons, Virginia
(Address of principal executive offices)
22102
(zip code)
Registrant's telephone number, including area code: (703) 245-9675
Securities registered pursuant to Section 12(b) of the Act:
Title of each 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
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. x Yes o No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. o Yes x No
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 Filer x
Accelerated Filer o
Non-accelerated Filer
o
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment
of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act
(15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes x No
The aggregate market value of the registrant's common stock held by non-affiliates of the registrant on September
30, 2020, the last business day of the registrant's most recently completed second fiscal quarter, based upon the
closing price of a share of the registrant’s common stock on that date, was $4,531,553,903.
254,806,966 shares of common stock, par value $0.01 per share, were outstanding as of May 24, 2021.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement relating to its 2021 Annual Meeting of Stockholders (the "2021
Proxy Statement"), which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A
within 120 days after the registrant's fiscal year end of March 31, 2021, are incorporated by reference into Part III of
this Annual Report on Form 10-K where indicated.
TABLE OF CONTENTS
Item
PART I
1.
Business
1A.
1B.
2.
3.
4.
5.
6.
7.
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
7A.
Quantitative and Qualitative Disclosures about Market Risk
8.
9.
9A.
9B.
10.
11.
12.
13.
14.
15.
16.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART IV
Exhibits, Financial Statement Schedules
Form 10-K Summary
Page
2
10
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34
34
34
35
36
36
63
65
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156
156
156
157
157
157
163
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
All statements and assumptions contained in this Annual Report on Form 10-K 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”) crisis and the impact of varying private and governmental
responses that affect our customers, employees, vendors and the economies and communities where they operate.
Important factors that could cause actual results to differ materially from those described in forward-looking statements
include, but are not limited to:
•
•
•
•
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the uncertainty of the magnitude, duration, geographic reach of the COVID-19 crisis, its impact on the global
economy, and the impact of current and potential travel restrictions, stay-at-home orders, and economic
restrictions implemented to address the crisis;
the effects of macroeconomic and geopolitical trends and events;
our inability to succeed in our strategic objectives;
our inability to succeed in our strategic transactions;
the risk of liability or damage to our reputation resulting from security incidents, including breaches, cyber-attacks
insider threats, disclosure of sensitive data or failure to comply with data protection laws and regulations in a
rapidly evolving regulatory environment; in each case, whether deliberate or accidental.
our inability to develop and expand our service offerings to address emerging business demands and
technological trends, including our inability to sell differentiated services up the Enterprise Technology Stack;
the risks associated with our international operations;
our credit rating and ability to manage working capital, refinance and raise additional capital for future needs;
the competitive pressures faced by our business;
our inability to accurately estimate the cost of services, and the completion timeline, of contracts;
execution risks by us and our suppliers, customers, and partners;
our inability to retain and hire key personnel and maintain relationships with key partners;
our inability to comply with governmental regulations or the adoption of new laws or regulations;
our inability to achieve the expected benefits of our restructuring plans;
inadvertent infringement of third-party intellectual property rights or our inability to protect our own intellectual
property assets;
our inability to remediate any material weakness and maintain effective internal control over financial reporting;
potential losses due to asset impairment charges;
our inability to pay dividends or repurchase shares of our common stock;
pending investigations, claims and disputes and any adverse impact on our profitability and liquidity;
disruptions in the credit markets, including disruptions that reduce our customers' access to credit and increase
the costs to our customers of obtaining credit;
our failure to bid on projects effectively;
financial difficulties of our customers and our inability to collect receivables;
our inability to maintain and grow our customer relationships over time and to comply with customer contracts or
government contracting regulations or requirements;
changes in tax laws and any adverse impact on our effective tax rate;
risks following the merger of Computer Sciences Corporation ("CSC") and Enterprise Services business of
Hewlett Packard Enterprise Company's ("HPES") businesses, including anticipated tax treatment, unforeseen
liabilities and future capital expenditures;
1
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risks following the spin-off of our former U.S. Public Sector business and its related mergers with Vencore Holding
Corp. and KeyPoint Government Solutions to form Perspecta Inc. (the "USPS"); and
the other factors described under Item 1A. “Risk Factors.”
No assurance can be given that any goal or plan set forth in any forward-looking statement can or will be achieved, and
readers are cautioned not to place undue reliance on such statements, which speak only as of the date they are made.
Any forward-looking statement made by us in this Annual Report on Form 10-K speaks only as of the date on which this
Annual Report on Form 10-K was first filed. We do not undertake any obligation to update or release any revisions to any
forward-looking statement or to report any events or circumstances after the date of this report or to reflect the occurrence
of unanticipated events, except as required by law.
Throughout this report, we refer to DXC Technology Company, together with its consolidated subsidiaries, as “we,” “us,”
“our,” “DXC,” or the “Company.” In order to make this report easier to read, we also refer throughout to (i) our
Consolidated Financial Statements as our “financial statements,” (ii) our Consolidated Statements of Operations as our
“statements of operations,” (iii) our Consolidated Statement of Comprehensive (Loss) Income as the "statements of
comprehensive income,"(iv) our Consolidated Balance Sheets as our “balance sheets” and (v) our Consolidated
Statements of Cash Flows as our “statements of cash flows.” In addition, references throughout to numbered “Notes” refer
to the numbered Notes to our Financial Statements that we include in the Financial Statements section of this report.
PART I
ITEM 1. BUSINESS
Overview
DXC, a Nevada corporation, is a global IT services market leader. Our more than 130,000 people in 70-plus countries help
our global customers, over half of today’s fortune 500 companies, run mission-critical systems with the latest technology
innovations across our Enterprise Technology Stack.
Our customers trust DXC to innovate and deliver transformative solutions for new levels of performance, profitability,
competitiveness, and customer experience.
DXC was formed on April 1, 2017 by the merger of CSC and HPES (the "HPES Merger").
Transformation Journey
The DXC “Transformation Journey” strategy focuses on building stronger relationships with customers, its people, and
unlocking value across the Enterprise Technology Stack.
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Key transformation journey priorities include:
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Inspire and Take Care of our People – Ensuring the health and safety of our people is a top priority, especially
in the current environment
Continuing to bring in new technology, account and delivery talent across the world, and making investments that
recognize and reward our people
Focus on Customers – Strengthening our customer relationships and ensuring we are proactively delivering for
customers
• Optimize Cost – Optimizing value to better serve our customers by eliminating confusion and complexity
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Seize the Market – Seizing the market opportunity by cross-selling and expanding what we do with our
customers across the Enterprise Technology Stack
Unlock Value to Strengthen Balance Sheet – Unlocking value by pursuing strategic alternatives, rationalizing
our portfolio, and strengthening our balance sheet through our commitment to running a long-term sustainable
business
The Company will continue to focus on execution of its strategy in the next fiscal year, with a continued focus on our
people, revenue stabilization, cost optimization and winning in the market. While the Company has already disclosed that
it completed the sale of two businesses that comprised the Strategic Alternatives plan, the Company will continue its
portfolio shaping efforts and divest assets that the Company does not believe are well integrated with its enterprise
technology stack and its strategic direction so it can focus on its strategy.
Important Acquisitions and Divestitures
During fiscal 2021, DXC completed the sale of its U.S. State and Local Health and Human Services business ("HHS" or
the "HHS Business") to Veritas Capital Fund Management, L.L.C. ("Veritas Capital") to form Gainwell Technologies. The
sale was accomplished by the cash purchase of all equity interests and assets attributable to the HHS Business together
with future services to be provided by the Company for a total enterprise value of $5.0 billion, subject to net working
capital adjustments and assumed liabilities.
On July 17, 2020, DXC entered into a purchase agreement with Dedalus Holding S.p.A. ("Dedalus"), a company
organized under the laws of Italy, pursuant to which Dedalus will acquire DXC’s healthcare provider software business
(the "HPS" or the "HPS Business"). The sale was completed on April 1, 2021, for a purchase price of €462 million
(approximately $543 million) (the "HPS Sale").
During fiscal 2020, DXC completed the acquisition of Luxoft Holding, Inc., a global scale digital service provider whose
offerings encompass strategic consulting, custom software development, and digital solution engineering services. We
also completed other acquisitions during fiscal 2020 to complement our offerings and to provide opportunities for future
growth.
See Note 2 - "Acquisitions" and Note 3 - "Divestitures" for further information on acquisitions and divestitures.
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Segments and Services
Our reportable segments are Global Business Services ("GBS") and Global Infrastructure Services ("GIS").
Global Business Services
GBS provides innovative technology solutions that help our customers address key business challenges and accelerate
transformations tailored to each customer’s industry and specific objectives. GBS offerings include:
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Analytics and Engineering. Our portfolio of analytics services and extensive partner ecosystem help customers
gain rapid insights, automate operations, and accelerate their transformation journeys. We provide 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. We use 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. Our vertical-specific IP includes solutions for insurance,
banking and capital markets, and automotive among others.
Business process services. Include integration and optimization of front and back office processes, and agile
process automation. This helps companies to reduce cost and minimize business disruption, human error, and
operational risk while improving customer experiences.
Global Infrastructure Services
GIS provides a portfolio of technology offerings that deliver predictable outcomes and measurable results while reducing
business risk and operational costs for customers. GIS offerings include:
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Cloud and Security. We help customers to rapidly modernize by adapting legacy apps to cloud, migrate the right
workloads, and securely manage their multi-cloud environments. Our security solutions help predict attacks,
proactively respond to threats, ensure compliance and protect data, applications and infrastructure.
IT Outsourcing ("ITO"). Our ITO services support infrastructure, applications, and workplace IT operations,
including hardware, software, physical/virtual end-user devices, collaboration tools, and IT support services. We
help customers securely optimize operations to ensure continuity of their systems and respond to new business
and workplace demands while achieving cost takeout, all with limited resources, expertise, and budget.
• Modern Workplace. Services to fit our customer’s employee, business and IT needs from intelligent collaboration,
modern device management, digital support services, Internet of Things ("IoT") and mobility services, providing a
consumer-like, digital experience.
See Note 20 - "Segment and Geographic Information" for additional information related to our reportable segments,
including the disclosure of segment revenues, segment profit, and financial information by geographic area.
Sales and Marketing
We market and sell our services to customers through our direct sales force, operating out of locations around the world.
Our customers include commercial businesses of many sizes and in many industries and public sector enterprises. No
individual customer exceeded 10% of our consolidated revenues for fiscal 2021, fiscal 2020, or fiscal 2019.
Seasonality
General economic conditions have an impact on our business and financial results. The markets in which we sell our
solutions, services and productions occasionally experience weak economic conditions that may negatively affect sales.
We also experience some seasonal trends in the sale of our services. For example, contract awards and certain revenue
are often tied to the timing of our customers' fiscal year-ends, and we also experience seasonality related to our own fiscal
year-end selling activities.
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Competition
The IT and professional services markets we compete in are highly competitive and are not dominated by a single
company or a small number of companies. A substantial number of companies offer services that overlap and are
competitive with those we offer. In addition, the increased importance of offshore labor centers has brought several
foreign-based competitors into our markets.
Our competitors include:
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large multinational enterprises that offer some or all of the services and solutions that we offer;
smaller companies that offer focused services and solutions similar to those that we offer;
offshore service providers in lower-cost locations, particularly in India that sell directly to end-users;
solution or service providers that compete with us in a specific industry segment or service area; and
in-house functions of corporations that use their own resources rather than engaging an outside IT services
provider.
The principal methods of competition in the markets for our solutions and services include:
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vision and strategic advisory ability;
integrated solutions capabilities;
performance and reliability;
global and diverse talent;
delivery excellence and ongoing support;
responsiveness to customer needs;
competitive pricing of services;
technical and industry expertise;
reputation and experience;
quality of solutions and services; and
financial stability and strong corporate governance.
Our ability to obtain new business and retain existing business is dependent upon the following:
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technology, industry and systems know-how with an independent perspective on best solutions across software,
hardware, and service providers;
ability to offer improved strategic frameworks and technical solutions;
investments in our services and solutions;
focus on responsiveness to proactively address customer needs, quality of services and competitive prices;
successful management of our relationships with leading strategic and solution partners in hardware, networking,
cloud, applications and software;
project management experience and capabilities, including delivery;
end-to-end spectrum of IT and professional services we provide; and
financial stability and strong corporate governance.
Intellectual Property
We rely on a combination of trade secrets, patents, copyrights, and trademarks, as well as contractual protections to
protect our business interests. While our technical services and products are not generally dependent upon patent
protection, we do selectively seek patent protection for certain inventions likely to be incorporated into products and
services or where obtaining such proprietary rights will improve our competitive position.
As our patent portfolio has been built over time, the remaining terms of the individual patents across the patent portfolio
vary. We believe that our patents and patent applications are important for maintaining the competitive differentiation of
our solutions and services and enhancing our freedom to sell solutions and services in markets in which we choose to
participate. No single patent is in itself essential to our company as a whole or to any business segment.
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Additionally, we own or have rights to various trademarks, service marks, and trade names that are used in the operation
of our business. We also own or have the rights to copyrights that protect the content of our products and other proprietary
materials.
In addition to developing our intellectual property portfolio, we license intellectual property rights from third parties as we
deem appropriate. We have also granted and plan to continue to grant licenses to others under our intellectual property
rights when we consider these arrangements to be in our interest. These license arrangements include a number of cross-
licenses with third parties.
Environmental Regulation
Our operations are subject to regulation under various federal, state, local, and foreign laws concerning the environment
and sustainability, including laws addressing the discharge of pollutants into the air and water, the management and
disposal of hazardous substances and wastes, and the clean-up of contaminated sites. Environmental costs and accruals
are presently not material to our operations, cash flows or financial position; and, we do not currently anticipate material
capital expenditures for environmental control facilities. However, we could incur substantial costs including clean-up
costs, fines and civil or criminal sanctions and third-party damage or personal injury claims if we were to violate or become
liable under existing and future environmental laws or legislation.
Human Capital Management
As a leading global information technology services company, we attract highly skilled and educated people. As of March
31, 2021, we employed approximately 134,000 people worldwide. At DXC our people are our number one asset - ensuring
they feel valued and respected.
Value of Employee Engagement
We value our people and take various actions for employee engagement. We assess employee engagement at least
annually through a global engagement survey. During the past year, 77% of our people participated in the survey, which
resulted in an Employee Engagement Index measuring 72%. Based on feedback received through periodic engagement
surveys, management has implemented several initiatives to improve the employee experience from rewards and
recognition, communications and process improvement. Various platforms like Global Talent Management, Coaching &
Mentoring, Career Development programs, and global recognition are also used to improve employee experiences and
engagement.
Management During COVID-19
We are committed to keeping our people safe and well. DXC employees are equipped and enabled to work virtually and
flexibly from home today and continue to deliver results for our customers. Science and data will remain the drivers of our
approach as we continue to navigate through COVID-19, and ensure the safety and well-being of our people. We will
remain flexible and ready to react quickly if required to deliver for our customers. We recognize that this is an opportunity
for DXC to change the employee experience in an impactful way.
Training and Education
We view professional development as a corporate responsibility — a strategic investment in our employees’ and the
company’s future. Through our global learning management ecosystem, we offer hundreds of learning programs as well
as a career development system to help employees reach their potential. Providing ways to learn, grow, and explore new
and challenging opportunities contribute to our ability to retain a motivated, knowledgeable workforce. Assessing
employee abilities and contributions is a cornerstone of development at DXC. Our self-directed learning culture
encourages employees to learn at their own pace and in a learning environment of their preference. Key to our people
development is the role managers play – we remain focused on equipping and enabling our people leaders to ensure our
people have leaders that guide and support them in their development and success.
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Inclusion & Diversity
We are committed to an Inclusive and Diverse workforce. The DXC Global Diversity and Non-Discrimination Policy guides
our engagement in management and hiring practices that promote diversity and inclusion.
Human Rights
We are committed to the protection and advancement of human rights and to ensuring that our operations in communities
around the world function with integrity. DXC is firmly committed to preventing the exploitation of vulnerable groups. Our
main human rights–related focus areas are promoting good practice through our large and diverse global supply chain
and supporting a diverse and inclusive corporate culture.
Available Information
We use our corporate website, www.dxc.technology, as a routine channel for distribution of important information,
including detailed company information, financial news, SEC filings, Annual Reports, historical stock information and links
to a recent earnings call webcast. DXC’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, all amendments to those reports, and the Proxy Statements for our Annual Meetings of
Stockholders are made available, free of charge, on our corporate website as soon as reasonably practicable after such
reports have been filed with or furnished to the SEC. They are also available through the SEC at www.sec.gov/edgar/
searchedgar/companysearch.html. Our corporate governance guidelines, Board of Directors' committee charters
(including the charters of the Audit Committee, Compensation Committee, Nominating/Corporate Governance Committee
and Risk Committee) and code of ethics entitled "Code of Business Conduct" are also available on our website. The
information on our website is not incorporated by reference into, and is not a part of, this report.
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Information About Our Executive Officers
Name
Michael J. Salvino
Kenneth P. Sharp
William L. Deckelman, Jr.
Mary E. Finch
Vinod Bagal
Neil A. Manna
Age
55
50
63
51
55
58
Year First
Elected as
Officer
2019
Term as
an Officer
Indefinite
Position Held with the Registrant as of the filing date
President and Chief Executive Officer
2020
2017
2019
2019
2017
Indefinite
Executive Vice President and Chief Financial Officer
Indefinite
Executive Vice President and General Counsel
Indefinite
Executive Vice President and Chief Human Resources Officer
Indefinite
Executive Vice President, Global Delivery and Transformation
Indefinite
Senior Vice President, Corporate Controller and
Principal Accounting Officer
Family
Relationship
None
None
None
None
None
None
Business Experience of Executive Officers
Michael J. Salvino became the President and Chief Executive Officer of DXC in September 2019 and has been a
member of the Board of Directors of DXC since May 2019. Prior to joining DXC, Mr. Salvino served as managing director
of Carrick Capital Partners from 2016 to 2019, where he was directly involved with Carrick's portfolio companies and in
sourcing new investments, growing and managing large scale tech-enabled services businesses, specifically business
process outsourcing, security and machine learning. Prior to his tenure at Carrick, from 2009 to 2016, Mr. Salvino served
as group chief executive of Accenture Operations, where he led a team of more than 100,000 consulting and outsourcing
professionals focused on providing business process outsourcing, infrastructure, security and cloud services to deliver
business value and drive productivity and digital improvements for clients. Prior to that, he held leadership roles in the HR
outsourcing business at Hewitt Associates Inc. and as president of the Americas Region at Exult Inc. Mr. Salvino is a
board member of the Atrium Health Foundation, the largest healthcare system in the Carolinas, where he serves on the
Investment Oversight Committee for both the hospital and the foundation. Mr. Salvino graduated from Marietta College
with a Bachelor of Science degree in industrial engineering. He serves on the Marietta College Board of Trustees and is
also a member of the Board of Visitors of the Duke University Pratt School of Engineering.
Kenneth P. Sharp became the Executive Vice President and Chief Financial Officer of DXC in November 2020. Prior to
joining DXC, Mr. Sharp served as Vice President and Chief Financial Officer, Defense Systems Sector for Northrop
Grumman (“NOC”) from June 2018 to November 2020. From January 2016 to June 2018, Mr. Sharp served as Senior
Vice President, Finance of Orbital ATK (subsequently purchased by NOC). Prior to that, he served as Senior Vice
President, Chief Accounting Officer and Corporate Controller of Leidos, Inc. (formerly SAIC, Inc.). Before joining Leidos,
Mr. Sharp spent a decade at CSC, the predecessor company to DXC and eight years at Ernst & Young. Mr. Sharp also
served in the United States Marine Corps.
William L. Deckelman, Jr. serves as Executive Vice President and General Counsel of DXC since September 2020. He
previously served as Executive Vice President, General Counsel and Secretary of DXC since the completion of the HPES
Merger. Prior to that, Mr. Deckelman served as Executive Vice President, General Counsel and Secretary of CSC. Mr.
Deckelman joined CSC in January 2008 and served as Vice President, General Counsel and Secretary from 2008 to
2012, as Executive Vice President and General Counsel from 2012 to 2014, and as Executive Vice President, General
Counsel and Secretary from August 2014 until the completion of the HPES Merger. Prior to joining CSC, Mr. Deckelman
served as Executive Vice President and General Counsel of Affiliated Computer Services Inc. from 2000 to 2008, served
as a director from 2000 to 2003, and previously held various executive positions there from 1989 to 1995.
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Mary E. Finch was appointed as Executive Vice President and Chief Human Resources Officer of DXC in October 2019.
Ms. Finch previously served as Executive Vice President and Chief Human Resources Officer of AECOM from September
2015 to October 2019. Prior to that, she served at Accenture as Senior Managing Director from September 2013 to August
2015 and as Managing Director Human Resources from January 2001 to September 2013, where she held various roles
across the company including COO of Human Resources where she drove global delivery of HR services, overseeing
operations supporting approximately 320,000 employees across 56 countries and multiple Accenture businesses. Ms.
Finch also served as VP Human Resources of Abilizer Solutions Inc. from 2000 to 2001.
Vinod Bagal was appointed as Executive Vice President, Global Delivery and Transformation of DXC in October 2019.
Prior to joining DXC, Mr. Bagal served at Cognizant Technology Solutions as Senior Vice President - Global Multi-Service
Integration and North America Delivery and as Senior Vice President - Global Technology Consulting and Multi-Service
Integration from September 2014 to October 2019, where he led the transformation of Cognizant's client delivery
organization to position it for the next wave of professional services demands. From 1994 to 2014, Mr. Bagal held a series
of leadership roles at Accenture.
Neil A. Manna has served as Senior Vice President, Corporate Controller and Principal Accounting Officer of DXC since
the completion of the HPES Merger. He also served as Acting Chief Financial Officer of DXC from October 2020 until
November 2020. Mr. Manna previously served as Principal Accounting Officer, Vice President and Controller of CSC. Mr.
Manna joined CSC in June 2016. Prior to joining CSC, he served as the Chief Accounting Officer and Senior Vice
President of CA Technologies (formerly Computer Associates, Inc.) from December 2008 to June 2016. He served as
Principal Accounting Officer and Vice President of Worldwide Accounting for RealNetworks, Inc. from July 2007 to
November 2008. He is a Certified Public Accountant and holds a Bachelor’s degree in Accounting and a Master’s degree
in Business Administration.
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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 Annual Report. 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.
Risk Factor Summary
The following is a summary of the risk factors our business faces. The list below is not exhaustive, and investors should
read this "Risk Factors" section in full. Some of the risks we face include:
Risks Related to Our Business
• Our business and financial results have been adversely affected and could continue to be materially adversely
affected by the COVID-19 crisis.
• We may not succeed in our strategic objectives and our strategic transactions may prove unsuccessful.
• We could be held liable for damages, our reputation could suffer, or we may experience service interruptions, from
security breaches, cyber-attacks or disclosure of confidential information or personal data.
• Our ability to continue to develop and expand our service offerings to address emerging business demands and
technological trends, including our ability to sell differentiated services up the Enterprise Technology Stack, may
impact our future growth.
• Our ability to compete in certain markets we serve is dependent on our ability to continue to expand our capacity
in certain offshore locations. However, as our presence in these locations increases, we are exposed to risks
inherent to these locations which may adversely affect our revenue and profitability.
• Our credit rating and ability to manage working capital, refinance and raise additional capital for future needs
could adversely affect our liquidity, capital position, borrowing, cost and access to capital markets.
• We have indebtedness, which could have a material adverse effect on our business, financial condition and
results of operations.
• Our primary markets are highly competitive. If we are unable to compete in these highly competitive markets, our
results of operations may be materially and adversely affected.
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If we are unable to accurately estimate the cost of services and the timeline for completion of contracts, the
profitability of our contracts may be materially and adversely affected.
Performance under contracts, including those on which we have partnered with third parties, may be adversely
affected if we or the third parties fail to deliver on commitments or otherwise breach obligations to our customers.
• Our ability to provide customers with competitive services is dependent on our ability to attract and retain qualified
personnel.
• Our international operations are exposed to risks, including fluctuations in exchange rates.
• Our business operations are subject to various and changing federal, state, local and foreign laws and regulations
that could result in costs or sanctions that adversely affect our business.
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• We may not achieve some or all of the expected benefits of our restructuring plans and our restructuring may
adversely affect our business.
• We may inadvertently infringe on the intellectual property rights of others and our inability to procure third-party
licenses may result in decreased revenue or increased costs.
• We may be exposed to negative publicity and other potential risks if we are unable to achieve and maintain
effective internal controls over financial reporting.
• We have identified a material weakness in our internal control over financial reporting. Without effective internal
control over financial reporting, we may fail to detect or prevent a material misstatement in our financial
statements, which could materially harm our business, our reputation and our stock price.
• We could suffer additional losses due to asset impairment charges.
• We may not be able to pay dividends or repurchase shares of our common stock.
•
Pending litigations may have a material and adverse impact on our profitability and liquidity.
• We may be adversely affected by disruptions in the credit markets, including disruptions that reduce our
customers' access to credit and increase the costs to our customers of obtaining credit, and our hedging program
is subject to counterparty default risk.
• We derive significant revenues and profit from contracts awarded through costly competitive bidding processes,
and we may not achieve revenue and profit objectives if we fail to bid on these projects effectively.
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If our customers experience financial difficulties, we may not be able to collect our receivables.
If we are unable to maintain and grow our customer relationships over time or to comply with customer contracts
or government contracting regulations or requirements, our operating results and cash flows will suffer.
Recent U.S. tax legislation may materially affect our financial condition, results of operations and cash flows, and
changes in our tax rates could affect our future results.
Risks Related to Our Strategic Transactions
• We could have an indemnification obligation to HPE if the stock distribution in connection with the HPES business
separation were determined not to qualify for tax-free treatment.
•
If the HPES Merger does not qualify as a reorganization under Section 368(a) of the Code, CSC's former
stockholders may incur significant tax liabilities.
• We assumed certain material pension benefit obligations following the HPES Merger. These liabilities and future
funding obligations could restrict our cash available for operations, capital expenditures and other requirements.
•
The USPS Separation and Mergers and NPS Separation could result in substantial tax liability to DXC and our
stockholders.
11
Risks Related to Our Business
Our business and financial results have been adversely affected and could continue to be materially
adversely affected by the COVID-19 crisis.
The COVID-19 crisis has caused disruptions in global economies, financial and commodities markets and rapid
shifts in governmental and public health policies in the countries where we operate or our customers are located
or the industries in which we and our customers compete. The COVID-19 crisis and the actions taken by
governments, businesses and individuals to curtail the spread of the disease have negatively impacted, and are
expected to continue to negatively impact our business, results of operations, cash flows and financial condition.
The extent of such impact will depend on future developments, including the duration and spread of COVID-19,
the speed at which the vaccine is distributed, the number of individuals in general who agree to receive the
vaccine along with the number of our employees receiving the vaccine. In addition, the recent COVID-19 strain
mutations may also hamper the vaccine's effectiveness.
Negative impacts that have occurred, or may occur in the future, include disruptions or restrictions on our
employees’ ability to work effectively, as well as temporary closures of our facilities or the facilities of our
customers or our subcontractors, or the requirements to deliver our services remotely. A significant portion of our
application outsourcing and software development activities is in India, which is currently experiencing a high rate
of COVID-19 infections. Continued public health threat and government responses could materially adversely
affect our operations and the delivery of our services. Negative impacts from COVID-19 could potentially affect
our ability to perform under our contracts with customers. Cost increases may not be recoverable from customers
or covered by insurance, which could impact our profitability. If a business interruption occurs and we are
unsuccessful in our continuing efforts to minimize the impact of these events, our business, results of operations,
financial position, and cash flows could be materially adversely affected.
In addition, the COVID-19 crisis has resulted in a widespread global health crisis that is adversely affecting the
economies and financial markets of many countries, which could result in an economic downturn that may
negatively affect demand for our services, including the financial failure of some of our customers. This economic
downturn, depending upon its severity and duration, could also lead to the deterioration of worldwide credit and
financial markets that could limit our customers’ ability or willingness to pay us in a timely manner and our ability
to obtain external financing to fund our operations and capital expenditures, result in losses on our holdings of
cash and investments due to failures of financial institutions and other parties, and result in a higher rate of losses
on our accounts receivables due to credit defaults.
Our financial results may also be materially and adversely impacted by a variety of factors related to COVID-19
that have not yet been determined, including potential impairments of goodwill and other assets, and changes to
our contingent liabilities, for which actual amounts may materially exceed management estimates and our
calculation of global tax liabilities. Even after the COVID-19 crisis has subsided, depending upon its duration and
potential recurrence, and the governmental policies in response thereto, we may continue to experience materially
adverse impacts to our business as a result of its global economic impact, including any recession that may occur
or be continuing as a result.
We continue to evaluate the extent to which the COVID-19 crisis has impacted us and our employees, customers
and suppliers and the extent to which it and other emerging developments will impact us and our employees,
customers and suppliers in the future. We caution investors that any of the factors mentioned above could have
material and adverse impacts on our current and future business, results of operations, cash flows and financial
condition.
To the extent the COVID-19 crisis and the resulting economic disruption continue to adversely affect our business
and financial results, it may also have the effect of heightening many of the other risks described in this “Risk
Factors” section, such as those relating to our level of indebtedness, our ability to generate sufficient cash flows to
service our indebtedness and to comply with the covenants contained in the agreements that govern our
indebtedness and our counterparty credit risk.
12
We may not succeed in our strategic objectives, which could adversely affect our business, financial
condition, results of operations and cash flows.
Our transformation journey focuses on our customers, optimizing costs and seizing the market. Our strategic
priorities include an initiative to assist DXC customers across a broader range of their information technology
needs, which we refer to as “the enterprise technology stack.” We may not be able to implement our strategic
priorities and progress on our transformation journey in accordance with our expectations for a variety of reasons,
including failure to execute on our plans in a timely fashion, lack of adequate skills, ineffective management,
inadequate incentives, customer resistance to new initiatives, inability to control costs or maintain competitive
offerings. We also cannot be certain that executing on our strategy will generate the benefits we expect. If we fail
to execute successfully on our strategic priorities, or if we pursue strategic priorities that prove to be unsuccessful,
our business, financial position, results of operations and cash flows may be materially and adversely affected.
We could be held liable for damages, our reputation could suffer, or we may experience service
interruptions, from security breaches, cyber-attacks, other security incidents or disclosure of confidential
information or personal data, which could cause significant financial loss.
As a provider of IT services to private and public sector customers operating in a number of industries and
countries, we store and process increasingly large amounts of data for our customers, including sensitive and
personally identifiable information. We also manage IT infrastructure of our own and of customers. We possess
valuable proprietary information, including copyrights, trade secrets and other intellectual property and we collect
and store certain personal and financial information from customers and employees. Our security measures
designed to identify and protect against security incidents may fail to detect, prevent or adequately respond to a
future threat incident. Security incidents can result from unintentional events or deliberate attacks by insiders such
as employees, contractors or service providers or third parties, including criminals, competitors, nation-states, and
hacktivists. These incidents can result in significant disruption to our business through an impact on our
operations or those of our clients, employees, vendors or other partners; loss of data (including proprietary,
confidential or otherwise sensitive or valuable information) for us, our clients, employees, vendors or partners;
reputational damage, injury to customer relationships, liability (whether contractual or otherwise) for any of the
above, including monetary damages; remediation costs; regulatory actions from regulators; any of which, or a
combination of which, could have a material impact on our results of operations or financial condition. The
regulatory environment related to information security and data privacy is evolving rapidly and the Company will
need to expend time and resources to ensure compliance with these evolving regulations, and failure to
understand and comply with these regulations can have an impact on the Company, its results of operations, and
financial condition.
The continued occurrence of high-profile data breaches and cyber-attacks, including by nation-state actors,
reflects an external environment that is increasingly hostile to information and corporate security. Like other
companies, we face an evolving array of information security and data security threats that pose risks to us and
our customers. We can also be harmed by attacks on third parties, such as denial-of-service attacks. We see
regular unauthorized efforts to access our systems, which we evaluate for severity and frequency. For example, in
July 2020, certain systems of our subsidiary, Xchanging, experienced a ransomware attack. While incidents
experienced thus far have not resulted in significant disruption to our business, it is possible that we could suffer a
severe attack or incident, with potentially material and adverse effects on our business, reputation, customer
relations, results of operations or financial condition.
In the event of a security incident, we could be exposed to regulatory actions, customer attrition due to
reputational concerns or otherwise, containment and remediation expenses, and claims brought by our customers
or others for breaching contractual confidentiality and security provisions or data protection or privacy laws. We
must expend capital and other resources to protect against security incidents, including attempted security
breaches and cyber-attacks and to alleviate problems caused by successful breaches or attacks. The cost,
potential monetary damages, and operational consequences of responding to security incidents and implementing
remediation measures could be significant and may be in excess of insurance policy limits or be not covered by
our insurance at all.
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We rely on internal and external information and technological systems to manage our operations and are
exposed to risk of loss resulting from security incidents, including breaches in the security or other failures of
these systems. Security incidents such as through an advanced persistent threat attack, or the accidental loss,
inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data
about us, or our customers, could expose us to risk of loss of this information, regulatory scrutiny, actions and
penalties, extensive contractual liability and other litigation, reputational harm, and a loss of customer confidence,
which could potentially have an adverse impact on future business with current and potential customers.
Moreover, failure to maintain effective internal accounting controls related to data security breaches and
cybersecurity in general could impact our ability to produce timely and accurate financial statements and could
subject us to regulatory scrutiny.
Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments
may result in a compromise or breach of the algorithms that we use to protect our data and that of customers,
including sensitive customer transaction data. A party, whether an insider or third party operating outside the
Company, who is able to circumvent our security measures or those of our contractors, partners or vendors could
access our systems and misappropriate proprietary information, the confidential data of our customers,
employees or business partners or cause interruption in our or their operations.
Experienced computer programmers, hackers or insiders may be able to penetrate our network security and
misappropriate or compromise our confidential information or that of third parties, create system disruptions or
cause shutdowns. Computer programmers and hackers have deployed and may continue to develop and deploy
ransomware, malware and other malicious software programs through phishing and other methods that attack our
products or otherwise exploit any security vulnerabilities of these products. In addition, sophisticated hardware
and operating system software and applications produced or procured from third parties may contain defects in
design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the security
and operation of our systems, or harm those of third parties with whom we may interact. The costs to eliminate or
alleviate cyber or other security problems, including ransomware, malware, bugs, malicious software programs
and other security vulnerabilities, could be significant, and our efforts to address these problems may not be
successful and could result in interruptions, delays, cessation of service and loss of existing or potential
customers, which may impede our sales, distribution or other critical functions.
Increasing cybersecurity, data privacy and information security obligations around the world could also impose
additional regulatory pressures on our customers’ businesses and, indirectly, on our operations, or lead to
inquiries or enforcement actions. In the United States, we are seeing increasing obligations and expectations from
federal and non-federal customers. In response, some of our customers have sought, and may continue to seek,
to contractually impose certain strict data privacy and information security obligations on us. Some of our
customer contracts may not limit our liability for the loss of confidential information. If we are unable to adequately
address these concerns, our business and results of operations could suffer.
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Compliance with new privacy and security laws, requirements and regulations may result in cost increases due to
expanded compliance obligations, potential systems changes, the development of additional administrative
processes and increased enforcement actions, litigation, fines and penalties. The regulatory landscape in these
areas continues to evolve rapidly, and there is a risk that the Company could fail to address or comply with the
fast changing regulatory environment, which could lead to regulatory or other actions which result in material
liability for the Company. For example, in 2020, the California Consumer Privacy Act (“CCPA”) came into force
and provides new data privacy rights for California consumers and new operational requirements for covered
companies. The CCPA also includes a private right of action for certain data breaches that is expected to increase
data breach litigation. Failure to comply with the CCPA could result in civil penalties of $2,500 for each violation or
$7,500 for each intentional violation. Additionally, a new privacy law, the California Privacy Rights Act (“CPRA”),
was approved by California voters in the November 3, 2020 election. The CPRA, which takes effect on January 1,
2023 and significantly modifies the CCPA, potentially results in further uncertainty and could require us to incur
additional costs and expenses in an effort to comply. Some observers have noted the CCPA and CPRA could
mark the beginning of a trend toward more stringent privacy legislation in the United States, which could also
increase our potential liability and adversely affect our business. For example, the CCPA has encouraged
“copycat” laws in other states across the country, such as in Virginia, New Hampshire, Illinois and Nebraska. This
legislation may add additional complexity, variation in requirements, restrictions and potential legal risk, require
additional investment in resources to compliance programs, and could impact strategies and availability of
previously useful data and could result in increased compliance costs and/or changes in business practices and
policies.
In addition, the data protection landscape in the European Union (“EU”) is continually evolving, resulting in
possible significant operational costs for internal compliance and risks to our business. The EU adopted the
General Data Protection Regulation (“GDPR”), which became effective in May 2018, and contains numerous
requirements and changes from previously existing EU laws, including more robust obligations on data
processors and heavier documentation requirements for data protection compliance programs by companies.
Among other requirements, the GDPR regulates the transfer of personal data subject to the GDPR to third
countries that have not been found to provide adequate protection to such personal data, including the United
States. Recent legal developments in Europe have created complexity and uncertainty regarding such transfers.
For instance, on July 16, 2020, the Court of Justice of the European Union (the “CJEU”) invalidated the EU-U.S.
Privacy Shield Framework (the “Privacy Shield”) under which personal data could be transferred from the EEA to
U.S. entities who had self-certified under the Privacy Shield scheme. While the CJEU upheld the adequacy of the
standard contractual clauses (a standard form of contract approved by the European Commission as an adequate
personal data transfer mechanism and potential alternative to the Privacy Shield), it made clear that reliance on
such clauses alone may not necessarily be sufficient in all circumstances. Use of the standard contractual clauses
must now be assessed on a case-by-case basis taking into account the legal regime applicable in the destination
country, including, in particular, applicable surveillance laws and rights of individuals, and additional measures
and/or contractual provisions may need to be put in place; however, the nature of these additional measures is
currently uncertain. The CJEU went on to state that if a competent supervisory authority believes that the
standard contractual clauses cannot be complied with in the destination country and that the required level of
protection cannot be secured by other means, such supervisory authority is under an obligation to suspend or
prohibit that transfer.
Failure to comply with the GDPR could result in penalties for noncompliance (including possible fines of up to the
greater of €20 million and 4% of our global annual turnover for the preceding financial year for the most serious
violations, as well as the right to compensation for financial or non-financial damages claimed by individuals under
Article 82 of the GDPR).
Further, in March 2017, the United Kingdom (“U.K.”) formally notified the European Council of its intention to leave
the EU pursuant to Article 50 of the Treaty on European Union (“Brexit”). The U.K. ceased to be an EU Member
State on January 31, 2020, but enacted a Data Protection Act substantially implementing the GDPR, effective in
May 2018, which was further amended to align more substantially with the GDPR following Brexit. It is unclear
how U.K. data protection laws or regulations will develop in the medium to longer term. Since the beginning of
2021 we must comply with both the GDPR and the U.K. GDPR, with each regime having the ability to fine up to
the greater of €20 million (in the case of the GDPR) or £17 million (in the case of the U.K. GDPR) and 4% of total
annual revenue.
15
While we strive to comply with all applicable data protection laws and regulations, as well as internal privacy
policies, any failure or perceived failure to comply or any misappropriation, loss or other unauthorized disclosure
of sensitive or confidential information may result in proceedings or actions against us by government or other
entities, private lawsuits against us (including class actions) or the loss of customers, which could potentially have
an adverse effect on our business, reputation and results of operations.
Portions of our infrastructure also may experience interruptions, delays or cessations of service or produce errors
in connection with systems integration or migration work that takes place from time to time. We may not be
successful in implementing new systems and transitioning data, which could cause business disruptions and be
expensive, time-consuming, disruptive and resource intensive. Such disruptions could adversely impact our ability
to fulfill orders and respond to customer requests and interrupt other processes. Delayed sales, lower margins or
lost customers resulting from these disruptions could reduce our revenues, increase our expenses, damage our
reputation, and adversely affect our stock price.
Our strategic transactions may prove unsuccessful and our profitability may be materially and adversely
affected.
At any given time, we may be engaged in discussions or negotiations with respect to one or more transactions,
including acquisitions, divestitures or spin-offs, strategic partnerships or other transaction involving one or more of
our businesses. Any of these transactions could be material to our business, financial condition, results of
operations and cash flows. We may ultimately determine not to proceed with any transaction for commercial,
financial, strategic or other reasons. As a result, we may not realize benefits expected from exploring one or more
strategic transactions, may realize benefits further in the future or those benefits may ultimately be significantly
smaller than anticipated, which could adversely affect our business, financial condition, results of operations and
cash flows.
In addition, we may fail to complete transactions. Closing transactions is subject to uncertainties and risks,
including the risk that we may be unable to satisfy conditions to closing, such as regulatory and financing
conditions and the absence of material adverse changes to our business.
For acquisitions, our inability to successfully integrate the operations we acquire and leverage these operations to
generate substantial cost savings, as well as our inability to avoid revenue erosion and earnings decline, could
have a material adverse effect on our results of operations, cash flows and financial position. In order to achieve
successful acquisitions, we will need to:
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integrate the operations and business cultures, as well as the accounting, financial controls, management
information, technology, human resources and other administrative systems, of acquired businesses with
existing operations and systems;
• maintain third-party relationships previously established by acquired companies;
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• manage new business lines, as well as acquisition-related workload.
attract and retain senior management and key personnel at acquired businesses; and
Existing contractual restrictions may limit our ability to engage in certain integration activities for varying periods.
We may not be successful in meeting these or any other challenges encountered in connection with historical and
future acquisitions. Even if we successfully integrate, we cannot predict with certainty if or when these cost and
revenue synergies, growth opportunities and benefits will occur, or the extent to which they actually will be
achieved. In addition, the quantification of previously announced synergies expected to result from an acquisition
is based on significant estimates and assumptions that are subjective in nature and inherently uncertain.
Realization of any benefits and synergies could be affected by a number of factors beyond our control, including,
without limitation, general economic conditions, increased operating costs, regulatory developments and other
risks. In addition, future acquisitions could require dilutive issuances of equity securities and/or the assumption of
contingent liabilities. The occurrence of any of these events could adversely affect our business, financial
condition and results of operations.
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Divestiture transactions, such as the USPS Separation, the sale of HHS business to Veritas Capital or the sale of
the HPS business to Dedalus, also involve significant challenges and risks, including:
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the potential loss of key customers, suppliers, vendors and other key business partners;
declining employee morale and retention issues affecting employees, which may result from changes in
compensation, or changes in management, reporting relationships, future prospects or perceived
expectations;
difficulty making new and strategic hires of new employees;
diversion of management time and a shift of focus from operating the businesses to transaction execution
considerations;
customers delaying or deferring decisions or ending their relationships;
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 transactions 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;
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; and
including contractual terms limiting our ability to compete for or perform certain contracts or services.
We have also entered into and intend to identify and enter into additional strategic partnerships with other industry
participants that will allow us to expand our business. However, we may be unable to identify attractive strategic
partnership candidates or complete these partnerships on terms favorable to us. In addition, if we are unable to
successfully implement our partnership strategies or our strategic partners do not fulfill their obligations or
otherwise prove disadvantageous to our business, our investments in these partnerships and our anticipated
business expansion could be adversely affected.
Our ability to continue to develop and expand our service offerings to address emerging business
demands and technological trends, including our ability to sell differentiated services up the Enterprise
Technology Stack, may impact our future growth. If we are not successful in meeting these business
challenges, our results of operations and cash flows may be materially and adversely affected.
Our ability to implement solutions for our customers, incorporating new developments and improvements in
technology that translate into productivity improvements for our customers, and our ability to develop digital and
other new service offerings that meet current and prospective customers' needs, as well as evolving industry
standards, are critical to our success. The markets we serve are highly competitive and characterized by rapid
technological change which has resulted in deflationary pressure in the price of services which in turn can
adversely impact our margins. Our competitors may develop solutions or services that make our offerings
obsolete or may force us to decrease prices on our services which can result in lower margins. Our ability to
develop and implement up to date solutions utilizing new technologies that meet evolving customer needs in
digital cloud, information technology outsourcing, consulting, industry software and solutions, and application
services markets, and in areas such as artificial intelligence, automation, Internet of Things and as-a-service
solutions, in a timely or cost-effective manner, will impact our ability to retain and attract customers and our future
revenue growth and earnings. If we are unable to continue to execute our strategy and build our business across
the Enterprise Technology Stack in a highly competitive and rapidly evolving environment or if we are unable to
commercialize such services and solutions, expand and scale them with sufficient speed and versatility, our
growth, productivity objectives and profit margins could be negatively affected.
17
Technological developments may materially affect the cost and use of technology by our customers. Some of
these technologies have reduced and replaced some of our traditional services and solutions and may continue to
do so in the future. This has caused, and may in the future cause, customers to delay spending under existing
contracts and engagements and to delay entering into new contracts while they evaluate new technologies. Such
delays can negatively impact our results of operations if the pace and level of spending on new technologies by
some of our customers is not sufficient to make up any shortfall by other customers. Our growth strategy focuses
on responding to these types of developments by driving innovation that will enable us to expand our business
into new growth areas. If we do not sufficiently invest in new technology and adapt to industry developments, or
evolve and expand our business at sufficient speed and scale, or if we do not make the right strategic investments
to respond to these developments and successfully drive innovation, our services and solutions, our results of
operations, and our ability to develop and maintain a competitive advantage and to execute on our growth
strategy could be negatively affected.
Our ability to compete in certain markets we serve is dependent on our ability to continue to expand our
capacity in certain offshore locations. However, as our presence in these locations increases, we are
exposed to risks inherent to these locations which may adversely affect our revenue and profitability.
A significant portion of our application outsourcing and software development activities has been shifted to India
and we plan to continue to expand our presence there and in other lower-cost locations. As a result, we are
exposed to the risks inherent in operating in India or other locations, including (1) the current high rate of
COVID-19 infections and government responses, including renewed lockdowns,(2) a highly competitive labor
market for skilled workers which may result in significant increases in labor costs, as well as shortages of qualified
workers in the future and (3) the possibility that the U.S. Federal Government or the European Union may enact
legislation that creates significant disincentives for customers to locate certain of their operations offshore, which
would reduce the demand for the services we provide in such locations and may adversely impact our cost
structure and profitability. In addition, India has experienced, and other countries may experience, political
instability, civil unrest and hostilities with neighboring countries. Negative or uncertain political climates in
countries or locations where we operate, such as Ukraine and Russia, including but not limited to, military activity
or civil hostilities, criminal activities and other acts of violence, infrastructure disruption, natural disasters or other
conditions could adversely affect our operations.
We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended ("FCPA") and similar anti-bribery
laws in other jurisdictions. We pursue opportunities in certain parts of the world that experience government
corruption and in certain circumstances, compliance with anti-bribery laws may conflict with local customs and
practices. Our internal policies mandate compliance with all applicable anti-bribery laws. We require our
employees, partners, subcontractors, agents, and others to comply with the FCPA and other anti-bribery laws.
There is no assurance that our policies or procedures will protect us against liability under the FCPA or other laws
for actions taken by our employees and intermediaries. If we are found to be liable for FCPA violations (either due
to our own acts or our omissions, or due to the acts or omissions of others), we could suffer from severe criminal
or civil penalties or other sanctions, which could have a material adverse effect on our reputation, business,
results of operations or cash flows. In addition, detecting, investigating and resolving actual or alleged violations of
the FCPA or other anti-bribery violations is expensive and could consume significant time and attention of our
senior management.
18
Our credit rating and ability to manage working capital, refinance and raise additional capital for future
needs, could adversely affect our liquidity, capital position, borrowing, cost, and access to capital
markets.
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 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. There can be no assurance that we will be able to maintain our credit ratings, and any
additional actual or anticipated changes or downgrades in our credit ratings, including any announcement that our
ratings are under review for a downgrade, may have a negative impact on our liquidity, capital position and access
to capital markets.
Our liquidity is a function of our ability to successfully generate cash flows from a combination of efficient
operations and continuing operating improvements, access to capital markets and funding from third parties. In
addition, like many multinational regulated enterprises, our operations are subject to a variety of tax, foreign
exchange and regulatory capital requirements in different jurisdictions that have the effect of limiting, delaying or
increasing the cost of moving cash between jurisdictions or using our cash for certain purposes. Our ability to
maintain sufficient liquidity going forward is subject to the general liquidity of and on-going changes in the credit
markets as well as general economic, financial, competitive, legislative, regulatory and other market factors that
are beyond our control. An increase in our borrowing costs, limitations on our ability to access the global capital
and credit markets or a reduction in our liquidity can adversely affect our financial condition and results of
operations.
Information regarding our credit ratings is included in Part II, Item 7 of this Annual Report on Form 10-K under the
caption "Liquidity and Capital Resources."
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We have indebtedness, which could have a material adverse effect on our business, financial condition
and results of operations.
We have indebtedness totaling approximately $5.5 billion as of March 31, 2021 (including capital lease
obligations). We may incur substantial additional indebtedness in the future for many reasons, including to fund
acquisitions. Our existing indebtedness, together with the incurrence of additional indebtedness and the restrictive
covenants contained in, or expected to be contained in the documents evidencing such indebtedness, could have
significant consequences on our future operations, including:
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events of default if we fail to comply with the financial and other covenants contained in the agreements
governing our debt instruments, which could, if material and not cured, result in all of our debt becoming
immediately due and payable or require us to negotiate an amendment to financial or other covenants
that could cause us to incur additional fees and expenses;
subjecting us to the risk of increased sensitivity to interest rate increases in our outstanding variable-rate
indebtedness that could cause our debt service obligations to increase significantly;
increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs
and limit the future availability for debt financing;
debt service may reduce the availability of our cash flow to fund working capital, capital expenditures,
acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for
these purposes;
placing us at a competitive disadvantage compared to less leveraged competitors;
increasing our vulnerability to the impact of adverse economic and industry conditions; and
causing us to reduce or eliminate our return of cash to our stockholders, including via dividends and share
repurchases.
In addition, we could be unable to refinance our outstanding indebtedness on reasonable terms or at all.
Our ability to meet our payment and other obligations under our debt instruments depends on our ability to
generate significant cash flow in the future. This, to some extent, is subject to general economic, financial,
competitive, legislative and regulatory factors as well as other factors that are beyond our control. There can be
no assurance that our business will generate sufficient cash flow from operations, or that current or future
borrowings will be sufficient to meet our current debt obligations and to fund other liquidity needs.
In July 2017, the U.K.’s Financial Conduct Authority (“FCA”), which regulates LIBOR, announced that it intends to
phase out LIBOR by the end of 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference
Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing
LIBOR with the Secured Overnight Financing Rate ("SOFR"), a new index calculated by short-term repurchase
agreements, backed by Treasury securities.
Certain of our financing agreements include language to determine a replacement rate for LIBOR, if necessary.
However, if LIBOR ceases to exist, we may need to renegotiate some financing agreements extending beyond
2021 that utilize LIBOR as a factor in determining the interest rate. We are evaluating the potential impact of the
eventual replacement of the LIBOR benchmark interest rate; however, we are not able to predict whether LIBOR
will cease to be available after 2021, whether SOFR will become a widely accepted benchmark in place of LIBOR,
or what the impact of such a possible transition to SOFR may be on our business, financial condition, and results
of operations.
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Our primary markets are highly competitive. If we are unable to compete in these highly competitive
markets, our results of operations may be materially and adversely affected.
Our competitors include large, technically competent and well-capitalized companies, some of which have
emerged as a result of industry consolidation, as well as “pure-play” companies that have a single product focus.
This competition may place downward pressure on operating margins in our industry, particularly for technology
outsourcing contract extensions or renewals. As a result, we may not be able to maintain our current operating
margins, or achieve favorable operating margins, for technology outsourcing contracts extended or renewed in the
future. If we fail to effectively reduce our cost structure during periods with declining margins, our results of
operations may be adversely affected.
We encounter aggressive competition from numerous and varied competitors. Our competitiveness is based on
factors including technology, innovation, performance, price, quality, reliability, brand, reputation, range of
products and services, account relationships, customer training, service and support and security. If we are
unable to compete based on such factors, we could lose customers or we may experience reduced profitability
from our customers and our results of operations and business prospects could be harmed. We have a large
portfolio of services and we need to allocate financial, personnel and other resources across all services while
competing with companies that have smaller portfolios or specialize in one or more of our service lines. As a
result, we may invest less in certain business areas than our competitors do, and competitors may have greater
financial, technical and marketing resources available to them compared to the resources allocated to our
services. Industry consolidation may also affect competition by creating larger, more homogeneous and potentially
stronger competitors in the markets in which we operate. Additionally, competitors may affect our business by
entering into exclusive arrangements with existing or potential customers or suppliers.
Companies with whom we have alliances in certain areas may be or become competitors in other areas. In
addition, companies with whom we have alliances also may acquire or form alliances with competitors, which
could reduce their business with us. If we are unable to effectively manage these complicated relationships with
alliance partners, our business and results of operations could be adversely affected.
We face aggressive price competition and may have to lower prices to stay competitive, while simultaneously
seeking to maintain or improve revenue and gross margin. This price competition may continue to increase from
emerging companies that sell products and services into the same markets in which we operate. In addition,
competitors who have a greater presence in some of the lower-cost markets in which we compete, or who can
obtain better pricing, more favorable contractual terms and conditions, may be able to offer lower prices than we
are able to offer. If we experience pressure from competitors to lower our prices, we may have lower than
expected profit margins and lost business opportunities if we are unable to match the price declines. Our cash
flows, results of operations and financial condition may be adversely affected by these and other industry-wide
pricing pressures.
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If we are unable to accurately estimate the cost of services and the timeline for completion of contracts,
the profitability of our contracts may be materially and adversely affected.
Our commercial contracts are typically awarded on a competitive basis. Our bids are based upon, among other
items, the expected cost to provide the services. We generally provide services under time and materials
contracts, unit price contracts, fixed-price contracts, and multiple-element software sales. We are dependent on
our internal forecasts and predictions about our projects and the marketplace and, to generate an acceptable
return on our investment in these contracts, we must be able to accurately estimate our costs to provide the
services required by the contract and to complete the contracts in a timely manner. We face a number of risks
when pricing our contracts, as many of our projects entail the coordination of operations and workforces in
multiple locations and utilizing workforces with different skill sets and competencies across geographically diverse
service locations. In addition, revenues from some of our contracts are recognized using the percentage-of-
completion method, which requires estimates of total costs at completion, fees earned on the contract, or both.
This estimation process, particularly due to the technical nature of the services being performed and the long-term
nature of certain contracts, is complex and involves significant judgment. Adjustments to original estimates are
often required as work progresses, experience is gained, and additional information becomes known, even though
the scope of the work required under the contract may not change. If we fail to accurately estimate our costs or
the time required to complete a contract, the profitability of our contracts may be materially and adversely
affected.
Some ITO services agreements contain pricing provisions that permit a customer to request a benchmark study
by a mutually acceptable third party. The benchmarking process typically compares the contractual price of
services against the price of similar services offered by other specified providers in a peer comparison group,
subject to agreed-upon adjustment, and normalization factors. Generally, if the benchmarking study shows that
the pricing differs from the peer group outside a specified range, and the difference is not due to the unique
requirements of the customer, then the parties will negotiate in good faith appropriate adjustments to the pricing.
This may result in the reduction of rates for the benchmarked services performed after the implementation of
those pricing adjustments, which could harm the financial performance of our services business.
Some IT service agreements require significant investment in the early stages that is expected to be recovered
through billings over the life of the agreement. These agreements often involve the construction of new IT systems
and communications networks and the development and deployment of new technologies. Substantial
performance risk exists in each agreement with these characteristics, and some or all elements of service delivery
under these agreements are dependent upon successful completion of the development, construction, and
deployment phases. Failure to perform satisfactorily under these agreements may expose us to legal liability,
result in the loss of customers or harm our reputation, which could harm the financial performance of our IT
services business.
Performance under contracts, including those on which we have partnered with third parties, may be
adversely affected if we or the third parties fail to deliver on commitments or otherwise breach
obligations to our customers.
Our contracts are complex and, in some instances, may require that we partner with other parties, including
software and hardware vendors, to provide the complex solutions required by our customers. Our ability to deliver
the solutions and provide the services required by our customers is dependent on our and our partners' ability to
meet our customers' delivery schedules. If we or our partners fail to deliver services or products on time, our
ability to complete the contract may be adversely affected. Additionally, our customers may perform audits or
require us to perform audits and provide audit reports with respect to the controls and procedures that we use in
the performance of services for such customers. Our ability to acquire new customers and retain existing
customers may be adversely affected and our reputation could be harmed if we receive a qualified opinion, or if
we cannot obtain an unqualified opinion in a timely manner, with respect to our controls and procedures in
connection with any such audit. We could also incur liability if our controls and procedures, or the controls and
procedures we manage for a customer, were to result in an internal control failure or impair our customer’s ability
to comply with its own internal control requirements. If we or our partners fail to meet our contractual obligations
or otherwise breach obligations to our customers, we could be subject to legal liability, which may have a material
and adverse impact on our revenues and profitability.
22
Our ability to provide customers with competitive services is dependent on our ability to attract and retain
qualified personnel.
Our ability to grow and provide our customers with competitive services is partially dependent on our ability to
attract and retain highly motivated people with the skills necessary to serve our customers. The markets we serve
are highly competitive and competition for skilled employees in the technology outsourcing, consulting, and
systems integration and enterprise services markets is intense for both onshore and offshore locales. The loss of
personnel could impair our ability to perform under certain contracts, which could have a material adverse effect
on our consolidated financial position, results of operations and cash flows.
Additionally, the inability to adequately develop and train personnel and assimilate key new hires or promoted
employees could have a material adverse effect on relationships with third parties, our financial condition and
results of operations and cash flows.
We also must manage leadership development and succession planning throughout our business. Any significant
leadership change and accompanying senior management transition 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 high, 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 customers, 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 customer demand in those geographies.
23
Our international operations are exposed to risks, including fluctuations in exchange rates, which may be
beyond our control.
Our exposure to currencies other than the U.S. dollar may impact our results, as they are expressed in U.S.
dollars. Currency variations also contribute to variations in sales of products and services in affected jurisdictions.
For example, in the event that one or more European countries were to replace the Euro with another currency,
sales in that country or in Europe generally may be adversely affected until stable exchange rates are established.
While historically we have partially mitigated currency risk, including exposure to fluctuations in currency
exchange rates by matching costs with revenues in a given currency, our exposure to fluctuations in other
currencies against the U.S. dollar increases, as revenue in currencies other than the U.S. dollar increases and as
more of the services we provide are shifted to lower cost regions of the world. Approximately 66% of revenues
earned during fiscal 2021 were derived from sales denominated in currencies other than the U.S. dollar and are
expected to continue to represent a significant portion of our revenues. Also, we believe that our ability to match
revenues and expenses in a given currency will decrease as more work is performed at offshore locations.
We may use forward and option contracts to protect against currency exchange rate risks. The effectiveness of
these hedges will depend on our ability to accurately forecast future cash flows, which may be particularly difficult
during periods of uncertain demand and highly volatile exchange rates. We may incur significant losses from our
hedging activities due to factors such as demand volatility and currency variations. In addition, certain or all of our
hedging activities may be ineffective, may expire and not be renewed or may not offset the adverse financial
impact resulting from currency variations. Losses associated with hedging activities may also impact our revenues
and to a lesser extent our cost of sales and financial condition.
The U.K. withdrew from the European Union on January 31, 2020 (“Brexit”). In connection with Brexit, the U.K.
and the European Union agreed on the Trade and Cooperation Agreement (“TCA”) that governs the future trading
relationship between the U.K. and the European Union in specified areas. The TCA took effect on January 1,
2021. The U.K. is no longer in the European Union customs union and is outside of the European Union single
market. The TCA addresses trade, economic arrangements, law enforcement, judicial cooperation and a
governance framework including procedures for dispute resolution, among other things. Because the agreement
merely sets forth a framework in many respects and will require complex additional bilateral negotiations between
the U.K. and the European Union as both parties continue to work on the rules for implementation, significant
political and economic uncertainty remains about whether the terms of the relationship will differ materially from
the terms before withdrawal. Uncertainty surrounding the effect of Brexit, as well as any potential impact on tax
laws and trade policy in the U.S. and elsewhere may adversely impact our operations.
Our future business and financial performance could suffer due to a variety of international factors, including:
•
•
•
•
ongoing instability or changes in a country’s or region’s economic or geopolitical and security conditions,
including inflation, recession, interest rate fluctuations, and actual or anticipated military or political
conflict, civil unrest, crime, political instability, human rights concerns, and terrorist activity;
natural or man-made disasters, industrial accidents, public health issues, cybersecurity incidents,
interruptions of service from utilities, transportation or telecommunications providers, or other catastrophic
events;
longer collection cycles and financial instability among customers;
trade regulations and procedures and actions affecting production, pricing and marketing of products,
including policies adopted by countries that may champion or otherwise favor domestic companies and
technologies over foreign competitors;
local labor conditions and regulations;
•
• managing our geographically dispersed workforce;
•
•
•
•
changes in the international, national or local regulatory and legal environments;
differing technology standards or customer requirements;
difficulties associated with repatriating earnings generated or held abroad in a tax-efficient manner and
changes in tax laws.
24
Our business operations are subject to various and changing federal, state, local and foreign laws and
regulations that could result in costs or sanctions that adversely affect our business and results of
operations.
We operate in approximately 70 countries in an increasingly complex regulatory environment. Among other things,
we provide complex industry specific insurance processing in the U.K., which is regulated by authorities in the
U.K. and elsewhere, such as the U.K.’s Financial Conduct Authority and Her Majesty’s Treasury and the U.S.
Department of Treasury, which increases our exposure to compliance risk. For example, in February 2017, CSC
submitted an initial notification of voluntary disclosure to the U.S. Department of Treasury's Office of Foreign
Assets Control (“OFAC”) regarding certain possible violations of U.S. sanctions laws pertaining to insurance
premium data and claims data processed by two partially-owned joint ventures of Xchanging, which CSC acquired
during the first quarter of fiscal 2017. A copy of the disclosure was also provided to Her Majesty’s Treasury Office
of Financial Sanctions Implementation in the U.K. Our related internal investigation is substantially complete, and
we provided supplemental information to OFAC on January 31, 2020 and continue to work with OFAC on these
issues. Our retail investment account management business in Germany is another example of a regulated
business, which must maintain a banking license, is regulated by the German Federal Financial Supervisory
Authority and the European Central Bank and must comply with German banking laws and regulations.
In addition, businesses in the countries in which we operate are subject to local, legal and political environments
and regulations including with respect to employment, tax, statutory supervision and reporting and trade
restriction, along with industry regulations such as regulation by bank regulators in the U.S. and Europe. These
regulations and environments are also subject to change.
Adjusting business operations to changing environments and regulations may be costly and could potentially
render the particular business operations uneconomical, which may adversely affect our profitability or lead to a
change in the business operations. Notwithstanding our best efforts, we may not be in compliance with all
regulations in the countries in which we operate at all times and may be subject to sanctions, penalties or fines as
a result. These sanctions, penalties or fines may materially and adversely impact our profitability.
Our operations are also subject to a broad array of domestic and international environmental, health, and safety
laws and regulations, including laws addressing the discharge of pollutants into the air and water, the
management and disposal of hazardous substances and wastes, and the clean-up of contaminated sites.
Environmental costs and accruals are presently not material to our operations, cash flows or financial position;
and, we do not currently anticipate material capital expenditures for environmental control facilities. However, our
failure to comply with these laws or regulations can result in civil, criminal or regulatory penalties, fines, and legal
liabilities; suspension, delay or alterations of our operations; damage to our reputation; and restrictions on our
operations or sales. Our business could also be affected if new environmental legislation is passed which impacts
our current operations and business. In addition, as climate change laws, regulations, treaties and national and
global initiatives are adopted and implemented regionally or throughout the world, we may be required to comply
or potentially face market access limitations, fines or reputational injury. Such laws, regulations, treaties or
initiatives in response to climate change could result in increased operational costs associated with air pollution
requirements and increased compliance and energy costs, which could harm our business and results of
operations by increasing our expenses or requiring us to alter our business operations.
We are also subject to risks associated with environmental, social and governance (“ESG”) regulations.
Governmental bodies, investors, clients and businesses are increasingly focused on prioritizing ESG practices,
which has resulted and may in the future continue to result in the adoption of new laws and regulations. Our
inability to keep pace with any ESG regulations, trends and developments or failure to meet the expectations or
interests of our clients and investors could adversely affect our business and reputation.
25
We may not achieve some or all of the expected benefits of our restructuring plans and our restructuring
may adversely affect our business.
We have implemented several restructuring plans to realign our cost structure due to the changing nature of our
business and to achieve operating efficiencies to reduce our costs. We may not be able to obtain the costs
savings and benefits that were initially anticipated in connection with our restructuring plans. Additionally, as a
result of our restructuring, we may experience a loss of continuity, loss of accumulated knowledge and/or
inefficiency during transitional periods. Reorganization and restructuring can require a significant amount of
management and other employees' time and focus, which may divert attention from operating and growing our
business. There are also significant costs associated with restructuring which can have a significant impact on our
earnings and cash flow. If we fail to achieve some or all of the expected benefits of restructuring, it could have a
material adverse effect on our competitive position, business, financial condition, results of operations and cash
flows. For more information about our restructuring plans, see Note 22 - "Restructuring Costs."
In the course of providing services to customers, we may inadvertently infringe on the intellectual
property rights of others and be exposed to claims for damages.
The solutions we provide to our customers may inadvertently infringe on the intellectual property rights of third
parties, resulting in claims for damages against us or our customers. Our contracts generally indemnify our
customers from claims for intellectual property infringement for the services and equipment we provide under the
applicable contracts. We also indemnify certain vendors and customers against claims of intellectual property
infringement made by third parties arising from the use by such vendors and customers of software products and
services and certain other matters. Some of the applicable indemnification arrangements may not be subject to
maximum loss clauses. The expense and time of defending against these claims may have a material and
adverse impact on our profitability. If we lose our ability to continue using any such services and solutions
because they are found to infringe the rights of others, we will need to obtain substitute solutions or seek
alternative means of obtaining the technology necessary to continue to provide such services and solutions. Our
inability to replace such solutions, or to replace such solutions in a timely or cost-effective manner, could
materially adversely affect our results of operations. Additionally, the publicity resulting from infringing intellectual
property rights may damage our reputation and adversely impact our ability to develop new business.
Our inability to procure third-party licenses 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, there can be no assurance 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.
We may be exposed to negative publicity and other potential risks if we are unable to achieve and
maintain effective internal controls over financial reporting.
The Sarbanes-Oxley Act of 2002 and the related regulations require our management to report on, and our
independent registered public accounting firm to attest to, the effectiveness of our internal control over financial
reporting. Effective internal controls are necessary for us to provide reliable financial reports and effectively
prevent fraud. However, a control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system are met. There can be no assurance
that all control issues or fraud will be detected. As we continue to grow our business, our internal controls continue
to become more complex and require more resources.
26
Any failure to maintain effective controls could prevent us from timely and reliably reporting financial results and
may harm our operating results. In addition, if we are unable to conclude that we have effective internal control
over financial reporting or, if our independent registered public accounting firm is unable to provide an unqualified
report as to the effectiveness of our internal control over financial reporting, as of each fiscal year end, we may be
exposed to negative publicity, which could cause investors to lose confidence in our reported financial information.
Any failure to maintain effective internal controls and any such resulting negative publicity may negatively affect
our business and stock price.
Additionally, the existence of any material weaknesses or significant deficiencies would require management to
devote significant time and incur significant expense to remediate any such material weaknesses or significant
deficiencies and management may not be able to remediate any such material weaknesses or significant
deficiencies in a timely manner. The existence of any material weakness in our internal control over financial
reporting could also result in errors in our financial statements that could require us to restate our financial
statements, cause us to fail to meet our reporting obligations, subject us to litigation or regulatory scrutiny and
cause stockholders to lose confidence in our reported financial information, all of which could materially and
adversely affect us and the market price of our common stock.
We have identified a material weakness in our internal control over financial reporting. Without effective
internal control over financial reporting, we may fail to detect or prevent a material misstatement in our
financial statements, which could materially harm our business, our reputation and our stock price.
During the third quarter of fiscal 2020, our management identified a material weakness in our internal control over
financial reporting as of December 31, 2019 related to reassessing policies and procedures to determine their
continued relevance, as impacted by complex transactions and processes. See "Item 9A. Controls and
Procedures." Without effective internal control over financial reporting, we may fail to detect or prevent a material
misstatement in our financial statements. In that event, we may be required to restate our financial statements. A
restatement or an unremediated material weakness could result in a loss of confidence in us by our investors,
customers, regulators and/or counterparties. In addition, our remediation efforts are still ongoing and if we are
unable to promptly remediate the material weakness identified above, or if we were to conclude in the future that
we have one or more additional weaknesses, our investors, regulators, customers and/or counterparties may lose
confidence in our reported financial information. Additionally, management may be required to devote significant
time and incur significant expense to remediate the material weakness, and management may not be able to
complete such remediation in a timely manner. Any of the foregoing could materially harm our business, our
reputation and the market price of our common stock.
We could suffer additional losses due to asset impairment charges.
We acquired substantial goodwill and other intangibles as a result of the HPES Merger and the Luxoft Acquisition,
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 changes in circumstances indicate that it is more likely than not that the
fair value of a reporting unit is below its carrying amount. If the fair value of a reporting unit is revised downward
due to declines in business performance or other factors or if the Company suffers further declines in share price,
an impairment could result and a non-cash charge could be required. We test intangible assets with finite lives for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. This assessment of the recoverability of finite-lived intangible assets could result in an impairment
and a non-cash charge could be required. 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.
27
We may not be able to pay dividends or repurchase shares of our common stock in accordance with our
announced intent or at all.
On April 3, 2017, we announced the establishment of a share repurchase plan approved by the Board of Directors
with an initial authorization of up to $2.0 billion for future repurchases of outstanding shares of our common stock.
On November 8, 2018, DXC announced that its Board of Directors approved an incremental $2.0 billion share
repurchase authorization. In addition, while we paid quarterly cash dividends to our stockholders starting fiscal
2018 in accordance with our announced dividend policy, we suspended the payment of quarterly dividends
starting in fiscal 2021 to enhance our financial flexibility. We intend to continue to suspend quarterly cash
dividends for fiscal 2022. The declaration and payment of future dividends, the amount of any such dividends, and
the establishment of record and payment dates for dividends, if any, are subject to final determination by our
Board of Directors after review of our current strategy and financial performance and position, among other things.
The Board of Directors’ determinations regarding dividends and share repurchases will depend on a variety of
factors, including net income, cash flow generated from operations, amount and location of our cash and
investment balances, overall liquidity position and potential alternative uses of cash, such as acquisitions, as well
as economic conditions and expected future financial results. There can be no guarantee that we will achieve our
financial goals in the amounts or within the expected time frame, or at all. Our ability to declare future dividends
will depend on our future financial performance, which in turn depends on the successful implementation of our
strategy and on financial, competitive, regulatory and other factors, general economic conditions, demand and
prices for our services and other factors specific to our industry or specific projects, many of which are beyond our
control. Therefore, our ability to generate cash flow depends on the performance of our operations and could be
limited by decreases in our profitability or increases in costs, regulatory changes, capital expenditures or debt
servicing requirements.
Any failure to achieve our financial goals could negatively impact our reputation, harm investor confidence in us,
and cause the market price of our common stock to decline.
We are defendants in pending litigation that may have a material and adverse impact on our profitability
and liquidity.
As noted in Note 23 - "Commitments and Contingencies," we are currently party to a number of disputes that
involve or may involve litigation or arbitration, including putative securities class actions pending in both state and
federal courts 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, including
in the form of legal fees and/or damages, 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.
We are also subject to continuous examinations of our income tax returns by tax authorities. Although we believe
our tax estimates are reasonable, the final results of any tax examination or related litigation could be materially
different from our related historical income tax provisions and accruals. Adverse developments in an audit,
examination or litigation related to previously filed tax returns, or in the relevant jurisdiction’s tax laws, regulations,
administrative practices, principles and interpretations could have a material effect on our results of operations
and cash flows in the period or periods for which that development occurs, as well as for prior and subsequent
periods. For more detail, see Note 13 – “Income Taxes.”
28
We may be adversely affected by disruptions in the credit markets, including disruptions that reduce our
customers' access to credit and increase the costs to our customers of obtaining credit.
The credit markets have historically been volatile and therefore it is not possible to predict the ability of our
customers to access short-term financing and other forms of capital. If a disruption in the credit markets were to
occur, it could pose a risk to our business if customers or suppliers are unable to obtain financing to meet
payment or delivery obligations to us. In the event that one or more customers or suppliers' defaults on its
payment or delivery obligations, we could incur significant losses, which may harm our business, reputation,
results of operations, cash flows and financial condition. In addition, customers may decide to downsize, defer or
cancel contracts which could negatively affect our revenues.
Further, as of March 31, 2021, we have $0.7 billion of floating interest rate debt. Accordingly, a spike in interest
rates could adversely affect our results of operations and cash flows.
Our hedging program is subject to counterparty default risk.
We enter into foreign currency forward contracts and interest rate swaps with a number of counterparties. As a
result, we are subject to the risk that the counterparty to one or more of these contracts defaults on its
performance under the contract. During an economic downturn, the counterparty's financial condition may
deteriorate rapidly and with little notice and we may be unable to take action to protect our exposure. In the event
of a counterparty default, we could incur significant losses, which may harm our business and financial condition.
In the event that one or more of our counterparties becomes insolvent or files for bankruptcy, our ability to
eventually recover any losses suffered as a result of that counterparty's default may be limited by the liquidity of
the counterparty.
We derive significant revenues and profit from contracts awarded through competitive bidding
processes, which can impose substantial costs on us and we may not achieve revenue and profit
objectives if we fail to bid on these projects effectively.
We derive significant revenues and profit from government contracts that are awarded through competitive
bidding processes. We expect that most of the non-U.S. government business we seek in the foreseeable future
will be awarded through competitive bidding. Competitive bidding is expensive and presents a number of risks,
including:
•
the substantial cost and managerial time and effort that we spend to prepare bids and proposals for
contracts that may or may not be awarded to us;
the need to estimate accurately the resources and costs that will be required to service any contracts we
are awarded, sometimes in advance of the final determination of their full scope and design;
the expense and delay that may arise if our competitors protest or challenge awards made to us pursuant
to competitive bidding;
the requirement to resubmit bids protested by our competitors and in the termination, reduction, or
modification of the awarded contracts; and
the opportunity cost of not bidding on and winning other contracts we might otherwise pursue.
•
•
•
•
If our customers experience financial difficulties, we may not be able to collect our receivables, which
would materially and adversely affect our profitability and cash flows from operations.
Over the course of a contract term, a customer's financial condition may decline and limit its ability to pay its
obligations. This could cause our cash collections to decrease and bad debt expense to increase. While we may
resort to alternative methods to pursue claims or collect receivables, these methods are expensive and time
consuming and successful collection is not guaranteed. Failure to collect our receivables or prevail on claims
would have an adverse effect on our profitability and cash flows.
29
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 their
relationship with us over time. If we are not successful in implementing an offering or delivering a successful
customer experience, including achieving cost and staffing levels that meet our customers’ expectations,
customers could terminate or elect not to renew their agreements with us and our operating results may suffer.
Contracts with customers may include unique and specialized performance requirements. In particular, our
contracts with federal, state, provincial, and local governmental customers are generally subject to various
procurement regulations, contract provisions, and other requirements relating to their formation, administration,
and performance, including the maintenance of necessary security clearances. Contracts with U.S. government
agencies are also subject to audits and investigations, which may include a review of performance on contracts,
pricing practices, cost structure, and compliance with applicable laws and regulations.
Any failure on our part to comply with the specific provisions in customer contracts or any violation of government
contracting regulations or other requirements could result in the imposition of various civil and criminal penalties,
which may include termination of contracts, forfeiture of profits, suspension of payments, and, in the case of
government contracts, fines and suspension from future government contracting. Such failures could also cause
reputational damage to our business. In addition, we may be subject to qui tam litigation brought by private
individuals on behalf of the government relating to government contracts, which could include claims for treble
damages. Further, any negative publicity with respect to customer contracts or any related proceedings,
regardless of accuracy, may damage our business by harming our ability to compete for new contracts.
Contracts with the U.S. federal government and related agencies are also subject to issues with respect to federal
budgetary and spending limits or matters. Any changes to the fiscal policies of the U.S. federal government may
decrease overall government funding, result in delays in the procurement of products and services due to lack of
funding, cause the U.S. federal government and government agencies to reduce their purchases under existing
contracts, or cause them to exercise their rights to terminate contracts at- will or to abstain from exercising options
to renew contracts, any of which would have an adverse effect on our business, financial condition, results of
operations and/or cash flows.
If our customer contracts are terminated, if we are suspended or disbarred from government work, or our ability to
compete for new contracts is adversely affected, our financial performance could suffer.
Recent U.S. tax legislation may materially affect our financial condition, results of operations and cash
flows.
Recently enacted U.S. tax legislation has significantly changed the U.S. federal income taxation of U.S.
corporations, including by reducing the U.S. corporate income tax rate, limiting interest deductions, permitting
immediate expensing of certain capital expenditures, adopting elements of a territorial tax system, imposing a
one-time transition tax (or “repatriation tax”) on all undistributed earnings and profits of certain U.S.-owned foreign
corporations, revising the rules governing net operating losses and the rules governing foreign tax credits, and
introducing new anti-base erosion provisions. Many of these changes were effective immediately, without any
transition periods or grandfathering for existing transactions. The legislation is unclear in many respects and could
be subject to potential amendments and technical corrections, as well as interpretations and implementing
regulations by the U.S. Department of the Treasury and Internal Revenue Service ("IRS"), any of which could
lessen or increase certain impacts of the legislation. In addition, state and local jurisdictions continue to issue
guidance on how these U.S. federal income tax changes will affect state and local taxation, which often uses
federal taxable income as a starting point for computing state and local tax liabilities.
While our analysis and interpretation of this legislation is ongoing, based on our current evaluation, we recorded a
provisional reduction of our deferred income tax liabilities resulting in a material non-cash benefit to earnings
during fiscal 2018, the period in which the tax legislation was enacted, which was adjusted in fiscal 2019.
30
Additionally, the repatriation tax resulted in a material amount of additional U.S. tax liability, the majority of which
was reflected as an income tax expense in fiscal 2018, when the tax legislation was enacted, despite the fact that
the resulting tax may be paid over eight years. Further, there may be other material adverse effects resulting from
future guidance, including technical corrections.
In addition, on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was
enacted in respect to the recent outbreak of COVID-19. The CARES Act, among other things, includes provisions
relating to refundable payroll tax credits, the ability to utilize and carryback certain net operating losses, alternative
minimum tax refunds and modifications to rules regarding the deductibility of net interest expense. Subsequent to
the CARES Act, additional stimulus legislation has been enacted which included additional individual and
corporate tax provisions and modifications to the CARES Act.
While some of the changes made by recent tax legislation may be beneficial to the Company in one or more
reporting periods and prospectively, other changes may be adverse on a going forward basis. We continue to
work with our tax advisors to determine the full impact that recent tax legislation as a whole will have on us.
Changes in U.S. tax legislation, regulation and government policy as a result of the 2020 U.S. presidential
and congressional elections may impact our future financial position and results of operations.
On March 31, 2021, President Biden proposed the American Jobs Plan which included provisions to increase the
corporate income tax rate to 28%, create a new 15% minimum tax on “book income,” and increased taxes on
foreign income. While the likelihood of these changes or others being enacted or implemented is unclear, if
passed in its current form, the proposed legislation could have a negative impact on our future financial position.
To the extent that such changes have a negative impact on us, our suppliers or our customers, including as a
result of related uncertainty, these changes may materially and adversely impact our business, financial condition,
results of operations and cash flows.
Changes in tax rates could affect our future results.
Our future effective tax rates, which are largely driven by the mix of our global earnings and the differing statutory
tax rates in the jurisdictions where we operate, are subject to change as a result of changes in statutory tax rates
enacted in those jurisdictions, or by changes in the valuation of deferred tax assets and liabilities, or by changes
in tax laws or their interpretation. We are subject to the continuous examination of our income tax returns by the
IRS and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these
examinations to determine the adequacy of our provision for taxes. There can be no assurance that the outcomes
from these examinations will not have a material adverse effect on our financial condition and operating results.
Risks Related to our Strategic Transactions
We could have an indemnification obligation to HPE if the stock distribution in connection with the HPES
business separation (the "Distribution") were determined not to qualify for tax-free treatment, which could
materially adversely affect our financial condition.
If, due to any of our representations being untrue or our covenants being breached, the Distribution was
determined not to qualify for tax-free treatment under Section 355 of the Internal Revenue Code (the "Code"),
HPE would generally be subject to tax as if it sold the DXC common stock in a taxable transaction, which could
result in a material tax liability. In addition, each HPE stockholder who received DXC common stock in the
Distribution would generally be treated as receiving a taxable Distribution in an amount equal to the fair market
value of the DXC common stock received by the stockholder in the Distribution.
Under the tax matters agreement that we entered into with HPE in connection with the HPES Merger, we were
required to indemnify HPE against taxes resulting from the Distribution or certain aspects of the HPES Merger
arising as a result of an Everett Tainting Act (as defined in the Tax Matters Agreement). If we were required to
indemnify HPE for taxes resulting from an Everett Tainting Act, that indemnification obligation would likely be
substantial and could materially adversely affect our financial condition.
31
If the HPES Merger does not qualify as a reorganization under Section 368(a) of the Code, CSC's former
stockholders may incur significant tax liabilities.
The completion of the HPES Merger was conditioned upon the receipt by HPE and CSC of opinions of counsel to
the effect that, for U.S. federal income tax purposes, the HPES Merger will qualify as a "reorganization" within the
meaning of Section 368(a) of the Code (the "HPES Merger Tax Opinions"). The parties did not seek a ruling from
the IRS regarding such qualification. The HPES Merger Tax Opinions were based on current law and relied upon
various factual representations and assumptions, as well as certain undertakings made by HPE, HPES and CSC.
If any of those representations or assumptions is untrue or incomplete in any material respect or any of those
undertakings is not complied with, or if the facts upon which the HPES Merger Tax Opinions are based are
materially different from the actual facts that existed at the time of the HPES Merger, the conclusions reached in
the HPES Merger Tax Opinions could be adversely affected and the HPES Merger may not qualify for tax-free
treatment. Opinions of counsel are not binding on the IRS or the courts. No assurance can be given that the IRS
will not challenge the conclusions set forth in the HPES Merger Tax Opinions or that a court would not sustain
such a challenge. If the HPES Merger were determined to be taxable, previous holders of CSC common stock
would be considered to have made a taxable disposition of their shares to HPES, and such stockholders would
generally recognize taxable gain or loss on their receipt of HPES common stock in the HPES Merger.
We assumed certain material pension benefit obligations in connection with the HPES Merger. These
liabilities and the related future funding obligations could restrict our cash available for operations,
capital expenditures and other requirements, and may materially adversely affect our financial condition
and liquidity.
Pursuant to the Employee Matters Agreement entered into in connection with the HPES Merger, while HPE
retained all U.S. defined benefit pension plan liabilities, DXC retained all liabilities relating to the International
Retirement Guarantee (“IRG”) programs for all HPES employees. The IRG is a non-qualified retirement plan for
employees who transfer internationally at the request of the HPE Group. The IRG determines the country of
guarantee, which is generally the country in which an employee has spent the longest portion of his or her career
with the HPE Group, and the present value of a full career benefit for the employee under the HPE defined benefit
pension plan and social security or social insurance system in the country of guarantee. The IRG then offsets the
present value of the retirement benefits from plans and social insurance systems in the countries in which the
employee earned retirement benefits for his or her total period of HPE Group employment. The net benefit value
is payable as a single sum as soon as practicable after termination or retirement. This liability could restrict cash
available for our operations, capital expenditures and other requirements, and may materially affect our financial
condition and liquidity.
32
In addition, pursuant to the Employee Matters Agreement, DXC assumed certain other defined benefit pension
liabilities in a number of non-U.S. countries (including the U.K., Germany and Switzerland). Unless otherwise
agreed or required by local law, where a defined benefit pension plan was maintained solely by a member of the
HPES business, DXC assumed all assets and liabilities arising out of those non-U.S. defined benefit pension
plans, and where a defined benefit pension plan was not maintained solely by a member of the HPES business,
DXC assumed all assets and liabilities for those eligible HPES employees in connection with the HPES Merger.
These liabilities and the related future payment obligations could restrict cash available for our operations, capital
expenditures and other requirements, and may materially affect our financial condition and liquidity.
The USPS Separation and Mergers and NPS Separation could result in substantial tax liability to DXC and
our stockholders.
Among the closing conditions to completing the USPS Separation and Mergers, we received a legal opinion of tax
counsel substantially to the effect that, for U.S. federal income tax purposes: (i) the USPS Separation qualifies as
a “reorganization” within the meaning of Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended
(the “Code”); (ii) each of DXC and Perspecta is a “party to a reorganization” within the meaning of Section 368(b)
of the Code with respect to the USPS Separation; (iii) the USPS distribution qualifies as (1) a tax-free spin-off,
resulting in nonrecognition under Sections 355(a), 361 and 368(a) of the Code, and (2) a transaction in which the
stock distributed thereby should constitute “qualified property” for purposes of Sections 355(d), 355(e) and 361(c)
of the Code; and (iv) none of the related mergers causes Section 355(e) of the Code to apply to the USPS
distribution. If, notwithstanding the conclusions expressed in these opinions, the USPS Separation and Mergers
were determined to be taxable, DXC and its stockholders could incur significant tax liabilities.
In addition, prior to the HPES Merger, CSC spun off its North American Public Sector business ("NPS") on
November 27, 2015 (the "NPS Separation"). In connection with the NPS Separation, CSC received an opinion of
counsel substantially to the effect that, for U.S. federal income tax purposes, the NPS Separation qualified as a
tax-free transaction to CSC and holders of CSC common stock under Section 355 and related provisions of the
Code. The completion of the HPES Merger was conditioned upon the receipt of CSC of an opinion of counsel to
the effect that the HPES Merger should not cause Section 355(e) of the Code to apply to the NPS Separation or
otherwise affect the qualification of the NPS Separation as a tax-free distribution under Section 355 of the Code.
If, notwithstanding the conclusions expressed in these opinions, the NPS Separation were determined to be
taxable, CSC and CSC stockholders that received CSRA Inc ("CSRA") stock in the NPS Separation could incur
significant tax liabilities.
The opinions of counsel we received were based on, among other things, various factual representations and
assumptions, as well as certain undertakings made by DXC, Perspecta and CSRA. If any of those representations
or assumptions is untrue or incomplete in any material respect or any of those undertakings is not complied with,
the conclusions reached in the opinion could be adversely affected and the USPS Separation or the NPS
Separation may not qualify for tax-free treatment. Furthermore, an opinion of counsel is not binding on the IRS or
the courts. Accordingly, no assurance can be given that the IRS will not challenge the conclusions set forth in the
opinions or that a court would not sustain such a challenge. If, notwithstanding our receipt of the opinions, the
USPS Separation or NPS Separation is determined to be taxable, we would recognize taxable gain as if we had
sold the shares of Perspecta or CSRA in a taxable sale for its fair market value, which could result in a substantial
tax liability. In addition, if the USPS Separation or NPS Separation is determined to be taxable, each holder of our
common stock who received shares of Perspecta or CSRA would generally be treated as receiving a taxable
distribution in an amount equal to the fair market value of the shares received, which could materially increase
such holder’s tax liability.
Additionally, even if the USPS Separation otherwise qualifies as a tax-free transaction, the USPS distribution
could be taxable to us (but not to our shareholders) in certain circumstances if future significant acquisitions of our
stock or the stock of Perspecta are deemed to be part of a plan or series of related transactions that includes the
USPS distribution. In this event, the resulting tax liability could be substantial. In connection with the USPS
Separation, we entered into a tax matters agreement with Perspecta, under which it agreed not to undertake any
transaction without our consent that could reasonably be expected to cause the USPS Separation to be taxable to
us and to indemnify us for any tax liabilities resulting from such transactions. These obligations and potential tax
liabilities could be substantial.
33
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our corporate headquarters is located at a leased facility in Tysons, VA. We own or lease numerous general office
facilities, global security operations centers, strategic delivery centers and data centers with more than 500 locations
around the world. We do not identify properties by segment, as they are interchangeable in nature and used by both
segments.
We continue to reduce our space capacity at low utilization and sub-scale locations, exit co-location, align locations by
skill type and optimize our data center footprint. Where commercially reasonable and to the extent it is not needed for
future expansion, we seek to sell, lease or sublease our excess space.
The following table provides a summary of properties we owned and leased as of March 31, 2021:
Geographic Area
Owned
United States
International
Total
Approximate
Square Feet
(in millions)
Leased
5
4
9
1
13
14
Total
6
17
23
We believe that the facilities described above are suitable and adequate to meet our current and anticipated requirements.
As we transition to a more permanent virtual model we believe we will have excess facilities space. See Note 10 -
"Property and Equipment," which provides additional information related to our land, buildings and leasehold
improvements, and Note 7 - "Leases," which provides additional information related to our real estate lease commitments.
ITEM 3. LEGAL PROCEEDINGS
See Note 23 - "Commitments and Contingencies" under the caption “Contingencies” for information regarding legal
proceedings in which we are involved.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
34
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock trades on the New York Stock Exchange under the symbol "DXC."
Number of Holders
As of May 24, 2021, there were 42,656 holders of record of our common stock.
Dividends
The Board of Directors (the “Board”) indefinitely suspended the Company’s cash dividend payment beginning in the first
quarter of fiscal 2021.
Issuer Purchases of Equity Securities
On April 3, 2017, we 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 our common stock. On November 8,
2018, our 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. See Note 16 - "Stockholders' Equity" for more information.
35
Performance Graph
The following graph shows a comparison from April 3, 2017 (the date our common stock commenced trading on the
NYSE) through March 31, 2021 of the cumulative total return for our common stock, the Standard & Poor’s 500 Stock
Index ("S&P 500 Index") and the Standard & Poor’s North American Technology Index ("S&P North American Technology
Index"). The graph assumes that $100 was invested at the market close on April 3, 2017 in our common stock, the S&P
500 Index, and the S&P North American Technology Index and that dividends have been reinvested. The stock price
performance of the following graph is not necessarily indicative of future stock price performance.
Comparison of Cumulative Total Return
$300
$280
$260
$240
$220
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
Apr-17
Mar-18
Mar-19
Mar-20
Mar-21
DXC Technology Company
S&P 500 Index
S&P North American Technology Index
The following table provides indexed returns assuming $100 was invested on April 3, 2017, with annual returns using our
fiscal year-end date.
DXC Technology Company
S&P 500 Index
S&P North American Technology Index
* Since April 3, 2017
Equity Compensation Plans
Indexed Return
Return 2018*
Return 2019
Return 2020
Return 2021
48.9%
14.2%
31.4%
(25.0)%
9.5 %
15.7 %
(76.9)%
(7.0)%
3.8 %
121.5 %
56.4 %
72.0 %
See Item 12 contained in Part III of this Annual Report for information regarding our equity compensation plans.
ITEM 6. REMOVED AND RESERVED
36
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS ("MD&A") 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 fiscal year ended March 31, 2021 and our financial
condition as of March 31, 2021. The MD&A is provided as a supplement to, and should be read in conjunction with, our
financial statements and notes.
The MD&A is organized in the following sections:
Background
Results of Operations
Liquidity and Capital Resources
•
•
•
• Off-Balance Sheet Arrangements
•
•
Contractual Obligations
Critical Accounting Policies and Estimates
The following discussion includes a comparison of our results of operations and liquidity and capital resources for fiscal
2021 and fiscal 2020. A comparison of our results of operations and liquidity and capital resources for fiscal 2020 and
fiscal 2019 may be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations” on Form 10-K filed with the Securities and Exchange Commission on June 1, 2020.
Background
DXC helps global companies across the entire Enterprise Technology Stack, running their mission critical systems and
operations while modernizing IT, optimizing data architectures, and ensuring security and scalability across public, private
and hybrid clouds.
We generate revenue by offering a wide range of information technology services and solutions primarily in North
America, Europe, Asia, and Australia. We operate through two segments: Global Business Services ("GBS") and Global
Infrastructure Services ("GIS"). We market and sell our services directly to customers through our direct sales offices
around the world. Our customers include commercial businesses of many sizes and in many industries and public sector
enterprises.
37
Results of Operations
The following table sets forth certain financial data for fiscal 2021 and 2020:
(In millions, except per-share amounts)
Revenues
Income (loss) from continuing operations, before taxes
Income tax expense
Net loss
Diluted loss per common share:
Fiscal 2021 Highlights
Fiscal 2021 financial highlights include the following:
Fiscal Years Ended
March 31, 2021
March 31, 2020
$
$
$
17,729
$
19,577
654
800
(146) $
(5,228)
130
(5,358)
(0.59) $
(20.76)
•
•
•
Fiscal 2021 revenues were $17,729 million, a decrease of 9.4% as compared to fiscal 2020. The decrease was
primarily due to project terminations, the disposition of the U.S. State and Local Health and Human Services
business ("HHS") business at the beginning of the third quarter of fiscal 2021, decrease in run-rate project
volume, and project completions, offset by contributions from our Luxoft acquisition which was executed during
the first quarter of fiscal 2020 and additional services provided to new and existing customers. Refer to the section
below captioned "Revenues."
Fiscal 2021 net loss and diluted loss per share were $146 million and $0.59, respectively. Net loss decreased by
$5,212 million during fiscal 2021 as compared to the prior fiscal year. The decrease was primarily due to goodwill
impairment offset by a gain on arbitration recognized in the prior year with fiscal 2021 benefiting from a gain on
disposition of the HHS business, cost optimization realized in the current year and a reduction in revenue in the
current year previously mentioned. Refer to the section below captioned "Cost and Expenses." Net loss included
the cumulative impact of certain items of $773 million during fiscal 2021, reflecting restructuring costs, transaction,
separation and integration-related costs, amortization of acquired intangible assets, impairment losses, gains on
dispositions, pension and other post-retirement benefit ("OPEB") actuarial and settlement losses, debt
extinguishment costs, and tax adjustment. This compares with net loss and diluted loss per share of $5,358
million and $20.76, respectively, for fiscal 2020.
Fiscal 2021 income tax expense increased significantly over fiscal 2020 as a result of the gain on disposition of
the HHS business, which included the impact of non-tax deductible goodwill. Fiscal 2020 income tax expense also
reflected the impact of non-tax deductible goodwill impairments.
• Our cash and cash equivalents were $2,968 million at March 31, 2021.
• We generated $124 million of cash from operations during fiscal 2021, as compared to $2,350 million during fiscal
2020.
38
Revenues
During fiscal 2021 and fiscal 2020, the distribution of our revenues across geographies was as follows:
Revenues by Geography
8,000
6,000
4,000
2,000
)
s
n
o
i
l
l
i
M
(
$
0
United States
United
Kingdom
Other Europe
Australia
Other
International
Fiscal 2021
Fiscal 2020
(in millions)
GBS
GIS
Total Revenues
Fiscal Years Ended
March 31, 2021
March 31, 2020
Change
Percent Change
$
$
8,336
$
9,393
9,111
$
10,466
17,729
$
19,577
$
(775)
(1,073)
)
(1,848)
(
(8.5)%
(10.3)%
(9.4)%
The decrease in revenues for fiscal 2021 compared with fiscal 2020 reflects project terminations, the disposition of the
HHS business at the beginning of the third quarter of fiscal 2021, decrease in run-rate project volume, and project
completions offset by contributions from our Luxoft acquisition which was executed during the first quarter of fiscal 2020
and additional services provided to new and existing customers. Fiscal 2021 revenues included a favorable foreign
currency exchange rate impact of 1.7%, primarily driven by the weakening of the U.S. dollar against the Australian Dollar,
Euro, and British Pound.
39
For a discussion of risks associated with our foreign operations, see Part I, Item 1A "Risk Factors" of this Annual Report.
As a global company, over 66% of our fiscal 2021 revenues 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 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:
(in millions)
GBS
GIS
Total Revenues
Global Business Services
Fiscal Years Ended
Constant
Currency
March 31, 2021 March 31, 2020
Change
Percentage
Change
$
$
8,188
$
9,111
$
9,224
10,466
17,412
$
19,577
$
(923)
(1,242)
(2,165)
)
(
(10.1)%
(11.9)%
(11.1)%
Our GBS revenues were $8.3 billion for fiscal 2021, a decrease of 8.5% compared to fiscal 2020. GBS revenue in
constant currency decreased 10.1% compared to fiscal 2020. The decrease in GBS revenues was primarily due to the
disposition of the HHS business at the beginning of the third quarter of fiscal 2021, project completions, and decrease in
run-rate project volume. The decrease in revenue for fiscal 2021 was partially offset by contributions from our Luxoft
acquisition which was executed during the first quarter of fiscal 2020 and additional services provided to existing
customers.
Global Infrastructure Services
Our GIS revenues were $9.4 billion for fiscal 2021, a decrease of 10.3% compared to fiscal 2020. GIS revenue in constant
currency decreased 11.9% compared to fiscal 2020. The decrease in GIS revenues reflects project completions,
terminations, and decrease in run-rate project volume. The decrease in revenue for fiscal 2021 was partially offset by
additional services provided to new and existing customers.
During fiscal 2021, GBS and GIS had contract awards of $11.0 billion and $8.8 billion, respectively, compared with $9.0
billion and $8.7 billion, respectively, during fiscal 2020.
40
Costs and Expenses
Our total costs and expenses were as follows:
(in millions)
Costs of services (excludes depreciation
and amortization and restructuring costs)
Selling, general and administrative
(excludes depreciation and amortization
and restructuring costs)
Depreciation and amortization
Goodwill impairment losses
Restructuring costs
Interest expense
Interest income
Debt extinguishment costs
Gain on disposition of businesses
Gain on arbitration award
Other expense (income), net
Total costs and expenses
Fiscal Years Ended
Amount
Percentage of Revenues
March 31, 2021 March 31, 2020 March 31, 2021 March 31, 2020
$
14,086
$
14,901
79.5 %
76.0 %
2,066
2,050
11.7
10.5
1,970
—
551
361
(98)
41
(2,004)
—
102
17,075
$
1,942
6,794
252
383
(165)
—
—
(632)
(720)
24,805
$
11.1
—
3.1
2.0
(0.6)
0.2
(11.3)
—
0.6
96.3 %
9.9
34.7
1.3
2.0
(0.8)
—
—
(3.2)
(3.7)
126.7 %
Percentage
Point Change
3.5
1.2
1.2
(34.7)
1.8
—
0.2
0.2
(11.3)
3.2
4.3
)
(30.4)
(
The 30.4 point decrease in total costs and expenses as a percentage of revenue for fiscal 2021 primarily reflects gains net
of losses on dispositions in the current year and our fiscal 2020 goodwill impairment losses, partially offset by the gain on
arbitration award that didn’t occur in fiscal 2021.
Costs of Services
Cost of services, excluding depreciation and amortization and restructuring costs ("COS"), was $14.1 billion for fiscal
2021, as compared to $14.9 billion in fiscal 2020. COS decreased $0.8 billion compared to the prior fiscal year. The
decrease was primarily due to cost optimization savings partially offset by $190 million in impairments realized during
fiscal 2021. The majority of impairments were on assets pre-purchased through preferred vendor agreements, which are
scheduled to expire in fiscal 2022. The remainder of impairments primarily relate to software. COS as a percentage of
revenue increased 3.5% as compared to the prior fiscal year. The increase was driven by a decline in revenue exceeding
associated cost reductions that were further impacted by asset impairment during the current fiscal year.
Selling, General and Administrative
Selling, general and administrative expense, excluding depreciation and amortization and restructuring costs ("SG&A"),
was $2.1 billion for fiscal 2021, consistent with fiscal 2020. SG&A as a percentage of revenue increased 1.2%, compared
to fiscal 2020. The increase was driven by a reduction in revenue during the current fiscal year.
Transaction, separation and integration-related costs, included in SG&A, were $358 million during fiscal 2021, as
compared to $318 million during fiscal 2020.
Depreciation and Amortization
Depreciation expense was $754 million for fiscal 2021, as compared to $643 million in fiscal 2020. Depreciation expense
increased $111 million due to an increase in newly capitalized assets and assets placed into service.
Amortization expense was $1,216 million for fiscal 2021, as compared to $1,299 million in fiscal 2020. Amortization
expense decreased $83 million primarily due to a decrease in customer related intangibles related to the disposition of the
HHS business at the beginning of the third quarter of fiscal 2021. See Note 3 - "Divestitures" for additional information.
41
Goodwill Impairment Losses
DXC recognized goodwill impairment charges totaling $6,794 million during fiscal 2020. The impairment charges were
primarily the result of a sustained decline in market capitalization during the fiscal 2020. See Note 12 - "Goodwill" for
additional information.
Restructuring Costs
Restructuring costs represent severance related to workforce optimization programs and expense associated with
facilities and data center rationalization.
During fiscal 2021, management approved global cost savings initiatives designed to better align our workforce and facility
structures. Total restructuring costs recorded, net of reversals, during fiscal 2021 and 2020 were $551 million and $252
million, respectively. The net amounts recorded included $13 million and $10 million of pension benefit augmentations for
fiscal 2021 and 2020, respectively, owed to certain employees under legal or contractual obligations. These
augmentations will be paid as part of normal pension distributions over several years.
See Note 22 - "Restructuring Costs" for additional information about our restructuring actions.
Interest Expense and Interest Income
Interest expense for fiscal 2021 was $361 million, as compared to $383 million in fiscal 2020. The decrease in interest
expense was primarily due to lower interest rates on finance leases, a reduction in interest charges within our
multicurrency cash pools, and retirement of debt instruments. The decrease in interest expense for fiscal 2021 was
partially offset by increased amounts drawn on our revolving credit facility.
Interest income for fiscal 2021 was $98 million, as compared to $165 million in fiscal 2020. The year-over-year decrease
in interest income was primarily driven by interest income in the second quarter of fiscal year 2020 related to arbitration
discussed below under the caption “Gain on Arbitration Award" and lower income from our multicurrency cash pools and
money market accounts.
Debt Extinguishment Costs
During fiscal 2021, we recorded $41 million of debt extinguishment costs within the consolidated statement of operations,
which consists primarily of costs related to the redemption of 4.00% Senior Notes due fiscal 2024. There were no debt
extinguishment costs recorded in fiscal 2020.
Gain on Dispositions
During fiscal 2021, DXC sold its HHS business for $5.0 billion which resulted in an estimated pre-tax gain on sale of
$2,014 million, net of closing costs. Insignificant businesses were also sold during fiscal 2021 that resulted in a loss of
$10 million.
Gain on Arbitration Award
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 Expense (Income), Net
Other expense (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.
42
The components of other expense (income), net for fiscal 2021 and 2020 are as follows:
(in millions)
Non-service cost components of net periodic pension expense (income)
Foreign currency loss (gain)
Other gain
Total
Fiscal Years Ended
March 31, 2021
March 31, 2020
$
$
110
$
14
(22)
102
$
(658)
(25)
(37)
)
(720)
(
The $822 million decrease in other income for fiscal 2021, as compared to the prior fiscal year, was due to a year-over-
year decrease of $768 million in non-service components of net periodic pension income attributable to changes in mark-
to-market actuarial assumptions and asset valuations, a year-over-year unfavorable foreign currency impact of $39
million, and a $15 million decrease in other gains related to sales of non-operating assets.
Taxes
Our effective tax rate ("ETR") on income (loss) from continuing operations, before taxes, for fiscal 2021, 2020 and 2019
was 122.3%, 2.5% and 19% respectively. A reconciliation of the differences between the U.S. federal statutory rate and
the ETR, as well as other information about our income tax provision, is provided in Note 13 - "Income Taxes."
In fiscal 2021, the ETR was primarily impacted by:
•
•
•
•
•
Impact of the HHS and other business divestitures, which increased tax expense and increased the ETR $344
million and 52.6%, respectively. The HHS tax gain increased tax expense and the ETR as the tax basis of assets
sold, primarily goodwill, was lower than the book basis.
Continued losses in countries where we are recording a valuation allowance on certain deferred tax assets,
primarily in Belgium, Denmark, Italy, France, Luxembourg, and U.S., and an impairment of the full German
deferred tax asset, which increased income tax expense and increased the ETR by $1,565 million and 239.3%,
respectively.
An increase in Income Tax and Foreign Tax Credits, which decreased income tax expense and decreased the
ETR by $319 million and 48.7%, respectively.
Local losses on investments in Luxembourg that increased the foreign rate differential and decreased the ETR by
$1,226 million and 187.5%, respectively, with an offsetting increase in the ETR due to an increase in the valuation
allowance of the same amount.
The Company recognized adjustments to uncertain tax positions that increased the overall income tax expense
and the ETR by $112 million and 17.2% respectively.
43
In fiscal 2020, the ETR was primarily impacted by:
•
•
•
•
•
Non-deductible goodwill impairment charge, which increased income tax expense and increased the ETR by
$1,482 million and 28.3%, respectively.
Non-taxable gain on the arbitration award, which decreased income tax expense and decreased the ETR by $186
million and 3.6%, respectively
A change in the net valuation allowance on certain deferred tax assets, primarily in Australia, Brazil, China,
Luxembourg, and Singapore, which increased income tax expense and increased the ETR by $631 million and
12.1% respectively.
An increase in Income Tax and Foreign Tax Credits, primarily relating to research and development credits
recognized for prior years, which decreased income tax expense and decreased the ETR by $135 million and
2.6%, respectively.
Local losses on investments in Luxembourg that increased the foreign rate differential and decreased the ETR by
$637 million and 12.2%, respectively, with an offsetting increase in the ETR due to an increase in the valuation
allowance of the same amount.
In fiscal 2019, the ETR was primarily impacted by:
•
•
•
Local tax losses on investments in Luxembourg that decreased the foreign tax rate differential and decreased the
ETR by $360 million and 23.7%, respectively, with an offsetting increase in the ETR due to an increase in the
valuation allowance of the same amount.
A change in the net valuation allowance on certain deferred tax assets, primarily in Luxembourg, Germany, Spain,
U.K., and Switzerland, which increased income tax expense and increased the ETR by $256 million and 16.9%,
respectively.
A decrease in the transition tax liability and a change in tax accounting method for deferred revenue, which
decreased income tax expense and decreased the ETR by $66 million and 4.3%, respectively.
The IRS is examining the Company's federal income tax returns for fiscal 2008 through the tax year ended October 31,
2018. With respect to CSC's fiscal 2008 through 2017 federal tax returns, the Company has entered into negotiations for a
resolution on the years under audit through settlement with the IRS Office of Appeals. The IRS examined several issues
for these years that resulted in various audit adjustments. The Company and the IRS Office of Appeals have an
agreement in principle as to some of these adjustments, and we disagree with the IRS’ disallowance of certain losses and
deductions resulting from restructuring costs and tax planning strategies in previous years. As we believe we will
ultimately prevail on the technical merits of the disagreed items and intend to challenge them in the IRS Office of Appeals
or Tax Court, these matters are not fully reserved and would result in a federal and state tax expense of $405 million
(including estimated interest and penalties) and related cash cost for the unreserved portion of the these items if we do
not prevail in Tax Court. We do not expect these matters that proceed to tax court to be resolved in the next 12 months.
We have received a notice of deficiency with respect to fiscal 2011 and 2013, and have filed a petition in Tax Court with
respect to fiscal 2013 and expect to file in Tax Court with respect to fiscal 2011 in the first quarter of fiscal 2022. We also
expect fiscal 2010 to proceed to Tax Court.
The Company has agreed to extend the statute of limitations for fiscal years 2008 through 2012 through August 31, 2021
to provide for IRS completion of their review. The Company has agreed to extend the statute of limitations for fiscal years
2014 through fiscal 2017 through October 31, 2021 to provide for IRS completion of their review.
The Company expects to reach a resolution for all years no earlier than the first quarter of fiscal 2023 except for agreed
issues related to fiscal 2008 through 2010 and fiscal 2011 through 2017 federal tax returns, which are expected to be
resolved within twelve months.
In addition, the Company may settle certain other tax examinations, have lapses in statutes of limitations, or voluntarily
settle income tax positions in negotiated settlements for different amounts than we have accrued as uncertain tax
positions. The Company may need to accrue and ultimately pay additional amounts for tax positions that previously met a
more likely than not standard if such positions are not upheld. Conversely, the Company could settle positions by payment
with the tax authorities for amounts lower than those that have been accrued or extinguish a position through less
payment than previously estimated. We believe the outcomes that are reasonably possible within the next twelve months
may result in a reduction in liability for uncertain tax positions of $52 million, excluding interest, penalties, and tax
carryforwards.
44
Loss Per Share
Diluted loss per share for fiscal 2021 was $0.59, as compared to $20.76 in fiscal 2020. The loss per share decrease was
due to a decrease of $5,212 million in net loss.
Diluted loss per share for fiscal 2021 includes $1.79 per share of restructuring costs, $1.06 per share of transaction,
separation and integration-related costs, $1.59 per share of amortization of acquired intangible assets, $0.55 per share of
impairment losses, $(4.22) per share of net gains on dispositions, $1.57 per share of pension and OPEB actuarial and
settlement losses, $0.12 per share of debt extinguishment costs, and $0.55 per share of tax adjustment relating to a
valuation allowance on deferred tax assets offset by changes in outside basis related to held for sale classification of the
HPS business.
45
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 from continuing operations before income taxes, non-GAAP net income and non-GAAP EPS, constant currency
revenues, net debt and net debt-to-total capitalization.
We believe EBIT, adjusted EBIT, non-GAAP income before income taxes, non-GAAP net income and non-GAAP EPS
provide investors with useful supplemental information about our operating performance after excluding certain categories
of expenses.
We believe constant currency revenues provides investors with useful supplemental information about our revenues after
excluding the effect of currency exchange rate fluctuations for currencies other than U.S. dollars in the periods presented.
See below for a description of the methodology we use to present constant currency revenues. We believe net debt and
net debt-to-total capitalization provide investors with useful supplemental information about DXC’s net leverage and
capitalization.
One category of expenses excluded from adjusted EBIT, non-GAAP income from continuing operations before tax, non-
GAAP net income and non-GAAP EPS, incremental amortization of intangible assets acquired through business
combinations, may result in a significant difference in period over period amortization expense on a GAAP basis. We
exclude amortization of certain acquired intangible assets as these non-cash amounts are inconsistent in amount and
frequency and are significantly impacted by the timing and/or 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.
Another category of expenses excluded from adjusted EBIT, non-GAAP income from continuing operations before tax,
non-GAAP net income and non-GAAP EPS, impairment losses, may result in a significant difference in period over period
expense on a GAAP basis. We exclude impairment losses as these non-cash amounts, generally an acceleration of what
would be multiple periods of expense and do not expect to occur frequently. Further assets such as goodwill may be
significantly impacted by market conditions outside of management’s control.
There are limitations to the use of the non-GAAP financial measures presented in this report. One of the limitations is that
they do not reflect complete financial results. We compensate for this limitation by providing a reconciliation between our
non-GAAP financial measures and the respective most directly comparable financial measure calculated and presented in
accordance with GAAP. 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.”
46
Certain non-GAAP financial measures and the respective most directly comparable financial measures calculated and
presented in accordance with GAAP include:
Fiscal Years Ended
(in millions)
March 31, 2021 March 31, 2020
Change
Income (loss) from continuing operations
Non-GAAP income from continuing operations
Net income loss
Adjusted EBIT
$
$
$
$
654
839
$
$
(146) $
1,102
$
(5,228) $
1,843
$
(5,358) $
2,061
$
5,882
(1,004)
5,212
(959)
Percentage
Change
112.5 %
(54.5)%
97.3 %
(46.5)%
Reconciliation of Non-GAAP Financial Measures
Our non-GAAP adjustments include:
•
•
•
Restructuring costs – includes costs, net of reversals, related to workforce and real estate optimization and other
similar charges.
Transaction, separation and integration-related (“TSI”) costs – includes costs related to integration, planning,
financing and advisory fees and other similar charges associated with mergers, acquisitions, strategic
investments, joint ventures, and dispositions and other similar transactions.(1)
Amortization of acquired intangible assets – includes amortization of intangible assets acquired through business
combinations.
• Gains and losses on dispositions – gains and losses related to dispositions of businesses, strategic assets and
•
•
interests in less than wholly-owned entities.(2)
Pension and OPEB actuarial and settlement gains and losses – pension and OPEB actuarial mark to market
adjustments and settlement gains and losses.
Debt extinguishment costs – costs associated with early retirement, redemption, repayment or repurchase of debt
and debt-like items including any breakage, make-whole premium, prepayment penalty or similar costs as well as
solicitation and other legal and advisory expenses.(3)
Impairment losses – impairment losses on assets classified as long-term on the balance sheet.(4)
•
• Gain on arbitration award – reflects a gain related to the HPES merger arbitration award.
•
Tax adjustments – adjustments to impair tax assets, merger and divestiture related tax matters, restructuring
charges and income tax expense of non-GAAP adjustments. Income tax expense of other non-GAAP adjustments
is computed by applying the jurisdictional tax rate to the pre-tax adjustments on a jurisdictional basis.(5)
(1) TSI-Related Costs for all periods presented include fees and other internal and external expenses associated with legal,
accounting, consulting, due diligence, investment banking advisory, and other services, as well as financing fees, retention
incentives, and resolution of transaction related claims in connection with, or resulting from, exploring or executing potential
acquisitions, dispositions and strategic investments, whether or not announced or consummated.
(2) Gains and losses on dispositions for fiscal 2021 includes a $2,014 million gain on sale of the HHS business, a gain of $5
million on sales of other insignificant businesses, and a $15 million loss on equity securities without readily determinable fair
value, which were adjusted to fair value following receipt of a bona fide offer to purchase. We expect to close the sale of the
equity securities during fiscal 2022.
(3) Debt extinguishment costs adjustments for all periods presented includes $34 million to fully redeem our 4.00% senior notes
due fiscal 2024 and $7 million to partially redeem two series of our 4.45% senior notes due fiscal 2023 via tender offer.
(4) Impairment losses for the fourth quarter of fiscal 2021 of $190 million relate to the impairment of undeployable assets,
software, and capitalized transition and transformation costs. In fiscal 2020 goodwill was impaired following a sustained
decline in market capitalization.
Impairment losses for the fourth quarter of fiscal 2021 were $190 million. This includes $165 million impairment for assets
pre-purchased through preferred vendor agreements and determined undeployable, $12 million partial impairment of
acquired software, $7 million partial impairment of internally developed software intended for internal use and external sale,
and $6 million of capitalized transition and transformation contract costs.
47
(5) Tax adjustment for fiscal 2021 includes $175 million for the impairment of the German deferred tax asset via a valuation
allowance, $9 million for tax expense relating to the USPS spin-off, offset by $35 million tax benefit related to the held for
sale classification of the Healthcare Provider Software business, and $7 million tax benefit related to prior restructuring
charges. The German tax asset was created from multiple periods of losses in Germany that, if not for certain non-GAAP
adjustments of restructurings, pension mark to market loss, and impairments, would not have required the asset to be
impaired and a valuation allowance established. Tax adjustments for fiscal 2020 includes tax expense related to prior
restructuring charges.
A reconciliation of reported results to non-GAAP results is as follows:
(in millions, except per-
share amounts)
As
Reported
Restructuring
Costs
Fiscal Year Ended March 31, 2021
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)
Selling, general and
administrative (excludes
depreciation and
amortization and
restructuring costs)
Income from continuing
operations, before taxes
Income tax expense
(benefit)
Net (loss) income
Less: net income
attributable to non-
controlling interest, net of
tax
Net (loss) income
attributable to DXC
common stockholders
$ 14,086
$
— $
(2)
$
— $
(190) $
— $
— $
— $
— $ 13,894
2,066
654
800
(146)
3
—
551
92
459
—
(363)
358
87
271
—
530
121
409
—
190
49
141
—
(2,004)
(920)
(1,084)
—
519
115
404
—
—
—
—
—
—
41
10
31
—
—
—
(142)
142
1,703
839
212
627
—
3
$
)
(149)
(
$
459
$
271
$
409
$
141
$
)
(1,084)
(
$
404
$
31
$
142
$
624
Effective Tax Rate
122.3 %
25.3 %
Basic EPS
Diluted EPS
$
$
(0.59)
(0.59)
$
$
1.81
1.79
$
$
1.07
1.06
$
$
1.61
1.59
$
$
0.55
0.55
$
$
(4.27)
(4.22)
$
$
1.59
1.57
$
$
0.12
0.12
$
$
0.56
0.55
$
$
2.46
2.43
Weighted average common
shares outstanding for:
Basic EPS
Diluted EPS
254.14
254.14
254.14
256.86
254.14
256.86
254.14
256.86
254.14
256.86
254.14
256.86
254.14
256.86
254.14
256.86
254.14
256.86
254.14
256.86
* The net periodic pension cost within net loss includes $1,401 million of actual return on plan assets, whereas the net periodic pension cost within
non-GAAP net income includes $659 million of expected long-term return on pension assets of defined benefit plans subject to interim
remeasurement.
48
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)
Selling, general and administrative
(excludes depreciation and amortization
and restructuring costs)
(Loss) income from continuing operations,
before taxes
Income tax expense (benefit)
Net (loss) income
Less: net income attributable to non-
controlling interest, net of tax
Net (loss) income attributable to DXC
common stockholders
$
14,901
$
— $
— $
— $
— $
— $
— $
— $ 14,901
2,050
(5,228)
130
(5,358)
11
—
252
44
208
—
(318)
318
63
255
—
—
583
133
450
—
—
6,794
95
6,699
—
—
(632)
—
(632)
—
—
(244)
(51)
(193)
—
—
—
(33)
33
—
1,732
1,843
381
1,462
11
$
)
(5,369)
(
$
208
$
255
$
450
$
6,699
$
)
(632) $
(
)
(193) $
(
33
$
1,451
Effective Tax Rate
(2.5)%
20.7 %
Basic EPS
Diluted EPS
$
$
(20.76)
(20.76)
$
$
0.80
0.80
$
$
0.99
0.98
$
$
1.74
1.73
$
$
25.91
25.78
$
$
(2.44) $
(0.75) $
(2.43) $
(0.74) $
0.13
0.13
$
$
5.61
5.58
Weighted average common shares
outstanding for:
Basic EPS
Diluted EPS
258.57
258.57
258.57
259.81
258.57
259.81
258.57
259.81
258.57
259.81
258.57
259.81
258.57
259.81
258.57
259.81
258.57
259.81
* The net periodic pension cost within net loss includes $526 million of actual return on plan assets, whereas the net periodic pension cost
within non-GAAP net income includes $651 million of expected long-term return on pension assets of defined benefit plans subject to interim
remeasurement.
Reconciliations of net income to adjusted EBIT are as follows:
(in millions)
Net loss
Income tax expense
Interest income
Interest expense
EBIT
Restructuring costs
Transaction, separation and integration-related costs
Amortization of acquired intangible assets
(Gains) and losses on dispositions
Pension and OPEB actuarial and settlement losses (gains)
Debt extinguishment costs
Impairment losses
Gain on arbitration award
Adjusted EBIT
Fiscal Years Ended
March 31, 2021
March 31, 2020
$
(146) $
800
(98)
361
917
551
358
530
(2,004)
519
41
190
—
$
1,102
$
(5,358)
130
(165)
383
(5,010)
252
318
583
—
(244)
—
6,794
(632)
2,061
49
Liquidity and Capital Resources
Cash and Cash Equivalents and Cash Flows
As of March 31, 2021, our cash and cash equivalents ("cash") was $3.0 billion, of which $1.3 billion was held outside of
the U.S. We maintain various multi-currency, multi-entity, cross-border, physical and notional cash and pool arrangements
with various counterparties to manage liquidity efficiently that enable participating subsidiaries to draw on the Company’s
pooled resources to meet liquidity needs.
A significant portion of the cash held by our foreign subsidiaries is not expected to be impacted by U.S. federal income tax
upon repatriation. However, a portion of this cash may still be subject to foreign and U.S. state income tax consequences
upon future remittance. Therefore, if additional funds held outside the U.S. are needed for our operations in the U.S., we
plan to repatriate these funds not designated as indefinitely reinvested.
We have $0.2 billion in cash held by foreign subsidiaries used for local operations that is subject to country-specific
limitations which may restrict or result in increased costs in the repatriation of these funds. In addition, other practical
considerations may limit our use of consolidated cash. This includes cash of $0.6 billion held in a German financial
services subsidiary subject to regulatory requirements, and $0.1 billion held by majority owned consolidated subsidiaries
where third-parties or public shareholders hold minority interests.
Cash was $3.0 billion and $3.7 billion as of March 31, 2021 and March 31, 2020, respectively. The following table
summarizes our cash flow activity:
(in millions)
Net cash provided by operating activities
Net cash provided by (used in) investing activities
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Cash classified within current assets held for sale
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
$
$
Fiscal Year Ended
March 31, 2021
March 31, 2020
March 31, 2019
124
$
4,665
(5,476)
39
(63)
(711)
2,350
$
(2,137)
657
(90)
—
780
3,679
2,968
$
2,899
3,679
$
1,783
69
(1,663)
(19)
—
170
2,729
2,899
Operating cash flow
Net cash provided by operating activities during fiscal 2021 was $124 million as compared to $2,350 million during fiscal
2020. The decrease of $2,226 million was due to a decrease in net income, net of adjustments of $2,923 million. The net
decrease in cash provided by operating activities was partially offset by a $697 million favorable change in working capital
due to lower working capital outflows during fiscal 2021 as compared to fiscal 2020.
The following table contains certain key working capital metrics:
Days of sales outstanding in accounts receivable
Days of purchases outstanding in accounts payable
Cash conversion cycle
March 31, 2021
67
As of
March 31, 2020
65
March 31, 2019
64
(41)
26
(66)
(1)
(69)
(5)
50
Investing cash flow
Net cash provided by (used in) investing activities during fiscal 2021 was $4,665 million as compared to $(2,137) million
during fiscal 2020. The increase of $6,802 million was primarily due to cash proceeds received from business divestitures
of $4,947 million in fiscal 2021, a decrease in cash paid for acquisitions of $2,181 million, an increase in proceeds from
sale of assets of $91 million, a decrease in purchases of property and equipment of $89 million, and the absence of short-
term investing, net of proceeds, of $37 million in fiscal 2020. This was partially offset by a decrease in cash collections
related to deferred purchase price receivable of $512 million and a $48 million increase in payments for software licenses
related to the divestitures of the HHS business.
Financing cash flow
Net cash (used in) provided by financing activities during fiscal 2021 was $(5,476) million, as compared to $657 million
during fiscal 2020. The $6,133 million increase in cash used was primarily due to an increase in repayments, net of
borrowings, of $3,718 million on term loans and other long-term debt, $3,000 million on lines of credit, and $229 million on
commercial paper. In total, we used $3.5 billion of the net proceeds from the sale of the HHS business to repay debt
during the fiscal year. We also had an increase in payments on finance leases and borrowings for asset financing of $65
million and payments of debt extinguishment costs of $41 million in fiscal 2021. This was partially offset by elimination of
stock repurchases during fiscal 2021 while common stock repurchases totaled $736 million in fiscal 2020 and a decrease
in dividend payments of $161 million from fiscal 2020.
Capital Resources
See Note 23 - "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:
(in millions)
Short-term debt and current maturities of long-term debt
Long-term debt, net of current maturities
Total debt
As of
March 31, 2021
March 31, 2020
$
$
1,167
$
4,345
5,512
$
1,276
8,672
9,948
The $4.4 billion decrease in total debt during fiscal 2021 was primarily attributed to the prepayment of $1.5 billion of
Revolver Credit Facility outstanding at fiscal year-end March 31, 2020, €312 million of Euro commercial paper, and the
following term loan facilities: €750 million of Euro Term Loan due fiscal 2022 and 2023, A$800 million of AUD Term Loan
due fiscal 2022, £450 million of GBP Term Loan due fiscal 2022, $481 million of USD Term Loan due fiscal 2025, €350
million of Euro Term Loan due fiscal 2024 and the retirement of $127 million principal amount of 4.45% Senior Notes due
fiscal 2023 via tender offer. (See Note 14 - "Debt — Tender Offers.") In addition, we issued irrevocable redemption notice
to retire all the remaining two series of 4.45% Senior Notes (approximately $319 million) due fiscal 2023. These were
partially offset by the issuance of $500 million of 4.13% Senior Notes due fiscal 2026.
51
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 U.K., in order to stabilize and facilitate continued access to sterling
commercial paper markets. At our option, we can borrow up to a maximum of €1.0 billion or its equivalent in Euro, British
Pound and U.S. dollar. On June 15, 2020, DXC Capital Funding DAC (previously named DXC Capital Funding Limited),
an indirect subsidiary of the Company, issued £600 million in commercial paper maturing May 2021 under its existing €1.0
billion commercial paper program via direct sale to the BOE. The issued £600 million in commercial paper was
subsequently prepaid as discussed below.
In October 2020, we sold the HHS business and used approximately $3.5 billion of the proceeds to prepay $1,250 million
of Revolver Credit Facility, £600 million of GBP commercial paper (approximately $772 million), €350 million of Euro Term
Loan due fiscal 2024 (approximately $410 million), $381 million of USD Term loan due fiscal 2025, A$500 million of AUD
Term Loan due fiscal 2022 (approximately $358 million), and €250 million of Euro Term Loan due fiscal 2022 and 2023
(approximately $292 million).
During fiscal 2021, we borrowed the remaining $2.5 billion under the $4.0 billion credit facility agreement and repaid the
full $4.0 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 the COVID-19 crisis and
its potential impact on our customers and our business. The credit facility repayment resulted from the availability of other
liquidity resources. The entire $4.0 billion credit facility is available for redraw at our request.
In March 2021, we used cash on hand and redeemed the entire issue of $500 million of 4.00% Senior Notes due fiscal
2024 in anticipation of divestiture proceeds from the sale of our HPS business that was completed on April 1, 2021. We
also commenced in March 2021 a concurrent tender offer and issued irrevocable redemption notice that resulted in the
retirement of $127 million principal amount 4.45% Notes due fiscal 2023.
Subsequent to the fiscal year, we used the proceeds from the sale of our HPS business to complete the retirement of all
remaining $319 million of the two series of 4.45% Senior Notes due fiscal 2023. We also repurchased $33 million of the
4.125% Senior Notes due fiscal 2026 and took measures to retire and prepay certain capital leases and equipment related
financing whose balance was about $300 million as of fiscal 2021 using the proceeds from the divestitures of other
businesses and existing cash on hand.
We were in compliance with all financial covenants associated with our borrowings as of March 31, 2021 and March 31,
2020.
52
The debt maturity chart below summarizes the future maturities of long-term debt principal for fiscal years subsequent to
March 31, 2021 and excludes maturities of borrowings for assets acquired under long-term financing and finance lease
liabilities. The chart does not reflect the redemption of the remaining $319 million in Notes due fiscal 2023 that were
initiated via redemption notice in March 2021, which was completely retired in April 2021. See Note 14 - "Debt" for more
information.
Debt Maturity
$1,264
$1,264
$845
$845
$439
$439
$500
$500
$234
$234
24
25
26
27
28
29
30
Fiscal year maturity
Term Loans
Notes
)
s
n
o
i
l
l
i
M
(
$
$319$319
22
$95$95
23
The following table summarizes our capitalization ratios:
(in millions)
Total debt
Cash and cash equivalents(1)
Net debt(2)
Total debt
Equity
Total capitalization
Debt-to-total capitalization
Net debt-to-total capitalization(2)
As of
March 31, 2021 March 31, 2020
$
$
5,512
2,968
2,544
5,512
5,308
10,820
$
$
$
9,948
3,679
6,269
9,948
5,129
15,077
$
$
$
50.9 %
23.5 %
66.0 %
41.6 %
(1) Cash and cash equivalents includes previously described cash held outside of the U.S., at a German financial services subsidiary and at
majority owned consolidated subsidiaries.
(2) Net debt and Net debt-to-total capitalization are non-GAAP measures used by management to assess our ability to service our debts
using our cash and cash equivalents, including cash subject to limitations, as previously described in Cash and Cash Equivalents and
Cash Flows. 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.
53
Net debt-to-total capitalization as of March 31, 2021 decreased as compared to March 31, 2020, primarily due to the
decrease in total debt attributed to the prepayment of the credit facility agreement and various term loans, bonds and
commercial papers during the fiscal year as mentioned above, and by the increase in equity primarily attributed to the gain
on disposition of businesses during fiscal 2021.
As of March 31, 2021, our credit ratings were as follows:
Rating Agency
Fitch
Moody's
S&P
Long Term Ratings
BBB
Baa2
BBB-
Short Term Ratings
F-2
P-2
-
Outlook
Stable
Negative
Stable
For information on the risks of ratings downgrades, see Item 1A - Risk Factors subsection titled, "Our credit rating and
ability to manage working capital, refinance and raise additional capital for future needs, could adversely affect our
liquidity, capital position, borrowing, cost, and access to capital markets."
See Note 23 - "Commitments and Contingencies" for a discussion of the general purpose of guarantees and
commitments. The anticipated sources of funds to fulfill such commitments are listed below.
Liquidity
We expect our existing cash and cash equivalents, together with cash generated from operations, will be sufficient to meet
our normal operating requirements for the next 12 months. We expect to continue using cash generated by operations as
a primary source of liquidity; however, should we require funds greater than that generated from our operations to fund
discretionary investment activities, such as business acquisitions, we have the ability to raise capital through debt
financing, including the issuance of capital market debt instruments such as commercial paper and bonds. In addition, we
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 contract and is
dependent upon our performance as well as customer acceptance.
The following table summarizes our total liquidity:
(in millions)
Cash and cash equivalents
Available borrowings under our revolving credit facility
Total liquidity
As of
March 31, 2021
$
$
2,968
4,000
6,968
During March 2020 as the evolving global COVID-19 crisis resulted in increasing government actions to shut down
economic activity and enforce stay-at-home orders, global capital markets were disrupted and became tumultuous,
including the near shut down of commercial paper markets for issuers such as the Company as short-term fixed income
investors prepared for potential redemptions. On March 24, 2020, the Company announced the draw-down of $1.5 billion
from its Revolving Credit Facility due 2025 in order to increase cash on hand and eliminate the reliance on commercial
paper markets along with the suspension of the Company’s Euro and USD commercial paper program until the Company
deems such capital markets stabilized and reliable. As a result, the Company’s commercial paper outstanding was
reduced from $863 million to $542 million as of March 31, 2020, and further reduced to $213 million as of March 31, 2021.
During fiscal 2021, capital markets have stabilized and central bank actions have improved liquidity in commercial paper
markets and our access to such commercial paper markets have normalized.
54
On April 6, 2020, the Company drew the entire $2.5 billion remaining availability under its Revolving Credit Facilities, in
order to secure liquidity as additional cash on hand to support the Company’s liquidity resources during the COVID-19
crisis and to mitigate the uncertainties caused by volatile capital markets, changing governmental policies, and evolving
impact on world economies.
In May 2020, the Company issued $1.0 billion in principal amount of Senior Notes in the form of $500 million principal
amount of 4.00% Senior Notes due fiscal 2024 and $500 million principal amount of 4.13% Senior Notes due fiscal 2026.
All the net proceeds from the Notes offerings were applied towards the early prepayment of the Company’s term loan
facilities, including prepayment of €500 million of Euro Term Loan due fiscal 2022, £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.
In March 2021, the Company retired $500 million principal amount of 4.0% Senior Notes due fiscal 2024.
The Company retired via tender offer $127 million principal amount of its 4.45% Senior Notes due fiscal 2023 across two
series in March 2021 and issued irrevocable redemption notice for the remaining amounts outstanding. In April 2021, the
Company retired the remaining $319 million principal amount across two series through redemption. There is no amount
outstanding under either series of the 4.45% Notes due fiscal 2023 after the completion of these two actions.
On May 15, 2020, the Company agreed with its lenders and modified the definition of Leverage Ratio to be measured on a
“net of cash” basis across all of the Company’s bank credit and term loan facilities, and for such newly defined Leverage
Ratio limitation of Total Consolidated Net Indebtedness to Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization, as defined in such credit and term loan facilities, currently at 3.0x, to be reduced to 2.25x thereafter
beginning the fiscal year ending March 31, 2022 (with the first quarterly measurement date as of June 30, 2021). The net
effect of such adjustment to the Leverage Ratio definition in the Company’s credit and term loan facilities is to allow the
Company the flexibility to maintain elevated cash balances going forward both during current circumstances and
thereafter, without constraining the Company’s strategy of maintaining strong access to liquidity during the COVID crisis.
The Company’s credit and term loan facilities that were modified include: $4.0 billion Revolving Credit Facilities due fiscal
year 2025, €250 million Euro Term Loan due fiscal year 2022 (a substantial portion was extended to mature in fiscal year
2023 pursuant to the Euro Term Loan Extension, see below), €750 million Euro Term Loan due fiscal year 2023 (a
substantial portion was extended to mature in fiscal year 2024 pursuant to the Euro Term Loan Extension, see below),
£300 million in GBP Term Loan due fiscal year 2022, A$500 million in AUD Term Loan due fiscal year 2022, and
approximately $382 million in outstanding USD Term Loan due fiscal year 2025. As of fiscal 2021, only $4.0 billion
Revolving Credit Facilities due fiscal year 2026 (including a $390 million sub-tranche due fiscal 2025) and €400 million
Euro Term Loan due fiscal year 2024 (including a small €27 million sub-tranche due fiscal 2023) remain outstanding and
are subject to such amended Leverage Ratio limitations in the Company’s credit and term loan facilities.
On May 15, 2020, the Company initiated elective extension amendments in accordance with the terms of the aggregate
€1.0 billion principal amount of Euro Term Loans outstanding. Accordingly, €216.7 million out of €250 million Euro Term
Loan due fiscal year 2022 agreed to extend maturity 12-months to mature fiscal year 2023, and €700 million out of total
€750 million Euro Term Loan due fiscal year 2023 agreed to extend maturity 12-months to mature fiscal year 2024. Margin
would increase during the 12-month extension terms to Euribor + 125bps and Euribor + 175bps respectively, for the Euro
Term Loans originally due fiscal years 2022 and 2023, which would be an increase from the current applicable margin of
Euribor + 65bps, and Euribor + 80 bps, respectively. There is no change to current margin or terms through the original
maturity term of the Euro Term Loans.
Share Repurchases
During fiscal 2018, our Board of Directors authorized the repurchase of up to $2.0 billion of our common stock and during
fiscal 2019, our Board of Directors had approved an incremental $2.0 billion share repurchase. This program became
effective on April 3, 2017 with no end date established. There were no share repurchases during fiscal 2021. See Note 16
- "Stockholders' Equity" for more information.
Dividends
To maintain our financial flexibility we continue to suspend payment of quarterly dividends for fiscal 2022.
55
Off-Balance Sheet Arrangements
In the normal course of business, we are a 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 balance sheets. See Note 6 - "Receivables" and Note 23 - "Commitments and
Contingencies" for additional information regarding these off-balance sheet arrangements.
56
Contractual Obligations
Our contractual obligations as of March 31, 2021, were as follows:
(in millions)
Debt(1)
Finance lease liabilities
Operating Leases(2)
Purchase Obligations(3)
U.S. Tax Reform - Transition Tax(4)
U.S. FICA payroll tax deferral
U.K. VAT deferral
Interest and preferred dividend payments(5)
Less than
1 year
2-3 years
4-5 years
More than
5 years
Total
$
$
555
398
452
908
425
629
1,487
1,650
23
33
66
132
43
33
—
241
$
2,173
$
737
$
71
305
352
109
—
—
162
—
208
15
—
—
—
104
4,373
894
1,594
3,504
175
66
66
639
Total(6)
$
3,146
$
3,929
$
3,172
$
1,064
$
11,311
(1) Amounts represent scheduled principal payments of long-term debt and mandatory redemption of preferred stock of a consolidated
subsidiary.
(2) Amounts represent present value of operating leases including imputed interests. See Note 7 - "Leases" for more information.
(3) Includes long-term purchase agreements with certain software, hardware, telecommunication and other service providers and exclude
agreements that are cancellable without penalty. If we do not meet the specified service minimums, we may have an obligation to pay the
service provider a portion of or the entire shortfall. See Note 23 - "Commitments and Contingencies" for more information.
(4) The transition tax resulted in recording a total transition tax obligation of $237 million, of which $243 million was recorded as income tax
liability and $6 million recorded as a reduction in our unrecognized tax benefits, which has been omitted from this table. The transition tax
is payable over eight years; 8% of net tax liability in each of years 1-5, 15% in year 6, 20% in year 7, and 25% in year 8. We have made
our first three payments.
(5) Amounts represent scheduled interest payments on long-term debt and scheduled dividend payments associated with the mandatorily
redeemable preferred stock of a consolidated subsidiary excluding contingent dividends associated with the participation and variable
appreciation premium features.
(6) See Note 13 - "Income Taxes" for additional information about the estimated liability related to unrecognized tax benefits, which has been
omitted from this table. See Note 15 - "Pension and Other Benefit Plans" for the estimated liability related to estimated future benefit
payments under our Pension and OPEB plans that have been omitted from this table.
57
Critical Accounting Policies and Estimates
The preparation of financial statements, in accordance with GAAP, requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets
and liabilities. These estimates may change in the future if underlying assumptions or factors change. Accordingly, actual
results could differ materially from our estimates under different assumptions, judgments or conditions. We consider the
following policies to be critical because of their complexity and the high degree of judgment involved in implementing
them: revenue recognition, income taxes, business combinations, defined benefit plans and valuation of assets. We have
discussed the selection of our critical accounting policies and the effect of estimates with the audit committee of our board
of directors.
Revenue Recognition
Most of our revenues are recognized based on objective criteria and do not require significant estimates that may change
over time. However, some arrangements may require significant estimates, including contracts which include multiple
performance obligations.
Contracts with multiple performance obligations
Many of our contracts require us to provide a range of services or performance obligations to our customers, which may
include a combination of services, products or both and may also contain leases embedded in those arrangements. As a
result, significant judgment may be required to determine the appropriate accounting, including whether the elements
specified in contracts with multiple performance obligations should be treated as separate performance obligations for
revenue recognition purposes, and, when considered appropriate, how the total transaction price should be allocated
among the performance obligations and any lease components and the timing of revenue recognition for each. For
contracts with multiple performance obligations and lease components, we allocate the contract’s transaction price to
each performance obligation and lease component based on the relative standalone selling price of each distinct good or
service in the contract. Other than software sales involving multiple performance obligations, the primary method used to
estimate standalone selling price is the expected cost plus a margin approach, under which we forecast our expected
costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service. Certain
of our contracts involve the sale of DXC proprietary software, post contract customer support and other software-related
services. The standalone selling price generally is determined for each performance obligation using an adjusted market
assessment approach based on the price charged where each deliverable is sold separately. In certain limited cases
(typically for software licenses) when the historical selling price is highly variable, the residual approach is used. This
approach allocates revenue to the performance obligation equal to the difference between the total transaction price and
the observable standalone selling prices for the other performance obligations. These methods involve significant
judgments and estimates that we assess periodically by considering market and entity-specific factors, such as type of
customer, features of the products or services and market conditions.
Once the total revenues have been allocated to the various performance obligations and lease components, revenues for
each are recognized based on the relevant revenue recognition method for each. Estimates of total revenues at contract
inception often differ materially from actual revenues due to volume differences, changes in technology or other factors
which may not be foreseen at inception.
Contract modifications
A contract modification is a legally binding change to the scope, price, or both of an existing contract. Contract
modifications are reviewed to determine whether they should be accounted for as part of the original contract, the
termination of an existing contract and the creation of a new contract, or as a separate contract, and whether they modify
an embedded lease. This determination requires significant judgment, which could impact the timing of revenue
recognition.
58
Costs to obtain contracts with customers
Accounting for the costs to obtain contracts with customers requires significant judgments and estimates with regards to
the determination of sales commission payments that qualify for deferral of costs and the related amortization period. Most
of our sales commission plans are quota-based and payments are made by achieving targets related to a large number of
new and renewed contracts. Certain sales commissions earned by our sales force are considered incremental and
recoverable costs of obtaining a contract with a customer. We defer and amortize these costs on a straight-line basis over
an average period of benefit of five years, which is determined and regularly assessed by considering the length of our
customer contracts, our technology and other factors. Significant changes in these estimates or impairment may result if
material contracts terminate earlier than the expected benefit period, or if there are material changes in the average
contract period.
Income Taxes
We are subject to income taxes in the United States (federal and state) and numerous foreign jurisdictions. Significant
judgment is required in determining our provision for income taxes, analyzing our income tax reserves, the determination
of the likelihood of recoverability of deferred tax assets and any corresponding adjustment of valuation allowances. In
addition, our tax returns are routinely audited, and settlements of issues raised in these audits sometimes affect our tax
provisions.
As a global enterprise, our ETR is affected by many factors, including our global mix of earnings among countries with
differing statutory tax rates, the extent to which our non-U.S. earnings are indefinitely reinvested outside the U.S.,
changes in the valuation allowance for deferred tax assets, changes in tax regulations, acquisitions, dispositions and the
tax characteristics of our income. We cannot predict what our ETR will be in the future because there is uncertainty
regarding these factors.
With the following exceptions, the majority of our global unremitted foreign earnings have been taxed or would be exempt
from tax upon repatriation, except for the following earnings which are considered indefinitely reinvested: approximately
$522 million that could be taxable when repatriated to the U.S. under section 1.245A-5(b) of the final Treasury regulations
issued during fiscal 2021; and our accumulated earnings in India. A portion of these indefinitely reinvested earnings may
be subject to foreign and U.S. state tax consequences when remitted. The Company will continue to evaluate its position
in the future based on its future strategy and cash needs.
Considerations impacting the recoverability of deferred tax assets include the period of expiration of the tax asset, planned
use of the tax asset and historical and projected taxable income as well as tax liabilities for the tax jurisdiction to which the
tax asset relates. In determining whether the deferred tax assets are realizable, we consider all available positive and
negative evidence, including future reversals of existing taxable temporary differences, taxable income in prior carryback
years, projected future taxable income, tax planning strategies and recent financial operations. We recorded a valuation
allowance against deferred tax assets of approximately $3.9 billion as of March 31, 2021 due to uncertainties related to
the ability to utilize these assets. However, valuation allowances are subject to change in future reporting periods due to
changes in various factors.
We determine whether it is more likely than not a tax position will be sustained upon examination by the appropriate taxing
authorities before any part of the benefit is recorded in our financial statements. A tax position is measured as the portion
of the tax benefit that is greater than 50% likely to be realized upon settlement with a taxing authority (that has full
knowledge of all relevant information). We may be required to change our provision for income taxes when the ultimate
treatment of certain items is challenged or agreed to by taxing authorities, when estimates used in determining valuation
allowances on deferred tax assets significantly change, or when receipt of new information indicates the need for
adjustment in valuation allowances. Future events, such as changes in tax laws, tax regulations, or interpretations of such
laws or regulations, could have an impact on the provision for income tax and the effective tax rate. Any such changes
could significantly affect the amounts reported in the consolidated financial statements in the year these changes occur.
Recent enactment of the tax laws or changes in tax laws resulting from the Organization for Economic Co-operation and
Development’s multi-jurisdictional plan of action to address “base erosion and profit shifting” could impact our effective tax
rate. The calculation of our tax liabilities involves uncertainties in the application of complex changing tax regulations.
59
The India Finance Bill 2021 was enacted on March 28, 2021 after receiving approval of both houses of Parliament and
assent of the President of India. The key provision of this bill disallows depreciation on goodwill in case of merger/
demerger/slump sale, but permits a deduction for the amount paid for acquired goodwill at time of sale. The disallowance
of tax depreciation on goodwill has been factored in the calculation of our tax liabilities.
The U.K. Finance Bill 2021 (“Finance Bill”), which will become Finance Act 2021 after Royal Assent was published in
March 2021. The Finance Bill included increases in the corporation tax and diverted profits tax rates from April 1, 2023,
the new temporary 130% super deduction first year capital allowances and the temporary extension to the carry-back of
trading losses. As the detail of the legislation has yet to be finalized or enacted, it is difficult at this stage to determine the
impact of the Finance Bill on our future financial results in the U.K.
Business Combinations
We account for the acquisition of a business using the acquisition method of accounting, which requires us to estimate the
fair values of the assets acquired and liabilities assumed. This includes acquired intangible assets such as customer-
related intangibles, the liabilities assumed and contingent consideration, if any. Liabilities assumed may include litigation
and other contingency reserves existing at the time of acquisition and require judgment in ascertaining the related fair
values. Independent appraisals may be used to assist in the determination of the fair value of certain assets and liabilities.
Such appraisals are based on significant estimates provided by us, such as forecasted revenues or profits utilized in
determining the fair value of contract-related acquired intangible assets or liabilities. Significant changes in assumptions
and estimates subsequent to completing the allocation of the purchase price to the assets and liabilities acquired, as well
as differences in actual and estimated results, could result in material impacts to our financial results. Adjustments to the
fair value of contingent consideration are recorded in earnings. Additional information related to the acquisition date fair
value of acquired assets and liabilities obtained during the allocation period, not to exceed one year, may result in
changes to the recorded values of acquired assets and liabilities, resulting in an offsetting adjustment to the goodwill
associated with the business acquired.
Defined Benefit Plans
The computation of our pension and other post-retirement benefit costs and obligations is dependent on various
assumptions. Inherent in the application of the actuarial methods are key assumptions, including discount rates, expected
long-term rates of return on plan assets, mortality rates, rates of compensation increases and medical cost trend rates.
Our management evaluates these assumptions annually and updates assumptions as necessary. The fair value of assets
is determined based on observable inputs for similar assets or on significant unobservable inputs if not available. Two of
the most significant assumptions are the expected long-term rate of return on plan assets and the discount rate.
Our weighted average rates used were:
Discount rates
Expected long-term rates of return on assets
March 31, 2021
March 31, 2020
March 31, 2019
2.4 %
5.6 %
2.4 %
5.8 %
2.5 %
5.3 %
60
The assumption for the expected long-term rate of return on plan assets is impacted by the expected asset mix of the
plan; judgments regarding the correlation between historical excess returns and future excess returns and expected
investment expenses. The discount rate assumption is based on current market rates for high-quality, fixed income debt
instruments with maturities similar to the expected duration of the benefit payment period. The following table provides the
impact changes in the weighted-average assumptions would have had on our net periodic pension benefits and
settlement and contractual termination charges for fiscal 2021:
(in millions)
Expected long-term return on plan assets
Expected long-term return on plan assets
Discount rate
Discount rate
Approximate
Change in Net
Periodic Pension
Expense
Approximate
Change in
Settlement,
Contractual
Termination, and
Mark-to-Market
Charges
$
$
$
$
(58) $
58
$
25
$
(29) $
61
(61)
(1,001)
1,246
Change
0.5%
(0.5)%
0.5%
(0.5)%
61
Valuation of Assets
We review long-lived ("assets, intangible assets, and goodwill") for impairment in accordance with our accounting policy
disclosed in Note 1 - Summary of Significant Accounting Policies. Assessing the fair value of assets involves significant
estimates and assumptions including estimation of future cash flows, the timing of such cash flows, and discount rates
reflecting the risk inherent in projecting future cash flows. The valuation of long-lived and intangible assets involves
management estimates about future values and remaining useful lives of assets, particularly purchased intangible assets.
These estimates are subjective and can be affected by a variety of factors, including external factors such as industry and
economic trends, and internal factors such as changes in our business strategy and forecasts.
Evaluation of goodwill for impairment requires judgment, including the identification of reporting units, assignment of
assets, liabilities, and goodwill to reporting units and determination of the fair value of each reporting unit. The
identification of reporting units involves consideration of components of the operating segments and whether or not there
is discrete financial information available that is regularly reviewed by management. Additionally, we consider whether or
not it is reasonable to aggregate any of the identified components that have similar economic characteristics. The
estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market
conditions, and other factors. Changes in these estimates and assumptions include a significant change in the business
climate, established business plans, operating performance indicators or competition which could materially affect the
determination of fair value for each reporting unit.
We estimate the fair value of our reporting units using a combination of an income approach, utilizing a discounted cash
flow analysis, and a market approach, using performance-metric market multiples. The discount rate used in an income
approach is based on our weighted-average cost of capital and may be adjusted for the relevant risks associated with
business-specific characteristics and any uncertainty related to a reporting unit's ability to execute on the projected future
cash flows.
62
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a multinational company, we are exposed to certain market risks such as changes in foreign currency exchange rates
and interest rates. Changes in foreign currency exchange rates can impact our foreign currency denominated monetary
assets and liabilities and forecasted transactions in foreign currency, whereas changes in benchmark interest rates can
impact interest expense associated with our floating interest rate debt and the fair value of our fixed interest rate debt. A
variety of practices are employed to manage these risks, including operating and financing activities and the use of
derivative instruments. We do not use derivatives for trading or speculative purposes.
Presented below is a description of our risks together with a sensitivity analysis of each of these risks based on selected
changes in market rates. The foreign currency model incorporates the impact of diversification from holding multiple
currencies and the correlation of revenues, costs and any related short-term contract financing in the same currency. In
order to determine the impact of changes in interest rates on our future results of operations and cash flows, we
calculated the increase or decrease in the index underlying these rates. We estimate the fair value of our long-term debt
primarily using an expected present value technique using interest rates offered to us for instruments with similar terms
and remaining maturities. These analyses reflect management's view of changes that are reasonably possible to occur
over a one-year period.
Foreign Currency Risk
We are exposed to both favorable and unfavorable movements in foreign currency exchange rates. In the ordinary course
of business, we enter into contracts denominated in foreign currencies. Exposure to fluctuations in foreign currency
exchange rates arising from these contracts is analyzed during the contract bidding process. We generally manage these
contracts by incurring costs in the same currency in which revenues are received and any related short-term contract
financing requirements are met by borrowing in the same currency. Thus, by generally matching revenues, costs and
borrowings to the same currency, we are able to mitigate a portion of the foreign currency risk to earnings. However, due
to our increased use of offshore labor centers, we have become more exposed to fluctuations in foreign currency
exchange rates. We experienced significant foreign currency fluctuations during fiscal 2021 due primarily to the volatility of
the Australian dollar, Euro, and British pound in relation to the U.S. dollar. Significant foreign currency fluctuations during
fiscal 2020 was due primarily to the volatility of the Australian dollar, British pound and Euro in relation to the U.S. dollar.
We have policies and procedures to manage exposure to fluctuations in foreign currency by using short-term foreign
currency forward contracts to economically hedge certain foreign currency denominated assets and liabilities, including
intercompany accounts and loans. For accounting purposes, these foreign currency forward contracts are not designated
as hedges and changes in their fair value are reported in current period earnings within other expense (income), net in the
statements of operations. We also use foreign currency forward contracts to reduce foreign currency exchange rate risk
related to certain Indian rupee denominated intercompany obligations and forecasted transactions. For accounting
purposes, these foreign currency forward contracts are designated as cash flow hedges with critical terms that match the
hedged items. Therefore, the changes in fair value of these forward contracts are recorded in accumulated other
comprehensive income, net of taxes in the statements of comprehensive income and subsequently classified into net
income in the period the hedged transactions are recognized in net income.
63
We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than U.S.
dollar, see Note 21 - "Revenue." During fiscal 2021, over 66% of our revenues were generated outside of the United
States. For the year ended March 31, 2021, a hypothetical 10% change in the value of the U.S. dollar against all
currencies would have changed revenues by approximately 6.6%, or $1.2 billion. The majority of this fluctuation would be
offset by expenses incurred in local currency; and as a result, there would not be a material change to our income from
continuing operations before taxes. As such, in the view of management, the resulting impact would not be material to our
results of operations or cash flows.
Interest Rate Risk
As of March 31, 2021, we had outstanding debt with varying maturities for an aggregate carrying amount of $5.5 billion, of
which $0.7 billion was floating interest rate debt. Most of our floating interest rate debt is based upon varying terms of
adjusted LIBOR rates; consequently, changes in LIBOR result in the most volatility to our interest expense. As of
March 31, 2021, an assumed 10% unfavorable change in interest rates would not be material to our consolidated results
of operations or cash flows. A change in interest rates related to our long-term debt would not have a material impact on
our financial statements as we do not record our debt at fair value.
64
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of March 31, 2021 and March 31, 2020
Consolidated Statements of Operations for the Fiscal Years Ended March 31, 2021, March 31, 2020 and March 31,
2019
Consolidated Statements of Comprehensive Income (Loss) for the Fiscal Years Ended March 31, 2021, March 31,
2020 and March 31, 2019
Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31, 2021, March 31, 2020 and March 31,
2019
Consolidated Statements of Changes in Equity for the Fiscal Years Ended March 31, 2021, March 31, 2020 and
March 31, 2019
Notes to Consolidated Financial Statements
Note 1–Summary of Significant Accounting Policies
Note 2–Acquisitions
Note 3–Divestitures
Note 4–Assets Held For Sale
Note 5–Earnings (Loss) Per Share
Note 6–Receivables
Note 7–Leases
Note 8–Fair Value
Note 9–Derivative Instruments
Note 10–Property and Equipment
Note 11–Intangible Assets
Note 12–Goodwill
Note 13–Income Taxes
Note 14–Debt
Note 15–Pension and Other Benefit Plans
Note 16–Stockholders' Equity
Note 17–Stock Incentive Plans
Note 18–Cash Flows
Note 19–Other Expense (Income)
Note 20–Segment and Geographic Information
Note 21–Revenue
Note 22–Restructuring Costs
Note 23–Commitments and Contingencies
Note 24–Subsequent Events
65
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69
70
71
73
75
86
89
93
95
96
98
101
103
106
107
108
109
118
121
128
131
135
135
136
139
140
144
150
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
DXC Technology Company
Tysons, Virginia
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of DXC Technology Company and subsidiaries (the
"Company") as of March 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income
(loss), cash flows, and changes in equity for each of the three years in the period ended March 31, 2021, and the related
notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of March 31, 2021 and 2020, and the results of its operations
and its cash flows for each of the three years in the period ended March 31, 2021, in conformity with accounting principles
generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of March 31, 2021, based on criteria
established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission and our report dated May 27, 2021, expressed an adverse opinion on the Company's internal
control over financial reporting because of a material weakness.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide
a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex
judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements,
taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the
critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition — Refer to Notes 1 and 21 to the financial statements
Critical Audit Matter Description
Certain of the Company’s contracts with customers involve multiple performance obligations and may contain embedded
leases, which are assessed for classification and are typically recognized either as sales type leases or as operating
leases. When the Company enters into such arrangements, the contract’s transaction price is allocated to the contract
performance obligations and the lease component based upon the relative standalone selling price. These conclusions
could impact the timing of revenue recognition.
66
Additionally, the Company’s contracts with customers may be modified over the course of the contract term which may
change the scope, price, or both, of the existing contract. Contract modifications are reviewed to determine whether they
should be accounted for as part of the original contract, the termination of an existing contract and the creation of a new
contract, or as a separate contract. If the contract modification is part of the existing contract, a cumulative adjustment to
revenue is recorded. If the contract modification represents the termination of the existing contract and the creation of a
new contract, the modified transaction price is allocated to the prospective performance obligations and any embedded
lease components. If a contract modification modifies an embedded lease component and the modification is not
accounted for as a separate contract, the classification of the lease is reassessed.
Given these factors related to complex new contracts with customers and modifications of such contracts in the current
fiscal year, the related audit effort in evaluating complex revenue arrangements was significant and required a high degree
of auditor judgment.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s revenue recognition for complex new and modified revenue arrangements
included the following:
• We tested the effectiveness of internal controls related to the review of revenue recognition conclusions for new
and modified contracts.
• We analyzed the population of material revenue arrangements that were new or modified during the year and
performed the following procedures on the arrangements that were determined to be complex:
– Obtained and read the customer contract and evaluated management’s identification of performance
obligations and embedded lease components, if applicable.
–
If applicable, evaluated management’s conclusions regarding lease classification.
– Evaluated management’s determination of standalone selling price for the identified performance
obligations and lease components.
– Recalculated the transaction price and tested the allocation of transaction price to each performance
obligation and lease component.
– Evaluated the pattern of delivery and revenue recognition timing for each performance obligation and
lease component.
/s/ Deloitte & Touche LLP
McLean, Virginia
May 27, 2021
We have served as the Company's auditor since at least 1965; however, an earlier year could not be reliably determined.
67
DXC TECHNOLOGY COMPANY
CONSOLIDATED BALANCE SHEETS
(in millions, except per share and share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Receivables and contract assets, net of allowance for doubtful accounts of $91 and $74
Prepaid expenses
Other current assets
Assets held for sale
Total current assets
Intangible assets, net of accumulated amortization of $4,422 and $4,347
Operating right-of-use assets, net
Goodwill
Deferred income taxes, net
Property and equipment, net of accumulated depreciation of $4,121 and $3,818
Other assets
Assets held for sale - non-current
Total Assets
LIABILITIES and EQUITY
Current liabilities:
Short-term debt and current maturities of long-term debt
Accounts payable
Accrued payroll and related costs
Current operating lease liabilities
Accrued expenses and other current liabilities
Deferred revenue and advance contract payments
Income taxes payable
Liabilities related to assets held for sale
Total current liabilities
Long-term debt, net of current maturities
Non-current deferred revenue
Non-current operating lease liabilities
Non-current pension obligations
Non-current income tax liabilities and deferred tax liabilities
Other long-term liabilities
Liabilities related to assets held for sale - non-current
Total Liabilities
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
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Treasury stock, at cost, 2,458,027 and 2,148,708 shares as of March 31, 2021 and
March 31, 2020
Total DXC stockholders’ equity
Non-controlling interest in subsidiaries
Total Equity
Total Liabilities and Equity
As of
March 31, 2021
March 31, 2020
$
$
$
$
$
$
$
2,968
4,156
567
357
160
8,208
4,043
1,366
641
289
2,946
4,192
353
22,038
1,167
914
698
418
3,358
1,079
398
118
8,150
4,345
622
1,038
793
854
908
20
16,730
—
3
10,761
(5,331)
(302)
(158)
4,973
335
5,308
22,038
$
3,679
4,392
646
270
—
8,987
5,731
1,428
2,017
265
3,547
4,031
—
26,006
1,276
1,598
630
482
2,801
1,021
87
—
7,895
8,672
735
1,063
761
1,157
594
—
20,877
—
3
10,714
(5,177)
(603)
(152)
4,785
344
5,129
26,006
The accompanying notes are an integral part of these consolidated financial statements.
68
DXC TECHNOLOGY COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per-share amounts)
March 31,
2021
Fiscal Years Ended
March 31,
2020
March 31,
2019
Revenues
$
17,729
$
19,577
$
20,753
Costs of services (excludes depreciation and amortization and restructuring costs)
Selling, general and administrative (excludes depreciation and amortization and
restructuring costs)
Depreciation and amortization
Goodwill impairment losses
Restructuring costs
Interest expense
Interest income
Debt extinguishment costs
Gain on disposition of businesses
Gain on arbitration award
Other expense (income), net
Total costs and expenses
Income (loss) from continuing operations, before taxes
Income tax expense
(Loss) income from continuing operations
Income from discontinued operations, net of taxes
Net (loss) income
Less: net income attributable to non-controlling interest, net of tax
Net (loss) income attributable to DXC common stockholders
(Loss) income per common share
Basic:
Continuing operations
Discontinued operations
Diluted:
Continuing operations
Discontinued operations
14,086
14,901
14,946
2,066
1,970
—
551
361
(98)
41
(2,004)
—
102
17,075
654
800
(146)
—
(146)
3
)
(149) $
(
(0.59) $
—
)
(0.59) $
(
(0.59) $
—
)
(0.59) $
(
2,050
1,942
6,794
252
383
(165)
—
—
(632)
(720)
24,805
(5,228)
130
(5,358)
—
(5,358)
11
(
(5,369) $
)
(20.76) $
—
(
(20.76) $
)
(20.76) $
—
(
(20.76) $
)
1,959
1,968
—
465
334
(128)
—
—
—
(306)
19,238
1,515
288
1,227
35
1,262
5
1,257
4.40
0.13
4.53
4.35
0.12
4.47
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
69
DXC TECHNOLOGY COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
Net (loss) income
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments, net of tax (1)
Cash flow hedges adjustments, net of tax (2)
Available-for-sale securities, net of tax (3)
Pension and other post-retirement benefit plans, net of tax:
Prior service cost, net of tax (4)
Amortization of prior service cost, net of tax (5)
Pension and other post-retirement benefit plans, net of tax
Other comprehensive income (loss), net of taxes
Comprehensive income (loss)
Less: comprehensive income attributable to non-controlling interest
Fiscal Years Ended
March 31, 2021 March 31, 2020 March 31, 2019
$
(146) $
(5,358) $
1,262
300
19
(9)
7
(13)
(6)
304
158
6
(323)
(17)
—
—
(8)
(8)
(348)
(5,706)
22
(259)
(12)
—
(21)
(13)
(34)
(305)
957
2
955
Comprehensive income (loss) attributable to DXC common stockholders
$
152
$
(
(5,728) $
)
(1) Tax benefit related to foreign currency translation adjustments was $27, $2, and $1 for the fiscal years ended March 31, 2021, March 31, 2020,
March 31, 2019, respectively.
(2) Tax expense (benefit) related to cash flow hedge adjustments was $6, $(5), and $(3) for the fiscal years ended March 31, 2021, March 31, 2020,
March 31, 2019, respectively.
(3) Tax benefit related to available-for-sale securities was $1, $0, and $0 for the fiscal years ended March 31, 2021, March 31, 2020, March 31, 2019,
respectively.
(4) Tax expense (benefit) related to prior service costs was $2, $0, and $(5) for the fiscal years ended March 31, 2021, March 31, 2020, March 31,
2019, respectively.
(5) Tax benefit related to amortization of prior service costs was $4, $1, and $2 for the fiscal years ended March 31, 2021, March 31, 2020, March 31,
2019, respectively.
The accompanying notes are an integral part of these consolidated financial statements.
70
DXC TECHNOLOGY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Cash flows from operating activities:
Net (loss) income
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
Depreciation and amortization
Goodwill impairment losses
Operating right-of-use expense
Pension & other post-employment benefits, actuarial & settlement
losses (gains)
Share-based compensation
Deferred taxes
(Gain) loss on dispositions
Provision for losses on accounts receivable
Unrealized foreign currency exchange (gains) losses
Impairment losses and contract write-offs
Debt extinguishment costs
Amortization of debt issuance costs and discount (premium)
Cash surrender value in excess of premiums paid
Other non-cash charges, net
Changes in assets and liabilities, net of effects of acquisitions and
dispositions:
Decrease (increase) in receivables
Increase in prepaid expenses and other current assets
Decrease in accounts payable and accruals
Increase (decrease) in income taxes payable and income tax
liability
Decrease in operating lease liability
Decrease in advance contract payments and deferred revenue
Other operating activities, net
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property and equipment
Payments for transition and transformation contract costs
Software purchased and developed
Proceeds (payments) for acquisitions, net of cash acquired
Business dispositions
Cash collections related to deferred purchase price receivable
Proceeds from sale of assets
Short-term investing
Proceeds from short-term investing
Other investing activities, net
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Borrowings of commercial paper
Repayments of commercial paper
Borrowings under lines of credit
Repayment of borrowings under lines of credit
Borrowings on long-term debt
Principal payments on long-term debt
Payments on finance leases and borrowings for asset financing
71
Fiscal Years Ended
March 31, 2021
March 31, 2020
March 31, 2019
$
(146) $
(5,358) $
1,262
1,988
—
616
519
56
(403)
(1,983)
53
(36)
275
41
3
(3)
1
257
(299)
(527)
434
(616)
(66)
(40)
124
(261)
(261)
(254)
184
4,947
159
164
—
—
(13)
4,665
1,486
(1,852)
2,500
(4,000)
—
(3,552)
(930)
1,960
6,794
698
(244)
68
(56)
1
3
24
30
—
(4)
(12)
—
269
(229)
(565)
(197)
(698)
(146)
12
2,350
(350)
(281)
(235)
(1,997)
—
671
73
(75)
38
19
(2,137)
4,939
(5,076)
1,500
—
2,198
(1,039)
(865)
2,023
—
—
143
74
97
(163)
(10)
30
—
—
(10)
(11)
11
(947)
(632)
(52)
(107)
—
(74)
149
1,783
(297)
(394)
(261)
(365)
(65)
1,084
357
—
—
10
69
2,747
(2,840)
—
—
1,646
(2,625)
(944)
Borrowings for USPS spin transaction
Proceeds from bond issuance
Proceeds from stock options and other common stock transactions
Taxes paid related to net share settlements of share-based
compensation awards
Repurchase of common stock and advance payment for accelerated
share repurchase
Dividend payments
Payments for debt extinguishment costs
Other financing activities, net
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents including cash
classified within current assets held for sale
Less: cash classified within current assets held for sale
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
$
—
993
1
(7)
—
(53)
(41)
(21)
(5,476)
39
(648)
(63)
(711)
3,679
2,968
$
—
—
11
(16)
(736)
(214)
—
(45)
657
(90)
780
—
780
2,899
3,679
$
1,114
753
47
(54)
(1,344)
(210)
—
47
(1,663)
(19)
170
—
170
2,729
2,899
The accompanying notes are an integral part of these consolidated financial statements.
72
DXC TECHNOLOGY COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions, except shares in thousands)
Shares
Amount
Common Stock
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
Cumulative effect of adopting the new revenue standard
Net income
Other comprehensive loss
Share-based compensation expense
Acquisition of treasury stock
Share repurchase program
Stock option exercises and other common stock transactions
Dividends declared ($0.76 per share)
Non-controlling interest distributions and other
Divestiture of USPS
Balance at March 31, 2019
(1) 1,788,658 treasury shares as of March 31, 2019
286,393
$
3 $
12,210 $
1,301 $
58 $
(85) $
13,487 $
350 $
13,837
74
(845)
37
(19,343)
3,164
114
1,257
(494)
(209)
(302)
(51)
114
1,257
(302)
74
(51)
(1,339)
37
(209)
—
114
1,262
(305)
74
(51)
(1,339)
37
(209)
(29)
5
(3)
(29)
(175)
(1,491)
(1,666)
(1,666)
270,214
$
3 $
11,301 $
478 $
)
(
(244) $
)
(
(136) $
11,402 $
323 $
11,725
(in millions, except shares in thousands)
Shares
Amount
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
Balance at March 31, 2019
Net loss
Other comprehensive loss
Share-based compensation expense
Acquisition of treasury stock
Share repurchase program
Stock option exercises and other common stock transactions
Dividends declared ($0.84 per share)
Non-controlling interest distributions and other
Balance at March 31, 2020
(1)
2,148,708 treasury shares as of March 31, 2020
270,214
$
3 $
11,301 $
478 $
(244) $
(136) $
11,402 $
323 $
11,725
(5,369)
(5,369)
(15,934)
1,394
70
(669)
12
(67)
(219)
(359)
(16)
(359)
70
(16)
(736)
12
(219)
—
11
11
(1)
(5,358)
(348)
70
(16)
(736)
12
(219)
(1)
255,674
$
3 $
10,714 $
(5,177) $
(
)
(603) $
)
(
(152) $
)
(
4,785 $
344 $
5,129
The accompanying notes are an integral part of these consolidated financial statements.
73
(in millions, except shares in thousands)
Shares
Amount
Common Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Treasury
Stock (1)
Total
DXC Equity
Non-
Controlling
Interest
Total
Equity
255,674
$
3 $
10,714 $
(5,177) $
(603) $
(152) $
4,785 $
344 $
5,129
Balance at March 31, 2020
Cumulative effect of adopting ASU 2016-13
Net loss
Other comprehensive income
Share-based compensation expense
Acquisition of treasury stock
Stock option exercises and other common stock transactions
1,379
Non-controlling interest distributions and other
Balance at March 31, 2021
(1)
2,458,027 treasury shares as of March 31, 2021
(4)
(149)
(1)
46
1
301
(6)
(4)
(149)
301
46
(6)
1
(1)
(4)
(146)
304
46
(6)
1
(16)
5,308
3
3
(15)
335
257,053
3
10,761
)
(
(5,331)
)
(
(302)
)
(
(158)
4,973
The accompanying notes are an integral part of these consolidated financial statements.
74
DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Business
DXC Technology Company ("DXC" or the "Company") helps global companies run their mission critical systems and
operations while modernizing IT, optimizing data architectures, and ensuring security and scalability across public, private
and hybrid clouds. With decades of driving innovation, the world’s largest companies trust DXC to deploy its Enterprise
Technology Stack to deliver new levels of performance, competitiveness and customer experiences.
HPS Sale
On April 1, 2021, DXC completed the sale of its healthcare provider software business ("HPS" or the "HPS Business") to
Dedalus Holding S.p.A. ("Dedalus"). The sale was accomplished by the cash purchase of all equity interests and assets
attributable to the HPS Business for €462 million (approximately $543 million), subject to certain adjustments. See Note 4
- "Assets Held for Sale" and Note 24 - "Subsequent Events" for further information.
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 "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 total enterprise value of $5.0 billion, subject to net working
capital adjustments and assumed liabilities. See Note 3 - "Divestitures" for further information.
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 customers at scale. See Note 2 - "Acquisitions" for further information.
Basis of Presentation
In order to make this report easier to read, DXC refers throughout to (i) the Consolidated Financial Statements as the
“financial statements,” (ii) the Consolidated Statements of Operations as the “statements of operations,” (iii) the
Consolidated Statement of Comprehensive Income (Loss) as the "statements of comprehensive income," (iv) the
Consolidated Balance Sheets as the “balance sheets,” and (v) the 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 Consolidated Financial Statements unless otherwise noted.
The accompanying financial statements have been prepared in accordance with the rules and regulations of the U.S.
Securities and Exchange Commission for annual reports and accounting principles generally accepted in the United
States ("GAAP"). The financial statements include the accounts of DXC, its consolidated subsidiaries, and those business
entities in which DXC maintains a controlling interest. Investments in business entities in which the Company does not
have control, but has the ability to exercise significant influence over operating and financial policies, are accounted for by
the equity method. Other investments are accounted for by the cost method. Non-controlling interests are presented as a
separate component within equity in the 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.
75
DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Use of Estimates
The preparation of the financial statements, in accordance with GAAP, requires the Company's management to make
estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. 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 COVID-19 crisis, are uncertain, rapidly changing and difficult to predict. Therefore, accounting estimates and
assumptions may change over time in response to the COVID-19 crisis and may change materially in future periods.
Estimates are used for, but not limited to, contracts accounted for using the percentage-of-completion method, cash flows
used in the evaluation of impairment of goodwill and other long-lived assets, reserves for uncertain tax positions, valuation
allowances on deferred tax assets, loss accruals for litigation, and obligations related to our pension plans. In the opinion
of the Company's management, the accompanying financial statements contain all adjustments necessary, including
those of a normal recurring nature, to fairly present the financial statements.
Leases
Effective April 1, 2019, the Company adopted ASU 2016-02, "Leases (ASC 842)" using the modified retrospective method.
Refer to Note 7 - "Leases" for required disclosures. The Company determines if an arrangement is a lease at inception by
evaluating whether 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 use of the asset. Operating leases are included in operating right-
of-use ("ROU") assets, net, current operating lease liabilities and non-current operating lease liabilities in DXC's balance
sheets. Finance leases are included in property and equipment, net, short-term debt and current maturities of long-term
debt and long-term debt, net of current maturities in DXC's balance sheets.
ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent its
obligation to make lease payments arising from the lease. Operating ROU assets and operating lease liabilities are
recognized at commencement based on the present value of lease payments over the lease term.
As most of the Company's leases do not provide an implicit rate, DXC uses its incremental borrowing rate based on the
information available at commencement to determine the present value of lease payments. The incremental borrowing
rate is the rate of interest that DXC would have to pay to borrow, on a collateralized basis, an amount equal to the lease
payments, in a similar economic environment and over a similar term. The rate is dependent on several factors, including
the lease term, currency of the lease payments and the Company's credit ratings.
Operating ROU assets also include any lease payments made and exclude lease incentives. The Company's lease terms
may include options to extend or terminate the lease. 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.
Revenue Recognition
Effective April 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers (ASC 606),” using
the modified retrospective method. Refer to Note 21 - “Revenue” for required disclosures. The Company’s accounting
policy related to the new revenue standard is summarized below.
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DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's primary service offerings are information technology outsourcing, other professional services, or a
combination thereof. Revenues are recognized when control of the promised goods or services is transferred to DXC's
customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those
goods or services.
DXC determines revenue recognition through the five-step model as follows:
•
•
•
•
•
Identification of the contract, or contracts, with a customer
Identification of the performance obligations in the contract
Determination of the transaction price
Allocation of the transaction price to the performance obligations in the contract
Recognition of revenue when, or as, the Company satisfies a performance obligation
DXC's IT outsourcing ("ITO") arrangements typically reflect a single performance obligation that comprises a series of
distinct services which are substantially the same and provided over a period of time using the same measure of progress.
Revenue derived from these arrangements is recognized over time based upon the level of services delivered in the
distinct periods in which they are provided based on time increments. When other parties are involved in providing goods
or services as part of our customer arrangements, DXC recognizes revenue on a gross basis as a principal when it
controls goods or services before they are transferred to the customer. DXC's contracts often include upfront fees billed
for activities to familiarize DXC with the customers operations, take control over their administration and operation, and
adapt them to DXC's solutions. Upfront fees are generally recognized ratably over the contract period, which
approximates the manner in which the services are provided. These activities typically do not qualify as performance
obligations, and the related revenues are allocated to the relevant performance obligations and recognized ratably over
time as the performance obligation is satisfied during the period in which DXC provides the related service, which is
typically the life of the contract. Software transactions that include multiple performance obligations are described below.
For contracts with multiple performance obligations, DXC allocates the contract’s transaction price to each performance
obligation based on the relative standalone selling price of each distinct good or service in the contract. Other than
software sales involving multiple performance obligations, the primary method used to estimate standalone selling price is
the expected cost plus a margin approach, under which the Company forecasts its expected costs of satisfying a
performance obligation and then adds an appropriate margin for that distinct good or service.
DXC's ITO arrangements may also contain embedded leases for equipment used to fulfill services. A contract with a
customer includes an embedded lease when DXC grants the customer a right to control the use of an identified asset for a
period of time in exchange for consideration. Embedded leases with customers are typically recognized either as a sales
type lease in which revenue and cost of sales is recognized upon lease commencement; or they may be recognized as
operating leases in which revenue is recognized over the usage period. Where a contract contains an embedded lease,
the contract’s transaction price is allocated to the contract performance obligations and the lease component based upon
the relative standalone selling price.
The transaction price of a contract is determined based on fixed and variable consideration. Variable consideration related
to the Company’s ITO offerings often include volume-based pricing that are allocated to the distinct days of the services to
which the variable consideration pertains. However, in certain cases, estimates of variable consideration, including
penalties, contingent milestone payments and rebates are necessary. The Company only includes estimates of variable
consideration in the transaction price to the extent it is probable that a significant reversal of cumulative revenue
recognized will not occur. These judgments involve consideration of historical and expected experience with the customer
and other similar customers, and the facts and circumstances specific to the arrangement.
The Company generally provides its services under time and materials contracts, unit price contracts, fixed-price
contracts, and software contracts for which revenue is recognized in the following manner:
Time and materials contracts. Revenue is recognized over time at agreed-upon billing rates when services are provided.
Unit-price contracts. Revenue is recognized over time based on unit metrics multiplied by the agreed upon contract unit
price or when services are delivered.
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DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fixed-price contracts. For certain fixed-price contracts, revenue is recognized over time using a method that measures the
extent of progress towards completion of a performance obligation, generally using a cost-input method (referred to as the
percentage-of-completion cost-to-cost method). Under the percentage-of-completion cost-to-cost method, revenue is
recognized based on the proportion of total cost incurred to estimated total costs at completion. A performance obligation's
estimate at completion includes all direct costs such as materials, labor, subcontractor costs, overhead, and a ratable
portion of general and administrative costs. If output or input measures are not available or cannot be reasonably
estimated, revenue is deferred until progress can be measured and costs are not deferred unless they meet the criteria for
capitalization. Under the percentage-of-completion cost-to-cost method, progress towards completion is measured based
on either achievement of specified contract milestones, costs incurred as a proportion of estimated total costs, or other
measures of progress when appropriate. Profit in a given period is reported at the estimated profit margin to be achieved
on the overall contract.
Software contracts. Certain of DXC's arrangements involve the sale of DXC proprietary software, post contract customer
support, and other software-related services. The standalone selling price generally is determined for each performance
obligation using an adjusted market assessment approach based on the price charged where each deliverable is sold
separately. In certain limited cases (typically for software licenses) when the historical selling price is highly variable, the
residual approach is used. This approach allocates revenue to the performance obligation equal to the difference between
the total transaction price and the observable standalone selling prices for the other performance obligations. Revenue
from distinct software licenses is recognized at a point in time when the customer can first use the software license. If
significant customization is required, software revenue is recognized as the related software customization services are
performed in accordance with the percentage-of-completion method described above. Revenue for post contract customer
support and other software services is recognized over time as those services are provided.
Modifications. Contracts with our customers may be modified over the course of the contract term and may change the
scope, price or both of the existing contract. Contract modifications are reviewed to determine whether they should be
accounted for as part of the original contract, the termination of an existing contract and the creation of a new contract, or
as a separate contract. Contract modifications are a separate contract when the modification provides additional goods
and services that are distinct and the transaction price is at the standalone selling price. If the contract modification is part
of the existing contract, a cumulative adjustment to revenue is recorded. If the contract modification represents the
termination of the existing contract and the creation of a new contract, the modified transaction price is allocated to the
prospective performance obligations and any embedded lease components. If a contract modification modifies an
embedded lease component and the modification is not accounted for as a separate contract, the classification of the
lease is reassessed.
Practical Expedients and Exemptions
DXC does not adjust the promised amount of consideration for the effects of a significant financing component when the
period between when DXC transfers a promised good or service to a customer and when the customer pays for that good
or service will be one year or less. In addition, the Company reports revenue net of any revenue-based taxes assessed by
a governmental authority that are imposed on and concurrent with specific revenue-producing transactions, such as sales
taxes and value-added taxes.
Contract Balances
The timing of revenue recognition, billings and cash collections results in accounts receivable (billed receivables, unbilled
receivables and contract assets) and deferred revenue and advance contract payments (contract liabilities) on the
Company's balance sheets. In arrangements that contain an element of customized software solutions, amounts are
generally billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g.
monthly) or upon achievement of certain contractual milestones. Generally, billing occurs subsequent to revenue
recognition, sometimes resulting in contract assets if the related billing is conditional upon more than just the passage of
time. However, the Company sometimes receives advances or deposits from customers, before revenue is recognized,
which results in the generation of contract liabilities. Payment terms vary by type of product or service being provided as
well as by customer, although the term between invoicing and when payment is due is generally an insignificant period of
time.
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DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Costs to Obtain a Contract
Certain sales commissions earned by the Company's sales force are considered incremental and recoverable costs of
obtaining a contract with a customer. The majority of sales commissions are paid based on the achievement of quota-
based targets. These costs are deferred and amortized on a straight-line basis over an average period of benefit
determined to be five years. The Company determined the period of benefit considering the length of its customer
contracts, its technology, and other factors. The period of benefit approximates the average stated contract terms,
excluding expected future renewals because sales commissions are paid upon contract renewal in a manner
commensurate with the initial commissions. Some commission payments are not capitalized because they are expensed
during the fiscal year as the related revenue is recognized. Capitalized sales commissions costs are classified within other
assets and amortized in selling, general and administrative expenses.
Costs to Fulfill a Contract
Certain contract setup costs incurred upon initiation or renewal of an outsourcing contract that generate or enhance
resources to be used in satisfying future performance obligations are capitalized when they are deemed recoverable.
Judgment is applied to assess whether contract setup costs are capitalizable. Costs that generate or enhance resources
often pertain to activities that enhance the capabilities of the services, improve customer experience, and establish a more
effective and efficient IT environment. The Company recognizes these transition and transformation contract costs as
other assets, which are amortized over the respective contract life.
Pension and Other Benefit Plans
The Company accounts for its pension, other post-retirement benefit ("OPEB"), defined contribution and deferred
compensation plans using the guidance of ASC 710 "Compensation – General" and ASC 715 "Compensation –
Retirement Benefits." The Company recognizes actuarial gains and losses and changes in fair value of plan assets in
earnings at the time of plan remeasurement as a component of net periodic benefit expense. Typically plan
remeasurement occurs annually during the fourth quarter of each fiscal year. The remaining components of pension and
OPEB expense, primarily current period service and interest costs and expected return on plan assets, are recorded on a
quarterly basis.
Inherent in the application of the actuarial methods are key assumptions, including, but not limited to, discount rates,
expected long-term rates of return on plan assets, mortality rates, rates of compensation increases, and medical cost
trend rates. Company management evaluates these assumptions annually and updates assumptions as necessary. The
fair value of assets is determined based on the prevailing market prices or estimated fair value of investments when
quoted prices are not available.
Software Development Costs
After establishing technological feasibility, and until such time as the software products are available for general release to
customers, the Company capitalizes costs incurred to develop commercial software products to be sold, leased or
otherwise marketed. Costs incurred to establish technological feasibility are charged to expense as incurred.
Enhancements to software products are capitalized where such enhancements extend the life or significantly expand the
marketability of the products. Amortization of capitalized software development costs is determined separately for each
software product. Annual amortization expense is calculated based on the greater of the ratio of current gross revenues
for each product to the total of current and anticipated future gross revenues for the product or the straight-line
amortization method over the estimated useful life of the product.
Unamortized capitalized software costs associated with commercial software products are periodically evaluated for
impairment on a product-by-product basis by comparing the unamortized balance to the product’s net realizable value.
The net realizable value is the estimated future gross revenues from that product reduced by the related estimated future
costs. When the unamortized balance exceeds the net realizable value, the unamortized balance is written down to the
net realizable value and an impairment charge is recorded.
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DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company capitalizes costs incurred to develop internal-use computer software during the application development
stage. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. Internal
and external costs incurred in connection with development of upgrades or enhancements that result in additional
functionality are also capitalized. Capitalized costs associated with internal-use software are amortized on a straight-line
basis over the estimated useful life of the software. Purchased software is capitalized and amortized over the estimated
useful life of the software. Internal-use software assets are evaluated for impairment whenever events or changes in
circumstances occur that could impact the recoverability of these assets.
Share-Based Compensation
Share-based awards are accounted for under the fair value method. The Company provides different forms of share-
based compensation to its employees and non-employee directors. This includes stock options and restricted stock units
("RSUs"), including performance-based restricted stock units ("PSUs"). The fair value of the awards is determined on the
grant date, based on the Company's closing stock price. For awards settled in shares, the Company recognizes
compensation expense based on the grant-date fair value net of estimated forfeitures over the vesting period. For awards
settled in cash, the Company recognizes compensation expense based on the fair value at each reporting date net of
estimated forfeitures.
The Company uses a Monte Carlo simulation model to compute the estimated fair value of PSUs with a market condition.
This model includes assumptions regarding term, risk-free interest rates, expected volatility and dividend yields, which are
evaluated each time the Company issues an award. The risk-free rate equals the yield, as of the Valuation Date on semi-
annual zero-coupon U.S. Treasury rates. The dividend yield assumption is based on the respective fiscal year dividend
payouts. Expected volatility is based on a historical approach, therefore the expected volatility assumption is based on the
performance period of the award.
The Company uses the Black-Scholes-Merton model to compute the estimated fair value of options granted. This model
includes assumptions regarding expected term, risk-free interest rates, expected volatility and dividend yields, which are
periodically evaluated. The expected term is calculated based on the Company’s historical experience with respect to its
stock plan activity and an estimate of when vested and unexercised option shares will be exercised. The expected term of
options is based on job tier classifications, which have different historical exercise behavior. The risk-free interest rate is
based on the zero-coupon interest rate of U.S. government issued treasury STRIPS with a period commensurate with the
expected term of the options.
Expected volatility is based on a blended approach, which uses a two-thirds weighting for historical volatility and one-third
weighting for implied volatility. The Company’s historical volatility calculation is based on employee class and historical
closing prices of the Company's peer group, in order to better align this factor with the expected terms of the stock
options. DXC’s implied stock price volatility is derived from the price of exchange traded options on DXC’s stock with the
longest remaining contractual term. Implied volatility is a prospective, forward looking measure representing market
participants’ expectations of DXC's future stock price volatility. The dividend yield assumption is based on the respective
fiscal year dividend payouts. Forfeitures are estimated based on historical experience.
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DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Business Combinations
Companies acquired during each reporting period are reflected in the results of the Company effective from their
respective dates of acquisition through the end of the reporting period. The Company allocates the fair value of purchase
consideration to the assets acquired and liabilities assumed based on their fair values at the acquisition date. The excess
of the fair value of purchase consideration over the fair value of the assets acquired and liabilities assumed in the acquired
entity is recorded as goodwill. If the Company obtains new information about facts and circumstances that existed as of
the acquisition date during the measurement period, which may be up to one year from the acquisition date, the Company
may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the
conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed,
whichever comes first, any subsequent adjustments are recorded to the Company's statements of operations. For
contingent consideration recorded as a liability, the Company initially measures the amount at fair value as of the
acquisition date and adjusts the liability, if needed, to fair value each reporting period. Changes in the fair value of
contingent consideration, other than measurement period adjustments, are recognized as income or expense. Acquisition-
related expenses and post-acquisition integration costs are recognized separately from the business combination and are
expensed as incurred.
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 12 - "Goodwill" for 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 assesses qualitative factors 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.
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DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 uses 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.
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.
Fair Value
The Company applies fair value accounting for its financial assets and liabilities and non-financial assets and liabilities that
are recognized or disclosed at fair value in the financial statements on a recurring basis. The objective of a fair value
measurement is to estimate the price to sell an asset or transfer a liability in an orderly transaction between market
participants at the measurement date under current market conditions. Such transactions to sell an asset or transfer a
liability are assumed to occur in the principal market for that asset or liability, or in the absence of the principal market, the
most advantageous market.
Assets and liabilities subject to fair value measurement disclosures are required to be classified according to a three-level
fair value hierarchy with respect to the inputs used to determine fair value. The level in which an asset or liability is
disclosed within the fair value hierarchy is based on the lowest level input that is significant to the related fair value
measurement in its entirety. The levels of input are defined as follows:
Level 1: Quoted prices unadjusted for identical assets or liabilities in an active market.
Level 2: Quoted prices for similar assets or liabilities in an active market, quoted prices for identical similar assets
or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-
corroborated inputs which are derived principally from or corroborated by observable market data.
Level 3: Unobservable inputs that reflect the entity's own assumptions which market participants would use in
pricing the asset or liability.
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Receivables
The Company records receivables at their face amounts less an allowance for doubtful accounts. Receivables consist of
amounts billed and currently due from customers, amounts earned but unbilled (including contracts measured under the
percentage-of-completion cost-to-cost method of accounting), amounts retained by the customer until the completion of a
specified contract, negotiation of contract modification and claims. Unbilled recoverable amounts under contracts in
progress generally become billable upon the passage of time, the achievement of project milestones, or upon acceptance
by the customer.
Allowances for uncollectible billed trade receivables are estimated based on a combination of write-off history, aging
analysis, any known collectability issues, and certain forward-looking information.
DXC uses receivables securitization facilities or receivables sales facilities in the normal course of business as part of
managing its cash flows. The Company accounts for receivables sold under these facilities as a sale of financial assets
pursuant to ASC 860 “Transfers and Servicing” and derecognizes these receivables, as well as the related allowances,
from its balance sheets. Generally, the fair value of the sold receivables approximates the book value due to the short-
term nature and, as a result, no gain or loss on sale of receivables is recorded. Under the receivables securitization
facility, the deferred purchase price (the "DPP") receivable is recorded at fair value, which is determined by calculating the
expected amount of cash to be received based on unobservable inputs consisting of the face amount of the receivables
adjusted for anticipated credit losses.
The Company reflects cash flows related to its beneficial interests in securitization transactions, which is the DPP
recorded in connection with the Company's Receivables Securitization Facility within investing activities in its statements
of cash flows.
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. The estimated useful lives of DXC's property and equipment are as follows:
Buildings
Computers and related equipment
Furniture and other equipment
Leasehold improvements
Up to 40 years
4 to 7 years
3 to 15 years
Shorter of lease term or useful life up to 20 years
In accordance with its policy, the Company reviews the estimated useful lives of its property and equipment on an ongoing
basis. As a result, effective fiscal year 2020, 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 $225 million decrease to
depreciation expense for the fiscal year ended March 31, 2020.
Intangible Assets
The Company's estimated useful lives for finite-lived intangibles are shown in the table below:
Software
Customer related intangibles
2 to 10 years
Expected customer service life
Acquired contract related intangibles
Contract life and first contract renewal, where applicable
Software is amortized using predominately the straight-line method. Acquired contract related and customer related
intangible assets are amortized in proportion to the estimated undiscounted cash flows projected over the estimated life of
the asset or on a straight-line basis if such cash flows cannot be reliably estimated.
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Impairment of Long-Lived Assets and Finite-Lived Intangible Assets
Long-lived assets such as property and equipment and finite-lived intangible assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be
recoverable. Recoverability of long-lived assets or groups of assets is assessed based on a comparison of the carrying
amount of such assets to the estimated future net cash flows. If estimated future net cash flows are less than the carrying
amount of such assets, an expense is recorded in the amount required to reduce the carrying amount of such assets to
fair value. Fair value is determined based on a discounted cash flow approach or, when available and appropriate,
comparable market values. Long-lived assets to be disposed of are reported at the lower of their carrying amount or their
fair value less costs to sell.
Income Taxes
The Company uses the liability method in accounting for income taxes. Deferred tax assets and liabilities are recorded for
the expected future tax consequences of temporary differences between financial statement carrying amounts of assets
and liabilities and their respective tax bases, using statutory tax rates in effect for the year in which the differences are
expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the results of
operations in the period that includes the related enactment date.
A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will not be
realized. Changes in valuation allowances from period to period are included in the Company’s tax provision during the
period in which the change occurred. In determining whether a valuation allowance is warranted, the Company considers
all available positive and negative evidence, including future reversals of existing taxable temporary differences, taxable
income in prior carryback years, projected future taxable income, tax planning strategies and recent financial operations.
The Company recognizes uncertain tax positions when it is more likely than not that the tax position will be sustained
upon examination. Uncertain tax positions are measured based on the probabilities that the uncertain tax position will be
realized upon final settlement.
All tax-related cash flows resulting from excess tax benefits related to the settlement of share-based awards are classified
as cash flows from operating activities and cash paid by directly withholding shares for tax withholding purposes is
classified as a financing activity in the statements of cash flows.
Cash and Cash Equivalents
The Company considers investments with an original maturity of three months or less to be cash equivalents. The
Company’s cash equivalents consist of time deposits, money market funds and money market deposit accounts with a
number of institutions that have high credit ratings.
Foreign Currency
The local currency of the Company's foreign affiliates is generally their functional currency. Accordingly, the assets and
liabilities of the foreign affiliates are translated from their respective functional currency to U.S. dollars using fiscal year-
end exchange rates, income and expense accounts are translated at the average rates in effect during the fiscal year and
equity accounts are translated at historical rates. The resulting translation adjustment is reported in the statements of
comprehensive income and recorded as part of accumulated other comprehensive income ("AOCI").
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Derivative Instruments
The Company designates certain derivative instruments as hedges for purposes of hedge accounting, as defined under
ASC 815 “Derivatives and Hedging.” For such derivative instruments, the Company documents its risk management
objectives and strategy for undertaking hedging transactions, as well as all relationships between hedging and hedged
risks. The Company's derivative instruments designated for hedge accounting include interest rate swaps and foreign
currency forward and option contracts. Changes in the fair value measurements of these derivative instruments are
reflected as adjustments to other comprehensive income and subsequently reclassified into earnings in the period during
which the hedged transactions occurred. Any ineffectiveness or excluded portion of a designated hedge is recognized in
earnings.
The Company also has entered into certain net investment hedges. Changes in the fair value of net investment hedges
are recorded in the currency translation adjustment section of other comprehensive income and subsequently reclassified
into earnings in the period the hedged item affects earnings. The Company excludes forward points from the effectiveness
assessment of its net investment hedges. Changes in fair value of the excluded component are recognized in earnings.
The derivative instruments not designated as hedges for purposes of hedge accounting include total return swaps and
certain short-term foreign currency forward contracts. These instruments are recorded at their respective fair values and
the change in their value is reported in current period earnings. The Company does not use derivative instruments for
trading or speculative purpose. The Company reports the effective portion of its cash flow hedges in the same financial
statement line item as changes in the fair value of the hedged item. All cash flows associated with the Company's
derivative instruments are classified as operating activities in the statements of cash flows.
Recently Adopted Accounting Pronouncements
During fiscal 2021, DXC adopted the following Accounting Standards Updates ("ASU") issued by the Financial Accounting
Standards Board:
Description
Impact
This update requires the measurement and
recognition of expected credit losses using the
current expected credit loss model for financial
assets held at amortized cost, which includes the
Company’s trade accounts receivable, certain
financial instruments and contract assets. It
replaces the existing incurred loss impairment
model with an expected loss methodology. The
recorded credit losses are adjusted each period
for changes in expected lifetime credit losses.
The standard requires a cumulative effect
adjustment to the statement of financial position
as of the beginning of the first reporting period in
which the guidance is effective.
This update helps 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 the modified
retrospective approach and recorded an immaterial
cumulative effect adjustment in retained earnings as of
April 1, 2020.
The Company adopted this standard using the prospective
method and determined that the adoption of ASU 2018-15
had no material impact to its condensed consolidated
financial statements.
Date Adopted
and Method
April 1, 2020
Modified
retrospective
April 1, 2020
Prospective
Date Issued and
ASU
June 2016
ASU 2016-13,
“Financial
Instruments - Credit
Losses (Topic 326):
Measurement of
Credit Losses on
Financial
Instruments”
August 2018
ASU 2018-15,
"Intangibles -
Goodwill and Other
- Internal-Use
Software (Subtopic
350-40):
Customer’s
Accounting for
Implementation
Costs Incurred in a
Cloud Computing
Arrangement That
Is a Service
Contract"
85
New Accounting Pronouncements:
The following ASUs were recently issued but have not yet been adopted by DXC:
Date Issued and ASU
December 2019
DXC Effective Date
Fiscal 2022
ASU 2019-12, "Income
Taxes (Topic 740):
Simplifying the
Accounting for Income
Taxes"
Description
This update is intended to simplify 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.
Impact
DXC has evaluated the impact of adopting
ASU 2019-12 and determined that the
adoption will be immaterial to the
consolidated financial statements.
Other recently issued ASUs effective after March 31, 2021 are not expected to have a material effect on DXC's
consolidated financial statements.
Note 2 - Acquisitions
Fiscal 2021 Acquisitions
AXA Bank Germany Acquisition
On January 1, 2021, DXC completed its acquisition of AXA Bank Germany ("AXA Bank"), a German retail bank, from AXA
Group for the total consideration of $101 million. In connection with its acquisition of AXA Bank, DXC received cash of
$294 million which includes customer deposit liabilities totaling $197 million. DXC recorded goodwill associated with the
acquisition of AXA Bank totaling $2 million.
Fiscal 2020 Acquisitions
Luxoft Acquisition
On June 14, 2019, DXC completed the acquisition of Luxoft, a digital service provider whose offerings encompass
strategic consulting, custom software development services, and digital solution engineering for total consideration of $2.0
billion. The acquisition will combine Luxoft’s digital engineering capabilities with DXC’s expertise in IT modernization and
integration. The purchase agreement (“Merger Agreement”) was entered into by DXC and Luxoft on January 6, 2019 and
the transaction was closed on June 14, 2019.
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.
86
The Company's allocation of the purchase price to the assets acquired and liabilities assumed as of the Luxoft acquisition
date is as follows:
(in millions)
Cash and cash equivalents
Accounts receivable
Other current assets
Total current assets
Property and equipment
Intangible assets
Other assets
Total assets acquired
Accounts payable, accrued payroll, accrued expenses, and other current liabilities
Deferred revenue
Long-term deferred tax liabilities and income tax payable
Other liabilities
Total liabilities assumed
Net identifiable assets acquired
Goodwill
Total consideration transferred
Fair Value
113
233
15
361
31
577
99
1,068
(121)
(8)
(106)
(72)
(307)
761
1,262
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 GBS and is not deductible for tax purposes.
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 fair
value based on a cost plus margin approach. The Company valued acquired property and equipment using predominately
the direct capitalization method of the income approach and in certain specific cases, the Company determined that the
net book value represents the fair value. The Company valued customer relationships using the multi-period excess
earnings method under the income approach and valued trade names and developed technology using a relief from
royalty method under the income approach. The Company determined that the net book value of the purchased software
represents the fair value.
Below are the estimated useful lives of the acquired intangibles:
Customer related intangibles
Trade names
Developed technology
Third-party purchased software
Estimated
Useful Lives
(Years)
10
20
3
3
The Company 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.
87
Results of Operations
The Company's statement of operations includes the following revenues and net income attributable to Luxoft since the
acquisition date:
(in millions)
Revenues
Net income (loss)
Twelve Months Ended
March 31, 2020(1)
$
$
695
(25)
(1) Results for the fiscal year ended March 31, 2020 reflect operations subsequent to the acquisition date of June 14, 2019, not the full twelve
months of fiscal 2020.
Fiscal 2019 Acquisitions
Molina Medicaid Solutions Acquisition(1)
On October 1, 2018, DXC completed its acquisition of Molina Medicaid Solutions ("MMS"), a Medicaid Management
Information Systems business, from Molina Healthcare, Inc. for the 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 for the MMS was allocated to assets acquired and liabilities assumed based upon the current
determination of fair values at the date of acquisition as follows: $87 million to current assets, $112 million to intangible
assets other than goodwill, $11 million to other assets, $51 million to current liabilities, $18 million to other liabilities
and $92 million to goodwill. The goodwill is associated with the Company's 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.
(1) MMS was sold as part of the HHS Sale discussed in Note 3 - "Divestitures."
Other Acquisitions
In addition to the MMS acquisition, DXC completed seven 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 for the GBS segment. The purchase consideration of $228 million included cash of $187 million and contingent
consideration with an estimated fair value of $41 million. The purchase price was allocated to assets acquired and
liabilities assumed based upon determination of fair values at the dates of acquisition as follows: $73 million to current
assets, $71 million to intangible assets other than goodwill, $10 million to other non-current assets, $63 million to current
liabilities and $137 million to goodwill. The goodwill is associated with the Company's GBS segment some of which is tax
deductible.
88
Note 3 - Divestitures
Fiscal 2021 Divestitures
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 for a total enterprise value of $5.0 billion
(including $85 million related to future services to be provided by the Company). As part of the sale of the HHS business,
$272 million of repurchased receivables, previously sold under the Milano Receivables Facility ("Milano Facility') (see
Note 6 - "Receivables" to the financial statements), $12 million of prepaid maintenance, and $48 million of software
licenses were transferred to the HHS Business. DXC made payment for these assets during the third quarter of fiscal
2021. The repurchase of receivables and payment on prepaid maintenance are reported as operating cash outflows, and
the payment for software license is considered an investing cash outflow. The HHS Sale resulted in a pre-tax gain on sale
of $2,014 million, net of closing costs. The sale price is subject to adjustment based on changes in actual closing net
working capital. Final potential working capital adjustments are pending.
Approximately $3.5 billion of the sale proceeds were used to prepay $1,250 million of Revolver Credit Facility, £600 million
of GBP commercial paper (approximately $772 million), and the following term loan facilities: €350 million of Euro Term
Loan due fiscal 2024 (approximately $410 million), $381 million of USD Term loan due fiscal 2025, A$500 million of AUD
Term Loan due fiscal 2022 (approximately $358 million), and €250 million of Euro Term Loan due fiscal 2022 and 2023
(approximately $292 million). See Note 14 - "Debt" to the financial statements.
DXC's post-divestiture relationship with the HHS Business is governed by the Purchase Agreement, which provides for
the allocation of assets, employees, liabilities and obligations (including property, employee benefits, litigation, and tax-
related assets and liabilities) between DXC and the HHS Business attributable to periods prior to, at and after the
divestment. In addition, DXC and the HHS Business have service and commercial contracts that generally extend through
fiscal 2023.
The divestment of the HHS Business, reported as part of the GBS segment, did not meet the requirements for
presentation as discontinued operations as it did not represent a strategic shift that would have a major effect on DXC's
operations and financial results and was included in income from continuing operations prior to its divestment.
89
The following is a summary of the assets and liabilities distributed as part of the HHS Sale on October 1, 2020:
(in millions)
Assets:
Cash and cash equivalents
Accounts receivable, net
Prepaid expenses
Other current assets
Total current assets
Intangible assets, net
Operating right-of-use assets, net
Goodwill
Property and equipment, net
Other assets
Total non-current assets
Total assets
Liabilities:
Accounts payable
Accrued payroll and related costs
Current operating lease liabilities
Accrued expenses and other current liabilities
Deferred revenue and advance contract payments
Total current liabilities
Non-current deferred revenue
Long-term operating lease liabilities
Other long term liabilities
Total long-term liabilities
Total liabilities
As of October 1, 2020
$
$
$
$
8
295
39
2
344
1,308
74
1,354
46
54
2,836
3,180
79
13
27
36
20
175
32
48
2
82
257
During fiscal 2021, the Company sold some insignificant businesses that resulted in a loss of $10 million.
Fiscal 2019 Divestitures
Separation of USPS
During fiscal 2019, the Company completed the separation of its U.S. Public Sector business ("USPS") (the "Separation"),
and combination of USPS with Vencore Holding Corp. ("Vencore") and KeyPoint Government Solutions ("Keypoint") (the
"Mergers") to form Perspecta, an independent public company.
90
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 twelve months ended March 31, 2021 and March 31, 2020 include $31 million and $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.
91
The following is a summary of the assets and liabilities distributed as part of the Separation of USPS on May 31, 2018:
(in millions)
Assets:
Cash and cash equivalents
Receivables, net
Prepaid expenses
Other current assets
Total current assets of discontinued operations
Intangible assets, net(1)
Goodwill
Property and equipment, net
Other assets(1)
Total non-current assets of discontinued operations
Total assets
Liabilities:
Short-term debt and current maturities of long-term debt
Accounts payable
Accrued payroll and related costs
Accrued expenses and other current liabilities
Deferred revenue and advance contract payments
Income tax payable
Total current liabilities of discontinued operations
Long-term debt, net of current maturities
Non-current deferred revenue
Non-current income tax liabilities and deferred tax liabilities
Other long-term liabilities
Total long-term liabilities of discontinued operations
Total liabilities
As of May 31,
2018
95
458
82
35
670
870
2,029
294
169
3,362
4,032
161
165
17
358
53
18
772
1,320
5
196
71
1,592
2,364
$
$
$
$
(1) Previously reported amounts were adjusted to reflect the reclassification of transition and transformation contract costs from intangible
assets to other assets to conform to the current year presentation.
92
The following is a summary of the operating results of USPS which have been reflected within income from discontinued
operations, net of tax:
(in millions)
Revenue
Costs of services
Selling, general and administrative
Depreciation and amortization
Restructuring costs
Interest expense
Other (income) expense, net
Total costs and expenses
Total income from discontinued operations, before income taxes
Income tax expense
Total income from discontinued operations
Fiscal Year Ended
March 31, 2019 (1)
$
$
431
311
50
33
1
8
(25)
378
53
18
35
(1) Results for the fiscal year ended March 31, 2019 reflect operations through the Separation date of May 31, 2018, not the full twelve-month period
as shown for the prior period.
There was no 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)
Depreciation
Amortization
Capital expenditures
Significant operating non-cash items:
Gain on dispositions
Fiscal Year Ended
March 31, 2019 (1)
$
$
$
$
16
17
—
24
(1) Results for the fiscal year ended March 31, 2019 reflect operations through the Separation date of May 31, 2018, not the full twelve-month period
as shown for the prior period.
Note 4 - Assets Held for Sale
On July 17, 2020, DXC entered into a purchase agreement to sell (the "HPS Sale") its healthcare software business
("HPS" or the "HPS Business") to Dedalus Holding S.p.A. ("Dedalus") for €462 million (approximately $543 million), which
includes €10 million (approximately $12 million) related to future services to be provided by the Company. Final
consideration for the HPS Sale is subject to certain adjustments. The transaction closed on April 1, 2021. See Note 24 -
"Subsequent Events."
As of March 31, 2021, the disposition of the HPS Business, reported as part of the GBS segment, met the requirements
for presentation as assets held for sale under GAAP.
In addition, as of March 31, 2021, the Company entered into a definitive agreements to sell insignificant businesses, which
were also classified as held for sale.
93
Assets held for sale are reported at carrying value, which is less than fair value. Assets held for sale and related liabilities
as of March 31, 2021 were as follows:
(in millions)
Assets:
Cash and cash equivalents
Accounts receivable, net
Prepaid expenses
Other current assets
Total current assets held for sale
Intangible assets, net
Operating right-of-use assets, net
Goodwill
Deferred income taxes, net
Property and equipment, net
Other assets
Total non-current assets held for sale
Total assets held for sale
Liabilities:
Accounts payable
Accrued payroll and related costs
Current operating lease liabilities
Accrued expenses and other current liabilities
Deferred revenue and advance contract
payments
Total current liabilities related to assets
held for sale
Non-current deferred revenue
Long-term operating lease liabilities
Income tax liabilities and deferred tax liabilities
Other long term liabilities
Total long-term liabilities related to assets
held for sale
HPS Business
Other
Total
$
28 $
35 $
64
6
—
98
101
5
80
43
4
16
17
5
5
62
16
18
9
—
52
9
$
$
249
347 $
104
166 $
4 $
8 $
7
2
13
46
72
10
3
1
3
17
2
17
13
6
46
—
1
—
2
3
Total liabilities related to assets held for sale
$
89 $
49 $
63
81
11
5
160
117
23
89
43
56
25
353
513
12
9
19
26
52
118
10
4
1
5
20
138
94
Note 5 - Earnings (Loss) Per Share
Basic EPS are computed using the weighted average number of common shares outstanding during the period. Diluted
EPS reflect the incremental shares issuable upon the assumed exercise of stock options and equity awards. The following
table reflects the calculation of basic and diluted EPS:
(in millions, except per-share amounts)
March 31, 2021 March 31, 2020 March 31, 2019
Fiscal Years Ended
Net (loss) income attributable to DXC common shareholders:
From continuing operations
From discontinued operations
Common share information:
Weighted average common shares outstanding for basic EPS
Dilutive effect of stock options and equity awards
Weighted average common shares outstanding for diluted EPS
EPS:
Basic
Continuing operations
Discontinued operations
Total
Diluted
Continuing operations
Discontinued operations
Total
$
$
$
$
$
$
(149) $
(5,369) $
—
—
)
(149) $
(
(
(5,369) $
)
254.14
—
254.14
258.57
—
258.57
(0.59) $
(20.76) $
—
—
)
(0.59) $
(
(
(20.76) $
)
(0.59) $
(20.76) $
—
—
)
(0.59) $
(
(
(20.76) $
)
1,222
35
1,257
277.54
3.89
281.43
4.40
0.13
4.53
4.35
0.12
4.47
Certain share based equity awards were excluded from the computation of dilutive EPS because inclusion of these
awards would have had an anti-dilutive effect. The following table reflects awards excluded:
Stock Options
RSUs
PSUs
March 31, 2021(1)
Fiscal Years Ended
March 31, 2020(1)
March 31, 2019
1,596,985
2,768,022
1,463,872
1,075,901
2,029,567
289,972
—
46,051
25,086
(1) Due to the Company's net loss during fiscal 2021 and fiscal 2020, stock options, RSUs and PSUs were excluded from the computation of dilutive
EPS because they would have had an anti-dilutive effect.
95
Note 6 - Receivables
Receivables, net of allowance for doubtful accounts consist of the following:
(in millions)
Billed trade receivables
Unbilled receivables
Other receivables
Total
As of
March 31, 2021 March 31, 2020
$
$
2,009
$
1,214
933
4,156
$
2,094
1,419
879
4,392
The Company calculates expected credit losses for trade accounts receivable based on historical credit loss rates for
each aging category as adjusted for the current market conditions and forecasts about future economic conditions. The
following table presents the activity in allowances against trade accounts receivables:
(in millions)
Beginning balance
Impact of adoption of the Credit Loss Standard
Provisions for losses on accounts receivable
Other adjustments to allowance and write-off's
Ending balance
Receivables Facility
As of and for Fiscal Years Ended
March 31, 2021 March 31, 2020
$
$
74
$
4
53
(40)
91
$
60
—
3
11
74
The Company has an accounts receivable sales facility (as amended, restated, supplemented or otherwise modified as of
March 31, 2021, 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, certain of the Company subsidiaries
(the "Sellers") sell accounts receivable to DXC Receivables LLC ("Receivables SPV"), a wholly 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 2021,
Receivables SPV amended the Receivables Facility (the "Amendment") to decrease the investment limit from $600 million
to $500 million and extend the termination date to August 5, 2021. For the fiscal year ended March 31, 2021, there is no
deferred purchase price ("DPP") for receivables as the entire purchase price is paid in cash when the receivables are sold
to the Purchasers. DPPs 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 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 March 31, 2021, the total
availability under the Receivables Facility was $350 million and the amount sold to the Purchasers was $390 million,
which was derecognized from the Company's balance sheet. As of March 31, 2021, the Company recorded a $40 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 is scheduled to terminate on August 5, 2021, but
provides for one or more optional one-year extensions, if agreed to by the Purchasers. The Company uses the proceeds
from Receivables SPV's 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, no gain or
loss on sale of receivables was recorded.
96
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 balances of the DPP:
(in millions)
Beginning balance
Transfers of receivables
Collections
Change in funding availability
Facility amendments
Ending balance
Milano Receivables Facility
As of and for the
Fiscal Year Ended
March 31, 2020
$
$
574
1,214
(1,265)
2
(525)
—
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 3 - "Divestitures."
German Receivables Facility
On October 1, 2019, DXC executed an accounts receivable securitization facility (as amended, restated, supplemented or
otherwise modified as of March 31, 2021, 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 an
investment limit of €150 million (approximately $175 million as of March 31, 2021). 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 ("DE
Amendment"). Under the terms of the amended 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 DE 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 DE Amendment was executed. Upon execution of the DE Amendment, the DE Purchasers
extinguished the DPP balance and returned title to the applicable underlying receivables to DE Receivables SPV. The
DPP extinguishment was classified as a non-cash investing activity, please refer to Note 18 - "Cash Flows."
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 March 31, 2021,
the total availability under the DE Receivables Facility was approximately $117 million, and the amount sold to DE
Purchasers was $114 million, which was derecognized from the Company's balance sheet. As of March 31, 2021, the
Company recorded a $3 million receivable within accounts receivable because the amount of cash proceeds received by
the Company under the DE Receivables Facility was less than the total availability. The DE Receivables Facility is
scheduled to terminate on September 30, 2021, but provides for one or more optional one-year extensions, if agreed to by
the DE Purchasers. The Company uses the proceeds from DE Receivables SPV's sale of receivables under the DE
Receivables Facility for general corporate purposes.
The fair value of the sold receivables approximated book value due to the short-term nature, and as a result, no gain or
loss on sale of receivables was recorded.
97
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:
(in millions)
Beginning balance
Transfers of receivables
Collections
Change in funding availability
Facility amendments
Ending balance
As of March 31, 2021
As of March 31, 2020
$
$
103 $
417
(420)
2
(102)
— $
—
996
(879)
(14)
—
103
98
Note 7 - Leases
The Company has operating and finance leases for data centers, corporate offices and certain equipment. Our leases
have remaining lease terms of one to 12 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 one to three years.
The components of lease expense were as follows:
(in millions)
Operating lease cost
Short-term lease cost
Variable lease cost
Sublease income
Total operating costs
Finance lease cost:
Amortization of right-of-use assets
Interest on lease liabilities
Total finance lease cost
For the Fiscal Year Ended
March 31, 2021
March 31, 2020
616
53
56
(40)
685
433
45
478
$
$
$
$
698
49
46
(45)
748
405
65
470
$
$
$
$
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 18 - "Cash
Flows."
(in millions)
Cash paid for amounts included in the measurement of:
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
For the Fiscal Year Ended
March 31, 2021
March 31, 2020
$
$
$
616 $
45 $
584 $
698
65
576
99
Supplemental Balance Sheet information related to leases was as follows:
(in millions)
Assets:
Balance Sheet Line Item
March 31, 2021
March 31, 2020
As of
ROU operating lease assets
ROU finance lease assets
Operating right-of-use assets, net
Property and Equipment, net
Total
Liabilities:
Current
Operating lease
Finance lease
Total
Non-current
Operating lease
Finance lease
Total
Current operating lease liabilities
Short-term debt and current maturities
of long-term debt
Non-current operating lease liabilities
Long-term debt, net of current
maturities
$
$
$
$
$
$
1,366
834
2,200
$
$
$
418
$
398
816
$
1,038
$
496
1,534
$
1,428
1,220
2,648
482
444
926
1,063
602
1,665
The following table provides information on the weighted average remaining lease term and weighted average discount
rate for operating and finance leases:
Weighted average remaining lease term:
Operating leases
Finance leases
Weighted average remaining discount rate:
Operating leases
Finance leases
As of
March 31, 2021
March 31, 2020
Years
4.9
2.6
Rate
3.8 %
3.6 %
4.8
2.7
4.0 %
6.4 %
100
The following maturity analysis presents expected undiscounted cash payments for operating and finance leases on an
annual basis as of March 31, 2021:
Fiscal year
(in millions)
2022
2023
2024
2025
2026
Thereafter
Total lease payments
Less: imputed interest
Total payments
Operating Leases
Real Estate
Equipment
Finance Leases
$
411 $
41 $
335
260
190
108
207
1,511
135
23
11
5
2
1
83
3
$
1,376 $
80 $
418
290
152
59
14
—
933
39
894
101
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 15 - "Pension and Other Benefit Plans" and Note
9 - "Derivative Instruments" for information about these excluded assets and liabilities. There were no transfers between
any of the levels during the periods presented.
(in millions)
Assets:
Money market funds and money market deposit accounts
Time deposits(1)
Other securities(2)
Total assets
Liabilities:
Contingent consideration
Total liabilities
(in millions)
Assets:
Money market funds and money market deposit accounts
Time deposits(1)
Other debt securities(2)
Deferred purchase price receivable
Total assets
Liabilities:
Contingent consideration
Total Liabilities
Fair Value Hierarchy
As of March 31, 2021
Fair Value
Level 1
Level 2
Level 3
$
$
$
$
$
$
$
$
12
78
57
147
27
27
Fair Value
156
595
51
103
905
46
46
$
$
$
$
$
$
$
$
12
78
—
90
$
$
— $
— $
— $
—
55
55
$
— $
— $
—
—
2
2
27
27
As of March 31, 2020
Level 1
Level 2
Level 3
156
595
—
—
751
$
$
— $
— $
— $
—
48
—
48
$
— $
— $
—
—
3
103
106
46
46
(1) Cost basis approximated fair value due to the short period of time to maturity.
(2) Other securities include available-for-sale equity security investments with Level 2 inputs that have a cost basis of $57 million and $37 million,
and (losses)/gains of $(2) million and $11 million, as of March 31, 2021 and March 31, 2020, respectively, included in other expense (income),
net in the Company’s statements of operations. During the third quarter of fiscal 2021, previously held investments were sold and the proceeds
were used to purchase new investments. The gain of $17 million from the sale was included in other expense (income), net.
102
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 securities
included in other long-term assets is based on actual market prices. The fair value of the DPPs included in receivables,
net is determined by calculating the expected amount of cash to be received and is principally based on unobservable
inputs consisting primarily of the face amount of the receivables adjusted for anticipated credit losses. The fair value of
contingent consideration included in other liabilities is based on contractually defined targets of financial performance in
connection with earn-outs and other considerations.
Other Fair Value Disclosures
The carrying amounts of the Company’s financial instruments with short-term maturities, primarily accounts receivable,
accounts payable, short-term debt, and financial liabilities included in other accrued liabilities approximate their market
values due to their short-term nature. If measured at fair value, these financial instruments would be classified as Level 2
or Level 3 within the fair value hierarchy.
The Company estimates the fair value of its long-term debt primarily by using quoted prices obtained from third-party
providers such as Bloomberg and by using an expected present value technique 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 $4.7 billion and $8.2 billion as of March 31, 2021 and March 31, 2020,
respectively as compared with the carrying value of $4.4 billion and $8.4 billion as of March 31, 2021 and March 31, 2020,
respectively. If measured at fair value, long-term debt excluding finance lease liabilities would be classified as Level 1 or
Level 2 within 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 as Level 3 within the fair value hierarchy. Other than the goodwill
impairment losses discussed in Note 12 - "Goodwill," there were no significant impairments recorded during the fiscal
periods covered by this report.
Note 9 - Derivative Instruments
In the normal course of business, the Company is exposed to interest rate and foreign exchange rate fluctuations. As part
of its risk management strategy, the Company uses derivative instruments, primarily foreign currency forward contracts
and interest rate swaps, to hedge certain foreign currency and interest rate exposures. The Company’s objective is to
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.
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-denominated intercompany obligations and forecasted
transactions. The notional amounts of foreign currency forward contracts designated as cash flow hedges as of March 31,
2021 and March 31, 2020 was $546 million and $455 million, respectively. As of March 31, 2021, the related forecasted
transactions extend through March 2023.
For the fiscal years ended March 31, 2021 and March 31, 2020, the Company performed an assessment at the inception
of the cash flow hedge transactions and determined all critical terms of the hedging instruments and hedged items
matched. The Company performs an assessment of critical terms on an on-going basis throughout the hedging period.
During the fiscal years ended March 31, 2021 and March 31, 2020, the Company had no cash flow hedges for which it
was probable that the hedged transaction would not occur. As of March 31, 2021, $3 million of the existing amount of gain
related to the cash flow hedge reported in AOCI is expected to be reclassified into earnings within the next 12 months.
103
Amounts recognized in other comprehensive income (loss) and income (loss) from continuing operations
The pre-tax gain (loss) on derivatives designated for hedge accounting recognized in other comprehensive income (loss)
was $19 million and in income (loss) from continuing operations was $(5) million during the fiscal year ended March 31,
2021.
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.
Foreign currency forward contracts
The Company manages the exposure to fluctuations in foreign currencies by using foreign currency forward contracts to
hedge certain foreign currency denominated assets and liabilities, including intercompany accounts and forecasted
transactions. The notional amount of the foreign currency forward contracts outstanding as of March 31, 2021 and
March 31, 2020 was $2.1 billion and $2.2 billion, respectively.
The following table presents the pretax amounts impacting income related to designated and non-designated foreign
currency forward contracts:
(in millions)
Statement of Operations Line Item March 31, 2021 March 31, 2020 March 31, 2019
Foreign currency forward contracts Other expense (income), net
$
51
$
(37) $
16
Fiscal Years Ended
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 Item
March 31, 2021
March 31, 2020
Derivatives designated for hedge accounting:
Foreign currency forward contracts
Other current assets
Total fair value of derivatives designated for hedge accounting
Derivatives not designated for hedge accounting:
Foreign currency forward contracts
Other current assets
Total fair value of derivatives not designated for hedge accounting
$
$
$
9
9
3
3
$
$
$
—
—
16
16
104
Derivative Liabilities
As of
(in millions)
Balance Sheet Line Item
March 31, 2021
March 31, 2020
Derivatives designated for hedge accounting:
Foreign currency forward contracts
Accrued expenses and other current
liabilities
Total fair value of derivatives designated for hedge accounting:
Derivatives not designated for hedge accounting:
Foreign currency forward contracts
Accrued expenses and other current
liabilities
Total fair value of derivatives not designated for hedge accounting
$
$
$
$
5
5
3
3
$
$
$
$
20
20
12
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.
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 March 31, 2021, there were five counterparties with concentration of credit risk,
and based on gross fair value, the maximum amount of loss that the Company could incur is not material.
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 denominated debt designated as a hedge, the
effectiveness of the hedge is assessed based on changes in spot rates. For qualifying net investment hedges, all gains or
losses on the hedging instruments are included in currency translation. Gains or losses on individual net investments in
non-U.S. operations are reclassified to earnings from accumulated other comprehensive income (loss) when such net
investments are sold or substantially liquidated.
As of March 31, 2021, DXC had $0.8 billion of foreign currency-denominated debt designated as hedges of net
investments in non-U.S. subsidiaries. For the fiscal year ended March 31, 2021, the pre-tax impact of gain (loss) on
foreign currency-denominated debt designated for hedge accounting recognized in other comprehensive income (loss)
was $(93) million. As of March 31, 2020, DXC had $1.9 billion of foreign currency-denominated debt designated as
hedges of net investments in non-U.S. subsidiaries.
105
Note 10 - Property and Equipment
Property and equipment consisted of the following:
(in millions)
Property and equipment — gross:
Land, buildings and leasehold improvements
Computers and related equipment
Furniture and other equipment
Construction in progress
Less: accumulated depreciation
Property and equipment, net
As of
March 31, 2021 March 31, 2020
$
2,228 $
4,596
227
16
7,067
4,121
$
2,946 $
2,233
4,876
226
30
7,365
3,818
3,547
Depreciation expense for fiscal 2021, 2020 and 2019 was $754 million, $643 million and $820 million, respectively.
106
Note 11 - Intangible Assets
Intangible assets consisted of the following:
(in millions)
Software
Customer related intangible assets
Other intangible assets
Total intangible assets
(in millions)
Software
Customer related intangible assets
Other intangible assets
Total intangible assets
Gross Carrying
Value
As of March 31, 2021
Accumulated
Amortization
Net Carrying
Value
$
$
4,014
4,212
239
8,465
$
$
2,733
1,641
48
4,422
$
$
1,281
2,571
191
4,043
Gross Carrying
Value
As of March 31, 2020
Accumulated
Amortization
Net Carrying
Value
$
$
4,048
5,795
235
10,078
$
$
2,614
1,697
36
4,347
$
$
1,434
4,098
199
5,731
Fiscal Years Ended
March 31, 2020
1,019
280
1,299
$
$
March 31, 2019
890
258
1,148
$
$
(in millions)
837
755
669
554
505
$
$
$
$
$
The components of amortization expense were as follows:
(in millions)
Intangible asset amortization
Transition and transformation contract cost amortization(1)
Total amortization expense
March 31, 2021
952
264
1,216
$
$
(1) Transition and transformation contract costs are included within other assets on the balance sheet.
Estimated future amortization as of March 31, 2021 is as follows:
Fiscal Year
2022
2023
2024
2025
2026
107
Note 12 - Goodwill
The following tables summarize the changes in the carrying amounts of goodwill, by segment, for the fiscal years ended
March 31, 2021 and March 31, 2020, respectively:
(in millions)
GBS
GIS
Total
Balance as of March 31, 2020, net
$
2,017
$
— $
2,017
Acquisition related adjustments
Divestitures
Assets held for sale
Foreign currency translation
Goodwill, gross
Accumulated impairment losses
Balance as of March 31, 2021, net
(in millions)
Balance as of March 31, 2019, net
Acquisitions
Impairment Losses
Foreign currency translation
Goodwill, gross
Accumulated impairment losses
Balance as of March 31, 2020, net
15
(1,355)
(90)
54
5,131
(4,490)
—
—
—
—
5,066
(5,066)
$
641
$
— $
15
(1,355)
(90)
54
10,197
(9,556)
641
GBS
GIS
Total
4,599
3,007
7,606
1,288
(3,789)
(81)
6,507
(4,490)
70
(3,005)
(72)
5,066
(5,066)
$
2,017
$
— $
1,358
(6,794)
(153)
11,573
(9,556)
2,017
The fiscal 2021 and 2020 additions to goodwill were due to the acquisitions described in Note 2 - "Acquisitions," including
goodwill of some insignificant acquisitions. The foreign currency translation amount reflects the impact of currency
movements on non-U.S. dollar-denominated goodwill balances.
Goodwill Impairment Analyses
Fiscal 2021
The Company’s annual goodwill impairment analysis, which was performed qualitatively as of July 1, 2020, did not result
in an impairment charge. At the end of the fiscal 2021, the Company assessed whether there were events or changes in
circumstances that would more likely than not reduce the fair value of any of its reporting units below its carrying amount
and require goodwill to be tested for impairment. The Company determined that there have been no such indicators, and,
therefore, it was unnecessary to perform an interim goodwill impairment test as of March 31, 2021.
108
Fiscal 2020
The Company performed its annual goodwill impairment assessment as of July 1, 2019. Subsequent to the measurement
date, the Company experienced a decline in its stock price and market capitalization that represented an indicator of
impairment as the observed declines were substantial and sustained. As a result, the Company performed quantitative
goodwill impairment tests during the second and fourth quarters of fiscal 2020. Both quantitative goodwill impairment tests
were performed for all of DXC's reporting units, consistent with its policy described in Note 1 - "Summary of Significant
Accounting Policies.” As part of the reconciliation to the Company’s market capitalization, the Company concluded on both
instances that the carrying values of its reporting units exceeded their estimated fair values and recognized total non-cash
impairment charges of $6,794 million, consisting of $3,789 million and $3,005 million in its GBS and GIS segments,
respectively. The goodwill impairment charges do not have an impact on the calculation of the Company's financial
covenants under the Company's debt arrangements.
Fiscal 2019
The Company’s annual goodwill impairment analysis, which was performed as of July 1, 2018, did not result in an
impairment charge. At the end of fiscal 2019, the Company assessed whether there were events or changes in
circumstances that would more likely than not reduce the fair value of any of its reporting units below its carrying amount
and require goodwill to be tested for impairment. The Company determined that there have been no such indicators and
therefore, it was unnecessary to perform an interim goodwill impairment test as of March 31, 2019.
109
Note 13 - Income Taxes
The sources of income (loss) from continuing operations, before income taxes, classified between domestic entities and
those entities domiciled outside of the United States, are as follows:
(in millions)
Domestic entities
Entities outside the United States
Total
Fiscal Years Ended
March 31, 2021 March 31, 2020 March 31, 2019
$
$
975
$
(321)
654
$
(2,928) $
(2,300)
(5,228) $
511
1,004
1,515
The income tax expense (benefit) on income (loss) from continuing operations is comprised of:
(in millions)
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Fiscal Years Ended
March 31, 2021 March 31, 2020 March 31, 2019
$
730
257
216
1,203
(221)
(51)
(131)
(403)
$
3
$
16
167
186
(125)
17
52
(56)
(50)
42
218
210
95
23
(40)
78
288
Total income tax expense
$
800
$
130
$
The current federal (benefit) and tax expense for fiscal years 2021, 2020, and 2019 includes a $(4) million transition tax
benefit, $(31) million transition tax benefit and $(44) million transition tax benefit, respectively. The current expense for
fiscal years 2021, 2020 and 2019, includes interest and penalties of $2 million, $2 million and $1 million, respectively, for
uncertain tax positions.
In connection with the HPES 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 $34 million tax indemnification
receivable related to uncertain tax positions, $70 million of tax indemnification receivable related to other tax payables and
$118 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 USPS
Separation. Income tax liabilities transferred to Perspecta primarily relate to pre-HPES Merger periods, for which the
Company is indemnified by HPE pursuant to the tax matters agreement between the Company and HPE. The Company
remains liable to HPE for tax receivables and refunds which it receives from Perspecta related to pre-HPES Merger
periods that were transferred to Perspecta. Pursuant to the tax matters agreement, the Company has recorded a tax
indemnification receivable from Perspecta of $72 million and a tax indemnification payable to Perspecta of $33 million
related to income tax and other tax liabilities.
110
The major elements contributing to the difference between the U.S. federal statutory tax rate and the effective tax rate
("ETR") for continuing operations is below.
Statutory rate
State income tax, net of federal tax
Foreign tax rate differential
Goodwill impairment
Change in valuation allowances
Income Tax and Foreign Tax Credits
Arbitration Award
Change in uncertain tax positions
Withholding Taxes
U.S. Tax on Foreign Income
Excess tax benefits or expense for stock compensation
Capitalized transaction costs
United States Tax Reform
Change in Indefinite Reinvestment Assertion
Impact of Business Divestitures
Granite Trust Capital Loss
Other items, net
Effective tax rate
In fiscal 2021, the ETR was primarily impacted by:
Fiscal Years Ended
March 31, 2021 March 31, 2020 March 31, 2019
21.0 %
10.8
(198.4)
—
239.3
(48.7)
—
17.2
10.3
17.6
2.2
0.5
(0.7)
—
52.6
(5.7)
4.3
(21.0)%
(1.4)
(11.9)
28.3
12.1
(2.6)
(3.6)
1.1
0.9
0.4
0.1
0.1
(0.7)
—
—
—
0.7
21.0 %
3.2
(18.4)
—
16.9
(0.6)
—
(1.5)
3.5
2.4
(1.1)
0.1
(3.4)
(3.1)
—
—
—
122.3 %
2.5 %
19.0 %
•
•
•
•
•
Impact of the HHS and other business divestitures, which increased tax expense and increased the ETR $344
million and 52.6%, respectively. The HHS tax gain increased tax expense and the ETR as the tax basis of assets
sold, primarily goodwill, was lower than the book basis.
Continued losses in countries where we are recording a valuation allowance on certain deferred tax assets,
primarily in Belgium, Denmark, Italy, France, Luxembourg, and U.S., and an impairment of the full German
deferred tax asset, which increased income tax expense and increased the ETR by $1,565 million and 239.3%,
respectively.
An increase in Income Tax and Foreign Tax Credits, which decreased income tax expense and decreased the
ETR by $319 million and 48.7%, respectively.
Local losses on investments in Luxembourg that increased the foreign rate differential and decreased the ETR by
$1,226 million and 187.5%, respectively, with an offsetting increase in the ETR due to an increase in the valuation
allowance of the same amount.
The Company recognized adjustments to uncertain tax positions that increased the overall income tax expense
and the ETR by $112 million and 17.2% respectively.
111
In fiscal 2020, the ETR was primarily impacted by:
•
•
•
•
•
Non-deductible goodwill impairment charge, which increased tax expense and increased the ETR by $1,482
million and 28.3%, respectively.
Non-taxable gain on the arbitration award, which decreased income tax expense and decreased the ETR by $186
million and 3.6%, respectively.
A change in the net valuation allowance on certain deferred tax assets, primarily in Australia, Brazil, China,
Luxembourg, and Singapore, which increased income tax expense and increased the ETR by $631 million and
12.1%, respectively.
An increase in Income Tax and Foreign Tax Credits, primarily relating to research and development credits
recognized for prior years, which decreased income tax expense and decreased the ETR by $135 million and
2.6%, respectively.
Local losses on investments in Luxembourg that increased the foreign rate differential and decreased the ETR by
$637 million and 12.2%, respectively, with an offsetting increase in the ETR due to an increase in the valuation
allowance of the same amount.
In fiscal 2019, the ETR was primarily impacted by:
•
•
•
Local tax losses on investments in Luxembourg that decreased the foreign tax rate differential and decreased the
ETR by $360 million and 23.7%, respectively, with an offsetting increase in the ETR due to an increase in the
valuation allowance of the same amount.
A change in the net valuation allowance on certain deferred tax assets, primarily in Luxembourg, Germany, Spain,
U.K., and Switzerland, which increased income tax expense and increased the ETR by $256 million and 16.9%,
respectively.
A decrease in the transition tax liability and a change in tax accounting method for deferred revenue, which
decreased income tax expense and decreased the ETR by $66 million and 4.3%, respectively.
112
The deferred tax assets (liabilities) were as follows:
(in millions)
Deferred tax assets
Investment basis differences
Tax loss/credit carryforwards
Accrued interest
Operating lease liabilities
Contract accounting
Other assets
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities
Depreciation and amortization
Operating right-of-use asset
Investment basis differences
Employee benefits
Other liabilities
Total deferred tax liabilities
As of
March 31, 2021 March 31, 2020
$
32
$
4,039
20
359
92
351
4,893
(3,860)
1,033
(513)
(339)
—
(6)
(246)
(1,104)
—
2,516
12
370
126
144
3,168
(2,162)
1,006
(850)
(343)
(68)
(48)
(150)
(1,459)
Total net deferred tax assets (liabilities)
$
(71) $
(453)
Income tax related assets are included in the accompanying balance sheets as follows:
(in millions)
Current:
Income tax receivables and prepaid taxes
Non-current:
Income taxes receivable and prepaid taxes
Deferred tax assets
Total
As of
March 31, 2021 March 31, 2020
$
$
$
$
$
67
67
136
289
425
$
$
$
$
492
$
58
58
180
265
445
503
113
Income tax related liabilities are included in the accompanying balance sheet as follows:
(in millions)
Current:
Liability for uncertain tax positions
Income taxes payable
Non-current:
Deferred taxes
Income taxes payable
Liability for uncertain tax positions
Total
As of
March 31, 2021 March 31, 2020
$
$
$
$
(30) $
(368)
(398) $
(360)
(130)
(364)
(12)
(75)
(87)
(718)
(168)
(271)
(854) $
(1,157)
(1,252) $
(1,244)
Significant management judgment is required in determining the Company's provision for income taxes, deferred tax
assets and liabilities and any valuation allowance recorded against deferred tax assets. As of each reporting date,
management weighs new evidence, both positive and negative, that could affect its view of the future realization of its net
deferred tax assets. Objective verifiable evidence, which is historical in nature, carries more weight than subjective
evidence, which is forward looking in nature.
A valuation allowance has been recorded against deferred tax assets of approximately $3.9 billion as of March 31, 2021
due to uncertainties related to the ability to utilize these assets. In assessing whether its deferred tax assets are
realizable, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will
not be realized and adjusts the valuation allowance accordingly. The Company considers all available positive and
negative evidence including future reversals of existing taxable temporary differences, taxable income in prior carryback
years, projected future taxable income, tax planning strategies and recent financial operations.
As of March 31, 2021, our net deferred tax assets in certain German entities were primarily the result of net operating loss
carryforwards, pension deductions, assumed debt obligations and other miscellaneous accruals. In the current reporting
period, the Company has determined that the negative evidence, including an unadjusted cumulative loss, on-going
employee restructuring expenses for termination benefits and projected FY22 losses outweighed the positive evidence of
potential steady state profitability when removing one-time non-recurring charges. Therefore, the Company has had a
change in judgement and concluded that the deferred tax assets in certain DXC German entities are no longer realizable
and has recorded a valuation allowance of $175 million.
The net increase in the valuation allowance of $1,698 million in fiscal 2021, is primarily due to the local losses in
Luxembourg, Belgium, Denmark, Italy, France, Germany and U.S. of $1,565 million, balance sheet movement of $4
million, and an adjustment for currency translation of $129 million.
114
The following table provides information on the Company's various tax carryforwards:
As of March 31, 2021
As of March 31, 2020
With No
Expiration
With
Expiration
Expiration
Dates
Through
Total
With No
Expiration
With
Expiration
Expiration
Dates
Through
(in millions)
Total
Net operating loss
carryforwards
Federal
State
Foreign
Tax credit
carryforwards
Federal
State
Foreign
Capital loss
carryforwards
Federal
State
Foreign
$
$
$
$
$
$
$
$
$
132
369
16,700
$
$
$
128
6
6,191
$
$
$
4
363
10,509
5
$
— $
— $
— $
— $
45
$
— $
— $
— $
— $
— $
45
$
5
—
—
—
—
—
2033
2041
2041
2040
N/A
N/A
N/A
N/A
N/A
$
$
$
$
$
$
$
$
$
15
673
10,512
9
16
16
$
$
$
$
$
$
— $
— $
59
$
3
6
6,471
$
$
$
12
667
4,041
— $
7
$
— $
— $
— $
40
$
9
9
16
—
—
19
2033
2040
2040
2040
2039
2020
N/A
N/A
2023
With the following exceptions, the majority of our global unremitted foreign earnings have been taxed or would be exempt
from tax upon repatriation, except for the following earnings which are considered indefinitely reinvested: approximately
$522 million that could be taxable when repatriated to the U.S. under section 1.245A-5(b) of the final Treasury regulations
issued during fiscal 2021; and our accumulated earnings in India. A portion of these indefinitely reinvested earnings may
be subject to foreign and U.S. state tax consequences when remitted. The Company will continue to evaluate its position
in the future based on its future strategy and cash needs.
As a result of the confluence of multiple events occurring during fiscal 2021, including but not limited to a corporate
initiative to paydown debt and a recent change in India tax laws governing distributions, the Company distributed
approximately $550 million from its accumulated earnings in India. Although the distribution was subject to India
withholding taxes under the new India tax rules, the withholding taxes are creditable against U.S. federal income tax,
resulting in minimal to no net income tax impact. The distribution was not 100% of the cumulative earnings of its Indian
subsidiaries, and the Company considers the undistributed accumulated earnings in India indefinitely reinvested.
The Company accounts for income tax uncertainties in accordance with ASC 740 Income Taxes, which prescribes a
recognition threshold and measurement criteria for the financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements
only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing
authority that would have full knowledge of all relevant information. A tax position that meets the more likely than not
recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized
upon ultimate settlement. Tax positions that previously failed to meet the more likely than not recognition threshold should
be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax
positions that no longer meet the more likely than not recognition threshold should be derecognized in the first subsequent
financial reporting period in which that threshold is no longer met. ASC 740 also provides guidance on the accounting for
and disclosure of liabilities for uncertain tax positions, interest and penalties.
115
In accordance with ASC 740, the Company’s liability for uncertain tax positions was as follows:
(in millions)
Tax
Interest
Penalties
Offset to receivable
Net of tax attributes
Total
Fiscal Years Ended
March 31, 2021 March 31, 2020
$
$
354
$
46
22
(18)
(10)
394
$
253
45
21
(24)
(12)
283
The following table summarizes the activity related to the Company’s uncertain tax positions (excluding interest and
penalties and related tax attributes):
(in millions)
March 31, 2021 March 31, 2020 March 31, 2019
Fiscal Years Ended
Balance at beginning of fiscal year
$
253
$
165
$
Gross increases related to prior year tax positions
Gross decreases related to prior year tax positions
Gross increases related to current year tax positions
Settlements and statute of limitation expirations
Acquisitions
Foreign exchange and others
Balance at end of fiscal year
60
(30)
102
(36)
6
(1)
74
(9)
15
(7)
18
(3)
$
354
$
253
$
219
4
(27)
—
(23)
—
(8)
165
The Company’s liability for uncertain tax positions at March 31, 2021, March 31, 2020 and March 31, 2019, includes $316
million, $210 million and $138 million, respectively, related to amounts that, if recognized, would affect the effective tax
rate (excluding related interest and penalties). The increase relating to the tax positions primarily relate to the Company's
increase in foreign tax credits and transfer pricing.
116
The Company recognizes interest accrued related to uncertain tax positions and penalties as a component of income tax
expense. During the year ended March 31, 2021, the Company had a net increase in interest of $1 million ($(1) million net
of tax) and a net increase in accrued expense for penalties of $1 million and as of March 31, 2021, recognized a liability
for interest of $46 million ($39 million net of tax) and penalties of $22 million. During the year ended March 31, 2020, the
Company had a net increase in interest expense of $5 million ($3 million net of tax) and a net decrease in accrued
expense for penalties of $3 million and, as of March 31, 2020, recognized a liability for interest of $45 million ($40 million
net of tax) and penalties of $21 million. During the year ended March 31, 2019, the Company had a net increase in
interest expense of $2 million ($1 million net of tax) and a net decrease in accrued expense for penalties of $1 million and,
as of March 31, 2019, recognized a liability for interest of $41 million ($36 million net of tax) and penalties of $25 million.
The Company is currently under examination in several tax jurisdictions. A summary of the tax years that remain subject to
examination in certain of the Company’s major tax jurisdictions are:
Jurisdiction:
United States – Federal
United States – Various States
Australia
Canada
France
Germany
India
U. K.
Tax Examinations
Tax Years that Remain Subject to Examination
(Fiscal Year Ending):
2008 and forward
2008 and forward
2012 and forward
2006 and forward
2016 and forward
2010 and forward
2001 and forward
2018 and forward
The IRS is examining the Company's federal income tax returns for fiscal 2008 through the tax year ended October 31,
2018. With respect to CSC's fiscal 2008 through 2017 federal tax returns, the Company has 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 of
these adjustments and we disagree with the IRS' disallowance of certain losses and deductions resulting from
restructuring costs and tax planning strategies in previous years. As we believe we will ultimately prevail on the technical
merits of the disagreed items and intend to challenge them in the IRS Office of Appeals or Tax Court, these matters are
not fully reserved and would result in a federal and state tax expense of $405 million (including estimated interest and
penalties) and related cash cost for the unreserved portion of the these items if we do not prevail in Tax Court. We do not
expect these matters that proceed to tax court to be resolved in the next 12 months. We have received a notice of
deficiency with respect to fiscal 2011 and 2013, and have filed a petition in Tax Court with respect to fiscal 2013 and
expect to file in Tax Court with respect to fiscal 2011 in the first quarter of fiscal 2022. We also expect fiscal 2010 to
proceed to Tax Court.
The Company has agreed to extend the statute of limitations for fiscal years 2008 through 2012 through August 31, 2021
to provide for IRS completion of their review. The Company has agreed to extend the statute of limitations for fiscal years
2014 through fiscal 2017 through October 31,2021 to provide for IRS completion of their review.
The Company expects to reach a resolution for all years no earlier than the first quarter of fiscal 2023 except for agreed
issues related to fiscal 2008 through 2010 and fiscal 2011 through 2017 federal tax returns, which are expected to be
resolved within twelve months.
117
In addition, the Company may settle certain other tax examinations, have lapses in statutes of limitations, or voluntarily
settle income tax positions in negotiated settlements for different amounts than the Company has accrued as uncertain
tax positions. 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 with
the tax authorities for amounts lower than those that have been accrued or extinguish a position though less payment than
previously estimated. The Company believes the outcomes which are reasonably possible within the next twelve months
may result in a reduction in liability for uncertain tax positions of $52 million, excluding interest, penalties, and tax
carryforwards.
Note 14 - Debt
The following is a summary of the Company's debt:
(in millions)
Short-term debt and current maturities of long-term
debt
Commercial paper(1)
Current maturities of long-term debt
Current maturities of finance lease liabilities
Short-term debt and current maturities of long-term debt
Long-term debt, net of current maturities
AUD term loan
GBP term loan
EUR term loan
EUR term loan
USD term loan
$274 million Senior notes
$171 million Senior notes
$500 million Senior notes
$500 million Senior notes
£250 million Senior notes
€650 million Senior notes
$500 million Senior notes
$234 million Senior notes
Revolving credit facility
Lease credit facility
Finance lease liabilities
Borrowings for assets acquired under long-term financing
Mandatorily redeemable preferred stock outstanding
Other borrowings
Long-term debt
Less: current maturities
Long-term debt, net of current maturities
.
Interest Rates
Fiscal Year
Maturities March 31, 2021 March 31, 2020
As of
(0.39)% - 0.44%
Various
0.59% - 19.79%
2022
2022
2022
0.94% - 0.96%
0.88% - 1.46%
0.65%
0.80%(2)
1.40% - 2.24%
4.45%
4.45%
4.25%
4.13%
2.75%
1.75%
4.75%
7.45%
1.26% - 2.08%
1.15% - 1.99%
0.59% - 19.79%
0.00% - 6.39%
6.00%
Various
2022
2022
2022 - 2023
2023 - 2024
2025
2023
2023
2025
2026
2025
2026
2028
2030
2024 - 2025
2022 - 2023
2022 - 2027
2022 - 2027
2023
2022 - 2023
$
$
$
213
556
398
1,167
$
$
—
—
—
469
—
154
165
504
496
343
760
506
268
—
—
894
672
63
5
5,299
954
4,345
$
542
290
444
1,276
489
556
822
821
480
276
172
505
—
307
709
507
271
1,500
11
1,046
802
62
70
9,406
734
8,672
(1) At DXC's option, DXC can borrow up to a maximum of €1 billion or its equivalent in €, £, and $.
(2) At DXC’s option, the EUR term loan bears interest at the Eurocurrency Rate for a one-, two-, three-, or six-month interest period, plus a
margin between 0.55% and 1.05%, based on published credit ratings of DXC.
118
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 DXC's term loan facilities including
prepayment of €500 million of Euro Term Loan due fiscal 2023, £150 million of GBP Term Loan due
fiscal 2022, A$300 million of AUD Term Loan due fiscal 2022, and $100 million of USD Term Loan due fiscal 2025.
During the second quarter of fiscal 2021, the Company repaid the remaining £300 million GBP Term Loan due fiscal 2022.
During the third quarter of fiscal 2021, the Company used the proceeds from the sale of HHS Business to prepay
approximately $1,441 million of term loan facilities detailed below under the heading "HHS Sale Use of Proceeds."
Interest on the Company's remaining term loan is payable monthly at DXC's election. The Company fully and
unconditionally guarantees term loans issued by its 100% owned subsidiaries. The interest on the Company's senior
notes is payable semi-annually in arrears except for interest on the £250 million Senior Notes due fiscal 2025 and the
€650 million Senior Notes due fiscal 2026, which are payable annually in arrears. Generally, the Company's notes are
redeemable at the Company's discretion at the then-applicable redemption premium plus accrued and unpaid interest.
During the fourth quarter of fiscal 2021, the Company repaid the $500 million of 4.00% Senior Notes due fiscal 2024 that
was issued during the first quarter of fiscal 2021.
Tender Offers
On March 16, 2021, the Company announced the commencement of an offer (the "tender offers") to purchase for cash
any and all of the Company's outstanding 4.45% Senior Notes due fiscal 2023 (the "DXC Notes") and any and all of the
outstanding 4.45% Senior Notes due fiscal 2023 (the "CSC Notes) issued by its wholly owned subsidiary, Computer
Sciences Corporation ("CSC"). On March 25, 2021, the Company settled the principal amount tendered of $121 million of
the DXC Notes and $6 million of the CSC Notes. Refer to Form 8-K dated March 16, 2021 and March 23, 2021 for more
information.
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 the full $4.0 billion during the first nine months of fiscal 2021, which became available under the
revolving credit facility for redraw at the request of the Company.
HHS Sale Use of Proceeds
In October 2020, DXC sold the HHS business and used approximately $3.5 billion of the proceeds to prepay
$1,250 million of Revolver Credit Facility, £600 million of GBP commercial paper (approximately $772 million), and the
following term loan facilities: €350 million of Euro Term Loan due fiscal 2024 (approximately $410 million), $381 million of
USD Term loan due fiscal 2025, A$500 million of AUD Term Loan due fiscal 2022 (approximately $358 million), and
€250 million of Euro Term Loan due fiscal 2022 and 2023 (approximately $292 million).
119
Future Maturities of Long-term Debt
Expected maturities of long-term debt, including borrowings for asset financing but excluding minimum capital lease
payments, for fiscal years subsequent to March 31, 2021, are as follows:
Fiscal Year
2022
2023
2024
2025
2026
Thereafter
Total
(in millions)
555
304
615
898
1,278
756
4,406
$
$
120
Note 15 - Pension and Other Benefit Plans
The Company offers a number of pension and OPEB plans, life insurance benefits, deferred compensation and defined
contribution plans. Most of the Company's pension plans are not admitting new participants; therefore, changes to
pension liabilities are primarily due to market fluctuations of investments for existing participants and changes in interest
rates.
Defined Benefit Plans
The Company sponsors a number of defined benefit and post-retirement medical benefit plans for the benefit of eligible
employees. The benefit obligations of the Company's U.S. pension, U.S. OPEB, and non-U.S. OPEB plans represent an
insignificant portion of the Company's pension and other post-retirement benefit plans. As a result, the disclosures below
include the Company's U.S. and non-U.S. pension plans on a global consolidated basis.
Eligible employees are enrolled in defined benefit pension plans in their country of domicile. The Contributory defined
benefit pension plan in the U.K. represents the largest plan. In addition, healthcare, dental and life insurance benefits are
also provided to certain non-U.S. employees. A significant number of employees outside the United States are covered by
government sponsored programs at no direct cost to the Company other than related payroll taxes.
The Company accrued $13 million, $10 million and $3 million, for fiscal 2021, 2020 and 2019, respectively, as additional
contractual termination benefits for certain employees are part of the Company's restructuring plans. These amounts are
reflected in the projected benefit obligation and in the net periodic pension cost.
The change in projected benefit obligation for fiscal year 2021 is primarily related to actuarial losses and foreign currency
exchange rate changes. Actuarial losses were primarily due to a decrease in discount rates and an increase in inflation
rates across most plans, with partially offsetting impact of actuarial gains from a mortality update and lower than expected
benefit indexation in the United Kingdom.
Projected Benefit Obligations
(in millions)
Projected benefit obligation at beginning of year
Service cost
Interest cost
Plan participants’ contributions
Amendments
Business/contract acquisitions/divestitures
Contractual termination benefits
Settlement/curtailment
Actuarial loss (gain)
Benefits paid
Foreign currency exchange rate changes
Other
Projected benefit obligation at end of year
As of
March 31, 2021 March 31, 2020
$
10,150
$
11,016
91
245
31
(9)
11
13
(37)
1,262
(393)
1,084
(12)
92
237
30
—
12
10
(60)
(362)
(359)
(457)
(9)
$
12,436
$
10,150
121
The following table summarizes the weighted average rates used in the determination of the Company’s benefit
obligations:
Discount rate
Rates of increase in compensation levels
Interest Crediting Rate
Fair Value of Plan Assets and Funded Status
(in millions)
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contribution
Plan participants’ contributions
Benefits paid
Business/contract acquisitions/divestitures
Contractual termination benefits
Plan settlement
Foreign currency exchange rate changes
Other
Fair value of plan assets at end of year
Funded status at end of year
Selected Information
(in millions)
Other assets
Accrued expenses and other current liabilities
Non-current pension obligations
Other long-term liabilities - OPEB
Net amount recorded
Accumulated benefit obligation
Fiscal Years Ended
March 31, 2021 March 31, 2020
2.0 %
2.5 %
4.0 %
2.4 %
1.6 %
N/A
As of
March 31, 2021 March 31, 2020
$
11,090
$
11,343
1,401
117
31
(393)
—
7
(31)
1,224
(21)
526
108
30
(359)
7
15
(63)
(507)
(10)
$
$
13,425
$
11,090
989
$
940
As of
March 31, 2021 March 31, 2020
$
$
$
1,884
$
(81)
(796)
(18)
989
$
1,735
(16)
(761)
(18)
940
12,346
$
10,072
(in millions)
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
Benefit Plans with Projected
Benefit Obligation in Excess of
Plan Assets
Benefit Plans with Accumulated
Benefit Obligation in Excess of
Plan Assets
March 31, 2021 March 31, 2020 March 31, 2021 March 31, 2020
$
$
$
2,490
2,431
1,596
$
$
$
2,191
2,131
1,397
$
$
$
2,453
2,402
1,562
$
$
$
2,159
2,108
1,369
122
Net Periodic Pension Cost
(in millions)
Service cost
Interest cost
Expected return on assets
Amortization of transition obligation
Amortization of prior service costs
Contractual termination benefit
Settlement/curtailment (gain) loss
Recognition of actuarial loss (gain)
Net periodic pension expense (income)
Fiscal Years Ended
March 31, 2021 March 31, 2020 March 31, 2019
$
$
91
$
92
$
245
(659)
—
(8)
13
(18)
537
201
237
(651)
—
(9)
10
7
$
(252)
(566) $
88
253
(570)
—
(15)
3
(10)
153
(98)
The service cost component of net periodic pension (income) expense 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 in the
Company’s statements of operations.
Estimated prior service credit of $9 million will be amortized from AOCI into net periodic pension cost over the next fiscal
year. The weighted-average rates used to determine net periodic pension cost were:
Discount or settlement rates
Expected long-term rates of return on assets
Rates of increase in compensation levels
The following is a summary of amounts in AOCI, before tax effects:
(in millions)
Prior service cost
Estimated Future Contributions and Benefits Payments
Fiscal Years Ended
March 31, 2021 March 31, 2020 March 31, 2019
2.4 %
5.6 %
1.7 %
2.4 %
5.8 %
2.0 %
2.5 %
5.3 %
2.1 %
Fiscal Years Ended
March 31, 2021
March 31, 2020
$
(239) $
(247)
(in millions)
Employer contributions:
2022
Benefit Payments:
2022
2023
2024
2025
2026
2026 and thereafter
Total
$
$
$
155
506
443
444
452
462
2,454
4,761
123
Fair Value of Plan Assets
The tables below set forth the fair value of plan assets by asset category within the fair value hierarchy:
(in millions)
Equity:
Fixed Income:
Alternatives:
Other Assets
Insurance contracts
Cash and cash equivalents
Totals
US Domestic Stocks
Global Stocks
Global/International Equity
commingled funds
Global equity mutual funds
U.S./North American Equity
commingled funds
Non-U.S. Government funds
Fixed income commingled funds
Fixed income mutual funds
Corporate bonds
Other Alternatives (1)
Hedge Funds(2)
Level 1
As of March 31, 2021
Level 3
Level 2
Total
$
— $
—
— $
—
— $
—
246
—
—
—
1
—
—
1
—
70
4
97
2,260
—
6
—
42
4
5,500
2,706
10
65
380
2
—
—
—
—
15
—
—
1,930
1
85
—
—
—
—
2,506
—
6
—
58
4
5,500
4,637
11
220
384
99
$
419
$
10,975
$
2,031
$
13,425
124
(in millions)
Equity:
Fixed Income:
Alternatives:
Other Assets
Insurance contracts
Cash and cash equivalents
Totals
US Domestic Stocks
Global Stocks
Global/International Equity
commingled funds
Global equity mutual funds
U.S./North American Equity
commingled funds
Non-U.S. Government funds
Fixed income commingled funds
Fixed income mutual funds
Corporate bonds
Other Alternatives (1)
Hedge Funds(2)
As of March 31, 2020
Level 1
Level 2
Level 3
Total
$
— $
—
$
3
3
315
1,763
— $
—
—
—
—
—
—
—
—
3
3
2,078
8
5
136
126
3
4,808
—
4
—
71
—
4,807
2,038
1,297
3,335
7
229
136
2
2
59
—
—
11
375
136
63
$
669
$
9,063
$
1,358
$
11,090
8
1
136
55
3
1
—
2
87
—
61
(1) Represents real estate and other commingled funds consisting mainly of equities, bonds, or commodities.
(2) Represents investments in diversified fund of hedge funds.
Changes in fair value measurements of level 3 investments for the defined benefit plans were as follows:
(in millions)
Balance as of March 31, 2019
Actual return on plan assets held at the reporting date
Purchases, sales and settlements
Transfers in and / or out of Level 3
Changes due to exchange rates
Balance as of March 31, 2020
Actual return on plan assets held at the reporting date
Purchases, sales and settlements
Transfers in and / or out of Level 3
Changes due to exchange rates
Balance as of March 31, 2021
$
1,032
83
282
8
(47)
1,358
233
279
—
161
$
2,031
Domestic and global equity accounts are categorized as Level 1 if the securities trade on national or international
exchanges and are valued at their last reported closing price. Equity assets in commingled funds reporting a net asset
value are categorized as Level 2 and valued using broker dealer bids or quotes of securities with similar characteristics.
125
Fixed income accounts are categorized as Level 1 if traded on a publicly quoted exchange or as level 2 if investments in
corporate bonds are primarily investment grade bonds, generally priced using model-based pricing methods that use
observable market data as inputs. Broker dealer bids or quotes of securities with similar characteristics may also be used.
Alternative investment fund securities are categorized as Level 1 if held in a mutual fund or in a separate account
structure and actively traded through a recognized exchange, or as Level 2 if they are held in commingled or collective
account structures and are actively traded. Alternative investment fund securities are classified as Level 3 if they are held
in Limited Company or Limited Partnership structures or cannot otherwise be classified as Level 1 or Level 2.
Other assets represent property holdings by certain pension plans. As above, the property holdings represent a master
lease arrangement entered into by DXC in the U.K. and certain U.K. pension plans as a financing transaction.
Insurance contracts purchased to cover benefits payable to retirees are valued using the assumptions used to value the
projected benefit obligation.
Cash equivalents that have quoted prices in active markets are classified as Level 1. Short-term money market
commingled funds are categorized as Level 2 and valued at cost plus accrued interest which approximates fair value.
Plan Asset Allocations
Asset Category
Equity securities
Debt securities
Alternatives
Cash and other
Total
As of
March 31, 2021 March 31, 2020
19 %
42 %
37 %
2 %
100 %
19 %
46 %
31 %
4 %
100 %
Plan assets are held in a trust that includes commingled funds subject to country specific regulations and invested
primarily in commingled funds. For the U.K. pension plans, the Company's largest pension plans by assets and projected
liabilities, a target allocation by asset class was developed to achieve their long-term objectives. Asset allocations are
monitored closely and investment reviews regarding asset strategy are conducted regularly with internal and external
advisors.
The Company’s investment goals and risk management strategy for plan assets evaluates a number of factors, including
the time horizon of the plans’ obligations. Plan assets are invested in various asset classes that are expected to produce a
sufficient level of diversification in order to reduce risk, yet produces a reasonable amount of return on investment over the
long term. Sufficient liquidity is maintained to meet benefit obligations as they become due. Third party investment
managers are employed to invest assets in both passively-indexed and actively-managed strategies. Equities are primarily
invested broadly in domestic and foreign companies across market capitalizations and industries. Fixed income securities
are invested broadly, primarily in government treasury, corporate credit, mortgage backed and asset backed investments.
Alternative investment allocations are included in selected plans to achieve greater portfolio diversity intended to reduce
the overall volatility risk of the plans.
Plan asset risks include longevity, inflation, and other changes in market conditions that could reduce the value of plan
assets. Also, a decline in the yield of high quality corporate bonds may adversely affect discount rates resulting in an
increase in DXC's pension and other post-retirement obligations. These risks, among others, could cause the plans’
funded status to deteriorate, resulting in an increased reliance on Company contributions. Derivatives are permitted
although their current use is limited within traditional funds and broadly allowed within alternative funds. Derivatives are
used for inflation risk management and within the liability driven investing strategy. The Company also has investments in
insurance contracts to pay plan benefits in certain countries.
126
Return on Assets
The Company consults with internal and external advisors regarding the expected long-term rate of return on assets. The
Company uses various sources in its approach to compute the expected long-term rate of return of the major asset
classes expected in each of the plans. DXC utilizes long-term, asset class return assumptions of typically 30 years, which
are provided by external advisors. Consideration is also given to the extent active management is employed in each asset
class and also to management expenses. A single expected long-term rate of return is calculated for each plan by
assessing the plan's expected asset allocation strategy, the benefits of diversification therefrom, historical excess returns
from actively managed traditional investments, expected long-term returns for alternative investments and expected
investment expenses. The resulting composite rate of return is reviewed by internal and external parties for
reasonableness.
Retirement Plan Discount Rate
The U.K. discount rate is based on the yield curve approach using the U.K. Aon Hewitt GBP Single Agency AA
Corporates-Only Curve.
U.K. Pension Equalization Ruling
On October 26, 2018 the High Court of Justice in the U.K. (the "High Court") issued a ruling related to the equalization of
benefits payable to men and women for the effect of guaranteed minimum pensions under U.K. defined benefit pension
plans. As a result of this ruling, the Company estimated the impact of retroactively increasing benefits in its U.K. plans in
accordance with the High Court ruling. The Company treated the additional benefits as a prior service cost which resulted
in an increase to its projected benefit obligation and accumulated other comprehensive loss of $28 million. The Company
will amortize this cost over the average remaining life expectancy of the U.K. participants. Given the immaterial effect on
the U.K. plan's projected benefit, an interim remeasurement was not performed.
Defined Contribution Plans
The Company sponsors defined contribution plans for substantially all U.S. employees and certain foreign employees.
The plans allow employees to contribute a portion of their earnings in accordance with specified guidelines. Matching
contributions are made annually in January to participants employed on December 31 of the prior year and vest in one
year. However, if a participant retires from the Company or dies prior to December 31, the participant will be eligible to
receive matching contributions approximately 30 days following separation from service. During fiscal 2021, 2020 and
2019, the Company contributed $221 million, $192 million and $219 million, respectively, to its defined contribution plans.
As of March 31, 2021, plan assets included 3,046,140 shares of the Company’s common stock.
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.
127
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 under the plan, which is
included in other long-term liabilities in the Company's balance sheets, amounted to $42 million as of March 31, 2021 and
$48 million as of March 31, 2020. The Company's expense under the Plan totaled $8 million, $0 million and $2 million, for
fiscal 2021, 2020 and 2019, respectively.
Note 16 - Stockholders' Equity
Description of Capital Stock
The Company has authorized share capital consisting of 750,000,000 shares of common stock, par value $0.01 per
share, and 1,000,000 shares of preferred stock, par value $0.01 per share.
Each share of common stock is equal in all respects to every other share of common stock of the Company. Each share of
common stock is entitled to one vote per share at each annual or special meeting of stockholders for the election of
directors and upon any other matter coming before such meeting. Subject to all the rights of the preferred stock, dividends
may be paid to holders of common stock as and when declared by the Board of Directors (the "Board").
The Company's charter requires that preferred stock must be all of one class but may be issued from time to time in one
or more series, each of such series to have such full or limited voting powers, if any, and such designations, preferences
and relative, participating, optional or other special rights or qualifications, limitations or restrictions as provided in a
resolution adopted by the Board of Directors. Each share of preferred stock will rank on a parity with each other share of
preferred stock, regardless of series, with respect to the payment of dividends at the respectively designated rates and
with respect to the distribution of capital assets according to the amounts to which the shares of the respective series are
entitled.
Share Repurchase Program
On April 3, 2017, DXC announced the establishment of a share repurchase program approved by the Board of Directors
with an initial authorization of up to $2.0 billion for future repurchases of outstanding shares of DXC common stock. On
November 8, 2018, DXC announced that its 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.
128
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 no share repurchase activity during fiscal 2021. The details of shares repurchased during fiscal 2020
and 2019 are shown below:
Fiscal Year
2020
Open market purchases
ASR
2019
Open market purchases
Treasury Stock Transactions
Number of
shares
repurchased
Average Price
Per Share
Amount
(In millions)
12,279,107
3,654,544
15,933,651
19,342,586
19,342,586
2020 Total
2019 Total
$43.67 $
$54.73 $
$46.21 $
$69.20 $
$69.20 $
536
200
736
1,339
1,339
In fiscal 2021, 2020 and 2019 the Company accepted 4,050, 38,902 and 42,008 shares of its common stock, respectively,
in lieu of cash in connection with the exercise of stock options. In fiscal 2021, 2020 and 2019, the Company accepted
305,269, 321,148 and 729,703 shares of its common stock, respectively, in lieu of cash in connection with the tax
withholdings associated with the release of common stock upon vesting of restricted stock and RSUs. As a result, the
Company holds 2,458,027 treasury shares as of March 31, 2021.
Dividends
The Board of Directors (the “Board”) has suspended the Company’s cash dividend payment beginning in the first quarter
of fiscal 2021 to preserve cash and enhance financial flexibility in the current environment. We intend to continue to
suspend quarterly cash dividends for fiscal 2022. The dividends declared during fiscal 2020 and 2019 are shown in the
table below:
(in millions, except per share amounts)
Fiscal 2020
Fiscal 2019
Dividends Declared
Per Common
Share
Total
Unpaid at Fiscal
Year End
$
$
0.84
0.76
$
$
219
209
$
$
55
53
129
Accumulated Other Comprehensive Income (Loss)
The following table shows the changes in accumulated other comprehensive income (loss), net of taxes:
(in millions)
Balance at March 31, 2018
Current-period other comprehensive loss
Amounts reclassified from accumulated other
comprehensive income (loss), net of taxes
Balance at March 31, 2019
Current-period other comprehensive loss
Amounts reclassified from accumulated other
comprehensive (loss) income, net of taxes
Balance at March 31, 2020
Current-period other comprehensive income (loss)
Amounts reclassified from accumulated other
comprehensive income (loss), net of taxes
Balance at March 31, 2021
Foreign
Currency
Translation
Adjustments
Cash Flow
Hedges
Available-
for-sale
Securities
Pension and
Other Post-
retirement
Benefit
Plans
Accumulated
Other
Comprehensive
Income (Loss)
$
$
$
$
(261) $
(256)
—
(517) $
(334)
—
9
$
(22)
10
(3) $
(15)
(2)
(851) $
(20) $
297
—
14
5
$
$
$
9
—
—
9
—
—
9
(9)
—
301
$
(21)
(13)
267
$
—
(8)
259
$
—
(6)
(554) $
)
(
(1) $
( )
— $
253
$
58
(299)
(3)
(244)
(349)
(10)
(603)
302
(1)
(302)
)
(
130
Note 17 - Stock Incentive Plans
Equity Plans
As a result of the Separation of USPS, shared-based awards issued by the Company were modified. The number of stock
options and exercise price were adjusted to generally preserve the intrinsic value immediately prior to the Separation.
There was no incremental share-based compensation expense recognized as a result of the modification of the awards.
The Compensation Committee of the Board of Directors has broad authority to grant awards and otherwise administer the
DXC Employee Equity Plan. The plan became effective March 30, 2017 and will continue in effect for a period of 10 years
thereafter, unless terminated earlier 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.
Restricted stock units ("RSUs") represent the right to receive one share of DXC common stock upon a future settlement
date, subject to vesting and other terms and conditions of the award, plus any dividend equivalents accrued during the
award period. In general, if the employee’s status as a full-time employee is terminated prior to the vesting of the RSU
grant in full, then the RSU grant is automatically canceled on the termination date and any unvested shares and dividend
equivalents are forfeited. Certain executives were awarded service-based "career share" RSUs for which the shares are
settled over the 10 anniversaries following the executive's separation from service as a full-time employee, provided the
executive complies with certain non-competition covenants during that period. The Company also grants PSUs, which
generally vest over a period of three years. The number of PSUs that ultimately vest is dependent upon the Company’s
achievement of certain specified financial performance criteria over a 3-year period. If the specified performance criteria
are met, awards are settled for shares of DXC common stock and dividend equivalents upon the filing with the SEC of the
Annual Report on Form 10-K for the last fiscal year of the performance period. PSU awards include the potential for up to
25% of the shares granted to be earned after the first and second fiscal years if certain of the Company's performance
targets are met early, subject to vesting based on the participant's continued employment through the end of the three-
year performance period.
In fiscal 2021, DXC issued awards that are considered to have a market condition. A Monte Carlo simulation model was
used for the valuation of the grants. Settlement of shares for the fiscal 2021 PSU awards will be made at the end of the
third fiscal year subject to certain compounded annual growth rates of the stock price and continued employment through
the last day of the third fiscal year.
The terms of the DXC Director Equity Plan allow DXC to grant RSU awards to non-employee directors of DXC. Such RSU
awards vest in full at the earlier of (i) the first anniversary of the grant date or (ii) the next annual meeting date, and are
automatically redeemed for DXC common stock and dividend equivalents either at that time or, if an RSU deferral election
form is submitted, upon the date or event elected by the director. Distributions made upon a director’s separation from the
Board may occur in either a lump sum or in annual installments over periods of 5, 10, or 15 years, per the director’s
election. In addition, RSUs vest in full upon a change in control of DXC.
The DXC Share Purchase Plan allows DXC’s employees located in the U.K. to purchase shares of DXC’s common stock
at the fair market value of such shares on the applicable purchase date. There were 51,302 shares purchased under this
plan during fiscal 2021.
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:
DXC Employee Equity Plan
DXC Director Equity Plan
DXC Share Purchase Plan
Total
131
As of March 31, 2021
Reserved for
issuance
Available for future
grants
51,200,000
32,858,137
745,000
250,000
435,951
155,308
52,195,000
33,449,396
The Company recognized share-based compensation expense for fiscal 2021, 2020 and 2019 as follows:
(in millions)
Total share-based compensation cost
Related income tax benefit
Total intrinsic value of options exercised
Tax benefits from exercised stock options and awards
Fiscal Years Ended
March 31, 2021 March 31, 2020 March 31, 2019
$
$
$
$
56
6
1
6
$
$
$
$
68
12
8
14
$
$
$
$
74
15
44
39
As of March 31, 2021, total unrecognized compensation expense related to unvested DXC RSUs, net of expected
forfeitures was $135 million, respectively. The unrecognized compensation expense for unvested RSUs is expected to be
recognized over a weighted-average period of 1.96 years.
Stock Options
The Company’s stock options vest one-third annually on each of the first three anniversaries of the grant date. Stock
options are generally granted for a term of ten years. Information concerning stock options granted under stock incentive
plans was as follows:
Outstanding as of March 31, 2018 (1)
Granted
Issued due to Separation modification
Exercised
Canceled/Forfeited
Expired
Outstanding as of March 31, 2019
Granted
Exercised
Canceled/Forfeited
Expired
Outstanding as of March 31, 2020
Granted
Exercised
Canceled/Forfeited
Expired
Outstanding as of March 31, 2021
Vested and expected to vest in the future as of March 31, 2021
Exercisable as of March 31, 2021
Number
of Option
Shares
Weighted
Average
Exercise
Price
2,933,501
$
— $
400,170
$
(969,103) $
(14,607) $
(31,193) $
2,318,768
$
— $
(331,172) $
(2,213) $
(115,568) $
1,869,815
$
— $
(89,335) $
— $
(104,900) $
1,675,580
1,675,580
1,675,580
$
$
$
32.54
—
31.72
37.33
48.33
25.03
30.40
—
31.36
55.95
34.97
29.92
—
16.01
—
33.53
30.43
30.43
30.43
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
(in millions)
5.24 $
185
$
4.80 $
$
4.27 $
$
3.61 $
3.61 $
3.61 $
44
79
8
—
1
8
8
8
(1) The amount of the weighted average exercise price per share has been revised to reflect the impact of the Separation.
132
Range of Option Exercise Price
$8.96 - $24.47
$25.14 - $41.92
$42.05 - $58.80
As of March 31, 2021
Options Outstanding
Options Exercisable
Weighted
Average
Exercise
Price
19.72
27.71
44.70
Weighted
Average
Remaining
Contractual
Term
2.56
3.68
4.42
Number
Outstanding
413,808
798,509
463,263
$
$
$
1,675,580
Weighted
Average
Exercise
Price
19.71
27.71
44.70
Number
Exercisable
413,808
798,509
463,263
$
$
$
1,675,580
The cash received from stock options exercised during fiscal 2021, 2020 and 2019 was $1 million, $9 million and $34
million, respectively.
Restricted Stock
Information concerning RSUs and PSUs granted under the stock incentive plans was as follows:
Outstanding as of March 31, 2018 (1)
Granted
Issued due to Separation modification
Released/Issued
Canceled/Forfeited
Outstanding as of March 31, 2019
Granted
Released/Issued
Canceled/Forfeited
Outstanding as of March 31, 2020
Granted
Released/Issued
Canceled/Forfeited
Outstanding as of March 31, 2021
Number of
Shares
Weighted
Average
Grant Date
Fair Value
3,985,616
1,136,002
649,649
(2,207,467)
(754,025)
2,809,775
3,166,405
(1,039,346)
(762,358)
4,174,476
8,026,810
(1,249,681)
(2,625,385)
8,326,220
$
$
$
$
$
$
$
$
$
$
$
$
$
$
47.25
77.10
51.98
33.05
62.01
67.27
45.58
54.39
59.46
55.45
20.92
52.82
35.16
28.98
(1) The amount of the weighted average fair value per share has been revised to reflect the impact of the USPS Separation.
133
Non-employee Director Incentives
Information concerning RSUs granted to non-employee directors was as follows:
Outstanding as of March 31, 2018 (1)
Granted
Issued due to Separation modification
Released/Issued
Canceled/Forfeited
Outstanding as of March 31, 2019
Granted
Released/Issued
Canceled/Forfeited
Outstanding as of March 31, 2020
Granted
Released/Issued
Canceled/Forfeited
Outstanding as of March 31, 2021
Number of
Shares
Weighted
Average
Grant Date
Fair Value
66,386
19,200
10,488
$
$
$
(20,324) $
— $
75,750
62,200
$
$
(23,335) $
— $
114,615
118,500
$
$
(48,455) $
— $
184,660
$
37.26
87.88
37.69
51.59
—
46.31
35.90
60.90
—
37.69
18.82
26.90
—
28.42
(1) The amount of the weighted average fair value per share has been revised to reflect the impact of the USPS Separation.
134
Note 18 - Cash Flows
Cash payments for interest on indebtedness and income taxes and other select non-cash activities are as follows:
(in millions)
Cash paid for:
Interest
Taxes on income, net of refunds(1)
Non-cash activities:
Operating:
ROU assets obtained in exchange for lease, net(2)
Prepaid assets acquired under long-term financing
Investing:
Capital expenditures in accounts payable and accrued expenses
Capital expenditures through finance lease obligations
Assets acquired under long-term financing
(Decrease) increase in deferred purchase price receivable
Contingent consideration
Financing:
Dividends declared but not yet paid
Fiscal Years Ended
March 31, 2021 March 31, 2020 March 31, 2019
$
$
$
$
$
$
$
$
$
$
334
798
$
$
371
247
$
$
308
197
530
46
341
348
35
$
$
$
$
$
(52) $
3
$
411
99
66
605
376
$
$
$
$
$
(205) $
18
$
— $
55
$
—
48
45
668
200
1,489
41
53
(1) Income tax refunds were $70 million, $42 million, and $174 million for fiscal 2021, 2020, and 2019, respectively.
(2) $763 million and $216 million in modifications and terminations in fiscal 2021 and 2020, respectively, and net of $87 million change in lease
classification from operating to finance lease in fiscal 2020,
Note 19 - Other Expense (Income)
The following table summarizes components of other expense (income), net:
(in millions)
March 31, 2021 March 31, 2020 March 31, 2019
Fiscal Years Ended
Non-service cost components of net periodic pension expense (income)
Foreign currency loss (gain)
Other gain
Totals
$
$
110
$
(658) $
14
(22)
(25)
(37)
102
$
)
(
(720) $
(182)
31
(155)
)
(
(306)
Non-service cost components of net periodic pension expense resulted primarily from the actuarial loss of $537 million
compared to the gain of $252 million prior year. See Note 15 - Pension and Other Benefit Plans. Foreign currency loss
(gain) resulted from the movement of foreign currency exchange rates on the Company’s foreign currency denominated
assets and liabilities, related hedges including options to manage its exposure to economic risk and the cost of the
Company’s hedging program. Other gain primarily relates to gain on sale of non-operating assets and investment income.
135
Note 20 - Segment and Geographic Information
DXC has a matrix form of organization and is managed in several different and overlapping groupings including services,
industries and geographic 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 3 - "Divestitures." DXC now operates in two
reportable segments as described below:
Global Business Services
GBS provides innovative technology solutions that help our customers address key business challenges and accelerate
transformations tailored to each customer’s industry and specific objectives. GBS offerings include:
•
•
•
Analytics and Engineering. Our portfolio of analytics services and extensive partner ecosystem help customers
gain rapid insights, automate operations, and accelerate their transformation journeys. We provide 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. We use 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. Our vertical-specific IP includes solutions for insurance,
banking and capital markets, and automotive among others.
Business process services. Include integration and optimization of front and back office processes, and agile
process automation. This helps companies to reduce cost and minimize business disruption, human error, and
operational risk while improving customer experiences.
Global Infrastructure Services
GIS provides a portfolio of technology offerings that deliver predictable outcomes and measurable results while reducing
business risk and operational costs for customers. GIS offerings include:
•
•
Cloud and Security. We help customers to rapidly modernize by adapting legacy apps to cloud, migrate the right
workloads, and securely manage their multi-cloud environments. Our security solutions help predict attacks,
proactively respond to threats, ensure compliance and protect data, applications and infrastructure.
IT Outsourcing. Our ITO services support infrastructure, applications, and workplace IT operations, including
hardware, software, physical/virtual end-user devices, collaboration tools, and IT support services. We help
customers securely optimize operations to ensure continuity of their systems and respond to new business and
workplace demands while achieving cost takeout, all with limited resources, expertise, and budget.
• Modern Workplace. Services to fit our customer’s employee, business and IT needs from intelligent collaboration,
modern device management, digital support services, Internet of Things ("IoT") and mobility services, providing a
consumer-like, digital experience.
136
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)
Fiscal Year Ended March 31, 2021
Revenues
Segment Profit
Depreciation and amortization (1)
Fiscal Year Ended March 31, 2020
Revenues
Segment Profit
Depreciation and amortization (1)
Fiscal Year Ended March 31, 2019
Revenues
Segment Profit
Depreciation and amortization (1)
GBS
GIS
Total Reportable
Segments
All Other
Totals
$
$
$
$
$
$
$
$
$
8,336
1,120
212
9,111
1,301
199
8,684
1,645
90
$
$
$
$
$
$
$
$
$
9,393
245
1,122
10,466
1,007
1,051
12,069
1,911
1,212
$
$
$
$
$
$
$
$
$
17,729
1,365
1,334
19,577
2,308
1,250
20,753
3,556
1,302
$
$
$
$
$
$
$
$
$
— $
17,729
(263) $
106
$
1,102
1,440
— $
19,577
(247) $
109
$
2,061
1,359
— $
20,753
(287) $
127
$
3,269
1,429
(1) Depreciation and amortization as presented excludes amortization of acquired intangible assets of $530 million, $583 million, and $539 million for
fiscal 2021, 2020, and 2019, respectively.
137
Reconciliation of Reportable Segment Profit to Consolidation
The Company's management uses segment profit as the measure for assessing performance of its segments. Segment
profit is defined as segment revenues less cost of services, segment selling, general and administrative, depreciation and
amortization, and other income (excluding the movement in foreign currency exchange rates on DXC's foreign currency
denominated assets and liabilities and the related economic hedges). The Company does not allocate to its segments
certain operating expenses managed at the corporate level. These unallocated costs include certain corporate function
costs, stock-based compensation expense, pension and OPEB actuarial and settlement gains and losses, restructuring
costs, transaction, separation, and integration-related costs and amortization of acquired intangible assets.
(in millions)
Profit
Fiscal Years Ended
March 31, 2021 March 31, 2020 March 31, 2019
Total profit for reportable segment
$
1,365
$
2,308
$
3,556
All other loss
Interest income
Interest expense
Restructuring costs
Transaction, separation and integration-related costs
Amortization of acquired intangibles
Gains on dispositions
Pension and OPEB actuarial and settlement (losses) gains
Debt extinguishment cost
Impairment losses
Gain on arbitration award
(263)
98
(361)
(551)
(358)
(530)
2,004
(519)
(41)
(190)
—
(247)
165
(383)
(252)
(318)
(583)
—
244
—
(6,794)
632
(287)
128
(334)
(465)
(401)
(539)
—
(143)
—
—
—
Income (loss) from continuing operations before taxes
$
654
$
(
(5,228) $
)
1,515
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.
Geographic Information
See Note 21 - "Revenue" for the Company's revenue by geography. Property and equipment, net, which is based on the
physical location of the assets, was as follows:
(in millions)
United States
U.K.
Australia
Other Europe
Other International
Total Property and Equipment, net
As of
March 31, 2021
March 31, 2020
1,189
$
1,621
465
149
603
540
493
134
757
542
2,946
$
3,547
$
$
No single customer exceeded 10% of the Company’s revenues during fiscal 2021, fiscal 2020 or fiscal 2019.
138
Note 21 - Revenue
Revenue Recognition
The following table presents DXC's revenues disaggregated by geography, based on the location of incorporation of the
DXC entity providing the related goods or services:
(in millions)
United States
U.K.
Other Europe
Australia
Other International
Total Revenues
Twelve Months Ended
March 31, 2021 March 31, 2020 March 31, 2019
$
$
5,983
$
7,225
$
2,413
5,129
1,529
2,776
5,121
1,487
2,675
17,729
$
2,968
19,577
$
7,677
3,175
5,294
1,582
3,025
20,753
The revenue by geography pertains to both of the Company’s reportable segments. Refer to Note 20 - "Segment and
Geographic 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 has not materialized and
adjustments for currency. As of March 31, 2021, approximately $23 billion of revenue is expected to be recognized from
remaining performance obligations. The Company expects to recognize revenue on approximately 39% of these
remaining performance obligations in fiscal 2022, with the remainder of the balance recognized thereafter.
Contract Balances
The following table provides information about the balances of the Company's trade receivables and contract assets and
contract liabilities:
(in millions)
Trade receivables, net
Contract assets
Contract liabilities
Change in contract liabilities were as follows:
(in millions)
Balance, beginning of period
Deferred revenue
Recognition of deferred revenue
Currency translation adjustment
Other(1)
Balance, end of period
As of
March 31, 2021
March 31, 2020
$
$
$
2,871
351
1,701
$
$
$
3,059
454
1,756
Twelve Months Ended
March 31, 2021
Twelve Months Ended
March 31, 2020
$
$
1,756
$
2,933
(2,922)
128
(194)
1,701
$
1,886
2,910
(2,925)
(48)
(67)
1,756
(1) Other included contract liabilities of $52 million related to the divested HHS business discussed in Note 3 - "Divestitures" and $62 million related
to HPS business and other insignificant businesses reclassified to assets held for sale discussed in Note 4 - "Assets Held for Sale".
139
The following tables provides information about the Company’s capitalized costs to obtain and fulfill a contract:
(in millions)
Capitalized sales commission costs(1)
Transition and transformation contract costs, net(2)
As of
March 31, 2021
March 31, 2020
$
$
256
888
$
$
262
874
Amortization expense of capitalized sales commission and transition and transformation contract costs were as follows:
(in millions)
Capitalized sales commission costs amortization(1)
Transition and transformation contract cost amortization(2)
Fiscal Years Ended
March 31, 2021
March 31, 2020
March 31, 2019
$
$
70
264
$
$
72
280
$
$
62
258
(1) Capitalized sales commission costs are included within other assets in the accompanying balance sheets and amortization expense
related to the capitalized sales commission assets are included in selling, general, and administrative expenses in the accompanying
statements of operations.
(2) Transition and transformation contract costs, net reflect the Company’s setup costs incurred upon initiation of an outsourcing contract
that are classified as other assets in the accompanying balance sheets and amortization expense are included within depreciation and
amortization in the accompanying statements of operations.
140
Note 22 - Restructuring Costs
The Company recorded restructuring costs, net of reversals, of $551 million, $252 million and $465 million for fiscal 2021,
2020 and 2019, respectively. The costs recorded during fiscal 2021 were largely the result of implementing the Fiscal
2021 Plan as described below.
The composition of restructuring liabilities by financial statement line items is as follows:
(in millions)
Accrued expenses and other current liabilities
Other long-term liabilities
Total
Summary of Restructuring Plans
Fiscal 2021 Plan
As of
March 31, 2021 March 31, 2020
$
$
225
$
45
270
$
145
35
180
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 $296
million, comprising $279 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 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 $479 million, comprising $337 million in employee
severance and $142 million of facilities costs.
Other Prior Year Plans
In June 2017, management approved a post-HPES Merger restructuring plan to optimize the Company's operations in
response to a continuing business contraction (the "Fiscal 2018 Plan"). The Fiscal 2018 Plan focuses mainly on optimizing
specific aspects of global workforce, increasing the proportion of work performed in low cost offshore locations and re-
balancing the pyramid structure. Additionally, this plan included global facility restructuring, including a global data center
restructuring program. Costs incurred to date under the Fiscal 2018 Plan total $998 million, comprising $802 million in
employee severance and $196 million of facilities costs.
Acquired Restructuring Liabilities
As a result of the merger of Computer Sciences Corporation ("CSC") and HPES ("HPES Merger"), DXC acquired
restructuring liabilities under restructuring plans that were initiated for HPES under plans approved by the HPE Board of
Directors.
141
Restructuring activities, summarized by plan year, were as follows:
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
March 31, 2021
Fiscal 2021 Plan
Workforce Reductions
Facilities Costs
Total
Fiscal 2020 Plan
Workforce Reductions(4)
Facilities Costs
Total
Fiscal 2019 Plan
Workforce Reductions
Facilities Costs
Total
Other Prior Year Plans
Workforce Reductions
Facilities Costs
Total
Acquired Liabilities
Workforce Reductions
Facilities Costs
Total
$
$
$
$
$
$
$
$
$
$
— $
—
— $
74
$
2
76
$
25
$
5
30
$
24
—
24
39
11
50
$
$
$
$
501
$
(11) $
(313) $
37
(17)
(14)
538
$
)
(28) $
(
)
(327) $
(
3
$
(3)
— $
180
3
183
8
$
(4)
4
$
(1) $
(2)
( )
(3) $
12
—
12
$
$
1
$
(1)
— $
1
4
5
$
$
(60) $
4
$
(2)
—
)
(62) $
(
4
$
(2) $
(17) $
1
(1)
( )
(1) $
)
(
(18) $
2
3
5
$
$
(7) $
(19) $
2
$
—
—
—
( )
(7) $
)
(
(19) $
2
$
— $
1
1
(7) $
(9)
$
)
(
(16) $
1
$
(1)
— $
27
—
27
7
6
13
12
—
12
34
1
35
(1) Costs expensed, net of reversals include $11 million, $9 million, and $3 million of costs reversed from the Fiscal 2020 Plan, Fiscal 2019
Plan and Other Prior Year Plans, respectively.
(2) Pension benefit augmentations recorded as a pension liability and asset impairment.
(3) Foreign currency translation adjustments.
(4) Fiscal 2020 workforce reductions includes a $14 million adjustment to restructuring expense related to the prior year.
142
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
March 31,
2020
Fiscal 2020 Plan
Workforce Reductions
Facilities Costs
Total
Fiscal 2019 Plan
Workforce Reductions
Facilities Costs
Total
Fiscal 2018 Plan
Workforce Reductions
Facilities Costs
Total
Other Prior Year Plans
Workforce Reductions
Facilities Costs
Total
Acquired Liabilities
Workforce Reductions
Facilities Costs
Total
$
$
$
$
$
$
$
$
$
$
— $
—
— $
138
$
68
206
$
$
$
$
59
35
94
9
1
10
$
51
18
69
$
$
— $
—
— $
— $
(53)
)
(53) $
(
— $
(36)
)
(
(36) $
— $
(1)
( )
(1) $
— $
—
— $
271
$
(11) $
(177) $
21
(3)
(16)
292
$
)
(14) $
(
)
(193) $
(
(25) $
—
)
(25) $
(
(10) $
(1)
)
(
(11) $
(1) $
—
( )
(1) $
1
$
(4)
( )
(3) $
— $
(1)
( )
(1) $
— $
—
— $
— $
—
— $
— $
—
— $
(83) $
(7)
)
(90) $
(
(29) $
(2)
)
(
(31) $
(3) $
—
( )
(3) $
(16) $
(1)
)
(
(17) $
(9) $
—
( )
(9) $
(5) $
(2)
( )
(7) $
— $
4
4
$
(1) $
—
( )
(1) $
3
$
(2)
1
$
74
2
76
25
5
30
20
—
20
4
—
4
39
11
50
(1) Represents restructuring liability recorded as an offset to right-of-use assets upon the adoption of ASC 842.
(2) Costs expensed, net of reversals include $30 million, $11 million, and $3 million of costs reversed from the Fiscal 2019 Plan, Fiscal 2018 Plan
and Other Prior Year Plans, respectively.
(3) Pension benefit augmentations recorded as a pension liability and asset impairment.
(4) Foreign currency translation adjustments.
143
Note 23 - 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 one to five 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 March 31, 2021 were as follows:
Fiscal year
(in millions)
2022
2023
2024
2025
2026
Thereafter
Total
$
Minimum
Purchase
Commitment
1,487
1,227
423
175
177
15
$
3,504
In the normal course of business, the Company may provide certain customers 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 customer. 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 March 31, 2021:
(in millions)
Surety bonds
Letters of credit
Stand-by letters of credit
Totals
Fiscal 2022
Fiscal 2023
Fiscal 2024 and
Thereafter
Totals
$
$
98
$
172
71
341
$
18
30
26
74
$
$
69
$
510
11
185
712
108
590
$
1,005
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.
144
Contingencies
Strauch Fair Labor Standards Act Collective Action: On July 1, 2014, several plaintiffs filed an action in the U.S. District
Court for the District of Connecticut on behalf of themselves and a putative nationwide collective of CSC system
administrators, alleging CSC’s failure to properly classify these employees as non-exempt under the federal Fair Labor
Standards Act ("FLSA"). Plaintiffs alleged similar state-law Rule 23 class claims pursuant to Connecticut and California
statutes. Plaintiffs claimed double overtime damages, liquidated damages, and other amounts and remedies.
In 2015 the Court entered an order granting conditional certification under the FLSA of the collective of over 4,000 system
administrators. Approximately 1,000 system administrators filed consents with the Court to participate in the FLSA
collective. The class/collective action is currently made up of approximately 800 individuals who held the title of associate
professional or professional system administrator.
In June 2017, the Court granted Rule 23 certification of a Connecticut state-law class and a California state-law class
consisting of professional system administrators and associate professional system administrators. Senior professional
system administrators were found not to qualify for Rule 23 certification under the state-law claims. CSC sought
permission to appeal the Rule 23 decision to the Second Circuit Court of Appeals, which was denied.
In December 2017, a jury trial was held and a verdict was returned in favor of plaintiffs. On August 6, 2019, the Court
issued an order awarding plaintiffs $18.75 million in damages. In September 2019, Plaintiffs filed a motion seeking $14.1
million in attorneys’ fees and costs. In July 2020, the Court 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 fee 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. In February
2021, the Company executed a settlement agreement with the plaintiffs, which is now pending court approval.
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.
In September 2017, the Securities and Exchange Commission (“SEC”) filed a complaint against Mr. Pulier in the U.S.
District Court for the Central District of California alleging various claims, including for fraud and falsifying books and
records (Securities and Exchange Commission v. Eric Pulier, Case No. 2:17-cv-07124). In May 2021, the SEC and Mr.
Pulier filed a Consent of Defendant Eric Pulier and a Proposed Final Judgment as to Defendant Eric Pulier, which the
Court subsequently accepted and entered.
145
With the SEC’s claims against Mr. Pulier resolved, the Company’s obligation to advance amounts for Mr. Pulier’s legal
fees and costs has concluded.
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. On January 10, 2020, the Court of Appeals issued a decision 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 has 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.
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 stayed the entire action pending arbitration for these individuals, and
administratively closed the case.
146
A mediation was held in October 2018 with the 16 named and opt-in plaintiffs who were involved in the case at that time. A
settlement was reached, which included seven plaintiffs who were employed by former business units of HPE that are
now owned by the Company. In June 2019, a second mediation was held with 145 additional opt-in plaintiffs who were
compelled to arbitration pursuant to their release agreements. In December 2019, a settlement was reached with 142 of
the opt-in plaintiffs, 35 of whom were employed by former business units of HPE that are now owned by the Company,
and for which the Company was liable.
In December 2020, Plaintiffs filed a motion for preliminary certification of the collective action, which Defendants opposed.
In April 2021, the court granted Plaintiffs’ motion for preliminary certification and lifted the previously imposed stay of the
action.
Former business units of the Company now owned by Perspecta may be proportionately liable for any recovery by
plaintiffs in this matter.
Oracle America, Inc., et al. v. Hewlett Packard Enterprise Company: On March 22, 2016, Oracle filed a complaint against
HPE in the Northern District of California, alleging copyright infringement, interference with contract, intentional
interference with prospective economic relations, and unfair competition. The litigation relates in part to former business
units of HPE that are now owned by the Company. The Company may be required to indemnify HPE for a portion of any
recovery by Oracle in the litigation related to these business units.
Oracle’s claims arise primarily out of HPE’s prior relationship with a third-party maintenance provider named Terix
Computer Company, Inc. (“Terix”). Oracle claims that Terix infringed its copyrights while acting as 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 January 29, 2019, the court granted HPE’s motion for summary judgment and denied Oracle’s motion for summary
judgment, resolving the matter in HPE’s favor. Oracle appealed the judgment to the U.S. Court of Appeals for the Ninth
Circuit. In August 2020, the court granted Oracle's appeal in part. The case was then remanded to the District Court for
further proceedings.
In January 2021, the District Court entered a scheduling order that provided for summary judgment briefing to be
completed by May 2021 and a trial date in November 2021.
In re DXC Technology Company Securities Litigation: On December 27, 2018, a purported class action lawsuit was filed in
the United States District Court for the Eastern District of Virginia against the Company and two of its current officers. The
lawsuit asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and is
premised on allegedly false and/or misleading statements, and alleged non-disclosure of material facts, regarding the
Company’s business, operations, prospects and performance during the proposed class period of February 8, 2018 to
November 6, 2018. The Company moved to dismiss the claims in their entirety, and on June 2, 2020, the court granted
the Company’s motion, dismissing all claims and entering judgment in the Company's favor. On July 1, 2020, the plaintiffs
filed a notice of appeal to the U.S. Court of Appeals for the Fourth Circuit. The appeal has been fully briefed and a
decision on the appeal remains pending.
In March 2019, three related shareholder derivative lawsuits were filed in the Eighth Judicial District Court of the State of
Nevada, in and for Clark County, against one of the Company’s current officers and a former officer as well as members of
the Company’s board of directors, asserting claims for breach of fiduciary duty, waste of corporate assets, and unjust
enrichment. By agreement of the parties and order of the court, those lawsuits were consolidated on July 18, 2019, and
are presently stayed pending the outcome of the appeal of the Eastern District of Virginia matter.
147
On August 20, 2019, a purported class action lawsuit was filed in the Superior Court of the State of California, County of
Santa Clara, against the Company, directors of the Company, and a former officer of the Company, among other
defendants. On September 16, 2019, a substantially similar purported class action lawsuit was filed in the United States
District Court for the Northern District of California against the Company, directors of the Company, and a former officer of
the Company, among other defendants. On November 8, 2019, a third purported class action lawsuit was filed in the
Superior Court of the State of California, County of San Mateo, against the Company, directors of the Company, and a
former officer of the Company, among other defendants. The third lawsuit was voluntarily dismissed by the plaintiff and re-
filed in the Superior Court of the State of California, County of Santa Clara on November 26, 2019, and thereafter was
consolidated with the earlier-filed action in the same court on December 10, 2019. The California lawsuits assert claims
under Sections 11, 12 and 15 of the Securities Act of 1933, as amended, and are premised on allegedly false and/or
misleading statements, and alleged non-disclosure of material facts, regarding the Company’s prospects and expected
performance. Plaintiff in the federal action filed an amended complaint on January 8, 2020. The putative class of plaintiffs
in these cases includes all persons who acquired shares of the Company’s common stock pursuant to the offering
documents filed with the Securities and Exchange Commission in connection with the April 2017 transaction that formed
DXC. On July 15, 2020, the Superior Court of California, County of Santa Clara, denied the Company’s motion to stay the
state court case but extended the Company’s deadline to seek dismissal of the state action, until after a decision on the
Company’s motion to dismiss the federal action. The Company has since moved to dismiss the state action, and the court
has continued the motion until after the outcome of the federal action. On July 27, 2020, the United States District Court
for the Northern District of California granted the Company’s motion to dismiss the federal action. The Court’s order
permitted plaintiffs to amend and refile their complaint within 60 days, and on September 25, 2020, the plaintiffs filed an
amended complaint. On November 12, 2020, the Company filed a motion to dismiss the amended complaint. On April 30,
2021, the Court granted the Company’s motion to dismiss the amended complaint, while granting Plaintiffs leave to
amend and refile their complaint within 30 days.
On October 2, 2019, a shareholder derivative lawsuit was filed in the Eighth Judicial District Court of the State of Nevada,
in and for Clark County, asserting various claims, including for breach of fiduciary duty and unjust enrichment, and
challenging certain sales of securities by officers under Rule 10b5-1 plans. The shareholder filed this action after making a
demand on the board of directors, alleging breaches of fiduciary duty, corporate waste and disclosure violations, and
demanding that the board take certain actions to evaluate the allegations and respond. The Company’s board of directors
analyzed the demand, and has determined to defer its decision on the demand pending developments in the securities
and derivative lawsuits described above. The Company moved to dismiss the complaint on the basis that the Board’s
decision to defer action was not a refusal of the demand and was within its discretion. The Company’s motion to dismiss
was denied on January 22, 2020. By agreement of the parties and order of the court, the case is presently stayed,
pending the outcome of the appeal in the Eastern District of Virginia matter.
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 two 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 has substantially completed its internal investigation. The Company provided
supplemental information to OFAC on January 31, 2020 and continues to work with OFAC on these issues.
148
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 then increased
its damages calculations to include interest, bringing its total claim to $990 million.
In its arbitration demand, Perspecta also challenged $39 million in invoices issued by DXC in June 2019 under its IT
Services Agreement with Perspecta ("ITSA"). Perspecta subsequently challenged an additional $31 million sought by DXC
in August 2020 under the ITSA.
In October 2020, a hearing was held before an arbitration panel, during which the Company and Perspecta each
presented evidence on the claims at issue. In December 2020, the parties presented closing arguments and the case was
submitted. In February 2021, the arbitration panel issued an interim award, finding in DXC’s favor on all matters at issue in
the arbitration. Perspecta’s claims under the SDA were denied in full. Perspecta’s challenges under the ITSA were also
denied in full, and DXC was awarded the full amount of its invoices, totaling $69 million. The panel further held that DXC
could seek reimbursement of its costs and fees in litigating the matter, as well as pre- and post-judgment interest on the
$69 million DXC was awarded. The parties submitted briefing on these issues in March 2021. In May 2021, the parties
reached an agreement to settle DXC’s pending request for fees and interest. The agreement also provided for payment to
DXC of the $69 million awarded to it in the arbitration. This matter is now closed.
Tax Examinations: The Company is under IRS examination in the U.S. on its federal income tax returns for certain fiscal
years and is in disagreement with the IRS on certain of our tax positions. For more detail, see Note 13 - "Income Taxes—
Tax Examinations."
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.
149
Note 24 - Subsequent Events
HPS Sale
On April 1, 2021, DXC completed the sale of its HPS Business to Dedalus Holding S.p.A. ("Dedalus") for €462 million
(approximately $543 million), subject to certain adjustments. The sale of HPS to Dedalus is consistent with DXC’s strategy
and focus on the Enterprise Technology Stack. The sale proceeds were used to repay the remainder of two series of
4.45% Senior Notes due fiscal 2023 for $154 million and $165 million.
150
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. 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 Annual Report on Form 10-K, the effectiveness of the design
and operation 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, as of the end of the period covered by this report to ensure that
information required to be disclosed by us in the SEC reports (i) is recorded, processed, summarized and reported, within
the time periods specified in the SEC's rules and forms and (ii) is accumulated and communicated to our management,
including the principal executive and principal financial officers, or persons performing similar functions, as appropriate, to
allow timely decisions regarding required disclosure.
Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that DXC's disclosure
controls and procedures were not effective as of March 31, 2021 because of the material weakness in our internal control
over financial reporting as described below (and previously disclosed in our December 31, 2019 Form 10-Q and
subsequent Form 10-K and 10-Q filings), in Management's Report on Internal Control over Financial Reporting.
Notwithstanding this material weakness described below, management has concluded that the Company's consolidated
financial statements for the periods covered by and included in this Annual Report on Form 10-K are fairly stated in all
material respects in accordance with GAAP for each of the periods presented herein.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external reporting purposes in accordance with
accounting principles generally accepted in the United States of America.
Management assessed the effectiveness of our internal control over financial reporting based on the criteria and
framework established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control
over financial reporting was not effective as of March 31, 2021 because of the material weakness in our internal control
over financial reporting described below.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that
a reasonable possibility exists that a material misstatement of our annual or interim financial statement would not be
prevented or detected on a timely basis.
As previously disclosed in Item 4 “Controls and Procedures” of our Form 10-Q for the period ended December 31, 2019,
management concluded there was a material weakness in internal controls over financial reporting relating 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). Management
identified multiple deficiencies that constitute a material weakness, in the aggregate, related to the establishment and
timely reassessment of policies and procedures for complex transactions and processes and the related impacts to control
activities.
As a result, we have concluded that there is a reasonable possibility that a material misstatement to our 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
March 31, 2021.
151
Remediation Plan
Management has taken and will continue to take significant and comprehensive actions to remediate the material
weakness. With the addition of new operations and finance leadership working in concert with the Audit Committee,
management assessed the root cause of the multiple deficiencies that aggregated to the material weakness. As a result,
an extension of time is necessary to make further control enhancements to deliver a sustainable control environment and
remediate the material weakness.
The Audit Committee has been fully engaged and supportive of management’s efforts to remediate the Material
Weakness. Beginning in the fourth quarter of fiscal 2020, the Audit Committee has received a remediation report at each
regularly held meeting and had additional informal meetings specifically to review progress on the remediation.
Participants have included the Chief Executive Officer, Chief Financial Officer, Controller, SOX Leader and Internal Audit
to answer questions and take feedback from the Committee. Additionally, the Audit Committee requested that the new
finance leadership complete a detailed review of the root cause analysis and remediation plan which was completed
during the fourth quarter of fiscal 2021 making it necessary for an extension of time to complete additional remediation
actions, including further augmenting the Company's talent.
The following activities are designed as part of this remediation plan to (1) address the material weakness in the control
activities component of the COSO framework and (2) enhance and improve our control activities and processes:
Actions to remediate the material weakness in the control activities component of COSO:
• We appointed a new Chief Financial Officer during the third quarter of fiscal 2021 with previous experience as a
Chief Accounting Officer and substantial experience leading a finance organization through transformation
including remediating material weaknesses. Our Chief Financial Officer is leading our remediation efforts and is
focused on driving change in our finance organization, control environment and culture.
• We evaluated our finance organization and have and will augment our finance team with additional professionals
with the appropriate levels of accounting, controls, finance oversight and tax experience and training.
• We hired a dedicated team of controls and process experts to standardize our processes and focus our key
controls to address material risks.
• We are increasing communication and training to employees regarding internal control over financial reporting
and disclosure controls and procedures.
• We are designing and implementing an enterprise wide process to timely identify, track and appropriately resolve
and conclude on complex transactions and disclosures.
Additional enhancements to improve our control activities and processes:
• We are enhancing our financial cadence and discipline including reviewing the underlying performance of the
business and related balance sheet accounts.
• We are enhancing key enterprise controls including financial operations reviews, working capital reviews, balance
sheet reviews and assessment and monitoring of non-routine accounting transactions.
• We are assessing relevant policies focusing on ownership and accountability and reviewing and implementing
changes to thresholds to focus on risk.
• We are refining the financial close process so it executes with the appropriate cadence and rigor to reduce the
length of time it takes to close.
• We are standardizing processes, rationalizing and strengthening controls to mitigate significant risk, enhance
control owner accountability and transparency to address deficiencies in a holistic and timely manner.
These additional remediation efforts, identified to comprehensively address our analysis of root causes, have begun and
are expected to be completed in subsequent quarters. After management’s remediation efforts are complete, subsequent
testing will be required to conclude that a material weakness no longer exists. Our goal is to have enhanced control
policies, procedures, processes in place as promptly as practicable, however, we are not in a position to complete our
remediation plan and concluded that our internal control over financial reporting is not designed or operating effectively as
of March 31, 2021.
152
The effectiveness of DXC's internal control over financial reporting as of March 31, 2021 has been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, which is contained in this Annual Report.
Changes in Internal Controls Over Financial Reporting
In addition to the remediation efforts described above, we adopted ASC 326, “Financial Instruments - Credit Losses (Topic
326): Measurement of Credit Losses on Financial Instruments”, effective April 1, 2020, as described in Note 2 - “Recent
Accounting Pronouncements” to the financial statements during the first quarter of fiscal 2021. We began using a new
model and redesigned certain processes and controls relating to our reserves and expected losses.
There were no changes in our internal control over financial reporting during the three months ended March 31, 2021 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
153
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
DXC Technology Company
Tysons, Virginia
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of DXC Technology Company and subsidiaries (the
“Company”) as of March 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, because
of the effect of the material weakness identified below on the achievement of the objectives of the control criteria, the
Company has not maintained effective internal control over financial reporting as of March 31, 2021, based on criteria
established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated financial statements as of and for the year ended March 31, 2021, of the Company
and our report dated May 27, 2021, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on
the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
154
Material Weakness
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial
statements will not be prevented or detected on a timely basis. The following material weakness has been identified
and included in management's assessment:
The Company did not design and implement effective control activities based on the criteria established in the COSO
framework. The Company identified multiple deficiencies that constitute a material weakness, in the aggregate, related
to the establishment and timely reassessment of policies and procedures for complex transactions and processes and
the related impacts to control activities.
This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit
of the consolidated financial statements as of and for the year ended March 31, 2021, of the Company, and this report
does not affect our report on such financial statements.
/s/ Deloitte & Touche LLP
McLean, Virginia
May 27, 2021
155
ITEM 9B. OTHER INFORMATION
None.
PART III
Certain information required by Part III is omitted from this Annual Report on Form 10-K and is incorporated herein by
reference to the definitive proxy statement with respect to our 2021 Annual Meeting of Stockholders (the "2021 Proxy
Statement"), which we will file with the Securities and exchange Commission no later than 120 days after the end of the
fiscal year covered by this Annual Report.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information relating to our executive officers appears in Part I, Item I of this Annual Report on Form 10-K under the
heading "Information About Our Executive Officers."
Other information required by this item will appear under the headings "Proposal 1-Election of Directors,” "Delinquent
Section 16(a) Reports" (if applicable), “Corporate Governance,” and “Additional Information-Business for 2021 Annual
Meeting" in our 2021 Proxy Statement, which will be filed with the SEC pursuant to Regulation 14A not later than 120 days
after March 31, 2021, and such information is incorporated herein by reference.
We have a written Code of Business Conduct that applies to our Chief Executive Officer, Chief Financial Officer, Principal
Accounting Officer and every other officer and employee of DXC. Our Code of Business Conduct is available on our
website, www.dxc.technology, under the heading Leadership and Governance. If any amendment to, or a waiver from, a
provision of the Code of Business Conduct is made, we intend to disclose such information on our website within four
business days.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item will appear in our 2021 Proxy Statement under the headings "Executive Compensation"
and "Corporate Governance" and are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The following table gives information about our common stock that may be issued under our equity compensation plans
as of March 31, 2021. See Note 17 - "Stock Incentive Plans" of the consolidated financial statements included herein for
information regarding the material features of these plans.
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
Weighted-average exercise
price of outstanding options,
warrants and rights
Number of securities
remaining available for future
issuance under equity
compensation plans
excluding securities reflected
in column (a)
Plan Category
(a)
(b)
(c)
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
10,186,460
—
10,186,460
5.01
—
5.01
33,294,088
—
33,294,088
Other information required by this Item will appear in the 2021 Proxy Statement under the heading "Security Ownership,"
which section is incorporated by reference.
156
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information required by this item will appear in our 2021 Proxy Statement under the headings "Corporate Governance"
and "Certain Relationships and Related Transactions" and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information required by this item will appear in our 2021 Proxy Statement under the heading "Proposal 2-Ratification of
the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending
March 31, 2022-Fees" and is incorporated herein by reference.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(1) Consolidated Financial Statements
PART IV
The financial statements are included under Item 8 of this Annual Report. See the index on page [63].
(2) Exhibits
The following exhibits are filed herewith unless otherwise indicated.
Exhibit
Number
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
Description of Exhibit
Purchase Agreement, dated March 9, 2020, by and between Milano Acquisition Corp and DXC Technology Company
(incorporated by reference to Exhibit 2.1 to DXC Technology Company's Current Report on Form 8-K (filed March 12,
2020) (file no. 001-38033))
Agreement and Plan of Merger, dated as of May 24, 2016, by and among Computer Sciences Corporation, Hewlett
Packard Enterprise Company, Everett SpinCo, Inc. (now known as DXC Technology Company) and Everett Merger Sub,
Inc. (incorporated by reference to Exhibit 2.1 to Hewlett Packard Enterprise Company's Current Report on Form 8-K (filed
May 26, 2016) (file no. 001-37483))
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))
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))
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))
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))
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))
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))
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))
2.10
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))
157
2.11
2.12
2.13
2.14
2.15
2.16
2.17
2.18
2.19
2.20
2.21
2.22
2.23
3.1
3.2
4.1
4.2
4.3
4.4
4.5
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))
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))
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))
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))
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))
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))
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))
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))
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))
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))
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))
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))
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))
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))
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))
Base Indenture, dated as of March 27, 2017, between Everett SpinCo, Inc. (now known as DXC Technology Company)
and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to DXC Technology Company's
Form 8-K (filed March 27, 2017) (file no. 001-38033))
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 Form 8-K (filed March 27, 2017) (file no. 001-38033))
Third Supplemental Indenture, dated as of August 9, 2017, between DXC Technology Company and U.S. Bank National
Association, as trustee (incorporated by reference to Exhibit 4.2 to DXC Technology Company's Form 8-K (filed August 9,
2017) (file no. 001-38033))
Fifth Supplemental Indenture, dated 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))
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 Form 8-K (filed March 15, 2018) (file no. 001-38033))
158
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
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))
Eighth Supplemental Indenture, dated April 21, 2020, between DXC Technology Company and U.S. Bank National
Association, as trustee (incorporated by reference to Exhibit 4.1 to DXC Technology Company’s Current Report on Form 8-
K (filed April 21, 2020) (file no. 001-38033))
Form of DXC Technology Company's 4.750% Senior Notes due 2027 (incorporated by reference to Exhibit 4.2 to DXC
Technology Company's Form 8-K (filed March 27, 2017) (file no. 001-38033))
Form of DXC Technology Company's 4.250% Senior Notes due 2024 (incorporated by reference to Exhibit 4.2 to DXC
Technology Company's Form 8-K (filed August 9, 2017) (file no. 001-38033))
Form of DXC Technology Company's 4.750% Senior Notes due 2027 (incorporated by reference to Exhibit 4.2 to DXC
Technology Company's Form 8-K (filed August 9, 2017) (file no. 001-38033))
Form of DXC Technology Company's 7.45% Senior Notes due 2029 (incorporate 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))
Form of DXC Technology Company's 2.750% Senior Notes due 2025 (incorporated by reference to Exhibit 4.1 to DXC
Technology's Form 8-K filed March 15, 2018) (file no. 001-38033))
Form of DXC Technology Company’s 1.750% Senior Notes due 2026 (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))
Form of DXC Technology Company’s 4.125% Senior Notes due 2025 (incorporated by reference to Exhibit 4.1 to DXC
Technology Company’s Current Report on Form 8-K (filed April 21, 2020) (file no. 001-38033))
Description of Securities (incorporated by reference to Exhibit 4.21 to DXC Technology Company's Annual Report on Form
10-K (filed June 13, 2019) (file no. 001-38033))
Amended and Restated Credit Agreement, dated as of October 11, 2013, among Computer Sciences Corporation, the
financial institutions listed therein and Citibank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to
Computer Sciences Corporation's Current Report on Form 8-K (filed October 17, 2013) (file number 001-04850))
Amendment No. 1 dated as of April 21, 2016 to the Credit Agreement dated October 11, 2013, among Computer Sciences
Corporation, the financial institutions listed therein and Citibank, N.A. as administrative agent (incorporated by reference to
Exhibit 10.1 to Computer Sciences Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2016
(filed August 9, 2016) (file no. 001-04850))
Amendment No. 2 dated as of June 21, 2016 to the Credit Agreement dated October 11, 2013, among Computer Sciences
Corporation, the financial institutions listed therein and Citibank, N.A., as administrative agent (incorporated by reference to
Exhibit 10.1 to Computer Sciences Corporation’s Current Report on Form 8-K (filed June 21, 2016) (file no. 001-04850))
Waiver and Amendment No. 3 dated as of February 17, 2017 to the Amended and Restated Credit Agreement dated
October 11, 2013, among the Company, the financial institutions listed therein, and Citibank, N.A., as Agent (incorporated
by reference to Exhibit 10.54 to Computer Sciences Corporation’s Annual Report on Form 10-K for the year ended March
31, 2017 (filed May 26, 2017) (file no. 001-04850))
Amendment No. 4 dated as of October 11, 2018 to the Amended and Restated Credit Agreement dated October 11, 2013,
among DXC Technology Company, the financial institutions listed therein, and Citibank, N.A., as Agent (incorporated by
reference to Exhibit 10.9 to DXC Technology Company's Quarterly Report on Form 10-Q (filed November 8, 2018) (file no.
001-38033))
Amendment No. 5 and Extension Agreement dated October 11, 2019 to the Amended and Restated Credit Agreement
dated October 11, 2013, among DXC Technology Company, the financial institutions listed therein, and Citibank, N.A., as
Agent (incorporated by reference to Exhibit 10.6 to DXC Technology Company’s Annual Report on Form 10-K (filed June 1,
2020) (file no. 001-38033))
Amendment No. 6 dated May 15, 2020 to the Amended and Restated Credit Agreement dated October 11, 2013, among
DXC Technology Company, the financial institutions listed therein, and Citibank, N.A., as Agent (incorporated by reference
to Exhibit 10.7 to DXC Technology Company’s Annual Report on Form 10-K (filed June 1, 2020) (file no. 001-38033))
Incremental Assumption Agreement, dated as of June 15, 2016, by and among Computer Sciences Corporation, the
incremental lenders party thereto and Citibank, N.A. as administrative agent (incorporated by reference to Exhibit 10.3 to
Computer Sciences Corporation's Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2016 (filed August 9,
2016) (file no. 001-04850))
Second Incremental Assumption Agreement, dated as of July 25, 2016, by and among Computer Sciences Corporation,
the incremental lenders party thereto and Citibank, N.A. as Administrative Agent (incorporated by reference to Exhibit 10.5
to DXC Technology Company's Annual Report on Form 10-K (filed May 29, 2018) (file no. 001-38033))
10.10
10.11
Third Incremental Assumption Agreement, dated as of December 30, 2016, by and among Computer Sciences
Corporation, the incremental lenders party thereto and Citibank, N.A. as Administrative Agent (incorporated by reference to
Exhibit 10.6 to DXC Technology Company's Annual Report on Form 10-K (filed May 29, 2018) (file no. 001-38033))
Fourth Incremental Assumption Agreement, dated as of April 3, 2017, by and among DXC Technology Company, the
incremental lenders party thereto and Citibank, N.A. as administrative agent (incorporated by reference to Exhibit 10.8 to
DXC Technology Company's Annual Report on Form 10-K (filed May 29, 2018) (file no. 001-38033))
159
10.12
Fifth Incremental Assumption Agreement, dated as of September 27, 2017, by and among DXC Technology Company, the
incremental lenders party thereto and Citibank, N.A. as administrative agent (incorporated by reference to Exhibit 10.6 to
DXC Technology Company's Annual Report on Form 10-K (filed May 29, 2018) (file no. 001-38033))
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
Sixth Incremental Assumption Agreement dated September 26, 2018, by and among the DXC Technology Company and
the incremental lenders party thereto and consented to, with respect to the New Lender (as defined therein) only, by the
Swing Line Banks (as defined in the Revolving Credit Agreement) party thereto and consented to, with respect to the New
Lender only, and accepted by Citibank, as administrative agent (incorporated by reference to Exhibit 10.4 to DXC
Technology Company’s Current Report on Form 8-K (filed September 27, 2018) (file no. 001-38033))
Term Loan Credit Agreement dated as of March 15, 2019 among DXC Technology Company, as borrower, the lenders from
time to time party thereto, as Lenders, and Bank of America, N.A., as the administrative agent (incorporated by reference
to Exhibit 10.1 to DXC Technology Company's Current Report on Form 8-K (filed March 20, 2019) (file no. 001-38033))
Amendment No. 1 and Extension Agreement dates May 15, 2020 to the Term Loan Credit Agreement dated as of March
15, 2019 among DXC Technology Company, as borrower, the lenders from time to time party thereto, as Lenders, and
Bank of America, N.A., as the administrative agent (incorporated by reference to Exhibit 10.15 to DXC Technology
Company’s Annual Report on Form 10-K (filed June 1, 2020) (file no. 001-38033)
Dealer Agreement, dated July 24, 2015, by and between CSC Capital Funding Limited, as issuer, Computer Sciences
Corporation, as guarantor, Citibank International Limited, as arranger, and the financial institutions listed therein, as dealers
(incorporated by reference to Exhibit 99.1 to Computer Sciences Corporation’s Current Report on Form 8-K (filed July 28,
2015) (file no.001-04850))
Amendment No. 1 dated April 3, 2017, to the Dealer Agreement, dated July 24, 2015, by and between DXC Capital
Funding Limited, as Issuer, DXC Technology Company, as Guarantor, Citibank Europe PLC, UK Branch, as Arranger, and
the financial institutions listed therein, as Dealers (incorporated by reference to Exhibit 10.23 to DXC Technology
Company's Annual Report on Form 10-K (filed May 29, 2018) (file no. 001-38033))
Purchase and Sale Agreement dated as of December 21, 2016, among Computer Sciences Corporation, as Contributing
Originator and Servicer, Alliance-One Services, Inc., CSC Agility Platform, Inc., CSC Consulting, Inc., CSC Cybertek
Corporation, Mynd Corporation and PDA Software Services LLC, as Originators, and CSC Receivables LLC, as Buyer
(incorporated by reference to Exhibit 10.1 to Computer Sciences Corporation 's Current Report on Form 8-K (filed
December 23, 2016) (file no. 001-04850))
First Amendment to the Purchase and Sale Agreement dated as of August 22, 2018, among Computer Sciences
Corporation, as Contributing Originator and Servicer, Alliance-One Services, Inc., CSC Agility Platform, Inc., CSC
Consulting, Inc., CSC Cybertek Corporation, Mynd Corporation, DXC Technology Services LLC and PDA Software
Services LLC, as Originators, and CSC Receivables LLC, as Buyer (incorporated by reference to Exhibit 10.1 to DXC
Technology Company’s Current Report on Form 8-K (filed August 27, 2018) (file no. 001-38033))
Second Amendment to the Purchase and Sale Agreement dated as of September 24, 2018, among Computer Sciences
Corporation, as Exiting Originator and Exiting Servicer, Alliance-One Services, Inc., CSC Agility Platform, Inc., CSC
Consulting, Inc., CSC Cybertek Corporation, Mynd Corporation and PDA Software Services LLC, as Exiting Originators,
DXC Technology Services LLC, as Originator, DXC Technology Company, as Servicer, and DXC Receivables LLC (f/k/a
CSC Receivables LLC), as Buyer (incorporated by reference to Exhibit 10.1 to DXC Technology Company’s Current Report
on Form 8-K (filed September 27, 2018) (file no. 001-38033))
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 (incorporated by reference to Exhibit
10.1 to DXC Technology Company’s Quarterly Report on Form 10-Q (filed November 12, 2019) (file no. 001-38033))
Fourth Amendment to the Purchase and Sale Agreement dated as of November 22, 2019, among DXC Technology
Company, as Servicer, DXC Technology Services LLC, Alliance-One Services, Inc., Computer Sciences Corporation, CSC
Consulting, Inc., CSC Cybertek Corporation, Mynd Corporation, and PDA Software Services LLC, as Existing Originators;
CSC Puerto Rico LLC, CSC Covansys Corporation and Tribridge Holdings, LLC, as New Originators; and DXC
Receivables LLC (f/k/a CSC Receivables LLC), as Buyer (incorporated by reference to Exhibit 10.1 to DXC Technology
Company’s Quarterly Report on Form 10-Q (filed February 7, 2020) (file no. 001-38033))
Fifth Amendment to the Purchase and Sale Agreement dated as of May 29, 2020, among DXC Technology Company, as
Servicer, DXC MS LLC as exiting Originator, DXC Receivables LLC (f/k/a CSC Receivables LLC), as Buyer and the various
parties listed as remaining Originators (incorporated by reference to Exhibit 10.2 to DXC Technology Company’s Quarterly
Report on Form 10-Q (filed August 7, 2020) (file no. 001-38033))
Sixth Amendment to the Purchase and Sale Agreement dated as of August 10, 2020, among DXC Technology Company,
as Servicer, PDA Software Services LLC as exiting Originator, DXC Receivables LLC (f/k/a CSC Receivables LLC), as
Buyer and the various parties listed as remaining Originators (incorporated by reference to Exhibit 10.2 to DXC Technology
Company’s Quarterly Report on Form 10-Q (filed November 6, 2020) (file no. 001-38033))
Receivables Purchase Agreement dated as of December 21, 2016, among Computer Sciences Corporation, as Servicer,
CSC Receivables LLC, as Seller, the persons from time to time party thereto as Purchasers and group agents, PNC Bank,
National Association, as Administrative Agent and PNC Capital Markets LLC, as Structuring Agent (incorporated by
reference to Exhibit 10.2 to Computer Sciences Corporation’s Current Report on Form 8-K (filed December 23, 2016) (file
no. 001-04850))
160
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34*
10.35*
10.36*
10.37*
10.38*
10.39*
10.40*
10.41*
10.42*
10.43*
Third Amendment to the Receivables Purchase Agreement dated as of August 22, 2018, among Computer Sciences
Corporation, as Servicer, CSC Receivables LLC, as seller, the persons from time to time party thereto as Purchasers and
group agents, and PNC Bank, National Association, as Administrative Agent. (incorporated by reference to Exhibit 10.2 to
DXC Technology Company’s Current Report on Form 8-K (filed August 27, 2018) (file no. 001-38033))
Fourth Amendment to the Receivables Purchase Agreement dated as of September 24, 2018, among Computer Sciences
Corporation, as Exiting Servicer, DXC Receivables LLC (f/k/a CSC Receivables LLC), as seller, DXC Technology
Company, as Servicer, the persons from time to time party thereto as Purchasers and group agents, and PNC Bank,
National Association, as Administrative Agent (incorporated by reference to Exhibit 10.2 to DXC Technology Company’s
Current Report on Form 8-K (filed September 27, 2018) (file no. 001-38033))
Sixth Amendment to the Receivables Purchase Agreement dated as of August 21, 2019, among DXC Receivables LLC (f/
k/a CSC Receivables LLC), as Seller, DXC Technology Company, as Servicer, PNC Bank, National Association, as
Administrative Agent, and the persons from time to time party thereto as Purchasers and Group Agents (incorporated by
reference to Exhibit 10.1 to DXC Technology Company’s Quarterly Report on Form 10-Q (filed November 12, 2019) (file
no. 001-38033))
Seventh Amendment to the Receivables Purchase Agreement dated as of November 22, 2019, among DXC Receivables
LLC (f/k/a CSC Receivables LLC), as Seller, DXC Technology Company, as Servicer, PNC Bank, National Association, as
Administrative Agent, and the persons from time to time party thereto as Purchasers and Group Agents (incorporated by
reference to Exhibit 10.1 to DXC Technology Company’s Quarterly Report on Form 10-Q (filed February 7, 2020) (file no.
001-38033))
Eighth Amendment to the Receivables Purchase Agreement dated as of February 18, 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 (incorporated by
reference to Exhibit 10.34 to DXC Technology Company’s Annual Report on Form 10-K (filed June 1, 2020)(file no.
001-38033))
Ninth Amendment to the Receivables Purchase Agreement dated as of May 29, 2020, among DXC Receivables LLC (f/k/a
CSC Receivables LLC), as Seller, DXC Technology Company, as Servicer, PNC Bank, National Association, as
Administrative Agent, and the persons from time to time party thereto as Purchasers and Group Agents (incorporated by
reference to Exhibit 10.1 to DXC Technology Company’s Quarterly Report on Form 10-Q (filed August 7, 2020) (file no.
001-38033))
Tenth Amendment to the Receivables Purchase Agreement dated as of August 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 (incorporated by
reference to Exhibit 10.1 to DXC Technology Company’s Quarterly Report on Form 10-Q (filed November 6, 2020) (file no.
001-38033))
Fourth Amended and Restated Performance Guaranty dated as of February 18, 2020, made by DXC Technology
Company, as Performance Guarantor, in favor of PNC Bank, National Association, as Administrative Agent, for the benefit
of the Purchasers (incorporated by reference to Exhibit 10.38 to DXC Technology Company’s Annual Report on Form 10-K
(filed June 1, 2020)(file no. 001-38033))
DXC Technology Company 2017 Omnibus Incentive Plan (Amended and Restated effective August 13, 2020) (incorporated
by reference to Appendix C to the Company's Proxy Statement for the 2020 Annual Meeting of Stockholder on Form DEF
14A (filed July 2, 2020) (file no.001-38033)
DXC Technology Company 2017 Non-Employee Director Compensation Plan (Amended and Restated effective August 13,
2020) (incorporated by reference to Appendix D to the Company's Proxy Statement for the 2020 Annual Meeting of
Stockholder on Form DEF 14A (filed July 2, 2020) (file no.001-38033)
DXC Technology Company 2017 Share Purchase Plan (incorporated by reference to Exhibit 4.6 to the Company’s
Registration Statement on Form S-8 (filed March 31, 2017) (file no. 333-217053))
DXC Technology Company Deferred Compensation Plan (incorporated by reference to Exhibit 4.4 to the Company’s
Registration Statement on Form S-8 (filed March 31, 2017) (file no. 333-217054))
Amendment to DXC Technology Company Deferred Compensation Plan (incorporated by reference to Exhibit 10.4 to the
Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2017 (filed November 8, 2017) (file no.
001-38033))
Form of Stock Option Award under the DXC Technology Company 2017 Omnibus Incentive Plan (incorporated by
reference to Exhibit 10.4 to the Company’s Periodic Report on Form 8-K (filed April 6, 2017) (file no. 001-38033))
Form of Fiscal 2022 Performance Based Restricted Stock Unit Award under the DXC Technology Company 2017 Omnibus
Incentive Plan (filed herewith)
Form of Fiscal 2021 Performance Based Restricted Stock Unit Award under the DXC Technology Company 2017 Omnibus
Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the period
ended June 30, 2020 (filed August 7, 2020) (file no. 001-38033))
Form of Performance Based Restricted Stock Unit Award under the DXC Technology Company 2017 Omnibus Incentive
Plan (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K (filed April 6, 2017) (file no.
001-38033)
Form of Fiscal 2022 Service Based Restricted Stock Unit Award under the DXC Technology Company 2017 Omnibus
Incentive Plan (filed herewith)
161
10.44*
10.45*
10.46*
Form of Fiscal 2021 Service Based Restricted Stock Unit Award under the DXC Technology Company 2017 Omnibus
Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the period
ended June 30, 2020 (filed August 7, 2020) (file no. 001-38033))
Form of Service Based Restricted Stock Unit Award under the DXC Technology Company 2017 Omnibus Incentive Plan
(incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K (filed April 6, 2017) (file no.
001-38033)
Form of Restricted Stock Unit Agreement under the DXC Technology Company 2017 Non-Employee Director Incentive
Plan (incorporated by reference to Exhibit 10.7 to the Company’s Periodic Report on Form 8-K (filed April 6, 2017) (file no.
001-38033))
10.47*
DXC Technology Company Severance Plan for Senior Management and Key Employees (incorporated by reference to
Exhibit 10.11 to the Company’s Periodic Report on Form 8-K (filed April 6, 2017) (file no. 001-38033))
10.48*
10.49*
10.50*
10.51*
10.52*
10.53*
Amendment to the DXC Technology Corporation Severance Plan for Senior Management and Key Employees
(incorporated by reference to Exhibit 10.2 to DXC Technology Company's Quarterly Report on Form 10-Q (filed November
8, 2018) (file no. 001-38033))
Amendment No. 2 to the DXC Technology Company Severance Plan for Senior Management and Key Employees (filed
herewith)
Form of Director Indemnification Agreement (incorporated by reference to Exhibit 10.16 to the Company’s Periodic Report
on Form 8-K (filed April 6, 2017) (file no. 001-38033))
Form of Career Share Restricted Stock Unit Award under the DXC Technology Company 2017 Omnibus Incentive Plan
(incorporated by reference to Exhibit 10.45 to DXC Technology Company's Annual Report on Form 10-K (filed May 29,
2018) (file no. 001-38033))
Form of Fiscal 2022 Career Share Restricted Stock Unit Award under the DXC Technology Company 2017 Omnibus
Incentive Plan (filed herewith)
Employment Agreement with Michael J. Salvino (incorporated by reference to Exhibit 10.1 to DXC Technology Company’s
Current Report on Form 8-K (filed September 12, 2019) (file no. 001-38033))
10.54* Amendment to Employment Agreement with Michael J. Salvino dated May 27, 2021 (filed herewith)
10.55* Separation Agreement with Paul Saleh, dated October 2, 2020 (incorporated by reference to Exhibit 10.3 to DXC
Technology Company’s Quarterly Report on Form 10-Q (filed on November 6, 2020) (file no. 001-38033))
Significant Active Subsidiaries and Affiliates of the Registrant (filed herewith)
Consent of Independent Registered Public Accounting Firm
Section 302 Certification of the Chief Executive Officer
Section 302 Certification of the Chief Financial Officer
21
23
31.1
31.2
32.1** Section 906 Certification of Chief Executive Officer
32.2** Section 906 Certification of Chief Financial Officer
101.INS XBRL Instance
101.SCH XBRL Taxonomy Extension Schema
101.CAL XBRL Taxonomy Extension Calculation
101.LAB XBRL Taxonomy Extension Labels
101.PRE XBRL Taxonomy Extension Presentation
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*Management contract or compensatory plan or agreement
**Furnished herewith
162
ITEM 16. FORM 10-K SUMMARY
None.
163
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.
SIGNATURES
DXC TECHNOLOGY COMPANY
Dated: May 27, 2021
By:
/s/ Kenneth P. Sharp
Name: Kenneth P. Sharp
Title:
Executive Vice President and Chief Financial Officer
Each person whose signature appears below constitutes and appoints Michael J. Salvino and Kenneth P. Sharp, and each
or any of them, as his or her true and lawful attorney-in-fact and agent, each acting alone, with full power of substitution
and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all
amendments or supplements to this Report, and to file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises,
as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Michael J. Salvino
Michael J. Salvino
/s/ Kenneth P. Sharp
Kenneth P. Sharp
/s/ Neil A. Manna
Neil A. Manna
/s/ Ian C. Read
Ian C. Read
/s/ Mukesh Aghi
Mukesh Aghi
/s/ Amy E. Alving
Amy E. Alving
President and Chief Executive Officer, Director
May 27, 2021
(Principal Executive Officer)
Executive Vice President and Chief Financial Officer
May 27, 2021
(Principal Financial Officer)
Senior Vice President and Corporate Controller
May 27, 2021
(Principal Accounting Officer)
Chairman
May 27, 2021
Director
Director
May 27, 2021
May 27, 2021
164
/s/ David A. Barnes
David A. Barnes
/s/ Raul J. Fernandez
Raul J. Fernandez
/s/ David L. Herzog
David L. Herzog
/s/ Mary Louise Krakauer
Mary Louise Krakauer
/s/ Dawn Rogers
Dawn Rogers
/s/ Manoj P. Singh
Manoj P. Singh
/s/ Akihiko Washington
Akihiko Washington
/s/ Robert F. Woods
Robert F. Woods
May 27, 2021
May 27, 2021
May 27, 2021
May 27, 2021
May 27, 2021
May 27, 2021
May 27, 2021
May 27, 2021
Director
Director
Director
Director
Director
Director
Director
Director
165
DXC Stockholder Information
Stock Information
DXC Website
Common stock symbol: DXC, listed and traded on the
Additional DXC information is available at www.dxc.com,
New York Stock Exchange. As of June 21, 2021, there were
including all of the documents DXC files with or furnishes
255,639,898 shares of common stock outstanding and
to the SEC, which are available free of charge.
42,540 stockholders of record.
Transfer Agent and Registrar
Annual Meeting
The Annual Meeting of Stockholders will be held on
All inquiries concerning registered stockholder accounts
August 17, 2021 at 10:30 a.m. Eastern Time and will be
and stock transfer matters, including address changes and
a virtual meeting conducted via live webcast. Attend the
consolidation of multiple accounts, should be directed to EQ
meeting online and submit your questions during the
Shareowner Services, DXC’s transfer agent and registrar.
meeting by visiting:
Stockholder correspondence should be mailed to:
Regular mail:
EQ Shareowner Services
P.O. Box 64874
St. Paul, MN 55164-0874
First Class, registered and certified mail:
EQ Shareowner Services
1110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55120-4100
www.shareowneronline.com
By phone:
1.800.468.9716 (U.S. Domestic)
1.651.450.4064 (International)
Financial Community Information
www.virtualshareholdermeeting.com/DXC2021.
To participate in the Annual Meeting, you will need the
16-digit control number included on your notice of Internet
availability of the proxy materials, on your proxy card or on
the instructions that accompany your proxy materials.
Independent Auditors
Deloitte & Touche LLP
7900 Tysons One Place, Suite 800
McLean, VA 22102
Forward-Looking Statements
All statements in this Annual Report that do not directly and
exclusively relate to historical facts constitute “forward-
looking statements.” These statements represent current
expectations and beliefs, and no assurance can be given that
the results described in such statements will be achieved.
Institutional and individual investors, financial analysts and
Such statements are subject to numerous assumptions,
portfolio managers can submit written requests, including
risks, uncertainties and other factors that could cause
requests for DXC filings with the U.S. Securities and Exchange
actual results to differ materially from those described in
Commission (SEC), to:
DXC Investor Relations
1775 Tysons Boulevard
Tysons, VA 22102
1.703.245.9700
such statements, many of which are outside of our control.
For a written description of these factors, see the section
titled “Risk Factors” in DXC’s Annual Report on Form 10-K
for the fiscal year ended March 31, 2021, and any updating
information in subsequent SEC filings. No assurance can be
given that any goal or plan set forth in any forward-looking
investor.relations@dxc.com
statement can or will be achieved, and readers are cautioned
To enroll in electronic delivery of DXC’s Proxy
speak only as of the date they are made. DXC disclaims any
Statement, Annual Report and other materials,
intention or obligation to update these forward-looking
log on to www.proxyvote.com.
statements whether as a result of subsequent event or
not to place undue reliance on such statements, which
otherwise, except as required by law.
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About DXC Technology
DXC Technology (NYSE: DXC) helps global companies run their mission critical systems and operations while modernizing
IT, optimizing data architectures, and ensuring security and scalability across public, private and hybrid clouds. The world’s
largest companies and public sector organizations trust DXC to deploy services across the Enterprise Technology Stack to drive
new levels of performance, competitiveness, and customer experience. Learn more about how we deliver excellence for our
customers and colleagues at DXC.com.