What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-01 compared with 2022-08-02 · 91 added, 63 removed, 578 unchanged (21% of the section changed)

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions, except per share data) 2022 2021 2022 2021

23 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2022 2021 2022 2021

12 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions, except share data in thousands) June 30, 2022 December 31, 2021

(in millions, except share data in thousands) September 30, 2022 December 31, 2021

Cash and cash equivalents $ 577 $ 415

37 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six Months Ended

Nine Months Ended

September 30,

(in millions) 2022 2021

5 unchanged sentences

Deferred income taxes 43 ( 7 )

(Gain) loss from investments — 5

Amortization of debt financing costs 3 5

2 unchanged sentences

Stock-based compensation 15 14

Allowance for credit losses — ( 1 )

Changes in operating assets and liabilities:

21 unchanged sentences

Cash, Cash Equivalents and Restricted Cash at End of period (1)

(1) Includes $ 11 million and $ 6 million of restricted cash as of June 30, 2022 and 2021, respectively, that were included in Other current assets on their respective Condensed Consolidated Balance Sheets.

(1) Includes $ 10 million and $ 6 million of restricted cash as of September 30, 2022 and 2021, respectively, that were included in Other current assets on their respective Condensed Consolidated Balance Sheets.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

(in millions) Common Stock Additional Paid-in Capital Retained Earnings (Deficit) AOCL (1)

Shareholders'

Balance at March 31, 2022 $ 2 $ 3,912 $ ( 2,217 ) $ ( 435 ) $ 1,262

Balance at June 30, 2022 $ 2 $ 3,918 $ ( 2,220 ) $ ( 475 ) $ 1,225

Dividends - preferred stock, $ 20 /share

5 unchanged sentences

Total Comprehensive Income (Loss), Net — — 15 ( 38 ) ( 23 )

Balance at June 30, 2022 $ 2 $ 3,918 $ ( 2,220 ) $ ( 475 ) $ 1,225

Three Months Ended June 30, 2021

Balance at September 30, 2022 $ 2 $ 3,924 $ ( 2,207 ) $ ( 513 ) $ 1,206

Three Months Ended September 30, 2021

(in millions) Common Stock Additional Paid-in Capital Retained Earnings (Deficit) AOCL (1)

Shareholders'

Balance at March 31, 2021 $ 2 $ 3,902 $ ( 2,326 ) $ ( 410 ) $ 1,168

Balance at June 30, 2021 $ 2 $ 3,907 $ ( 2,317 ) $ ( 407 ) $ 1,185

Dividends - preferred stock, $ 20 /share

5 unchanged sentences

Total Comprehensive Income (Loss), Net — — 11 ( 16 ) ( 5 )

Balance at June 30, 2021 $ 2 $ 3,907 $ ( 2,317 ) $ ( 407 ) $ 1,185

Six Months Ended June 30, 2022

Balance at September 30, 2021 $ 2 $ 3,912 $ ( 2,308 ) $ ( 423 ) $ 1,183

Nine Months Ended September 30, 2022

(in millions) Common Stock Additional Paid-in Capital Retained Earnings (Deficit) AOCL (1)

8 unchanged sentences

Total Comprehensive Income (Loss), Net — — 151 ( 84 ) 67

Balance at June 30, 2022 $ 2 $ 3,918 $ ( 2,220 ) $ ( 475 ) $ 1,225

Six Months Ended June 30, 2021

Balance at September 30, 2022 $ 2 $ 3,924 $ ( 2,207 ) $ ( 513 ) $ 1,206

Nine Months Ended September 30, 2021

(in millions) Common Stock Additional Paid-in Capital Retained Earnings (Deficit) AOCL (1)

8 unchanged sentences

Total Comprehensive Income (Loss), Net — — 12 ( 25 ) ( 13 )

Balance at June 30, 2021 $ 2 $ 3,907 $ ( 2,317 ) $ ( 407 ) $ 1,185

Balance at September 30, 2021 $ 2 $ 3,912 $ ( 2,308 ) $ ( 423 ) $ 1,183

(1) AOCL - Accumulated other comprehensive loss.

19 unchanged sentences

These financial statements should be read in conjunction with the Company’s Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

The Company has evaluated subsequent events through August 2, 2022 and no material subsequent events were identified.

The Company has evaluated subsequent events through November 1, 2022 and no material subsequent events were identified.

Use of Estimates

4 unchanged sentences

The Company bases its estimates on assumptions, both historical and forward looking, that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Although as of June 30, 2022, many government-imposed restrictions have been lightened or removed, the future impact of the COVID-19 pandemic continues to be highly uncertain.

As of September 30, 2022, the effects of global macroeconomic and geopolitical uncertainty, including COVID-19 pandemic related factors, on the Company's business, results of operations and financial condition continue to evolve.

As a result, many of the Company's estimates and assumptions continue to require increased judgment and carry a higher degree of variability and volatility.

40 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2022 2021 2022 2021

29 unchanged sentences

The following table provides information about the balances of the Company's contract assets, unearned income and receivables from contracts with customers:

(in millions) June 30, 2022 December 31, 2021

(in millions) September 30, 2022 December 31, 2021

Contract Assets (Unearned Income)

8 unchanged sentences

(2) Presented in Other long-term liabilities in the Condensed Consolidated Balance Sheets.

Revenues of $ 18 million and $ 53 million were recognized during the three and six months ended June 30, 2022, respectively, related to the Company's unearned income at December 31, 2021.

Additionally, the Company recognized $ 7 million of revenue related to the unearned income of the divested Midas business for the six months ended June 30, 2022.

Revenues of $ 14 million and $ 67 million were recognized during the three and nine months ended September 30, 2022, respectively, related to the Company's unearned income at December 31, 2021.

Additionally, the Company recognized $ 7 million of revenue related to the unearned income of the divested Midas business for the nine months ended September 30, 2022.

Such amount was included in Liabilities Held for Sale on the December 31, 2021 consolidated balance sheet.

Revenues of $ 30 million and $ 88 million were recognized during the three and six months ended June 30, 2021 related to the Company's unearned income at December 31, 2020.

The Company had no material asset impairment charges related to contract assets for the three and six months ended June 30, 2022 or 2021.

Revenues of $ 11 million and $ 99 million were recognized during the three and nine months ended September 30, 2021 related to the Company's unearned income at December 31, 2020.

The Company had no material asset impairment charges related to contract assets for the three and nine months ended September 30, 2022 or 2021.

Transaction Price Allocated to the Remaining Performance Obligations

Estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially satisfied at June 30, 2022 was approximately $ 1.0 billion.

Estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially satisfied at September 30, 2022 was approximately $ 950 million.

The Company expects to recognize approximately 73 % of this revenue over the next two years and the remainder thereafter.

15 unchanged sentences

The Government Services segment provides government-centric business process services to U.S.

federal, state and local and foreign governments for public assistance program administration, transaction processing and payment services.

federal, state and local and foreign governments for public assistance, health services, program administration, transaction processing and payment services.

The solutions in this segment help governments respond to changing rules for eligibility and increasing citizen expectations.

7 unchanged sentences

Three Months Ended

September 30,

(in millions) Commercial Government Services Transportation Divestitures Unallocated Costs Total

3 unchanged sentences

Segment profit (loss) $ 16 $ 125 $ 13 $ 11 $ ( 89 ) $ 76

Six Months Ended

Nine Months Ended

September 30,

(in millions) Commercial Government Services Transportation Divestitures Unallocated Costs Total

5 unchanged sentences

(in millions) Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

Segment Profit (Loss) Reconciliation to Pre-tax Income (Loss) 2022 2021 2022 2021

21 unchanged sentences

The Company recorded approximately $ 62 million of income taxes in connection with the divestiture.

The revenue generated by this business was $ 7 million for the six months ended June 30, 2022 and $ 17 million and $ 35 million, respectively, for the three and six months ended June 30, 2021.

There was no revenue generated by this business for the three months ended June 30, 2022.

The revenue generated by this business was $ 7 million for the nine months ended September 30, 2022 and $ 19 million and $ 54 million, respectively, for the three and nine months ended September 30, 2021.

There was no revenue generated by this business for the three months ended September 30, 2022.

Note 6 – Goodwill

The following table presents the changes in the carrying amount of goodwill, by reportable segment:

(in millions) Commercial Government Services Transportation Total

Balance at December 31, 2021 $ 661 $ 617 $ 61 $ 1,339

Foreign currency translation ( 33 ) ( 7 ) ( 13 ) ( 53 )

Balance at September 30, 2022 $ 628 $ 610 $ 48 $ 1,286

Gross goodwill $ 2,181 $ 1,364 $ 628 $ 4,173

Accumulated impairment ( 1,553 ) ( 754 ) ( 580 ) ( 2,887 )

Balance at September 30, 2022 $ 628 $ 610 $ 48 $ 1,286

In the third quarter of 2022, the Company performed its ongoing assessment to consider whether events or circumstances had occurred that could more likely than not reduce the fair value of a reporting unit below its carrying value.

After evaluating and weighing all relevant events and circumstances, the Company concluded that it is not more likely than not that the fair values of any of its reporting units were less than their carrying values.

Consequently, the Company determined that it was not necessary to perform an interim impairment test for any of its reporting units.

CNDT Q3 2022 Form 10-Q

To the extent that:

(i) the COVID-19 pandemic or a potential recession disrupts the economic environment, such as a decline in the performance of the reporting units or loss of a significant contract or multiple significant contracts, or (ii) interest rates continue to rise in response to persistent inflation, the fair value of one or more of the reporting units could fall below their carrying value, resulting in a goodwill impairment charge.

Note 7 – Restructuring Programs and Related Costs

1 unchanged sentence

The implementation of the Company's operational efficiency improvement initiatives has reduced the Company's real estate footprint across all geographies and segments resulting in lease right-of-use asset impairments and other related costs.

Also included in Restructuring and related costs are incremental, non-recurring costs related to the consolidation of the Company's data centers, which totaled $ 3 million and $ 8 million for the three months ended June 30, 2022 and 2021, respectively, and $ 7 million and $ 15 million for the six months ended June 30, 2022 and 2021, respectively.

Also included in Restructuring and related costs are incremental, non-recurring costs related to the consolidation of the Company's data centers, which totaled $ 2 million and $ 4 million for the three months ended September 30, 2022 and 2021, respectively, and $ 9 million and $ 19 million for the nine months ended September 30, 2022 and 2021, respectively.

Management continues to evaluate the Company's businesses, and in the future, there may be additional provisions for new plan initiatives and/or changes in previously recorded estimates as payments are made, or actions are completed.

2 unchanged sentences

Asset impairment costs related to the reduction of our real estate footprint include impairment of operating lease right-of-use (ROU) assets and associated leasehold improvements.

CNDT Q2 2022 Form 10-Q

A summary of the Company's restructuring program activity during the six months ended June 30, 2022 and 2021 is as follows:

A summary of the Company's restructuring program activity during the nine months ended September 30, 2022 and 2021 is as follows:

(in millions) Severance and Related Costs Termination and Other Costs Asset Impairments Total

4 unchanged sentences

Charges against reserve and currency ( 7 ) ( 14 ) ( 6 ) ( 27 )

Accrued Balance at June 30, 2022 $ 1 $ 1 $ — $ 2

Accrued Balance at September 30, 2022 $ 1 $ — $ — $ 1

(in millions) Severance and Related Costs Termination and Other Costs Asset Impairments Total

4 unchanged sentences

Charges against reserve and currency ( 4 ) ( 21 ) ( 7 ) ( 32 )

Accrued Balance at June 30, 2021 $ 3 $ 1 $ — $ 4

Accrued Balance at September 30, 2021 $ 1 $ 1 $ — $ 2

(1) Represents amounts recognized within the Consolidated Statements of Income (Loss) for the years shown.

In addition, the Company recorded professional support costs associated with the implementation of certain strategic transformation programs of $ 1 million and $ 1 million for the three months ended June 30, 2022 and 2021, respectively, and $ 2 million and $ 2 million for the six months ended June 30, 2022 and 2021, respectively.

In addition, the Company recorded professional support costs associated with the implementation of certain strategic transformation programs of $ 1 million for the three months ended September 30, 2021, and $ 2 million and $ 3 million for the nine months ended September 30, 2022 and 2021, respectively.

The Company did not record any such costs for the three months ended September 30, 2022.

CNDT Q3 2022 Form 10-Q

The following table summarizes the total amount of costs incurred in connection with these restructuring programs by reportable and non-reportable segment:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2022 2021 2022 2021

8 unchanged sentences

Long-term debt was as follows:

(in millions) June 30, 2022 December 31, 2021

(in millions) September 30, 2022 December 31, 2021

2021 Term loan A due 2026 $ 255 $ 265

7 unchanged sentences

Total Long-term Debt $ 1,272 $ 1,383

CNDT Q2 2022 Form 10-Q

During the first quarter of 2022, the Company repaid $ 100 million that was outstanding as of December 31, 2021 under its 2021 Revolving Credit Facility maturing in 2026 (Revolver).

As of June 30, 2022, the Company had no outstanding borrowings under its Revolver.

However, the Company utilized $ 4 million of the Revolver to issue letters of credit as of June 30, 2022.

The net Revolver available to be drawn upon as of June 30, 2022 was $ 546 million.

At June 30, 2022, the Company was in compliance with all debt covenants related to the borrowings in the table above.

As of September 30, 2022, the Company had no outstanding borrowings under its Revolver.

However, the Company utilized $ 2 million of the Revolver to issue letters of credit as of September 30, 2022.

The net Revolver available to be drawn upon as of September 30, 2022 was $ 548 million.

At September 30, 2022, the Company was in compliance with all debt covenants related to the borrowings in the table above.

Note 9 – Financial Instruments

1 unchanged sentence

As a part of the Company's foreign exchange risk management strategy, the Company uses derivative instruments, primarily forward contracts, to hedge the funding of foreign entities which have a non-dollar functional currency, thereby reducing volatility of earnings or protecting fair values of assets and liabilities.

At June 30, 2022 and December 31, 2021, the Company had outstanding forward exchange contracts with gross notional values of $ 105 million and $ 150 million, respectively.

At June 30, 2022, approximately 76 % of these contracts mature within three months, 11 % in three to six months, 11 % in six to twelve months and 2 % in greater than twelve months.

At September 30, 2022 and December 31, 2021, the Company had outstanding forward exchange contracts with gross notional values of $ 105 million and $ 150 million, respectively.

At September 30, 2022, approximately 66 % of these contracts mature within three months, 13 % in three to six months, 16 % in six to twelve months and 5 % in greater than twelve months.

Most of these foreign currency derivative contracts are designated as cash flow hedges and did not have a material impact on the Company's balance sheet, income statement or cash flows for the periods presented.

Refer to Note 10 – Fair Value of Financial Assets and Liabilities for additional information regarding the fair value of the Company's foreign exchange forward contracts.

CNDT Q3 2022 Form 10-Q

Note 10 – Fair Value of Financial Assets and Liabilities

5 unchanged sentences

Fair value is estimated using unobservable inputs that are significant to the fair value of the assets or liabilities.

CNDT Q2 2022 Form 10-Q

Summary of Financial Assets and Liabilities Accounted for at Fair Value on a Recurring Basis

1 unchanged sentence

The basis for the measurement at fair value in all cases was Level 2.

(in millions) June 30, 2022 December 31, 2021

(in millions) September 30, 2022 December 31, 2021

Foreign exchange contract - forward $ — $ 1

4 unchanged sentences

The estimated fair values of other financial assets and liabilities were as follows:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(in millions) Carrying

8 unchanged sentences

The Company, at its discretion, matches a portion of employee contributions.

The Company recognized an expense related to its defined contribution plans of $ 3 million and $ 5 million for the three months ended June 30, 2022 and 2021, respectively and $ 8 million and $ 10 million for the six months ended June 30, 2022 and 2021, respectively.

The Company recognized an expense related to its defined contribution plans of $ 4 million and $ 6 million for the three months ended September 30, 2022 and 2021, respectively and $ 12 million and $ 16 million for the nine months ended September 30, 2022 and 2021, respectively.

The balance sheet and income statement impacts of any remaining defined benefit plans are immaterial for all periods presented in these Condensed Consolidated Financial Statements.

CNDT Q3 2022 Form 10-Q

Note 12 – Accumulated Other Comprehensive Loss (AOCL)

3 unchanged sentences

Other comprehensive income (loss) ( 82 ) ( 2 ) — ( 84 )

Balance at June 30, 2022 $ ( 476 ) $ 1 $ — $ ( 475 )

Balance at September 30, 2022 $ ( 513 ) $ — $ — $ ( 513 )

(in millions) Currency Translation Adjustments Gains (Losses) on Cash Flow Hedges Defined Benefit Pension Items Total

1 unchanged sentence

Other comprehensive income (loss) ( 23 ) ( 1 ) ( 1 ) ( 25 )

Balance at June 30, 2021 $ ( 407 ) $ 2 $ ( 2 ) $ ( 407 )

Balance at September 30, 2021 $ ( 423 ) $ 2 $ ( 2 ) $ ( 423 )

(1) All amounts are net of tax.

Tax effects were immaterial.

CNDT Q2 2022 Form 10-Q

Note 13 – Contingencies and Litigation

10 unchanged sentences

Should developments in any of these matters cause a change in the Company's determination as to an unfavorable outcome and result in the need to recognize a material accrual, or should any of these matters result in a final adverse judgment or be settled for significant amounts in excess of any accrual for such matter or matters, this could have a material adverse effect on the Company's results of operations, cash flows and financial position in the period or periods in which such change in determination, judgment or settlement occurs.

The Company believes it has recorded adequate provisions for any such matters as of June 30, 2022.

The Company believes it has recorded adequate provisions for any such matters as of September 30, 2022.

Litigation is inherently unpredictable, and it is not possible to predict the ultimate outcome of these matters and such outcome in any such matters could be more than any amounts accrued and could be material to the Company's results of operations, cash flows or financial position in any reporting period.

4 unchanged sentences

However, while the ultimate liabilities resulting from such claims may be significant to results of operations in the period recognized, management does not anticipate they will have a material adverse effect on the Company's Consolidated Financial position or liquidity.

As of June 30, 2022, the Company had accrued its estimate of liability incurred under its indemnification arrangements and guarantees.

As of September 30, 2022, the Company had accrued its estimate of liability incurred under its indemnification arrangements and guarantees.

CNDT Q3 2022 Form 10-Q

Litigation Against the Company

7 unchanged sentences

Upon the substantial completion of document discovery, the parties agreed to engage in mediation, and the Court administratively terminated the litigation to permit those efforts to proceed.

We intend to continue to defend the litigation vigorously.

The Company maintains insurance that may cover any costs arising out of this litigation up to the insurance limits, and subject to meeting certain deductibles and to other terms and conditions thereof.

The Company is not yet able to determine or predict the ultimate outcome of this proceeding or reasonably provide an estimate or range of estimate of the possible outcome or loss, if any, in excess of currently recorded reserves.

CNDT Q2 2022 Form 10-Q

Without any admission of liability or damages, in the third quarter of 2022, the parties settled this matter following that mediation, and are preparing the necessary documentation for approval by the court, class notice, and the claims administration process.

The Company maintains insurance that will cover the costs arising out of this litigation and resulting settlement subject to meeting the deductible and other terms and conditions thereof.

Until the court approves the documentation for the settlement, the Company is not able to determine or predict the ultimate outcome of this proceeding or reasonably provide an estimate or range of estimate of the possible outcome or loss, if any, in excess of currently recorded reserves.

Skyview Capital LLC and Continuum Global Solutions, LLC v.

12 unchanged sentences

The Company is not able to determine or predict the ultimate outcome of this proceeding or reasonably provide an estimate or range of estimate of the possible outcome or loss, if any, in excess of currently recorded reserves.

CNDT Q3 2022 Form 10-Q

Dennis Nasrawi v.

33 unchanged sentences

CBS will continue to vigorously defend itself against the counterclaims but the Company is not able to determine or predict the ultimate outcome of this proceeding or reasonably provide an estimate or range of estimate of the possible outcome or loss, if any, in excess of currently recorded reserves.

CNDT Q2 2022 Form 10-Q

Other Matters

1 unchanged sentence

As a result of the settlement agreements entered with the insurers, the Company received an aggregate sum of $ 38 million, of which $ 14 million was recognized as defense costs recovery in Selling, general and administrative and $ 24 million was recognized in Litigation settlements (recoveries), net.

CNDT Q3 2022 Form 10-Q

Since 2014, Xerox Education Services, Inc.

8 unchanged sentences

Certain contracts, primarily in the Company's Government Services and Transportation segments, require the Company to provide a surety bond or a letter of credit as a guarantee of performance.

As of June 30, 2022, the Company had $ 547 million of outstanding surety bonds issued to secure its performance of contractual obligations with its clients and $ 101 million of outstanding letters of credit issued to secure the Company's performance of contractual obligations to its clients as well as other corporate obligations.

As of September 30, 2022, the Company had $ 565 million of outstanding surety bonds issued to secure its performance of contractual obligations with its clients and $ 91 million of outstanding letters of credit issued to secure the Company's performance of contractual obligations to its clients as well as other corporate obligations.

In general, the Company would only be liable for these guarantees in the event of default in the Company's performance of its obligations under each contract.

10 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions, except per share data in whole dollars and shares in thousands) 2022 2021 2022 2021

22 unchanged sentences

The components of Other assets and Other liabilities were as follows:

(in millions) June 30, 2022 December 31, 2021

(in millions) September 30, 2022 December 31, 2021

Other Current Assets

32 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2022 2021 2022 2021

1 unchanged sentence

Purchases from related parties $ 7 $ 6 $ 20 $ 22

The Company's receivable and payable balances with related party entities were not material as of June 30, 2022 and December 31, 2021.

The Company's receivable and payable balances with related party entities were not material as of September 30, 2022 and December 31, 2021.

CNDT Q3 2022 Form 10-Q

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements