What changed in this filing

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Item 1. Financial Statements

2021-11-04 compared with 2021-08-05 · 297 added, 236 removed, 1038 unchanged (34% of the section changed)

1 unchanged sentence

Index to Condensed Consolidated Financial Statements

Condensed Consolidated Statements of Operations for the Three Months Ended June 30, 2021 and June 30, 2020 (unaudited)

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended June 30, 2021 and June 30, 2020 (unaudited)

Condensed Consolidated Balance Sheets as of June 30, 2021 and March 31, 2021 (unaudited)

Condensed Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2021 and June 30, 2020 (unaudited)

Condensed Consolidated Statements of Changes in Equity for the Three Months Ended June 30, 2021 and June 30, 2020 (unaudited)

Condensed Consolidated Statements of Operations for the Three and Six Months Ended September 30, 2021 and September 30, 2020 (unaudited)

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended September 30, 2021 and September 30, 2020 (unaudited)

Condensed Consolidated Balance Sheets as of September 30, 2021 and March 31, 2021 (unaudited)

Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2021 and September 30, 2020 (unaudited)

Condensed Consolidated Statements of Changes in Equity for the Three and Six Months Ended September 30, 2021 and Septe mber 30, 2020 (unaudited)

Notes to Condensed Consolidated Financial Statements (unaudited)

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Note 11–Goodwill

Note 1 2 –Debt

Note 13–Revenue

2 unchanged sentences

Note 16–Income Taxes

Note 1 7 –Stockholder s ’ Equity

Note 17–Stockholders’ Equity

Note 18–Stock Incentive Plans

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

Three Months Ended

(in millions, except per-share amounts) June 30, 2021 June 30, 2020

Three Months Ended Six Months Ended

(in millions, except per-share amounts) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Revenues $ 4,027 $ 4,554 $ 8,168 $ 9,056

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Total costs and expenses 4,275 4,860 7,992 9,587

Income (loss) before income taxes 424 ( 225 )

Income tax expense (benefit) 142 ( 26 )

Net income (loss) 282 ( 199 )

net income attributable to non-controlling interest, net of tax 4 6

Net income (loss) attributable to DXC common stockholders $ 278 $ ( 205 )

Income (loss) per common share:

(Loss) income before income taxes ( 248 ) ( 306 ) 176 ( 531 )

Income tax (benefit) expense ( 61 ) ( 60 ) 81 ( 86 )

Net (loss) income ( 187 ) ( 246 ) 95 ( 445 )

net income (loss) attributable to non-controlling interest, net of tax 1 ( 2 ) 5 4

Net (loss) income attributable to DXC common stockholders $ ( 188 ) $ ( 244 ) $ 90 $ ( 449 )

(Loss) income per common share:

Basic $ ( 0.74 ) $ ( 0.96 ) $ 0.35 $ ( 1.77 )

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DXC TECHNOLOGY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

Three Months Ended

(in millions)

June 30, 2021 June 30, 2020

Net income (loss) $ 282 $ ( 199 )

Other comprehensive income (loss), net of taxes:

Foreign currency translation adjustments, net of tax benefit of $ 2 and $ 7

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) (unaudited)

Three Months Ended Six Months Ended

(in millions) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Net (loss) income $ ( 187 ) $ ( 246 ) $ 95 $ ( 445 )

Other comprehensive (loss) income, net of taxes:

Foreign currency translation adjustments, net of tax (1)

( 62 ) 33 ( 174 ) 30

Cash flow hedges adjustments, net of tax expense of $ 0 and $ 3

Available-for-sale securities, net of tax expense of $ 0 and $ 0

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:

Amortization of prior service cost, net of tax benefit of $ 0 and $ 1

Amortization of prior service cost, net of tax (4)

( 2 ) ( 1 ) ( 4 ) ( 10 )

Pension and other post-retirement benefit plans, net of tax ( 2 ) ( 1 ) ( 4 ) ( 10 )

Other comprehensive (loss) income, net of taxes ( 55 ) 40 ( 170 ) 43

Comprehensive income (loss) 167 ( 196 )

comprehensive income (loss) attributable to non-controlling interest 13 5

Comprehensive income (loss) attributable to DXC common stockholders $ 154 $ ( 201 )

Comprehensive (loss) ( 242 ) ( 206 ) ( 75 ) ( 402 )

comprehensive income attributable to non-controlling interest 2 1 15 6

Comprehensive (loss) attributable to DXC common stockholders $ ( 244 ) $ ( 207 ) $ ( 90 ) $ ( 408 )

(1) Tax expense (benefit) related to foreign currency translation adjustments was $ 3 and $ 1 for the three and six months ended September 30, 2021, respectively, and $( 15 ) and $( 22 ) for the three and six months ended September 30, 2020, respectively.

(2) Tax expense related to cash flow hedge adjustments was $ 2 and $ 2 for the three and six months ended September 30, 2021, respectively, and $ 3 and $ 6 for the three and six months ended September 30, 2020, respectively.

(3) There was no tax expense related to available-for-sale securities during the three and six months ended September 30, 2020.

There were no available-for-sale securities during the three and six months ended September 30, 2021.

(4) Tax benefit related to amortization of prior service costs was $ 0 and $ 0 for the three and six months ended September 30, 2021, respectively, and $ 1 and $ 2 for the three and six months ended September 30, 2020, respectively.

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

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CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in millions, except per-share and share amounts) June 30, 2021 March 31, 2021

(in millions, except per-share and share amounts) September 30, 2021 March 31, 2021

Current assets:

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DXC stockholders’ equity:

Preferred stock, par value $ 0.01 per share, 1,000,000 shares authorized, none issued as of June 30, 2021 and March 31, 2021

Common stock, par value $ 0.01 per share, 750,000,000 shares authorized, 256,681,401 issued as of June 30, 2021 and 257,052,533 issued as of March 31, 2021

Preferred stock, par value $ 0.01 per share, 1,000,000 shares authorized, none issued as of September 30, 2021 and March 31, 2021

Common stock, par value $ 0.01 per share, 750,000,000 shares authorized, 255,003,243 issued as of September 30, 2021 and 257,052,533 issued as of March 31, 2021

Additional paid-in capital 10,646 10,761

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Accumulated other comprehensive loss ( 482 ) ( 302 )

Treasury stock, at cost, 2,697,498 and 2,458,027 shares as of June 30, 2021 and March 31, 2021

Treasury stock, at cost, 2,774,484 and 2,458,027 shares as of September 30, 2021 and March 31, 2021

( 170 ) ( 158 )

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Three Months Ended

(in millions)

June 30, 2021 June 30, 2020

Six Months Ended

(in millions) September 30, 2021 September 30, 2020

Cash flows from operating activities:

Net income (loss) $ 95 $ ( 445 )

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 879 1,025

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(Gain) loss on dispositions ( 415 ) 14

Provision for losses on accounts receivable ( 3 ) 35

Provision for (gains) losses on accounts receivable ( 2 ) 45

Unrealized foreign currency exchange gain ( 19 ) ( 43 )

Impairment losses and contract write-offs 17 42

Debt extinguishment costs 309 —

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Changes in assets and liabilities, net of effects of acquisitions and dispositions:

Decrease (increase) in assets 26 ( 100 )

Decrease in assets 348 57

Decrease in operating lease liability ( 254 ) ( 307 )

Decrease in other liabilities ( 691 ) ( 137 )

Net cash (used in) provided by operating activities ( 29 ) 119

Net cash provided by operating activities 534 591

Cash flows from investing activities:

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Proceeds from sale of assets 87 8

Short-term investing 24 —

Other investing activities, net 9 3

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Payments on finance leases and borrowings for asset financing ( 671 ) ( 487 )

Proceeds from bond issuance 2,918 993

Proceeds from stock options and other common stock transactions 12 —

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Other financing activities, net 13 ( 9 )

Net cash (used in) provided by financing activities ( 866 ) 1,786

Net cash used in financing activities ( 1,063 ) ( 963 )

Effect of exchange rate changes on cash and cash equivalents ( 2 ) 9

Net (decrease) increase in cash and cash equivalents including cash classified within current assets held for sale ( 571 ) 1,830

Net decrease in cash and cash equivalents including cash classified within current assets held for sale ( 332 ) ( 597 )

Cash classified within current assets held for sale 63 ( 3 )

Net (decrease) increase in cash and cash equivalents ( 508 ) 1,830

Net decrease in cash and cash equivalents ( 269 ) ( 600 )

Cash and cash equivalents at beginning of year 2,968 3,679

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

(in millions, except

shares in thousands) Common Stock Additional

Paid-in Capital

Accumulated Deficit Accumulated

Paid-in Capital Accumulated Deficit Accumulated

Comprehensive Loss

Treasury Stock (1)

Controlling Interest

DXC Equity Non-

Controlling Interest Total Equity

Shares Amount

Balance at June 30, 2021 256,681 $ 3 $ 10,713 $ ( 5,045 ) $ ( 426 ) $ ( 168 ) $ 5,077 $ 309 $ 5,386

Net loss ( 188 ) ( 188 ) 1 ( 187 )

Other comprehensive loss ( 56 ) ( 56 ) 1 ( 55 )

Share-based compensation expense 22 22 22

Acquisition of treasury stock ( 2 ) ( 2 ) ( 2 )

Share repurchase program ( 2,112 ) ( 89 ) 6 ( 83 ) ( 83 )

Stock option exercises and other common stock transactions 434 3 3 3

Non-controlling interest distributions and other ( 3 ) 2 ( 1 ) — ( 1 )

Balance at September 30, 2021 255,003 $ 3 $ 10,646 $ ( 5,225 ) $ ( 482 ) $ ( 170 ) $ 4,772 $ 311 $ 5,083

Three Months Ended September 30, 2020

(in millions, except

shares in thousands) Common Stock Additional

Paid-in Capital Accumulated Deficit Accumulated

Comprehensive Loss Treasury Stock Total

DXC Equity Non-

Controlling Interest Total Equity

Shares Amount

Balance at June 30, 2020 256,383 $ 3 $ 10,729 $ ( 5,386 ) $ ( 599 ) $ ( 154 ) $ 4,593 $ 349 $ 4,942

Net loss ( 244 ) ( 244 ) ( 2 ) ( 246 )

Other comprehensive income 37 37 3 40

Share-based compensation expense 17 17 17

Acquisition of treasury stock ( 1 ) ( 1 ) ( 1 )

Stock option exercises and other common stock transactions 139 — —

Non-controlling interest distributions and other ( 1 ) ( 1 ) ( 1 )

Balance at September 30, 2020 256,522 $ 3 $ 10,746 $ ( 5,631 ) $ ( 562 ) $ ( 155 ) $ 4,401 $ 350 $ 4,751

Six Months Ended September 30, 2021

(in millions, except

shares in thousands) Common Stock Additional

Paid-in Capital Accumulated Deficit Accumulated

Comprehensive Loss

Treasury Stock (1)

DXC Equity Non-

Controlling Interest Total Equity

Shares Amount

Balance at March 31, 2021 257,053 $ 3 $ 10,761 $ ( 5,331 ) $ ( 302 ) $ ( 158 ) $ 4,973 $ 335 $ 5,308

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Non-controlling interest distributions and other ( 3 ) 3 — ( 39 ) ( 39 )

Balance at June 30, 2021 256,681 $ 3 $ 10,713 $ ( 5,045 ) $ ( 426 ) $ ( 168 ) $ 5,077 $ 309 $ 5,386

Three Months Ended June 30, 2020

Balance at September 30, 2021 255,003 $ 3 $ 10,646 $ ( 5,225 ) $ ( 482 ) $ ( 170 ) $ 4,772 $ 311 $ 5,083

Six Months Ended September 30, 2020

(in millions, except

shares in thousands) Common Stock Additional

Paid-in Capital

Accumulated Deficit Accumulated

Paid-in Capital Accumulated Deficit Accumulated

Comprehensive Loss Treasury Stock Total

Controlling Interest

DXC Equity Non-

Controlling Interest Total Equity

Shares Amount

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Stock option exercises and other common stock transactions 848 — —

Balance at June 30, 2020 256,383 $ 3 $ 10,729 $ ( 5,386 ) $ ( 599 ) $ ( 154 ) $ 4,593 $ 349 $ 4,942

(1) 2,697,498 treasury shares as of June 30, 2021.

Non-controlling interest distributions and other ( 1 ) ( 1 ) ( 1 )

Balance at September 30, 2020 256,522 $ 3 $ 10,746 $ ( 5,631 ) $ ( 562 ) $ ( 155 ) $ 4,401 $ 350 $ 4,751

(1) 2,774,484 treasury shares as of September 30, 2021.

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

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 1 – Summary of Significant Accounting Policies

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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.

Net earnings attributable to the non-controlling interests are presented separately in the statements of operations and comprehensive income attributable to non-controlling interests is presented separately in the statements of comprehensive income.

All intercompany transactions and balances have been eliminated.

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Note 2 – Recent Accounting Pronouncements

During the three months ended June 30, 2021, DXC adopted the following Accounting Standards Update (“ASU”) issued by the Financial Accounting Standards Board:

During the six months ended September 30, 2021, DXC adopted the following Accounting Standards Update (“ASU”) issued by the Financial Accounting Standards Board:

Date Issued and ASU Date Adopted and Method Description Impact

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The Company determined that this standard had no material impact to its condensed consolidated financial statements following adoption.

The following ASU was recently issued but has not yet been adopted by DXC:

Date Issued and ASU DXC Effective Date Description Impact

ASU 2021-05, “Leases (Topic 842):

Lessors–Certain Leases with Variable Lease Payments” April 1, 2022 The amendments in this update modify lease classification requirements for lessors, providing that lease contracts with variable lease payments that do not depend on a reference index or a rate should be classified as operating leases if they would have been classified as a sales-type or direct financing lease and resulted in the recognition of a selling loss at lease commencement.

The Company is currently evaluating the potential impact this standard may have on its financial statements in future reporting periods.

Other recently issued ASUs effective after June 30, 2021 are not expected to have a material effect on DXC’s consolidated financial statements.

Lessors–Certain Leases with Variable Lease Payments” Second quarter of fiscal 2022

Prospective The amendments in this update modify lease classification requirements for lessors, providing that lease contracts with variable lease payments that do not depend on a reference index or a rate should be classified as operating leases if they would have been classified as a sales-type or direct financing lease and resulted in the recognition of a selling loss at lease commencement.

Upon adoption, on a prospective basis, customer leases with variable payments that would have resulted in an upfront loss when meeting sales type lease classification are classified as operating leases upon commencement or modification.

Associated revenues, cost of services, or depreciation are subsequently recognized over their related lease terms or useful life.

Before adopting this standard, leases with similar variable payments were classified as sales-type leases.

These similar leases resulted in the recognition of upfront losses upon commencement or modification prior to the adoption, even when the overall economics of the lease arrangements were expected to be profitable.

Other recently issued ASUs that have not yet been adopted are not expected to have a material effect on DXC’s consolidated financial statements.

Note 3 – Acquisitions

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 5 – Earnings (Loss) per Share

Note 5 – (Loss) Earnings per Share

Basic earnings (loss) per share (“EPS”) is computed using the weighted average number of shares of common stock outstanding during the period.

Diluted EPS reflects the incremental shares issuable upon the assumed exercise of stock options and equity awards.

For periods presented with net losses, diluted net loss per share is the same as basic net loss per share because the inclusion of all potentially dilutive shares of common stock would have been anti-dilutive.

For the six months ended September 30, 2021, diluted EPS reflects the incremental shares issuable upon the assumed exercise of stock options and equity awards.

The following table reflects the calculation of basic and diluted EPS:

Three Months Ended

(in millions, except per-share amounts)

June 30, 2021 June 30, 2020

Net income (loss) attributable to DXC common shareholders:

Three Months Ended Six Months Ended

(in millions, except per-share amounts) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Net (loss) income attributable to DXC common shareholders:

$ ( 188 ) $ ( 244 ) $ 90 $ ( 449 )

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Weighted average common shares outstanding for diluted EPS 252.40 254.13 258.90 253.88

Earnings (Loss) per share:

(Loss) earnings per share:

Basic $ ( 0.74 ) $ ( 0.96 ) $ 0.35 $ ( 1.77 )

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The number of awards excluded were as follows:

Three Months Ended

June 30, 2021 June 30, 2020 (1)

Three Months Ended Six Months Ended

September 30, 2021 (1)

September 30, 2020 (1)

September 30, 2021 September 30, 2020 (1)

Stock Options 745,357 1,625,591 521,967 1,735,395

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Performance Stock Units 2,829,237 83,125 1,309,752 158,444

(1) Due to the Company’s net loss for the three months ended June 30, 2020, stock options, restricted stock units and performance stock units were excluded from the computation of dilutive EPS because they would have had an anti-dilutive effect.

(1) Due to the Company’s net losses for the three months ended September 30, 2021 and the three and six months ended September 30, 2020, stock options, restricted stock units and performance stock units were excluded from the computation of dilutive EPS because they would have had an anti-dilutive effect.

DXC TECHNOLOGY COMPANY

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The following table presents the activity in allowances against trade accounts receivables:

(in millions) June 30, 2021 March 31, 2021

(in millions) September 30, 2021 March 31, 2021

Beginning balance $ 91 $ 74

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Receivables Facility

The Company has an accounts receivable sales facility (as amended, restated, supplemented or otherwise modified as of June 30, 2021, the “Receivables Facility”) with certain unaffiliated financial institutions (the “Purchasers”) for the sale of commercial accounts receivable in the United States.

The Receivables Facility has a facility limit of $ 500 million as of June 30, 2021.

The Company has an accounts receivable sales facility (as amended, restated, supplemented, or otherwise modified as of September 30, 2021, the “Receivables Facility”) with certain unaffiliated financial institutions (the “Purchasers”) for the sale of commercial accounts receivable in the United States.

The Receivables Facility has a facility limit of $ 400 million as of September 30, 2021.

Under the Receivables Facility, certain of the Company’s subsidiaries (the “Sellers”) sell accounts receivable to DXC Receivables LLC (“Receivables SPV”), a wholly owned bankruptcy-remote entity, in a true sale.

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The financial obligations of Receivables SPV to the Purchasers under the Receivables Facility are limited to the assets it owns with non-recourse to the Company.

Sales of receivables by Receivables SPV occur continuously and are settled on a monthly basis.

On July 30, 2021, Receivables SPV amended the Receivables Facility (the “Amendment”) to decrease the facility limit from $ 500 million to $ 400 million and extend the termination date to July 29, 2022.

Sales of receivables by Receivables SPV occur continuously and are settled monthly.

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 June 30, 2021, the total availability under the Receivables Facility was $ 380 million, and the amount sold to the Purchasers was $ 350 million, which was derecognized from the Company’s balance sheet.

As of June 30, 2021, the Company recorded a $ 30 million receivable within accounts receivable because the amount of cash proceeds received by the Company under the Receivables Facility was less than the total availability.

As of September 30, 2021, the total availability under the Receivables Facility was $ 400 million, and the amount sold to the Purchasers was $ 400 million, which was derecognized from the Company’s balance sheet.

The Receivables Facility is scheduled to terminate on July 29, 2022, but provides for one or more optional one-year extensions, if agreed to by the Purchasers.

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DE Receivables SPV subsequently sold certain of the receivables in their entirety to the DE Purchasers pursuant to a receivables purchase agreement.

Sales of receivables by DE Receivables SPV occurred continuously and were settled on a monthly basis.

Sales of receivables by DE Receivables SPV occurred continuously and were settled monthly.

During the first quarter of fiscal 2021, DE Receivables SPV amended the DE Receivables Facility.

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The following table is a reconciliation of the beginning and ending balances of the DPP:

(in millions) As of June 30, 2020

(in millions) As of September 30, 2020

Beginning balance, as of April 1, 2020 $ 103

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The components of lease expense were as follows:

(in millions) Three Months Ended June 30, 2021 Three Months Ended June 30, 2020

Three Months Ended Six Months Ended

(in millions) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Operating lease cost $ 124 $ 151 $ 254 $ 307

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Cash payments made for variable lease costs and short-term leases are not included in the measurement of operating lease liabilities, and as such, are excluded from the supplemental cash flow information stated below.

(in millions) Three Months Ended June 30, 2021 Three Months Ended June 30, 2020

Six Months Ended

(in millions) September 30, 2021 September 30, 2020

Cash paid for amounts included in the measurement of operating lease liabilities – operating cash flows

ROU assets obtained in exchange for operating lease liabilities (1)

(1) Net of $ 242 million and $ 58 million in lease modifications and terminations during the first quarters of fiscal 2022 and 2021, respectively.

(1) Net of $ 509 million and $ 253 million in lease modifications and terminations during the first six months of fiscal 2022 and 2021, respectively.

See Note 19 – “Cash Flows” for further information on non-cash activities affecting cash flows.

The following table presents operating lease balances:

(in millions) Balance Sheet Line Item June 30, 2021 March 31, 2021

(in millions) Balance Sheet Line Item September 30, 2021 March 31, 2021

ROU operating lease assets Operating right-of-use assets, net $ 1,174 $ 1,366

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Total operating lease liabilities $ 1,254 $ 1,456

The weighted-average operating lease term was 4.8 years and 4.9 years as of June 30, 2021 and March 31, 2021, respectively.

The weighted-average operating lease discount rate was 3.7 % and 3.8 % as of June 30, 2021 and March 31, 2021, respectively.

The weighted-average operating lease term was 4.6 years and 4.9 years as of September 30, 2021 and March 31, 2021, respectively.

The weighted-average operating lease discount rate was 3.5 % and 3.8 % as of September 30, 2021 and March 31, 2021, respectively.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following maturity analysis presents expected undiscounted cash payments for operating as of June 30, 2021:

The following maturity analysis presents expected undiscounted cash payments for operating leases as of September 30, 2021:

(in millions)

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The components of lease expense were as follows:

(in millions) Three Months Ended June 30, 2021 Three Months Ended June 30, 2020

Three Months Ended Six Months Ended

(in millions) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Amortization of right-of-use assets $ 99 $ 99 $ 186 $ 215

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The following table provides supplemental cash flow information related to the Company’s finance leases:

(in millions) Three Months Ended June 30, 2021 Three Months Ended June 30, 2020

(in millions) Six Months Ended September 30, 2021 Six Months Ended September 30, 2020

Interest paid for finance lease liabilities – Operating cash flows

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The following table presents finance lease balances:

(in millions) Balance Sheet Line Item June 30, 2021 March 31, 2021

(in millions) Balance Sheet Line Item September 30, 2021 March 31, 2021

ROU finance lease assets Property and Equipment, net $ 736 $ 834

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(1) See Note 12 – “Debt” for further information on finance lease liabilities.

The weighted-average finance lease term was 2.6 years and 2.6 years as of June 30, 2021 and March 31, 2021, respectively.

The weighted-average finance lease discount rate was 3.4 % and 3.6 % as of June 30, 2021 and March 31, 2021, respectively.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following maturity analysis presents expected undiscounted cash payments for finance leases as of June 30, 2021:

The weighted-average finance lease term was 2.6 years and 2.6 years as of September 30, 2021 and March 31, 2021, respectively.

The weighted-average finance lease discount rate was 3.2 % and 3.6 % as of September 30, 2021 and March 31, 2021, respectively.

The following maturity analysis presents expected undiscounted cash payments for finance leases as of September 30, 2021:

(in millions)

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Fair Value Hierarchy

(in millions) June 30, 2021

(in millions) September 30, 2021

Fair Value Level 1 Level 2 Level 3

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Total liabilities $ 20 $ — $ — $ 20

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

March 31, 2021

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(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 $ 57 million, and gains/(losses) of $( 1 ) million and $( 2 ) million, as of June 30, 2021 and March 31, 2021, respectively, included in other income, net in the Company’s statements of operations.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(2) Other securities include available-for-sale equity security investments with Level 2 inputs that have a cost basis of $ 56 million and $ 57 million, and gains/(losses) of $( 1 ) million and $( 2 ) million, as of September 30, 2021 and March 31, 2021, respectively, included in other income, net in the Company’s statements of operations.

The fair value of money market funds, money market deposit accounts, U.S.

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The fair value of other debt 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.

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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 that is based on observable market inputs for instruments with similar terms currently available to the Company.

The estimated fair value of the Company’s long-term debt, excluding finance lease liabilities, was $ 4.2 billion and $ 4.7 billion as of June 30, 2021 and March 31, 2021, respectively, compared with carrying value of $ 3.9 billion and $ 4.4 billion as of June 30, 2021 and March 31, 2021, respectively.

The estimated fair value of the Company’s long-term debt, excluding finance lease liabilities, was $ 4.2 billion and $ 4.7 billion as of September 30, 2021 and March 31, 2021, respectively, compared with carrying value of $ 4.1 billion and $ 4.4 billion as of September 30, 2021 and March 31, 2021, respectively.

Long-term debt, excluding finance lease liabilities, is classified as Level 1 or Level 2 within the fair value hierarchy.

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The fair value measurements in such instances would be classified as Level 3 within the fair value hierarchy.

There were no significant impairments recorded during the three months ended June 30, 2021.

There were no significant impairments recorded during the six months ended September 30, 2021.

DXC TECHNOLOGY COMPANY

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The Company has designated certain foreign currency forward contracts as cash flow hedges to reduce foreign currency risk related to certain Indian Rupee-denominated intercompany obligations and forecasted transactions.

The notional amounts of foreign currency forward contracts designated as cash flow hedges as of June 30, 2021 and March 31, 2021 were $ 537 million and $ 546 million, respectively.

As of June 30, 2021, the related forecasted transactions extend through March 2023.

For the three months ended June 30, 2021 and June 30, 2020, respectively, the Company performed an assessment at the inception of the cash flow hedge transactions and determined that all critical terms of the hedging instruments and hedged items matched.

The notional amounts of foreign currency forward contracts designated as cash flow hedges as of September 30, 2021 and March 31, 2021 were $ 537 million and $ 546 million, respectively.

As of September 30, 2021, the related forecasted transactions extend through June 2023.

For the three and six months ended September 30, 2021 and September 30, 2020, respectively, the Company performed an assessment at the inception of the cash flow hedge transactions and determined that all critical terms of the hedging instruments and hedged items matched.

The Company performs an assessment of critical terms on an on-going basis throughout the hedging period.

During the three months ended June 30, 2021 and June 30, 2020, respectively, the Company had no cash flow hedges for which it was probable that the hedged transaction would not occur.

As of June 30, 2021, $ 2.2 million of the existing amount of gain related to the cash flow hedge reported in accumulated other comprehensive loss is expected to be reclassified into earnings within the next 12 months.

During the three and six months ended September 30, 2021 and September 30, 2020, respectively, the Company had no cash flow hedges for which it was probable that the hedged transaction would not occur.

As of September 30, 2021, $ 10 million of the existing amount of gain related to the cash flow hedge reported in accumulated other comprehensive loss is expected to be reclassified into earnings within the next 12 months.

Amounts recognized in other comprehensive income (loss) and income (loss)

During the three months ended June 30, 2021, the pre-tax gain (loss) on derivatives designated for hedge accounting was no t material.

During the three and six months ended September 30, 2021, the pre-tax gain on derivatives designated for hedge accounting recognized in other comprehensive income was $ 11 million and $ 10 million, respectively, and gain from operations was not material.

Derivatives Not Designated for Hedge Accounting

3 unchanged sentences

The Company manages the exposure to fluctuations in foreign currencies by using short-term foreign currency forward contracts to hedge certain foreign currency denominated assets and liabilities, including intercompany accounts and forecasted transactions.

The net notional amounts of the foreign currency forward contracts outstanding as of June 30, 2021 and March 31, 2021 were $ 1.3 billion and $ 2.1 billion, respectively.

The net notional amounts of the foreign currency forward contracts outstanding as of September 30, 2021 and March 31, 2021 were $ 2.5 billion and $ 2.1 billion, respectively.

The following table presents the pretax amounts impacting income related to designated and non-designated foreign currency forward contracts:

For the Three Months Ended

(in millions) Statement of Operations Line Item June 30, 2021 June 30, 2020

For the Three Months Ended For the Six Months Ended

(in millions) Statement of Operations Line Item September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Foreign currency forward contracts Other income, net $ 13 $ 33 $ 48 $ 58

6 unchanged sentences

Derivative Assets

(in millions) Balance Sheet Line Item June 30, 2021 March 31, 2021

(in millions) Balance Sheet Line Item September 30, 2021 March 31, 2021

Derivatives designated for hedge accounting:

5 unchanged sentences

Derivative Liabilities

(in millions) Balance Sheet Line Item June 30, 2021 March 31, 2021

(in millions) Balance Sheet Line Item September 30, 2021 March 31, 2021

Derivatives designated for hedge accounting:

9 unchanged sentences

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 June 30, 2021, there were eight counterparties with concentration of credit risk, and based on gross fair value, the maximum amount of loss that the Company could incur is $ 5 million.

With respect to its foreign currency derivatives, as of September 30, 2021, there were seven counterparties with concentration of credit risk, and based on gross fair value, the maximum amount of loss that the Company could incur is $ 5 million.

The Company also enters into enforceable master netting arrangements with some of its counterparties.

13 unchanged sentences

operations are reclassified to earnings from accumulated other comprehensive income (loss) when such net investments are sold or substantially liquidated.

As of June 30, 2021, DXC had $ 0.8 billion of foreign currency-denominated debt designated as hedges of net investments in non-U.S.

As of September 30, 2021, DXC had $ 0.3 billion of foreign currency-denominated debt designated as hedges of net investments in non-U.S.

subsidiaries.

For the three months ended June 30, 2021, the pre-tax impact of loss on foreign currency-denominated debt designated for hedge accounting recognized in other comprehensive income (loss) was $( 7 ) million.

For the three and six months ended September 30, 2021, the pre-tax impact of loss on foreign currency-denominated debt designated for hedge accounting recognized in other comprehensive income (loss) was $ 12 million and $ 5 million.

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.

4 unchanged sentences

Intangible assets consisted of the following:

As of June 30, 2021

As of September 30, 2021

(in millions) Gross Carrying Value Accumulated Amortization Net Carrying Value

10 unchanged sentences

The components of amortization expense were as follows:

Three Months Ended

(in millions) June 30, 2021 June 30, 2020

Three Months Ended Six Months Ended

(in millions) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Intangible asset amortization $ 223 $ 258 $ 437 $ 511

Transition and transformation contract cost amortization (1)

60 67 110 128

Total amortization expense $ 283 $ 325 $ 547 $ 639

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

Estimated future amortization related to intangible assets as of June 30, 2021 is as follows:

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

Estimated future amortization related to intangible assets as of September 30, 2021 is as follows:

Fiscal Year (in millions)

3 unchanged sentences

Note 11 – Goodwill

The following table summarizes the changes in the carrying amount of goodwill, by segment, as of June 30, 2021.

The following table summarizes the changes in the carrying amount of goodwill, by segment, as of September 30, 2021.

(in millions) GBS GIS Total

5 unchanged sentences

Accumulated impairment losses ( 4,490 ) ( 5,066 ) ( 9,556 )

Balance as of June 30, 2021, net $ 639 $ — $ 639

Balance as of September 30, 2021, net $ 631 $ — $ 631

The foreign currency translation amount reflects the impact of currency movements on non-U.S.

2 unchanged sentences

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.

As of June 30, 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 June 30, 2021.

The Company concluded that, as a result of its qualitative assessment performed on July 1, 2021, it remained more likely than not that the fair value of the GBS reporting unit exceeds its carrying amount.

As of September 30, 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 September 30, 2021.

DXC TECHNOLOGY COMPANY

2 unchanged sentences

The following is a summary of the Company’s debt:

(in millions) Interest Rates Fiscal Year Maturities June 30, 2021 March 31, 2021

(in millions) Interest Rates Fiscal Year Maturities September 30, 2021 March 31, 2021

Short-term debt and

8 unchanged sentences

Long-term debt, net of current maturities

€ 750 million Senior notes

0.45 % 2028 $ 862 $ —

€ 600 million Senior notes

0.95 % 2032 688 —

$ 700 million Senior notes

1.80 % 2027 694 —

$ 650 million Senior notes

2.375 % 2029 644 —

EUR term loan 0.80 %

26 unchanged sentences

(1) At DXC’s option, DXC can borrow up to a maximum of € 1 billion.

(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.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Senior Notes and Term Loans

1 unchanged sentence

The Company also repurchased $ 33 million of its 4.125 % senior notes due fiscal 2026 using the proceeds from the divestitures of other insignificant businesses and existing cash on hand.

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.

Euro Senior Notes Issuance

During the second quarter of fiscal 2022, the Company issued (i) € 750 million aggregate principal amount of its 0.450 % senior notes due fiscal 2028 and (ii) € 600 million aggregate principal amount of its 0.950 % senior notes due fiscal 2032 (collectively, the “Euro Notes”).

The proceeds from the Euro Notes were applied principally to the repayment in full of the € 400 million aggregate principal amount of outstanding borrowings under its Euro-denominated term loan facility, the repayment of its U.S.

dollar-denominated 4.25 % senior notes due fiscal 2025 and the repayment of its Sterling-denominated 2.75 % senior notes due fiscal 2025.

Dollar Senior Notes Issuance

During the second quarter of fiscal 2022, the Company issued (i) $ 700 million aggregate principal amount of its 1.80 % senior notes due fiscal 2027, and (ii) $ 650 million aggregate principal amount of its 2.375 % senior notes due fiscal 2029 (collectively, the “USD Notes”).

The proceeds from the USD Notes were used for the repayment of its remaining 4.125 % senior notes due fiscal 2026, its 4.750 % senior notes due fiscal 2028 and its 7.45 % senior notes due fiscal 2030.

The interest on the Company’s $ 700 million senior notes due fiscal 2027 and $ 650 million senior notes due fiscal 2029 are payable semi-annually in arrears, while the interest on the € 650 million senior notes due fiscal 2026, € 750 million senior notes due fiscal 2028 and € 600 million senior notes due fiscal 2032 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.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 13 – Revenue

1 unchanged sentence

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:

Three Months Ended

(in millions) June 30, 2021 June 30, 2020

Three Months Ended Six Months Ended

(in millions) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

United States $ 1,193 $ 1,666 $ 2,402 $ 3,375

6 unchanged sentences

Refer to Note 20 – “Segment Information” for the Company’s segment disclosures.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Remaining Performance Obligations

1 unchanged sentence

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 have not materialized and adjustments for currency.

As of June 30, 2021, approximately $ 24 billion of revenue is expected to be recognized from remaining performance obligations.

As of September 30, 2021, approximately $ 22 billion of revenue is expected to be recognized from remaining performance obligations.

We expect to recognize revenue on approximately 25 % of these remaining performance obligations in fiscal 2022, with the remainder of the balance recognized thereafter.

1 unchanged sentence

The following table provides information about the balances of the Company’s trade receivables and contract assets and contract liabilities:

(in millions) June 30, 2021 March 31, 2021

(in millions) September 30, 2021 March 31, 2021

Trade receivables, net $ 2,661 $ 2,871

2 unchanged sentences

Change in contract liabilities were as follows:

Three Months Ended

(in millions) June 30, 2021 June 30, 2020

Six Months Ended

(in millions) September 30, 2021 September 30, 2020

Balance, beginning of period $ 1,701 $ 1,756

7 unchanged sentences

Note 14 – Restructuring Costs

The Company recorded restructuring costs of $ 67 million and $ 72 million, net of reversals, for the three months ended June 30, 2021 and June 30, 2020, respectively.

The costs recorded during the three months ended June 30, 2021 were largely a result of the Fiscal 2022 Plan (defined below).

The Company recorded restructuring costs of $ 145 million and $ 265 million, net of reversals, for the three months ended September 30, 2021 and September 30, 2020, respectively.

For the six months ended September 30, 2021 and September 30, 2020, the Company recorded restructuring costs of $ 212 million and $ 337 million, net of reversals, respectively.

The costs recorded during the three and six months ended September 30, 2021 were largely a result of the Fiscal 2022 Plan (defined below).

The composition of restructuring liabilities by financial statement line item is as follows:

(in millions) June 30, 2021

(in millions) September 30, 2021

Accrued expenses and other current liabilities $ 180

3 unchanged sentences

During fiscal 2022, management approved global cost savings initiatives designed to better align the Company’s workforce and facility structures (the “Fiscal 2022 Plan”).

Also included in restructuring costs for the three months ended June 30, 2021 is $ 2 million related to amortization of the right-of-use asset and interest expense for leased facilities that we have vacated but are being actively marketed for sublease or we are in negotiations with the landlord to potentially terminate or modify those leases.

Also included in restructuring costs for the six months ended September 30, 2021 is $ 7 million related to amortization of right-of-use assets and interest expense for leased facilities that we have vacated but that are being actively marketed for sublease or we are in negotiations with the landlord to potentially terminate or modify those leases.

Fiscal 2021 Plan

18 unchanged sentences

Cash Paid Other (2)

Restructuring Liability as of June 30, 2021

Restructuring Liability as of September 30, 2021

Fiscal 2022 Plan

35 unchanged sentences

The components of net periodic pension income were:

Three Months Ended

(in millions) June 30, 2021 June 30, 2020

Three Months Ended Six Months Ended

(in millions) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Service cost $ 22 $ 23 $ 45 $ 45

2 unchanged sentences

Amortization of prior service costs ( 2 ) ( 2 ) ( 4 ) ( 4 )

Contractual termination benefit 1 3 1 3

Curtailment gain — — — ( 9 )

12 unchanged sentences

Non-employee directors are eligible to defer up to 100 % of their cash compensation.

The liability, which is included in other long-term liabilities in the Company’s balance sheets, amounted to $ 43 million as of June 30, 2021 and $ 42 million as of March 31, 2021.

The liability, which is included in other long-term liabilities in the Company’s balance sheets, amounted to $ 40 million as of September 30, 2021 and $ 42 million as of March 31, 2021.

DXC TECHNOLOGY COMPANY

1 unchanged sentence

Note 16 – Income Taxes

The Company’s effective tax rate (“ETR”) was 33.5 % and 11.6 % for the three months ended June 30, 2021 and June 30, 2020, respectively.

For the three months ended June 30, 2021, the primary drivers of the ETR were the global mix of income, gain on sale of HPS business and tax rate changes in non-U.S.

The Company’s effective tax rate (“ETR”) was 24.6 % and 19.6 % for the three months ended September 30, 2021 and September 30, 2020, respectively, and 46.0 % and 16.2 % for the six months ended September 30, 2021 and September 30, 2020, respectively.

For the three months ended September 30, 2021, the primary drivers of the ETR were the global mix of income and a decrease in unrecognized tax benefits due to income tax audit settlements and statute expirations.

For the six months ended September 30, 2021, the primary drivers of the ETR were the global mix of income, gain on sale of HPS business, tax rate changes in non-U.S.

jurisdictions and a decrease in unrecognized tax benefits due to income tax audit settlements and statute expirations.

For the three and six months ended September 30, 2020, the primary drivers of the ETR were the global mix of income, foreign tax credits and adjustment of the prior tax provisions due to the filing of tax returns in the U.S.

and the non-U.S.

jurisdictions.

For the three months ended June 30, 2020, the primary drivers of the ETR were the global mix of income, adjustment of the prior tax provisions due to the filing of tax returns in non-U.S.

jurisdictions and generation of additional foreign tax credits in the U.S.

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.

The majority of our global unremitted foreign earnings have been taxed in the U.S.

or would be exempt from U.S.

tax upon repatriation.

Such earnings and all current foreign earnings are not indefinitely reinvested.

The following foreign earnings are considered indefinitely reinvested:

approximately $ 530 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 as of fiscal 2021.

approximately $ 518 million that could be subject to U.S.

federal tax when repatriated to the U.S.

under section 1.245A-5(b) of the final Treasury regulations;

and our accumulated earnings in India as of March 31, 2021.

A portion of these indefinitely reinvested earnings may be subject to foreign and U.S.

2 unchanged sentences

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.

income tax returns.

Likewise, DXC is liable to HPE for income tax receivables and refunds which it receives related to pre-HPES Merger periods.

HPE generally will be responsible for tax liabilities arising prior to the HPES Merger, and DXC is liable to HPE for income tax receivables it receives related to pre-HPES Merger periods.

Pursuant to the tax matters agreement, the Company recorded $ 34 million of tax indemnification receivable related to uncertain tax positions, $ 68 million of tax indemnification receivable related to other tax payables and $ 120 million of tax indemnification payable related to other tax receivables.

In connection with the spin-off of the Company’s former U.S.

public sector business (the “USPS Separation”), the Company entered into a tax matters agreement with Perspecta Inc.

(“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 related to other tax payable and a tax indemnification payable to Perspecta of $ 29 million related to income tax and other tax liabilities.

public sector business (the “USPS Separation”), the Company entered into a tax matters agreement with Peraton (formerly Perspecta Inc).

The Company generally will be responsible for tax liabilities arising prior to the USPS Separation, and Perspecta is liable to the Company for income tax receivables related to pre-spin-off periods.

Income tax liabilities transferred to Peraton 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 transferred to Perspecta related to pre-HPES Merger periods.

Pursuant to the tax matters agreement, the Company has recorded a tax indemnification receivable from Peraton of $ 73 million related to other tax payable and a tax indemnification payable to Peraton of $ 29 million related to income tax and other tax liabilities.

In connection with the sale of HPS business, the Company entered into a tax matters agreement with Dedalus.

Pursuant to the tax matters agreement, the Company generally will be responsible for tax liabilities arising prior to the sale of HPS business.

The Company will also be responsible for pre-sale tax liabilities including adjustments made by tax authorities to HPS income tax returns.

The Internal Revenue Service (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.

With respect to CSC’s fiscal 2008 through 2017 federal tax returns, the Company has entered settlement negotiations with the IRS Office of Appeals.

The IRS examined several issues for these tax 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 $ 407 million (including estimated interest and penalties) and related cash cost for the unreserved portion of these items if we do not prevail.

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 $ 438 million (including estimated interest and penalties) for the unreserved portion of these items and related cash cost if we do not prevail.

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 petitions in Tax Court with respect to both years.

We also expect fiscal 2009 and 2010 to proceed to Tax Court.

We have received a notice of deficiency with respect to fiscal 2010, 2011 and 2013 and have filed petitions in Tax Court with respect to fiscal 2011 and 2013.

We expect to file a petition in Tax Court for fiscal 2010 by the fourth quarter of fiscal 2022.

We also expect fiscal 2009 to proceed to Tax Court.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The Company has agreed to extend the statute of limitations for fiscal years 2008 through 2010 to April 30, 2022, for fiscal years 2011 through 2012 to August 31, 2021, for fiscal years 2014 through fiscal 2017 to February 28, 2022, and for the tax year ended October 31, 2017 to September 30, 2022, to provide the IRS time to complete their review.

The Company has agreed to extend the statute of limitations for fiscal years 2008 through 2010 to April 30, 2022, for fiscal years 2014 through fiscal 2017 to October 31, 2022, and for the tax year ended October 31, 2017 to September 30, 2022, to provide the IRS time to complete their review.

The statute of limitations for fiscal years 2011 through 2013 has expired.

However, as previously noted, fiscal years 2011 and 2013 are in Tax Court and consequently these years will remain open until the Tax Court proceedings have concluded.

The Company expects to reach a resolution for fiscal years 2008 through 2013 no earlier than fiscal 2025, except for agreed issues related to fiscal 2008 through 2010, and to reach resolution for fiscal years 2014 through 2017, 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 the Company has accrued as uncertain tax positions.

In the first quarter of fiscal 2022 the Company’s liability for uncertain tax positions increased by $ 4 million (excluding interest and penalties and related tax attributes) primarily related to disallowance of certain credits.

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.

The Company may settle certain other tax examinations or have lapses in statutes of limitations for different amounts than the Company has accrued as uncertain tax positions.

Consequently, 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.

In the second quarter of fiscal 2022, the Company’s liability for uncertain tax positions decreased by $ 29 million (excluding interest and penalties and related tax attributes) primarily due to income tax audit settlements and statute expirations.

The Company believes the outcomes that are reasonably possible within the next 12 months may result in a reduction in liability for uncertain tax positions of $ 43 million, excluding interest, penalties, and tax carry-forwards.

8 unchanged sentences

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 the three months ended June 30, 2020.

The details of shares repurchased during the three months ended June 30, 2021 are shown below:

There was no share repurchase activity during the six months ended September 30, 2020.

The details of shares repurchased during the six months ended September 30, 2021 are shown below:

Fiscal Period Number of Shares Repurchased Average Price Per Share Amount

(in millions)

Open market purchases 1,750,000 $ 38.52 $ 67

1st Quarter 1,750,000 $ 38.52 $ 67

2nd Quarter 2,112,212 $ 39.10 83

Total 3,862,212 $ 38.84 $ 150

8 unchanged sentences

( 86 ) — ( 4 ) ( 90 )

Balance at June 30, 2021 $ ( 675 ) $ ( 2 ) $ 251 $ ( 426 )

Balance at September 30, 2021 $ ( 732 ) $ 6 $ 244 $ ( 482 )

(1) Includes net cumulative foreign currency translation losses of $ 86 million upon sale of foreign entities primarily related to the HPS business divestiture.

4 unchanged sentences

Amounts reclassified from accumulated other comprehensive loss — 6 — ( 10 ) ( 4 )

Balance at June 30, 2020 $ ( 853 ) $ ( 9 ) $ 13 $ 250 $ ( 599 )

Balance at September 30, 2020 $ ( 823 ) $ ( 2 ) $ 14 $ 249 $ ( 562 )

Note 18 – Stock Incentive Plans

19 unchanged sentences

The DXC Share Purchase Plan allows DXC’s employees located in the United Kingdom to purchase shares of DXC’s common stock at the fair market value of such shares on the applicable purchase date.

There were 7,519 shares purchased under this plan during the three months ended June 30, 2021.

There were 6,663 and 14,182 shares purchased under this plan during the three and six months ended September 30, 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:

As of June 30, 2021

As of September 30, 2021

Issuance Available for

5 unchanged sentences

Stock Options

of Option Shares

Weighted Average Exercise Price

of Option Shares Weighted Average Exercise Price

Weighted Average Remaining Contractual Term

6 unchanged sentences

Expired ( 28,774 ) $ 34.97

Outstanding as of June 30, 2021 1,316,650 $ 32.19 3.54 $ 11

Vested and exercisable as of June 30, 2021 1,316,650 $ 32.19 3.54 $ 11

Outstanding as of September 30, 2021 1,198,390 $ 32.69 3.34 $ 6

Vested and exercisable as of September 30, 2021 1,198,390 $ 32.69 3.34 $ 6

Restricted Stock

7 unchanged sentences

Canceled/Forfeited ( 1,110,027 ) $ 36.74 — $ —

Outstanding as of June 30, 2021 9,004,967 $ 35.55 190,260 $ 28.52

Outstanding as of September 30, 2021 8,361,368 $ 36.04 156,722 $ 36.18

DXC TECHNOLOGY COMPANY

1 unchanged sentence

Share-Based Compensation

Three Months Ended

(in millions) June 30, 2021 June 30, 2020

Three Months Ended Six Months Ended

(in millions) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Total share-based compensation cost $ 26 $ 20 $ 51 $ 36

2 unchanged sentences

Tax benefits from exercised stock options and awards $ 4 $ 1 $ 15 $ 4

As of June 30, 2021, total unrecognized compensation expense related to unvested DXC RSUs, net of expected forfeitures was $ 255 million.

As of September 30, 2021, total unrecognized compensation expense related to unvested DXC RSUs, net of expected forfeitures was $ 216 million.

The unrecognized compensation expense for unvested RSUs is expected to be recognized over a weighted-average period of 2.17 years.

1 unchanged sentence

Cash payments for interest on indebtedness and income taxes and other select non-cash activities are as follows:

Three Months Ended

(in millions) June 30, 2021 June 30, 2020

Six Months Ended

(in millions) September 30, 2021 September 30, 2020

Cash paid for:

9 unchanged sentences

Contingent consideration $ — $ 3

Dividends declared but not yet paid $ — $ 1

Shares repurchased but not settled in cash $ 19 $ —

(1) Income tax refunds were $ 14 million and $ 18 million for the three months ended June 30, 2021 and June 30, 2020, respectively.

(2) Net of $ 242 million and $ 58 million in lease modifications and terminations during the first quarters of fiscal 2022 and 2021, respectively .

(1) Income tax refunds were $ 41 million and $ 25 million for the six months ended September 30, 2021 and September 30, 2020, respectively.

(2) Net of $ 509 million and $ 253 million in lease modifications and terminations during the first six months of fiscal 2022 and 2021, respectively .

DXC TECHNOLOGY COMPANY

33 unchanged sentences

(in millions) GBS GIS Total Reportable Segments All Other Totals

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Revenues $ 1,873 $ 2,154 $ 4,027 $ — $ 4,027

2 unchanged sentences

$ 51 $ 257 $ 308 $ 30 $ 338

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Revenues $ 2,242 $ 2,312 $ 4,554 $ — $ 4,554

2 unchanged sentences

$ 59 $ 291 $ 350 $ 23 $ 373

(1) Depreciation and amortization as presented excludes amortization of acquired intangible assets of $ 109 million and $ 148 million for the three months ended June 30, 2021 and 2020, respectively .

(in millions) GBS GIS Total Reportable Segments All Other Totals

Six Months Ended September 30, 2021

Revenues $ 3,760 $ 4,408 $ 8,168 $ — $ 8,168

Segment profit $ 570 $ 249 $ 819 $ ( 141 ) $ 678

Depreciation and amortization (1)

$ 91 $ 503 $ 594 $ 57 $ 651

Six Months Ended September 30, 2020

Revenues $ 4,416 $ 4,640 $ 9,056 $ — $ 9,056

Segment profit $ 532 $ 59 $ 591 $ ( 118 ) $ 473

Depreciation and amortization (1)

$ 109 $ 558 $ 667 $ 50 $ 717

(1) Depreciation and amortization as presented excludes amortization of acquired intangible assets of $ 110 million and $ 152 million for the three months ended September 30, 2021 and 2020, respectively, and $ 219 million and $ 300 million for the six months ended September 30, 2021 and 2020, respectively.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Reconciliation of Reportable Segment Profit to Consolidated Total

3 unchanged sentences

These unallocated costs include certain corporate function costs, stock-based compensation expense, pension and OPEB actuarial and settlement gains and losses, restructuring costs, transaction, separation and integration-related costs and amortization of acquired intangible assets.

Three Months Ended

(in millions) June 30, 2021 June 30, 2020

Three Months Ended Six Months Ended

(in millions) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Total profit for reportable segments $ 416 $ 353 819 $ 591

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Gains and (losses) on dispositions — — 347 —

Impairment losses ( 10 ) — ( 10 ) —

Debt extinguishment costs ( 281 ) — ( 309 ) —

Pension and OPEB actuarial and settlement losses — — — ( 2 )

Income (loss) before income taxes $ 424 $ ( 225 )

(Loss) income before income taxes $ ( 248 ) $ ( 306 ) $ 176 $ ( 531 )

Management does not use total assets by segment to evaluate segment performance or allocate resources.

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Company would have an obligation to pay the service provider all, or a portion, of the shortfall.

Minimum purchase commitments as of June 30, 2021 were as follows:

Minimum purchase commitments as of September 30, 2021 were as follows:

Fiscal year Minimum Purchase Commitment

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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 June 30, 2021:

The following table summarizes the expiration of the Company’s financial guarantees and stand-by letters of credit outstanding as of September 30, 2021:

(in millions) Remainder of Fiscal 2022 Fiscal 2023 Fiscal 2024 and Thereafter Totals

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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, and in July 2021 the Court approved the settlement.

This matter is now closed.

Kemper Corporate Services, Inc.

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The Company continues to pursue recovery with its insurance carriers.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Forsyth, et al.

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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.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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.

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

Oracle America, Inc., et al.

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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.

Oracle claims that HPE is liable for vicarious and contributory infringement arising from the alleged actions of Terix and for direct infringement arising from HPE’s 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.

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The matter is scheduled to proceed to trial in November 2021.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

In re DXC Technology Company Securities Litigation:

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Court of Appeals for the Fourth Circuit.

The appeal has been fully briefed and is scheduled for oral argument in September 2021.

The appeal has been fully briefed, and in September 2021, the Court of Appeals heard oral argument on the appeal.

A decision is now 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.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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.

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On June 1, 2021, the plaintiffs filed a third amended complaint, which the Company has moved to dismiss.

A hearing on the Company’s motion is scheduled for October 2021.

A hearing on the Company’s motion was held in October 2021, and a decision is now pending.

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.

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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.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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.

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

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Voluntary Disclosure of Certain Possible Sanctions Law Violations:

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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.

The Company substantially completed its internal investigation and provided supplemental information to OFAC in January 2020.

In August 2021, OFAC informed the Company that it had decided to address the Company’s voluntary disclosure by issuing a “Cautionary Letter” instead of pursuing a civil monetary penalty, and that the Letter represents OFAC’s final enforcement response to the Company’s voluntary disclosure.

The Company will continue to engage in periodic dialogue with OFAC regarding compliance items that arise in the ordinary course of business.

This matter is otherwise closed.

Tax Examinations:

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Unless otherwise noted, the Company is unable to determine at this time a reasonable estimate of a possible loss or range of losses associated with the foregoing disclosed contingent matters.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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• 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;

• the risk of liability or damage to our reputation resulting from security incidents, including breaches, and cyber-attacks to our systems and networks and those of our business partners, 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;

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Public Sector business and its related mergers with Vencore Holding Corp.

and KeyPoint Government Solutions to form Perspecta Inc (the “USPS”);

and KeyPoint Government Solutions to form Perspecta Inc.

(the “USPS”);

• the other factors described in Part I Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2021 and subsequent SEC filings, including Part II Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q.

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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