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Item 1. Financial Statements

2022-02-03 compared with 2021-11-04 · 242 added, 241 removed, 1094 unchanged (31% of the section changed)

1 unchanged sentence

Index to Condensed Consolidated Financial Statements

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)

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 2021 and December 31, 2020 (unaudited)

Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended December 31, 2021 and December 31, 2020 (unaudited)

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

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2021 and December 31, 2020 (unaudited)

Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended December 31, 2021 and December 31, 2020 (unaudited)

Notes to Condensed Consolidated Financial Statements (unaudited)

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Note 4–Divestitures

Note 5–Earnings (Loss) Per Share

Note 5–Earnings Per Share

Note 6–Receivables

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

(in millions, except per-share amounts) December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Revenues $ 4,089 $ 4,288 $ 12,257 $ 13,344

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Debt extinguishment costs 2 — 311 —

Gain on disposition of businesses — — ( 377 ) —

(Gain) loss on disposition of businesses 4 ( 2,046 ) ( 373 ) ( 2,046 )

Other income, net ( 85 ) ( 127 ) ( 290 ) ( 318 )

Total costs and expenses 3,923 2,310 11,915 11,897

(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:

Income before income taxes 166 1,978 342 1,447

Income tax expense 64 875 145 789

Net income 102 1,103 197 658

net income attributable to non-controlling interest, net of tax 4 5 9 9

Net income attributable to DXC common stockholders $ 98 $ 1,098 $ 188 $ 649

Income per common share:

Basic $ 0.39 $ 4.32 $ 0.74 $ 2.55

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DXC TECHNOLOGY COMPANY

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:

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

Three Months Ended Nine Months Ended

(in millions) December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Net income $ 102 $ 1,103 $ 197 $ 658

Other comprehensive income (loss), net of taxes:

Foreign currency translation adjustments, net of tax (1)

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Available-for-sale securities, net of tax (3)

— ( 11 ) — ( 6 )

Pension and other post-retirement benefit plans, net of tax:

Prior service cost, net of tax (4)

— ( 1 ) — ( 1 )

Amortization of prior service cost, net of tax (5)

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Pension and other post-retirement benefit plans, net of tax ( 2 ) ( 3 ) ( 6 ) ( 13 )

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

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

Other comprehensive income (loss), net of taxes 98 156 ( 72 ) 199

Comprehensive income 200 1,259 125 857

comprehensive income attributable to non-controlling interest 5 6 20 12

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.

Comprehensive income attributable to DXC common stockholders $ 195 $ 1,253 $ 105 $ 845

(1) Tax benefit related to foreign currency translation adjustments was $ 3 and $ 2 for the three and nine months ended December 31, 2021, respectively, and $ 9 and $ 31 for the three and nine months ended December 31, 2020, respectively.

(2) Tax expense related to cash flow hedge adjustments was $ 1 and $ 3 for the three and nine months ended December 31, 2021, respectively, and $ 0 and $ 6 for the three and nine months ended December 31, 2020, respectively.

(3) There was no tax benefit related to available-for-sale securities during the three and nine months ended December 31, 2021.

Tax benefit related to available-for-sale securities was $ 4 for the three and nine months ended December 31, 2020.

(4) There was no tax benefit related to prior service costs during the three and nine months ended December 31, 2021 and December 31, 2020, respectively.

(5) There was no tax benefit related to amortization of prior service costs during the three and nine months ended December 31, 2021.

Tax benefit related to amortization of prior service costs was $ 1 and $ 3 for the three and nine months ended December 31, 2020.

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) September 30, 2021 March 31, 2021

(in millions, except per-share and share amounts) December 31, 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 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

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

Common stock, par value $ 0.01 per share, 750,000,000 shares authorized, 248,356,181 issued as of December 31, 2021 and 257,052,533 issued as of March 31, 2021

Additional paid-in capital 10,383 10,761

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Accumulated other comprehensive loss ( 385 ) ( 302 )

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

Treasury stock, at cost, 2,807,321 and 2,458,027 shares as of December 31, 2021 and March 31, 2021

( 171 ) ( 158 )

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Six Months Ended

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

Nine Months Ended

(in millions) December 31, 2021 December 31, 2020

Cash flows from operating activities:

Net income (loss) $ 95 $ ( 445 )

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

Net income $ 197 $ 658

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 1,309 1,506

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Deferred taxes 17 ( 319 )

(Gain) loss on dispositions ( 415 ) 14

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

Gain on dispositions ( 402 ) ( 2,023 )

Provision for losses on accounts receivable 1 52

Unrealized foreign currency exchange gain ( 20 ) ( 60 )

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Decrease in operating lease liability ( 371 ) ( 463 )

Decrease in other liabilities ( 691 ) ( 137 )

(Decrease) increase in other liabilities ( 675 ) 392

Net cash provided by operating activities 1,230 404

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Other investing activities, net 35 ( 5 )

Net cash provided by (used in) investing activities 199 ( 234 )

Net cash provided by investing activities 93 4,500

Cash flows from financing activities:

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Effect of exchange rate changes on cash and cash equivalents 25 20

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

Net (decrease) increase in cash and cash equivalents including cash classified within current assets held for sale ( 112 ) 253

Cash classified within current assets held for sale 63 ( 13 )

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

Net (decrease) increase in cash and cash equivalents ( 49 ) 240

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 September 30, 2021

Three Months Ended December 31, 2021

(in millions, except

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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 )

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

Net income 98 98 4 102

Other comprehensive income 97 97 1 98

Share-based compensation expense 23 23 23

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Non-controlling interest distributions and other ( 4 ) ( 4 ) ( 1 ) ( 5 )

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

Balance at December 31, 2021 248,356 $ 3 $ 10,383 $ ( 5,058 ) $ ( 385 ) $ ( 171 ) $ 4,772 $ 315 $ 5,087

Three Months Ended December 31, 2020

(in millions, except

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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 )

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

Net income 1,098 1,098 5 1,103

Other comprehensive income 155 155 1 156

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Non-controlling interest distributions and other — ( 16 ) ( 16 )

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

Balance at December 31, 2020 256,801 $ 3 $ 10,748 $ ( 4,533 ) $ ( 407 ) $ ( 156 ) $ 5,655 $ 340 $ 5,995

Nine Months Ended December 31, 2021

(in millions, except

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Non-controlling interest distributions and other ( 3 ) ( 1 ) ( 4 ) ( 40 ) ( 44 )

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

Balance at December 31, 2021 248,356 $ 3 $ 10,383 $ ( 5,058 ) $ ( 385 ) $ ( 171 ) $ 4,772 $ 315 $ 5,087

Nine Months Ended December 31, 2020

(in millions, except

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Cumulative effect of adopting ASU 2016-13 ( 4 ) ( 4 ) ( 4 )

Net loss ( 449 ) ( 449 ) 4 ( 445 )

Net income 649 649 9 658

Other comprehensive income 196 196 3 199

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Non-controlling interest distributions and other ( 1 ) ( 1 ) ( 16 ) ( 17 )

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.

Balance at December 31, 2020 256,801 $ 3 $ 10,748 $ ( 4,533 ) $ ( 407 ) $ ( 156 ) $ 5,655 $ 340 $ 5,995

(1) 2,807,321 treasury shares as of December 31, 2021.

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

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On October 1, 2020, DXC completed the sale of its U.S.

State and Local Health and Human Services business (“HHS” or the “HHS Business”) to Veritas Capital Fund Management, L.L.C.

State and Local Health and Human Services business (“HHS” or the “HHS Business”) to an affiliate of Veritas Capital Fund Management, L.L.C.

(“Veritas Capital”) to form Gainwell Technologies.

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See Note 4 – “Divestitures” for further information.

During the third quarter of fiscal 2022, a subsidiary of DXC entered into a purchase agreement to sell (the "FDB Sale") its German financial services subsidiary ("FDB" or the "FDB Business") to the FNZ Group ("FNZ") for € 300 million (approximately $ 340 million), subject to certain adjustments.

The closing of the transaction is subject to certain conditions, including receipt of certain regulatory consents.

At December 31, 2021, FDB held approximately $ 670 million in cash which primarily related to customer deposit liabilities.

Basis of Presentation

In order to make this report easier to read, DXC refers throughout to (i) the interim unaudited Condensed Consolidated Financial Statements as the “financial statements,” (ii) the Condensed Consolidated Statements of Operations as the “statements of operations,” (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss) as the “statements of comprehensive income,” (iv) the Condensed Consolidated Balance Sheets as the “balance sheets,” and (v) the Condensed Consolidated Statements of Cash Flows as the “statements of cash flows.” In addition, references throughout to numbered “Notes” refer to the numbered Notes in these Notes to Condensed Consolidated Financial Statements, unless otherwise noted.

In order to make this report easier to read, DXC refers throughout to (i) the interim unaudited Condensed Consolidated Financial Statements as the “financial statements,” (ii) the Condensed Consolidated Statements of Operations as the “statements of operations,” (iii) the Condensed Consolidated Statements of Comprehensive Income as the “statements of comprehensive income,” (iv) the Condensed Consolidated Balance Sheets as the “balance sheets,” and (v) the Condensed Consolidated Statements of Cash Flows as the “statements of cash flows.” In addition, references throughout to numbered “Notes” refer to the numbered Notes in these Notes to Condensed Consolidated Financial Statements, unless otherwise noted.

The accompanying financial statements include the accounts of DXC, its consolidated subsidiaries, and those business entities in which DXC maintains a controlling interest.

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Certain amounts reported in the previous year have been reclassified to conform to the current year presentation.

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The financial statements of the Company have been prepared in accordance with the rules and regulations of the U.S.

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These financial statements should therefore be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2021 (“fiscal 2021”).

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Use of Estimates

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However, because the use of estimates involves an inherent degree of uncertainty, actual results could differ from those estimates.

The severity, magnitude and duration, as well as the economic consequences of the coronavirus disease 2019 (“COVID-19”) crisis, are uncertain, rapidly changing and difficult to predict.

The severity, magnitude and duration, as well as the economic consequences of the ongoing coronavirus disease 2019 (“COVID-19”) crisis, are uncertain, rapidly changing and difficult to predict.

Therefore, accounting estimates and assumptions may change over time in response to the COVID-19 crisis and may change materially in future periods.

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Note 2 – Recent Accounting Pronouncements

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

During the nine months ended December 31, 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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DXC recorded goodwill associated with the acquisition of AXA Bank totaling $ 2 million.

The AXA bank has been consolidated within FDB and will be part of the FDB sale previously disclosed.

DXC TECHNOLOGY COMPANY

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The HPS Sale resulted in a pre-tax gain on sale of $ 337 million, net of closing costs.

The sale price is subject to adjustment based on changes in actual closing net working capital.

Final potential working capital adjustments are pending.

The following is a summary of the assets and liabilities distributed as part of the HPS Sale on April 1, 2021:

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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.

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.

Note 5 – Earnings Per Share

Basic earnings 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.

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

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:

Three Months Ended Nine Months Ended

(in millions, except per-share amounts) December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Net income attributable to DXC common shareholders:

$ 98 $ 1,098 $ 188 $ 649

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Weighted average common shares outstanding for diluted EPS 254.82 255.75 257.59 255.20

(Loss) earnings per share:

Earnings per share:

Basic $ 0.39 $ 4.32 $ 0.74 $ 2.55

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The number of awards excluded were as follows:

Three Months Ended Six Months Ended

September 30, 2021 (1)

September 30, 2020 (1)

September 30, 2021 September 30, 2020 (1)

Three Months Ended Nine Months Ended

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Stock Options 507,424 1,519,611 518,052 1,582,568

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Performance Stock Units 1,937,752 836,866 1,089,869 723,754

(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) September 30, 2021 March 31, 2021

(in millions) December 31, 2021 March 31, 2021

Beginning balance $ 91 $ 74

Impact of adoption of the Credit Loss Standard — 4

(Reversals) provisions for expected credit losses ( 2 ) 53

Provisions for expected credit losses 1 53

Other adjustments to allowance and write-off’s ( 14 ) ( 40 )

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Receivables Facility

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.

The Company has an accounts receivable sales facility (as amended, restated, supplemented, or otherwise modified as of December 31, 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 December 31, 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.

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

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

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

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

As of December 31, 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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The following table is a reconciliation of the beginning and ending balances of the DPP:

(in millions) As of September 30, 2020

(in millions) As of December 31, 2020

Beginning balance, as of April 1, 2020 $ 103

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The components of lease expense were as follows:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

(in millions) December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Operating lease cost $ 117 $ 156 $ 371 $ 463

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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.

Six Months Ended

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

Nine Months Ended

(in millions) December 31, 2021 December 31, 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 $ 509 million and $ 253 million in lease modifications and terminations during the first six months of fiscal 2022 and 2021, respectively.

(1) Net of $ 792 million and $ 529 million in lease modifications and terminations during the first nine 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 September 30, 2021 March 31, 2021

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

ROU operating lease assets Operating right-of-use assets, net $ 1,122 $ 1,366

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Total operating lease liabilities $ 1,191 $ 1,456

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.

The weighted-average operating lease term was 4.5 years and 4.9 years as of December 31, 2021 and March 31, 2021, respectively.

The weighted-average operating lease discount rate was 3.3 % and 3.8 % as of December 31, 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 leases as of September 30, 2021:

The following maturity analysis presents expected undiscounted cash payments for operating leases as of December 31, 2021:

(in millions)

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The components of lease expense were as follows:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

(in millions) December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Amortization of right-of-use assets $ 85 $ 107 $ 271 $ 322

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

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

Nine Months Ended

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

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

ROU finance lease assets Property and Equipment, net $ 713 $ 834

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

DXC TECHNOLOGY COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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:

The weighted-average finance lease term was 2.7 years and 2.6 years as of December 31, 2021 and March 31, 2021, respectively.

The weighted-average finance lease discount rate was 3.0 % and 3.6 % as of December 31, 2021 and March 31, 2021, respectively.

The following maturity analysis presents expected undiscounted cash payments for finance leases as of December 31, 2021:

(in millions)

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Fair Value Hierarchy

(in millions) September 30, 2021

(in millions) December 31, 2021

Fair Value Level 1 Level 2 Level 3

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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 $ 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.

(2) Other securities include available-for-sale equity security investments with Level 2 inputs that have a cost basis of $ 55 million and $ 57 million, and losses of $ 2 million and $ 2 million, as of December 31, 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 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 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.

The estimated fair value of the Company’s long-term debt, excluding finance lease liabilities, was $ 4.0 billion and $ 4.7 billion as of December 31, 2021 and March 31, 2021, respectively, compared with carrying value of $ 4.0 billion and $ 4.4 billion as of December 31, 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 six months ended September 30, 2021.

There were no significant impairments recorded during the nine months ended December 31, 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 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 notional amounts of foreign currency forward contracts designated as cash flow hedges as of December 31, 2021 and March 31, 2021 were $ 740 million and $ 546 million, respectively.

As of December 31, 2021, the related forecasted transactions extend through March 2024.

For the three and nine months ended December 31, 2021 and December 31, 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 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 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.

During the three and nine months ended December 31, 2021 and December 31, 2020, respectively, the Company had no cash flow hedges for which it was probable that the hedged transaction would not occur.

As of December 31, 2021, $ 12 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

During the three and nine months ended December 31, 2021, the pre-tax gain on derivatives designated for hedge accounting recognized in other comprehensive income (loss) was $ 5 million and $ 15 million, respectively, and the gain from operations was $ 2 million and $ 3 million, respectively.

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 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 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

The net notional amounts of the foreign currency forward contracts outstanding as of December 31, 2021 and March 31, 2021 were $ 1.5 billion and $ 2.1 billion, respectively.

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

For the Three Months Ended For the Nine Months Ended

(in millions) Statement of Operations Line Item December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Foreign currency forward contracts Other expense (income), net $ ( 9 ) $ 16 $ 39 $ 74

DXC TECHNOLOGY COMPANY

5 unchanged sentences

Derivative Assets

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

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

Derivatives designated for hedge accounting:

Foreign currency forward contracts Other current assets $ 17 $ 9

Total fair value of derivatives designated for hedge accounting $ 14 $ 9

Derivatives not designated for hedge accounting:

Foreign currency forward contracts Other current assets $ 10 $ 3

Total fair value of derivatives not designated for hedge accounting $ 8 $ 3

Derivative Liabilities

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

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

Derivatives designated for hedge accounting:

Foreign currency forward contracts Accrued expenses and other current liabilities $ 1 $ 5

Total fair value of derivatives designated for hedge accounting:

Derivatives not designated for hedge accounting:

Foreign currency forward contracts Accrued expenses and other current liabilities $ 5 $ 3

Total fair value of derivatives not designated for hedge accounting $ 21 $ 3

The fair value of foreign currency forward contracts represents the estimated amount required to settle the contracts using current market exchange rates and is based on the period-end foreign currency exchange rates and forward points which are classified as Level 2 inputs.

3 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 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.

With respect to its foreign currency derivatives, as of December 31, 2021, there were nine counterparties with concentration of credit risk, and based on gross fair value, the maximum amount of loss that the Company could incur is $ 19 million.

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

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

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.

As of December 31, 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 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.

For the three and nine months ended December 31, 2021, the pre-tax impact of gain (loss) on foreign currency-denominated debt designated for hedge accounting recognized in other comprehensive income (loss) was $ 5 million and $ 11 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.

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Intangible assets consisted of the following:

As of September 30, 2021

As of December 31, 2021

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

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The components of amortization expense were as follows:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

(in millions) December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Intangible asset amortization $ 212 $ 224 $ 649 $ 735

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(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:

Estimated future amortization related to intangible assets as of December 31, 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 September 30, 2021.

The following table summarizes the changes in the carrying amount of goodwill, by segment, as of December 31, 2021.

(in millions) GBS GIS Total

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

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

Balance as of December 31, 2021, net $ 629 $ — $ 629

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

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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.

As of December 31, 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 December 31, 2021.

DXC TECHNOLOGY COMPANY

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

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

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

Short-term debt and

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Senior Notes and Term Loans

During the first quarter of fiscal 2022, the Company used the proceeds from the sale of its HPS business to complete the retirement of the remaining $ 319 million of the two series of 4.45 % senior notes due fiscal 2023.

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.

During the first quarter of fiscal 2022, the Company used the proceeds from the sale of its HPS business to complete the redemption of the remaining $ 319 million of the two series of 4.45 % senior notes due fiscal 2023.

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 and the remainder of these notes were subsequently redeemed in full.

Euro Senior Notes Issuance

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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 Six Months Ended

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

Three Months Ended Nine Months Ended

(in millions) December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

United States $ 1,168 $ 1,290 $ 3,570 $ 4,665

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

As of December 31, 2021, approximately $ 22 billion of revenue is expected to be recognized from remaining performance obligations.

We expect to recognize revenue on approximately 14 % 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) September 30, 2021 March 31, 2021

(in millions) December 31, 2021 March 31, 2021

Trade receivables, net $ 2,536 $ 2,871

2 unchanged sentences

Change in contract liabilities were as follows:

Six Months Ended

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

Nine Months Ended

(in millions) December 31, 2021 December 31, 2020 (1)

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

2 unchanged sentences

Currency translation adjustment ( 22 ) 146

Other ( 36 ) ( 88 )

( 51 ) ( 108 )

Balance, end of period $ 1,883 $ 1,768

(1) Other included $ 54 million of contract liabilities related to the divested HHS business discussed in Note 4 - “ Divestitures” and contract liabilities reclassified to assets held for sale.

DXC TECHNOLOGY COMPANY

1 unchanged sentence

Note 14 – Restructuring Costs

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 Company recorded restructuring costs of $ 36 million and $ 104 million, net of reversals, for the three months ended December 31, 2021 and December 31, 2020, respectively.

For the nine months ended December 31, 2021 and December 31, 2020, the Company recorded restructuring costs of $ 248 million and $ 441 million, net of reversals, respectively.

The costs recorded during the three and nine months ended December 31, 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) September 30, 2021

(in millions) December 31, 2021

Accrued expenses and other current liabilities $ 143

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 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.

Also included in restructuring costs for the nine months ended December 31, 2021 is $ 12 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

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Cash Paid Other (2)

Restructuring Liability as of September 30, 2021

Restructuring Liability as of December 31, 2021

Fiscal 2022 Plan

1 unchanged sentence

Facilities Costs — 65 ( 42 ) ( 20 ) 2 5

Total $ — $ 213 $ ( 36 ) $ ( 63 ) $ ( 2 ) $ 112

— 246 ( 40 ) ( 111 ) ( 1 ) 94

Fiscal 2021 Plan

1 unchanged sentence

Facilities Costs 3 6 ( 6 ) ( 1 ) ( 1 ) 1

Total $ 183 $ 2 $ ( 5 ) $ ( 106 ) $ ( 1 ) $ 73

183 6 ( 6 ) ( 128 ) ( 3 ) 52

Fiscal 2020 Plan

1 unchanged sentence

Facilities Costs — — — — — —

Total $ 27 $ ( 2 ) $ — $ ( 10 ) $ — $ 15

27 ( 1 ) — ( 14 ) ( 1 ) 11

Other Prior Year Plans

1 unchanged sentence

Facilities Costs 6 — — ( 4 ) — 2

Total $ 25 $ 1 $ — $ ( 16 ) $ — $ 10

25 1 — ( 19 ) 1 8

Acquired Liabilities

1 unchanged sentence

Facilities Costs 1 — — ( 1 ) — —

35 ( 4 ) — ( 7 ) ( 2 ) 22

Total $ 270 $ 248 $ ( 46 ) $ ( 279 ) $ ( 6 ) $ 187

16 unchanged sentences

The components of net periodic pension income were:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

(in millions) December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Service cost $ 22 $ 23 $ 67 $ 68

17 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 $ 40 million as of September 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 $ 41 million as of December 31, 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 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.

The Company’s effective tax rate (“ETR”) was 38.6 % and 44.2 % for the three months ended December 31, 2021 and December 31, 2020, respectively, and 42.4 % and 54.5 % for the nine months ended December 31, 2021 and December 31, 2020, respectively.

For the three months ended December 31, 2021, the primary drivers of the ETR were the global mix of income, an increase in unrecognized tax benefits primarily related to deductions taken in prior tax returns and tax rate changes in non-U.S.

jurisdictions.

For the nine months ended December 31, 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 recording a valuation allowance on certain deferred tax assets in non-U.S.

jurisdictions.

For the three and nine months ended December 31, 2020, the primary drivers of the ETR were the gain on sale of HHS Business, global mix of income and foreign tax credits.

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

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state tax consequences when remitted.

The Company will continue to evaluate its position in the future based on its future strategy and cash needs.

The Company will continue to evaluate its position based on its strategic objectives and future cash needs.

In connection with the HPES Merger, the Company entered into a tax matters agreement with HPE.

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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.

The Company generally will be responsible for tax liabilities arising prior to the USPS Separation, and Peraton 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.

The Company remains liable to HPE for tax receivables transferred to Peraton related to pre-HPES Merger periods.

Pursuant to the tax matters agreement, the Company has recorded a tax indemnification receivable from Peraton of $ 74 million related to other tax payables and a tax indemnification payable to Peraton of $ 29 million related to income tax and other tax receivables.

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 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 settlement negotiations with the IRS Office of Appeals.

The Internal Revenue Service (the “IRS”) has examined, or 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 participated in 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 $ 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 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.

The Company and the IRS Office of Appeals have an agreement in principle as to various audit 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 are challenging 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 $ 456 million (including estimated interest and penalties) for the unreserved portion of these items and related cash cost if we do not prevail.

We have received notices of deficiency with respect to fiscal 2009, 2010, 2011 and 2013 and have timely filed petitions in Tax Court with respect to fiscal 2010, 2011 and 2013.

We expect to file timely petitions in Tax Court for fiscal 2009 by the fourth quarter of fiscal 2022.

We do not expect the Tax Court matters to be resolved in the next 12 months.

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 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.

The statute of limitations on assessments 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.

The Company expects to reach resolution with regard to disagreed items for fiscal years 2009 through 2013 no earlier than fiscal 2025, and to reach resolution for fiscal years 2014 through 2017, within 12 months.

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.

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 or pay lower amounts than previously estimated and accrued.

In the third quarter of fiscal 2022, the Company’s liability for uncertain tax positions increased by $ 19 million (excluding interest and penalties and related tax attributes) primarily related to deductions taken in prior tax years.

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 $ 46 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 six months ended September 30, 2020.

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

There was no share repurchase activity during the nine months ended December 31, 2020.

The details of shares repurchased during the nine months ended December 31, 2021 are shown below:

Fiscal Period Number of Shares Repurchased Average Price Per Share Amount

2 unchanged sentences

2nd Quarter 2,112,212 $ 39.10 83

3rd Quarter 6,755,555 $ 31.48 213

Total 10,617,767 $ 34.15 $ 363

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Income (Loss)

The following table shows the changes in accumulated other comprehensive income (loss), net of taxes:

(in millions) Foreign Currency Translation Adjustments Cash Flow Hedges Pension and Other Post-retirement Benefit Plans Accumulated Other Comprehensive Loss

(in millions) Foreign Currency Translation Adjustments Cash Flow Hedges Pension and Other Post-retirement Benefit Plans Accumulated Other Comprehensive Income (Loss)

Balance at March 31, 2021 $ ( 554 ) $ ( 1 ) $ 253 $ ( 302 )

Other comprehensive loss before reclassifications ( 92 ) 7 ( 5 ) ( 90 )

Other comprehensive income before reclassifications — 12 — 12

Amounts reclassified from accumulated other comprehensive loss (1)

( 86 ) ( 3 ) ( 6 ) ( 95 )

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

Balance at December 31, 2021 $ ( 640 ) $ 8 $ 247 $ ( 385 )

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

See Note 4 – “Divestitures” for additional information.

(in millions) Foreign Currency Translation Adjustments Cash Flow Hedges Available-for-sale Securities Pension and Other Post-retirement Benefit Plans Accumulated Other Comprehensive Loss

(in millions) Foreign Currency Translation Adjustments Cash Flow Hedges Available-for-sale Securities Pension and Other Post-retirement Benefit Plans Accumulated Other Comprehensive Income (Loss)

Balance at March 31, 2020 $ ( 851 ) $ ( 20 ) $ 9 $ 259 $ ( 603 )

Other comprehensive loss before reclassifications 28 12 5 — 45

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

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

Other comprehensive income (loss) before reclassifications 197 12 ( 6 ) — 203

Amounts reclassified from accumulated other comprehensive income (loss) — 6 — ( 13 ) ( 7 )

Balance at December 31, 2020 $ ( 654 ) $ ( 2 ) $ 3 $ 246 $ ( 407 )

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 6,663 and 14,182 shares purchased under this plan during the three and six months ended September 30, 2021.

There were 7,437 and 21,619 shares purchased under this plan during the three and nine months ended December 31, 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 September 30, 2021

As of December 31, 2021

Issuance Available for

14 unchanged sentences

Expired ( 52,413 ) $ 36.33

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

Outstanding as of December 31, 2021 1,172,820 $ 32.59 3.16 $ 5

Vested and exercisable as of December 31, 2021 1,172,820 $ 32.59 3.16 $ 5

Restricted Stock

7 unchanged sentences

Canceled/Forfeited ( 1,366,605 ) $ 36.32 — $ —

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

Outstanding as of December 31, 2021 8,034,309 $ 35.83 156,722 $ 36.18

DXC TECHNOLOGY COMPANY

1 unchanged sentence

Share-Based Compensation

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

(in millions) December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Total share-based compensation cost $ 26 $ 6 $ 77 $ 42

2 unchanged sentences

Tax benefits from exercised stock options and awards $ — $ 1 $ 15 $ 5

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

As of December 31, 2021, total unrecognized compensation expense related to unvested DXC RSUs, net of expected forfeitures was $ 182 million.

The unrecognized compensation expense for unvested RSUs is expected to be recognized over a weighted-average period of 1.98 years.

1 unchanged sentence

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

Six Months Ended

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

Nine Months Ended

(in millions) December 31, 2021 December 31, 2020

Cash paid for:

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Contingent consideration $ — $ 2

(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 .

Shares repurchased but not settled in cash $ 11 $ —

(1) Income tax refunds were $ 46 million and $ 31 million for the nine months ended December 31, 2021 and December 31, 2020, respectively.

(2) Net of $ 792 million and $ 529 million in lease modifications and terminations during the first nine months of fiscal 2022 and 2021, respectively.

DXC TECHNOLOGY COMPANY

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The following table summarizes operating results regularly provided to the CODM by reportable segment and a reconciliation to the financial statements:

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

Three Months Ended September 30, 2021

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

Three Months Ended December 31, 2021

Revenues $ 1,946 $ 2,143 $ 4,089 $ — $ 4,089

2 unchanged sentences

$ 39 $ 252 $ 291 $ 27 $ 318

Three Months Ended September 30, 2020

Three Months Ended December 31, 2020

Revenues $ 1,921 $ 2,367 $ 4,288 $ — $ 4,288

2 unchanged sentences

$ 53 $ 281 $ 334 $ 27 $ 361

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

Six Months Ended September 30, 2021

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

Nine Months Ended December 31, 2021

Revenues $ 5,706 $ 6,551 $ 12,257 $ — $ 12,257

2 unchanged sentences

$ 130 $ 755 $ 885 $ 84 $ 969

Six Months Ended September 30, 2020

Nine Months Ended December 31, 2020

Revenues $ 6,337 $ 7,007 $ 13,344 $ — $ 13,344

2 unchanged sentences

$ 162 $ 839 $ 1,001 $ 77 $ 1,078

(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.

(1) Depreciation and amortization, as presented excludes amortization of acquired intangible assets of $ 106 million and $ 114 million for the three months ended December 31, 2021 and 2020, respectively, and $ 325 million and $ 414 million for the nine months ended December 31, 2021 and 2020, respectively.

DXC TECHNOLOGY COMPANY

5 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 Six Months Ended

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

Three Months Ended Nine Months Ended

(in millions) December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Total profit for reportable segments $ 417 $ 361 1,236 $ 952

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Pension and OPEB actuarial and settlement losses ( 7 ) — ( 7 ) ( 2 )

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

Income before income taxes $ 166 $ 1,978 $ 342 $ 1,447

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 September 30, 2021 were as follows:

Minimum purchase commitments as of December 31, 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 September 30, 2021:

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

The following table summarizes the expiration of the Company’s financial guarantees and stand-by letters of credit outstanding as of December 31, 2021:

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

Surety bonds $ 5 $ 60 $ 13 $ 78

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Stand-by letters of credit 10 72 23 105

Totals $ 176 $ 168 $ 554 $ 898

Total $ 33 $ 212 $ 621 $ 866

The Company generally indemnifies licensees of its proprietary software products against claims brought by third parties alleging infringement of their intellectual property rights, including rights in patents (with or without geographic limitations), copyrights, trademarks, and trade secrets.

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In April 2021, the court granted Plaintiffs’ motion for preliminary certification and lifted the previously imposed stay of the action.

In November 2021, notice was sent to putative members of the ADEA collectives regarding participation in the case.

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

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In June 2021, the Court issued a decision denying HPE’s motion for summary judgment and granting Oracle’s motion for summary judgment on various HPE defenses.

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

In November 2021, the court issued an order continuing the trial to May 2022.

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 in September 2021, the Court of Appeals heard oral argument on the appeal.

A decision is now pending.

In September 2021, the Court of Appeals heard oral argument on the appeal.

In December 2021, the Court of Appeals issued an order denying the plaintiffs’ appeal and affirming the District Court’s dismissal of the lawsuit.

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.

By agreement of the parties and order of the court, those lawsuits were consolidated on July 18, 2019, and stayed pending the outcome of the appeal of the Eastern District of Virginia matter.

The appeal was denied in December 2021, and the parties subsequently filed a voluntary dismissal of this action without prejudice.

This matter is now closed.

DXC TECHNOLOGY COMPANY

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On July 15, 2020, the Superior Court of California, County of Santa Clara, denied the Company’s motion to stay the state court case but extended the Company’s deadline to seek dismissal of the state action, until after a decision on the Company’s motion to dismiss the federal action.

The Company has since moved to dismiss the state action, and the court has continued the motion until after the outcome of the federal action.

The Company moved to dismiss the state action, and the court continued the motion until after the outcome of the federal action.

Following the dismissal of the federal action in December 2021, the court in the state action has entered an order permitting additional briefing on the matter.

On July 27, 2020, the United States District Court for the Northern District of California granted the Company’s motion to dismiss the federal action.

The Court’s order permitted plaintiffs to amend and refile their complaint within 60 days, and on September 25, 2020, the plaintiffs filed an amended complaint.

On November 12, 2020, the Company filed a motion to dismiss the amended complaint.

On April 30, 2021, the Court granted the Company’s motion to dismiss the amended complaint, while granting Plaintiffs leave to again amend and refile their complaint within 30 days.

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 was held in October 2021, and a decision is now pending.

On November 12, 2020, the Company filed a motion to dismiss the amended complaint, and on April 30, 2021, the Court granted the Company’s motion to dismiss the amended complaint, while granting plaintiffs leave to again amend and refile their complaint within 30 days.

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

A hearing on the Company’s motion was held in October 2021, and in December 2021, the Court granted the Company’s motion to dismiss, this time with prejudice.

Plaintiffs’ did not file a notice of appeal prior to the deadline to do so.

The federal action is now closed.

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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The Company’s motion to dismiss was denied on January 22, 2020.

By agreement of the parties and order of the court, the case is presently stayed, pending the outcome of the appeal in the Eastern District of Virginia matter.

By agreement of the parties and order of the court, the case was stayed pending the outcome of the appeal in the Eastern District of Virginia matter.

The appeal was denied in December 2021, and the shareholder subsequently filed a voluntary dismissal of this action with prejudice.

This matter is now closed.

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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And on May 13, 2020, the parties filed a stipulation requesting to stay the case subject to resolution of the motions to dismiss in the Northern District of California and Eastern District of Virginia class actions.

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

Following the dismissal with prejudice of the Northern District of California action and the denial of the plaintiffs appeal in the Eastern District of Virginia action, the plaintiffs in this action filed a voluntary dismissal with prejudice.

This matter is now closed.

The Company believes that the remaining lawsuits described above are also 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:

On February 2, 2017, CSC submitted an initial notification of voluntary disclosure to the U.S.

Department of Treasury, Office of Foreign Assets Control (“OFAC”) regarding certain possible violations of U.S.

sanctions laws pertaining to insurance premium data and claims data processed by two partially-owned joint ventures of Xchanging, which CSC acquired during the first quarter of fiscal 2017.

A copy of the disclosure was also provided to Her Majesty’s Treasury Office of Financial Sanctions Implementation in the United Kingdom.

The Company 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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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 in June 2018 to form Perspecta Inc., which was acquired by Peraton in May 2021;

• 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