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Item 2. Management’s Discussion and Analysis

2022-02-03 compared with 2021-11-04 · 216 added, 167 removed, 266 unchanged (59% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The purpose of the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is to present information that management believes is relevant to an assessment and understanding of our results of operations and cash flows for the second quarter and first six months of fiscal 2022 and our financial condition as of September 30, 2021.

The purpose of the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is to present information that management believes is relevant to an assessment and understanding of our results of operations and cash flows for the third quarter and first nine months of fiscal 2022 and our financial condition as of December 31, 2021.

The MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and accompanying notes.

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• Critical Accounting Policies and Estimates

The following discussion includes a comparison of our results of operations and liquidity and capital resources for the second quarters and first six months of fiscal 2022 and fiscal 2021.

The following discussion includes a comparison of our results of operations and liquidity and capital resources for the third quarters and first nine months of fiscal 2022 and fiscal 2021.

DXC Technology helps global companies run their mission critical systems and operations while modernizing IT, optimizing data architectures, and ensuring security and scalability across public, private and hybrid clouds.

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Results of Operations

The following table sets forth certain financial data for the second quarters and first six months of fiscal 2022 and fiscal 2021:

Three Months Ended Six Months Ended

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

The following table sets forth certain financial data for the third quarters and first nine months of fiscal 2022 and fiscal 2021:

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

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

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

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

Diluted (loss) earnings per share $ (0.74) $ (0.96) $ 0.35 $ (1.77)

Fiscal 2022 Second Quarter Highlights

Financial highlights for the second quarter and first six months of fiscal 2022 include the following:

• Revenues for the second quarter and first six months of fiscal 2022 were $4.0 billion and $8.2 billion, respectively, a decrease of 11.6% and 9.8%, respectively, as compared to the second quarter and first six months of fiscal 2021.

The decrease was primarily due to the dispositions of the HPS business and other insignificant businesses during the first quarter of fiscal 2022 and the HHS business during the third quarter of fiscal 2021.

Project completions and project terminations also contributed to the decrease in revenues.

The decrease in revenues was partially offset by increased pass-through revenue associated with the resale of hardware and software and additional services provided to new and existing customers.

• Net loss and diluted loss per share for the second quarter of fiscal 2022 were $(187) million and $(0.74), respectively.

Net loss decreased by $59 million during the second quarter of fiscal 2022 as compared to the same period of prior fiscal year.

The decrease was primarily due to cost optimization realized in the current period, lower costs after the dispositions of the HPS and HHS businesses, and lower transaction, separation and integration-related costs partially offset by a reduction in revenue in the current period and higher debt extinguishment costs.

Net loss included the cumulative impact of certain items of $420 million, reflecting restructuring costs, transaction, separation and integration-related costs, amortization of acquired intangible assets, impairment losses, and debt extinguishment costs.

This compares with net loss and diluted loss per share of $(246) million and $(0.96), respectively, for the second quarter of fiscal 2021.

• Net income and diluted earnings per share for the first six months of fiscal 2022 were $95 million and $0.35, respectively.

Net income increased by $540 million during the first six months of fiscal 2022 as compared to the same period of prior fiscal year.

The increase was primarily due to cost optimization realized in the current period, gain on disposition of the HPS business, lower costs after the dispositions of the HPS and HHS businesses and lower transaction, separation and integration-related costs partially offset by a reduction in revenue in the current period and higher debt extinguishment costs.

Net income included the cumulative impact of certain items of $360 million, reflecting restructuring costs, transaction, separation and integration-related costs, amortization of acquired intangible assets, gains on dispositions, impairment losses, debt extinguishment costs, and a tax adjustment.

This compares with net loss and diluted loss per share of $(445) million and $(1.77), respectively, for the first six months of fiscal 2021.

• Our cash and cash equivalents were $2.7 billion as of September 30, 2021.

• We generated $534 million of cash from operations during the first six months of fiscal 2022, as compared to $591 million during the first six months of fiscal 2021.

During the second quarter and first six months of fiscal 2022 and fiscal 2021, the distribution of our revenues across geographies was as follows:

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

Income tax expense 64 875 145 789

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

Diluted earnings per share $ 0.38 $ 4.29 $ 0.73 $ 2.54

Fiscal 2022 Third Quarter Highlights

Financial highlights for the third quarter and first nine months of fiscal 2022 include the following:

• Revenues for the third quarter and first nine months of fiscal 2022 were $4.1 billion and $12.3 billion, respectively, a decrease of 4.6% and 8.1%, respectively, as compared to the third quarter and first nine months of fiscal 2021.

See "Revenues” caption below for additional information.

• Net income and diluted earnings per share for the third quarter of fiscal 2022 were $102 million and $0.38, respectively.

Net income decreased by $1,001 million during the third quarter of fiscal 2022 as compared to the same period of prior fiscal year.

The decrease was primarily due to the gain on disposition of the HHS business during the third quarter of fiscal 2021 and a reduction in revenue in the current period partially offset by cost optimization realized in the current period, lower costs after the dispositions of the HPS and HHS businesses, lower transaction, separation and integration-related costs, a reduction in restructuring activities, and decreases in depreciation and amortization.

Net income included the cumulative impact of $137 million, reflecting restructuring costs, transaction, separation and integration-related costs, amortization of acquired intangible assets, gains and losses on dispositions, debt extinguishment costs, pension and other post-retirement benefit ("OPEB") actuarial and settlement losses, and a tax adjustment.

This compares with net income and diluted earnings per share of $1,103 million and $4.29, respectively, for the third quarter of fiscal 2021.

• Net income and diluted earnings per share for the first nine months of fiscal 2022 were $197 million and $0.73, respectively.

Net income decreased by $461 million during the first nine months of fiscal 2022 as compared to the same period of prior fiscal year.

In addition to the previously described activity for the third quarter of fiscal 2022, decreases in net income for the first nine months of fiscal 2022 also reflects higher debt extinguishment costs partially offset by the gain on disposition of the HPS business during the first quarter of fiscal 2022.

Net income included the cumulative impact of $497 million, reflecting restructuring costs, transaction, separation and integration-related costs, amortization of acquired intangible assets, gains on dispositions, impairment losses, debt extinguishment costs, pension and OPEB actuarial and settlement losses, and a tax adjustment.

This compares with net income and diluted earnings per share of $658 million and $2.54, respectively, for the first nine months of fiscal 2021.

• Our cash and cash equivalents were $2.9 billion as of December 31, 2021.

• We generated $1,230 million of cash from operations during the first nine months of fiscal 2022, as compared to $404 million during the first nine months of fiscal 2021.

See “Liquidity and Capital Resources” caption below for additional information.

During the third quarter and first nine months of fiscal 2022 and fiscal 2021, the distribution of our revenues across geographies was as follows:

Three Months Ended

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

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

$ 1,946 $ 1,921 $ 25 1.3 %

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$ 4,089 $ 4,288 $ (199) (4.6) %

Six Months Ended

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

Nine Months Ended

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

$ 5,706 $ 6,337 $ (631) (10.0) %

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$ 12,257 $ 13,344 $ (1,087) (8.1) %

The decrease in revenues for the second quarter and first six months of fiscal 2022, compared with fiscal 2021 of the same periods, reflects the disposition of the HHS business during the third quarter of fiscal 2021, in addition to dispositions of the HPS business and other insignificant businesses during the first quarter of fiscal 2022.

Project completions and project terminations also contributed to the decrease in revenues.

The decrease in revenues was partially offset by increased pass-through revenue associated with the resale of hardware and software and additional services provided to new and existing customers.

Revenues for the second quarter and first six months of fiscal 2022 included an favorable foreign currency exchange rate impacts of 1.4% and 3.6%, respectively, primarily driven by the weakening of the U.S.

dollar against the British Pound, Canadian Dollar, and Australian Dollar.

The decrease in revenues for the third quarter of fiscal 2022, compared with fiscal 2021 of the same period, reflects project completions, the dispositions of the HPS business and other insignificant businesses during the first quarter of fiscal 2022, and project terminations.

The decrease in revenues was partially offset by additional services provided to new and existing customers, including revenues from software licenses, increased pass-through revenue associated with the resale of hardware and software, and increased run-rate project volumes.

The decrease in revenues for first nine months of fiscal 2022 compared with fiscal 2021 of the same period, also reflects the disposition of the HHS business during the third quarter of fiscal 2021.

Revenues for the third quarter included an unfavorable foreign currency exchange rate impact of 1.0% and a favorable foreign currency exchange rate impact of 2.1% for the first nine months of fiscal 2022.

These impacts were primarily driven by the strengthening of the U.S.

dollar against the Euro and Australian Dollar during the third quarter of fiscal 2022 and an overall weakening of the U.S.

dollar against the British Pound, Canadian Dollar, and Australian Dollar for the first nine months of fiscal 2022.

For the discussion of risks associated with our foreign operations, see Part 1, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

As a global company, approximately 70% of our revenues for the first six months of fiscal 2022 were earned internationally.

As a global company, approximately 71% of our revenues for the first nine months of fiscal 2022 were earned internationally.

As a result, the comparison of revenues denominated in currencies other than the U.S.

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(in millions) Constant Currency

September 30, 2021 September 30, 2020 Change Percentage Change

December 31, 2021 December 31, 2020 Change Percentage Change

GBS $ 1,971 $ 1,921 $ 50 2.6 %

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Total $ 4,134 $ 4,288 $ (154) (3.6) %

Six Months Ended

Nine Months Ended

(in millions) Constant Currency

September 30, 2021 September 30, 2020 Change Percentage Change

December 31, 2021 December 31, 2020 Change Percentage Change

GBS $ 5,606 $ 6,337 $ (731) (11.5) %

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Global Business Services

Our GBS revenues were $1.9 billion in the second quarter and $3.8 billion in the first six months of fiscal 2022, a decrease of 16.5% and 14.9%, respectively, compared to the same periods in fiscal 2021.

GBS revenue in constant currency decreased by 17.4% and 17.7% in the second quarter and first six months of fiscal 2022, respectively, as compared to the same periods in fiscal 2021.

The decrease in GBS revenues for the second quarter and first six months of fiscal 2022 was primarily due to the disposition of the HHS business during the third quarter of fiscal 2021, the disposition of the HPS business at the beginning of the first quarter of fiscal 2022, and project completions.

The decrease in GBS revenues was partially offset by additional services provided to existing customers.

For the second quarter and first six months of fiscal 2022, GBS contract awards were $1.7 billion and $4.1 billion, respectively, as compared to $2.4 billion and $5.9 billion in the corresponding periods of fiscal 2021.

Our GBS revenues were $1.9 billion in the third quarter and $5.7 billion in the first nine months of fiscal 2022, an increase of 1.3% for the third quarter and a decrease of 10.0% for the first nine months of fiscal 2022 as compared to the same periods in fiscal 2021.

GBS revenue in constant currency increased by 2.6% in the third quarter and decreased 11.5% during the first nine months of fiscal 2022 as compared to the same periods in fiscal 2021.

The increase in GBS revenues for the third quarter of fiscal 2022 was primarily due to an increase in run-rate project volumes and additional services provided to new and existing customers, including revenues from software licenses.

The increase in revenue for the third quarter of fiscal 2022 was partially offset by the disposition of the HPS business at the beginning of the first quarter of fiscal 2022 and project completions.

The decrease in GBS revenues for the first nine months of fiscal 2022 also reflects the disposition of the HHS business during the third quarter fiscal 2021.

For the third quarter and first nine months of fiscal 2022, GBS contract awards were $2.5 billion and $6.6 billion, respectively, as compared to $2.7 billion and $8.6 billion in the corresponding periods of fiscal 2021.

Global Infrastructure Services

Our GIS revenues were $2.2 billion in the second quarter and $4.4 billion in the first six months of fiscal 2022, a decrease of 6.8% and 5.0%, respectively, compared to the same periods in fiscal 2021.

GIS revenue in constant currency decreased by 8.7% and 9.3% in the second quarter and first six months of fiscal 2022, respectively, as compared to the same periods in fiscal 2021.

The decrease in GIS revenues for the second quarter and first six months of fiscal 2022 was primarily due to project completions, project terminations, a decrease in run-rate project volumes, and decreases due to the dispositions of the HHS business and other insignificant businesses.

The decrease in GIS revenues was partially offset by additional services provided to new and existing customers.

For the second quarter and first six months of fiscal 2022, GIS contract awards were $2.0 billion and $4.2 billion, respectively, as compared to $2.5 billion and $4.3 billion in the corresponding periods of fiscal 2021.

Our GIS revenues were $2.1 billion in the third quarter and $6.6 billion in the first nine months of fiscal 2022, a decrease of 9.5% and 6.5%, respectively, compared to the same periods in fiscal 2021.

GIS revenues in constant currency decreased by 8.6% and 9.0% in the third quarter and first nine months of fiscal 2022, respectively, as compared to the same periods in fiscal 2021.

The decrease in GIS revenues for the third quarter of fiscal 2022 was primarily due to project completions, project terminations, and a decrease in run-rate project volumes.

The decrease in GIS revenues was partially offset by increased pass-through revenue associated with the resale of hardware and software and additional services provided to new and existing customers.

The decrease in GIS revenues for the first nine months of fiscal 2022 also reflects the dispositions of the HHS business during the third quarter fiscal 2021 and other insignificant businesses.

For the third quarter and first nine months of fiscal 2022, GIS contract awards were $2.5 billion and $6.7 billion, respectively, as compared to $2.2 billion and $6.5 billion in the corresponding periods of fiscal 2021.

Costs and Expenses

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Amount Percentage of Revenues Percentage Point Change

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

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

Costs of services (excludes depreciation and amortization and restructuring costs)

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Debt extinguishment costs 2 — — — —

Loss (gain) on disposition of businesses 4 (2,046) 0.1 (47.7) 47.8

Other income, net (85) (127) (2.1) (3.0) 0.9

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$ 3,923 $ 2,310 95.9 % 53.9 % 42.0

Six Months Ended

Nine Months Ended

Amount Percentage of Revenues Percentage Point Change

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

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

Costs of services (excludes depreciation and amortization and restructuring costs)

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$ 11,915 $ 11,897 97.2 % 89.2 % 8.0

Total costs and expenses as a percentage of revenue decreased by 0.5 and 8.1 percentage points during the second quarter and first six months of fiscal 2022, respectively.

The percentage point decreases primarily reflect operating cost reductions exceeding associated declines in revenue compared to the same period in the prior fiscal year.

Gains on dispositions during the first quarter of fiscal 2022 also contributed to the percentage point decrease during the first six months of fiscal 2022.

The decreases were partially offset by higher debt extinguishment costs incurred during the second quarter and first six months of fiscal 2022.

The 42.0 and 8.0 percentage point increase in total costs and expenses as a percentage of revenue for the third quarter and first nine months of fiscal 2022 primarily reflects the gain on disposition of businesses resulting from the sale of the Company’s HHS business that occurred during the third quarter of fiscal 2021.

Costs of Services

Costs of services, excluding depreciation and amortization and restructuring costs (“COS”), was $3.1 billion and $6.3 billion for the second quarter and first six months of fiscal 2022, respectively.

COS decreased by $475 million and $849 million during the second quarter and first six months of fiscal 2022, respectively, as compared to the same periods of the prior fiscal year.

The decreases were primarily due to cost optimization savings realized during fiscal 2022 and reduced costs resulting from the dispositions of the HPS business during the first quarter of fiscal 2022 and the HHS business during the third quarter of fiscal 2021.

COS as a percentage of revenue decreased by 1.6 and 2.0 points, respectively, as compared to the same periods of the prior fiscal year.

These point decreases were primarily driven by cost reductions exceeding the associated decline in revenue compared to the same period in the prior fiscal year.

Costs of services, excluding depreciation and amortization and restructuring costs (“COS”), was $3.2 billion and $9.5 billion for the third quarter and first nine months of fiscal 2022, respectively.

COS decreased by $154 million and $1,003 million during the third quarter and first nine months of fiscal 2022, respectively, as compared to the same periods of the prior fiscal year.

The decrease in COS for the third quarter of fiscal 2022, compared with fiscal 2021 of the same period, primarily reflects cost optimization savings realized during fiscal 2022 and reduced costs resulting from the dispositions of the HPS business and other insignificant businesses during the first quarter of fiscal 2022.

The decrease in COS for the first nine months of fiscal 2022 compared with fiscal 2021 of the same period, also reflects the disposition of the HHS business during the third quarter of fiscal 2021.

COS as a percentage of revenues were consistent during the third quarter and decreased 1.2 points during the first nine months of fiscal 2022, as compared to the same period of the prior fiscal year.

This point decrease was primarily driven by cost reductions exceeding the associated decline in revenue compared to the same period in the prior fiscal year.

Selling, General and Administrative

Selling, general and administrative expense, excluding depreciation and amortization and restructuring costs (“SG&A”), was $370 million and $753 million for the second quarter and first six months of fiscal 2022, respectively.

SG&A decreased by $169 million and $325 million during the second quarter and first six months of fiscal 2022, respectively, as compared to the same periods of the prior fiscal year.

The decreases were primarily driven by lower transaction, separation and integration-related costs, cost optimization savings realized during fiscal 2022, and reduced costs resulting from the dispositions of the HPS business during the first quarter of fiscal 2022 and the HHS business during the third quarter of fiscal 2021.

Transaction, separation and integration-related costs of $3 million and $12 million were included in SG&A for the second quarter and first six months of fiscal 2022, as compared to $101 million and $211 million for the comparable periods of the prior fiscal year.

Selling, general and administrative expense, excluding depreciation and amortization and restructuring costs (“SG&A”), was $340 million and $1,093 million for the third quarter and first nine months of fiscal 2022, respectively.

SG&A decreased by $177 million and $502 million during the third quarter and first nine months of fiscal 2022, respectively, as compared to the same periods of the prior fiscal year.

The decrease in SG&A for the third quarter of fiscal 2022, compared with fiscal 2021 of the same period, reflects lower transaction, separation and integration-related costs, cost optimization savings realized during fiscal 2022, and reduced costs resulting from the dispositions of the HPS business and other insignificant businesses during the first quarter of fiscal 2022.

The decrease in SG&A for the first nine months of fiscal 2022 compared with fiscal 2021 of the same period, also reflects the disposition of the HHS business during the third quarter of fiscal 2021

Transaction, separation and integration-related costs of $11 million and $23 million were included in SG&A for the third quarter and first nine months of fiscal 2022, as compared to $96 million and $307 million for the comparable periods of the prior fiscal year.

Depreciation and Amortization

Depreciation expense was $165 million and $323 million for the second quarter and first six months of fiscal 2022, respectively.

Depreciation expense decreased by $35 million and $55 million during the second quarter and first six months of fiscal 2022, respectively, as compared to the same periods of the prior fiscal year.

The net decrease in depreciation expense for the second quarter and first six months of fiscal 2022 was primarily due to asset life adjustments in the prior year and a reduction in assets due to impairment of undeployed assets and asset retirements.

Amortization expense was $283 million and $547 million for the second quarter and first six months of fiscal 2022, respectively.

Amortization expense decreased by $42 million and $92 million during the second quarter and first six months of fiscal 2022, respectively, as compared to the same periods of the prior fiscal year.

The decrease was primarily due to a reduction in customer related intangibles related to the disposition of the HHS business at the beginning of the third quarter of fiscal 2021.

Depreciation expense was $156 million and $479 million for the third quarter and first nine months of fiscal 2022, respectively.

Depreciation expense decreased by $29 million and $84 million during the third quarter and first nine months of fiscal 2022, respectively, as compared to the same periods of the prior fiscal year.

The net decrease in depreciation expense for the third quarter of fiscal 2022 was primarily due to impairment of undeployed assets in the prior year and asset retirements.

The net decrease in depreciation expense for the first nine months of fiscal 2022 was primarily due to asset useful life adjustments in the prior year, a reduction in assets due to impairment of undeployed assets in the prior year, and asset retirements.

Amortization expense was $268 million and $815 million for the third quarter and first nine months of fiscal 2022, respectively.

Amortization expense decreased by $22 million and $114 million during the third quarter and first nine months of fiscal 2022, respectively, as compared to the same periods of the prior fiscal year.

The net decrease in amortization expense for the third quarter of fiscal 2022 was primarily due to asset retirements and a decline in amortization related to transition and transformation contract costs.

The net decrease in amortization expense for the first nine months of fiscal 2022 was primarily due to a reduction in customer related intangibles related to the disposition of the HHS business at the beginning of the third quarter of fiscal 2021.

See Note 4 – “Divestitures” for additional information.

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During fiscal 2022, management approved global cost savings initiatives designed to better align our workforce and facility structures.

During the second quarter and first six months of fiscal 2022, restructuring costs, net of reversals, were $145 million and $212 million, respectively, as compared to $265 million and $337 million during the same periods of the prior fiscal year.

During the third quarter and first nine months of fiscal 2022, restructuring costs, net of reversals, were $36 million and $248 million, respectively, as compared to $104 million and $441 million during the same periods of the prior fiscal year.

For an analysis of changes in our restructuring liabilities by restructuring plans, see Note 14 – “Restructuring Costs” to the financial statements.

Interest Expense and Interest Income

Interest expense was $61 million and $123 million for the second quarter and first six months of fiscal 2022, respectively.

Interest expense decreased by $35 million and $79 million during the second quarter and first six months of fiscal 2022, respectively, as compared to the same periods of the prior fiscal year.

Interest expense was $38 million and $161 million for the third quarter and first nine months of fiscal 2022, respectively.

Interest expense decreased by $44 million and $123 million during the third quarter and first nine months of fiscal 2022, respectively, as compared to the same periods of the prior fiscal year.

These decreases were primarily due to a reduction in bonds and term loans, decreased amounts drawn on our revolving credit facility, and decreases to finance leases and asset financing.

Interest income was $16 million and $36 million for the second quarter and first six months of fiscal 2022, respectively.

Interest income decreased by $9 million and $12 million during the second quarter and first six months of fiscal 2022, respectively, as compared to the same periods of the prior fiscal year.

These decreases were primarily driven by lower income from our multicurrency cash pools and money market accounts.

Interest income was $15 million and $51 million for the third quarter and first nine months of fiscal 2022, respectively.

Interest income decreased by $13 million and $25 million during the third quarter and first nine months of fiscal 2022, respectively, as compared to the same periods of the prior fiscal year.

These decreases were primarily driven by lower income from our multicurrency cash pools and money market accounts as well as decreases in lease interest income.

Debt Extinguishment Costs

Debt extinguishment costs were $281 million and $309 million for the second quarter and first six months of fiscal 2022, respectively.

Debt extinguishment costs for the second quarter of fiscal 2022 include costs to fully redeem our Euro-denominated term loan facility, 4.25% senior notes due fiscal 2025, 2.75% senior notes due fiscal 2025, 4.125% senior notes due fiscal 2026, 4.750% senior notes due fiscal 2028, and 7.45% senior notes due fiscal 2030.

Debt extinguishment costs for the first six months of fiscal 2022 also includes activity from the first quarter of fiscal 2022 consisting of full redemption of two series of 4.45% senior notes due fiscal 2023, partial redemption of 4.125% senior notes due fiscal 2026, and extinguishment of debt associated with asset financing.

Debt extinguishment costs were $2 million and $311 million for the third quarter and first nine months of fiscal 2022, respectively.

Debt extinguishment costs for the third quarter of fiscal 2022 include costs related to the decrease in our revolving credit facility limit from $4 billion to $3 billion.

Debt extinguishment costs for the first nine months of fiscal 2022 also includes activity from the first and second quarters of fiscal 2022 consisting of full redemption of our Euro-denominated term loan facility, two series of 4.45% senior notes due fiscal 2023, 4.25% senior notes due fiscal 2025, 2.75% senior notes due fiscal 2025, 4.125% senior notes due fiscal 2026, 4.750% senior notes due fiscal 2028, 7.45% senior notes due fiscal 2030, and extinguishment of debt associated with asset financing.

There were no debt extinguishment costs recorded during the same period in fiscal 2021.

Gain on Disposition of Businesses

During the first quarter of fiscal 2022, DXC sold its HPS business for $551 million which resulted in an estimated pre-tax gain on sale of $341 million, net of closing costs.

Insignificant businesses were also sold during the first quarter of fiscal 2022 that resulted in a gain of $49 million.

This was partially offset by $13 million in sales price adjustments related to prior year dispositions, which resulted from changes in projected closing net working capital.

During the first quarter of fiscal 2022, DXC sold its HPS business for $551 million which resulted in an estimated pre-tax gain on sale of $337 million, net of closing costs for the first nine months of fiscal 2022.

Insignificant businesses were also sold during the first quarter of fiscal 2022 that resulted in a gain of $49 million for the first nine months of fiscal 2022.

This was partially offset by $13 million in sales price adjustments related to prior year dispositions for the first nine months of fiscal 2022, which resulted from changes in projected closing net working capital.

During the third quarter of fiscal 2021, DXC sold its U.S.

State and Local Health and Human Services business for a total enterprise value of $5.0 billion and resulted in an estimated pre-tax gain on sale of $2,041 million, net of closing costs for both the third quarter and first nine months of fiscal 2021.

Insignificant businesses were also sold during the third quarter of fiscal 2021 that resulted in a gain of $5 million.

The gain on sale of the U.S.

State and Local Health and Human Services business was adjusted during the fourth quarter of fiscal 2021 for $27 million.

Other Income, Net

Other income, net, comprises non-service cost components of net periodic pension income, movement in foreign currency exchange rates on our foreign currency denominated assets and liabilities and the related economic hedges, equity earnings of unconsolidated affiliates and other miscellaneous gains and losses.

Other income was $102 million and $205 million for the second quarter and first six months of fiscal 2022, respectively, as compared to $103 million and $191 million during the same periods of the prior fiscal year.

Other income decreased $(1) million during the second quarter of fiscal 2022 and increased $14 million during the first six months of fiscal 2022 as compared to the same periods of the prior fiscal year.

The increase during the first six months of fiscal 2022 was primarily due to net gains on sales of operating and non-operating assets partially offset by lower non-service components of net periodic pension income.

Our 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.

Other income was $85 million and $290 million for the third quarter and first nine months of fiscal 2022, respectively.

Other income decreased by $42 million and $28 million during the third quarter and first nine months of fiscal 2022, respectively, as compared to the same periods of the prior fiscal year.

These decreases were primarily due to lower net gains on sales of operating and non-operating assets and a decrease in non-service components of net periodic pension income.

Our 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 United States Congress is currently working to enact a tax reform bill, which would result in significant changes to the U.S.

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We continue to monitor developments and assess the impact to DXC.

Earnings (Loss) Per Share

Diluted EPS for the second quarter and first six months of fiscal 2022 was $(0.74) and $0.35, respectively.

Diluted earnings per share increased by $0.22 and $2.12 during the second quarter and first six months of fiscal 2022, respectively, as compared to the same periods of the prior fiscal year.

Increases in diluted EPS were due to net income increases of $59 million and $540 million during the second quarter and first six months of fiscal 2022, respectively, over the same periods in the prior fiscal year.

Diluted EPS for the second quarter of fiscal 2022 includes $0.43 per share of restructuring costs, $0.01 per share of transaction, separation and integration-related costs, $0.33 per share of amortization of acquired intangible assets, $0.03 per share of impairment losses, and $0.84 per share of debt extinguishment costs.

Diluted EPS for the first six months of fiscal 2022 includes $0.65 per share of restructuring costs, $0.03 per share of transaction, separation and integration-related costs, $0.65 per share of amortization of acquired intangible assets, $(0.99) per share of net gains on dispositions, $0.03 per share of impairment losses, $0.91 per share of debt extinguishment costs, and $0.11 per share of tax adjustments relating to the net revaluation of deferred taxes resulting from changes in non-US jurisdiction tax rates.

The IRS recently published final regulations for U.S.

foreign tax credits that will be effective for future periods.

The Company is currently assessing the impact of these regulations.

Earnings Per Share

Diluted EPS for the third quarter and first nine months of fiscal 2022 was $0.38 and $0.73, respectively.

Diluted EPS decreased by $3.91 and $1.81 during the third quarter and first nine months of fiscal 2022, respectively, as compared to the same periods of the prior fiscal year.

Decreases in diluted EPS were due to decreases in net income of $1,001 million and $461 million during the third quarter and first nine months of fiscal 2022, respectively, over the same periods in the prior fiscal year.

Diluted EPS for the third quarter of fiscal 2022 includes $0.13 per share of restructuring costs, $0.04 per share of transaction, separation and integration-related costs, $0.36 per share of amortization of acquired intangible assets, $0.02 per share of net losses on dispositions, $0.01 per share of debt extinguishment costs, $0.02 per share of pension and OPEB actuarial and settlement losses, and $(0.04) per share of tax adjustments relating to the net revaluation of deferred taxes resulting from changes in non-US jurisdiction tax rates.

Diluted EPS for the first nine months of fiscal 2022 includes $0.78 per share of restructuring costs, $0.07 per share of transaction, separation and integration-related costs, $1.02 per share of amortization of acquired intangible assets, $(0.98) per share of net gains on dispositions, $0.03 per share of impairment losses, $0.92 per share of debt extinguishment costs, $0.02 per share of pension and OPEB actuarial and settlement losses, and $0.07 per share of tax adjustments relating to the net revaluation of deferred taxes resulting from changes in non-US jurisdiction tax rates.

Non-GAAP Financial Measures

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This approach is used for all results where the functional currency is not the U.S.

Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Fiscal 2022 Second Quarter Highlights.”

Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Fiscal 2022 Third Quarter Highlights.”

Certain non-GAAP financial measures and the respective most directly comparable financial measures calculated and presented in accordance with GAAP include:

Three Months Ended

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

Loss before income taxes $ (248) $ (306) $ 58 (19.0) %

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

Income before income taxes $ 166 $ 1,978 $ (1,812) (91.6) %

Non-GAAP income before income taxes $ 332 $ 246 $ 86 35.0 %

Net loss $ (187) $ (246) $ 59 (24.0) %

Net income $ 102 $ 1,103 $ (1,001) (90.8) %

Adjusted EBIT $ 355 $ 300 $ 55 18.3 %

Six Months Ended

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

Income (loss) before income taxes $ 176 $ (531) $ 707 NM (1)

Nine Months Ended

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

Income before income taxes $ 342 $ 1,447 $ (1,105) (76.4) %

Non-GAAP income before income taxes $ 923 $ 565 $ 358 63.4 %

Net income (loss) $ 95 $ (445) $ 540 NM (1)

Net income $ 197 $ 658 $ (461) (70.1) %

Adjusted EBIT $ 1,033 $ 773 $ 260 33.6 %

(1) Calculation is not meaningful.

Reconciliation of Non-GAAP Financial Measures

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(1) TSI-Related Costs include fees and other internal and external expenses associated with legal, accounting, consulting, due diligence, investment banking advisory, and other services, as well as financing fees, retention incentives, and resolution of transaction related claims in connection with, or resulting from, exploring or executing potential, acquisitions, dispositions and strategic investments, whether or not announced or consummated.

The TSI-Related costs for the second quarter of fiscal 2022 include $2 million of costs to execute the strategic alternatives;

($2 million) credit to legal costs for Peraton Arbitration;

and $3 million of costs incurred in connection with activities related to other acquisitions and divestitures.

The TSI-Related costs for the first six months of fiscal 2022 include $13 million of costs to execute the strategic alternatives;

The TSI-Related costs for the third quarter of fiscal 2022 include $10 million of costs incurred in connection with activities related to acquisitions and divestitures;

and $1 million of expenses related to integration projects from the HPES merger.

The TSI-Related costs for the first nine months of fiscal 2022 include $13 million of costs to execute the strategic alternatives;

$4 million legal costs and ($14 million) credit towards Peraton Arbitration settlement, $5 million in expenses related to integration projects resulting from the HPES merger (including costs associated with continuing efforts to separate certain IT systems) and $15 million of costs incurred in connection with activities related to other acquisitions and divestitures.

(2) Gains and losses on dispositions for the first six months of fiscal 2022 include a $341 million gain on sale of the HPS business, gains of $19 million on other dispositions and ($13 million) of adjustments relating to the sale of the HHS business.

(3) Impairment losses on dispositions for the second quarter and first six months of fiscal 2022 includes a $10 million impairment charge of capitalized transition and transformation costs.

(4) Debt extinguishment costs adjustments for the second quarter of fiscal 2022 include $1 million to fully redeem our Euro-denominated term loan facility, $41 million to fully redeem our 4.25% senior notes due fiscal 2025, $26 million to fully redeem our 2.75% senior notes due fiscal 2025, $55 million to fully redeem our 4.125% senior notes due fiscal 2026, $87 million to fully redeem our 4.750% senior notes due fiscal 2028, and $71 million to fully redeem our 7.45% senior notes due fiscal 2030.

In addition to the above, debt extinguishment costs adjustments for the first six months of fiscal 2022 reflects activity from the first quarter of fiscal 2022, including $18 million to fully redeem two series of our 4.45% senior notes due fiscal 2023, $3 million to partially redeem our 4.125% senior notes due fiscal 2026, and $7 million of debt associated with asset financing.

(5) Tax adjustment for the first six months of fiscal 2022 reflects net revaluation of deferred taxes resulting from changes in non-US jurisdiction tax rates.

(2) Gains and losses on dispositions for the first nine months of fiscal 2022 include a $337 million gain on sale of the HPS business, gains of $19 million on other dispositions and ($13 million) of adjustments relating to the sale of the HHS business.

(3) Impairment losses on dispositions for the first nine months of fiscal 2022 includes a $10 million impairment charge of capitalized transition and transformation costs.

(4) Debt extinguishment costs adjustments for the third quarter of fiscal 2022 include $2 million related to the decrease in our revolving credit facility limit.

Debt extinguishment costs adjustments for the first nine months of fiscal 2022 reflects $2 million related to the decrease in our revolving credit facility limit, $18 million to fully redeem two series of our 4.45% senior notes due fiscal 2023, $7 million associated with asset financing, $1 million to fully redeem our Euro-denominated term loan facility, $41 million to fully redeem our 4.25% senior notes due fiscal 2025, $26 million to fully redeem our 2.75% senior notes due fiscal 2025, $58 million to fully redeem our 4.125% senior notes due fiscal 2026, $87 million to fully redeem our 4.750% senior notes due fiscal 2028, and $71 million to fully redeem our 7.45% senior notes due fiscal 2030.

(5) Tax adjustment for the first nine months of fiscal 2022 reflects net revaluation of deferred taxes resulting from changes in non-US jurisdiction tax rates.

A reconciliation of reported results to non-GAAP results is as follows:

Three Months Ended September 30, 2021

(in millions, except per-share amounts) As Reported Restructuring Costs Transaction, Separation and Integration-Related Costs Amortization of Acquired Intangible Assets Impairment Losses Debt Extinguishment Costs Non-GAAP Results

(Loss) income before income taxes $ (248) $ 145 $ 3 $ 110 $ 10 $ 281 $ 301

Income tax (benefit) expense (61) 34 1 26 2 66 68

Net (loss) income (187) 111 2 84 8 215 233

Three Months Ended December 31, 2021

(in millions, except per-share amounts) As

Reported Restructuring

Costs Transaction, Separation

and Integration-Related

Costs Amortization

Intangible Assets Gains and

Dispositions Debt

Extinguishment

Costs Pension and

Actuarial and

Settlement Losses Tax

Adjustment Non-GAAP

Income before income taxes $ 166 $ 36 $ 11 $ 106 $ 4 $ 2 $ 7 $ — $ 332

Income tax expense 64 4 1 13 — — 1 10 93

Net income 102 32 10 93 4 2 6 (10) 239

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

Net (loss) income attributable to DXC common stockholders $ (188) $ 111 $ 2 $ 84 $ 8 $ 215 $ 232

Net income attributable to DXC common stockholders $ 98 $ 32 $ 10 $ 93 $ 4 $ 2 $ 6 $ (10) $ 235

Effective Tax Rate 38.6 % 28.0 %

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Diluted EPS 254.82 254.82 254.82 254.82 254.82 254.82 254.82 254.82 254.82

Six Months Ended September 30, 2021

(in millions, except per-share amounts) As Reported Restructuring Costs Transaction, Separation and Integration-Related Costs Amortization of Acquired Intangible Assets Gains and Losses on Dispositions Impairment Losses Debt Extinguishment Costs Tax Adjustment Non-GAAP Results

Nine Months Ended December 31, 2021

(in millions, except per-share amounts) As

Reported Restructuring

Costs Transaction, Separation

and Integration-Related

Costs Amortization

Intangible Assets Gains and

Dispositions Impairment

Extinguishment

Costs Pension and

Actuarial and

Settlement Losses Tax

Adjustment Non-GAAP

Income before income taxes $ 342 $ 248 $ 23 $ 325 $ (343) $ 10 $ 311 $ 7 $ — $ 923

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Diluted EPS 257.59 257.59 257.59 257.59 257.59 257.59 257.59 257.59 257.59 257.59

Three Months Ended September 30, 2020

(Loss) income before income taxes $ (306) $ 265 $ 101 $ 152 — $ 212

Income tax (benefit) expense (60) 52 26 35 (2) 51

Net (loss) income (246) 213 75 117 2 161

net (loss) attributable to non-controlling interest, net of tax (2) — — — — (2)

Net (loss) income attributable to DXC common stockholders $ (244) $ 213 $ 75 $ 117 $ 2 $ 163

Three Months Ended December 31, 2020

(in millions, except per-share amounts) As

Reported Restructuring

Costs Transaction, Separation

and Integration-Related

Costs Amortization

Intangible Assets Gain on

of Businesses Non-GAAP

Income before income taxes $ 1,978 $ 104 $ 96 $ 114 (2,046) $ 246

Income tax expense 875 11 16 26 (903) 25

Net income 1,103 93 80 88 (1,143) 221

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

Net income attributable to DXC common stockholders $ 1,098 $ 93 $ 80 $ 88 $ (1,143) $ 216

Effective Tax Rate 44.2 % 10.2 %

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Diluted EPS 255.75 255.75 255.75 255.75 255.75 255.75

Six Months Ended September 30, 2020

(in millions, except per-share amounts) As Reported Restructuring Costs Transaction, Separation and Integration-Related Costs Amortization of Acquired Intangible Assets Pension and OPEB Actuarial and Settlement Losses Tax Adjustment Non-GAAP Results

(Loss) income before income taxes $ (531) $ 337 $ 211 $ 300 $ 2 — $ 319

Income tax (benefit) expense (86) 64 54 69 — (2) 99

Net (loss) income (445) 273 157 231 2 2 220

Nine Months Ended December 31, 2020

(in millions, except per-share amounts) As

Reported Restructuring

Costs Transaction, Separation

and Integration-Related

Costs Amortization

Intangible Assets Gain on

of Businesses Pension and

Actuarial and

Settlement Losses Tax

Adjustment Non-GAAP

Income before income taxes $ 1,447 $ 441 $ 307 $ 414 $ (2,046) $ 2 — $ 565

Income tax expense 789 75 70 95 (903) — (2) 124

Net income 658 366 237 319 (1,143) 2 2 441

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

Net (loss) income attributable to DXC common stockholders $ (449) $ 273 $ 157 $ 231 $ 2 $ 2 $ 216

Net income attributable to DXC common stockholders $ 649 $ 366 $ 237 $ 319 $ (1,143) $ 2 $ 2 $ 432

Effective Tax Rate 54.5 % 21.9 %

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Diluted EPS 255.20 255.20 255.20 255.20 255.20 255.20 255.20 255.20

Reconciliations of net income to adjusted EBIT are as follows:

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)

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

Reconciliations of net income to EBIT and adjusted EBIT are as follows:

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

Income tax expense 64 875 145 789

Interest income (15) (28) (51) (76)

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Cash and Cash Equivalents and Cash Flows

As of September 30, 2021, our cash and cash equivalents (“cash”) were $2.7 billion, of which $1.2 billion was held outside of the U.S.

As of December 31, 2021, our cash and cash equivalents (“cash”) were $2.9 billion, of which $1.5 billion was held outside of the U.S.

As of March 31, 2021, our cash was $3.0 billion, of which $1.3 billion was held outside of the U.S.

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The following table summarizes our cash flow activity:

Six Months Ended

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

Nine Months Ended

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

Net cash provided by operating activities $ 1,230 $ 404 $ 826

Net cash provided by (used in) investing activities 199 (234) 433

Net cash provided by investing activities 93 4,500 (4,407)

Net cash used in financing activities (1,460) (4,671) 3,211

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Cash classified within current assets held for sale 63 (13) 76

Net decrease in cash and cash equivalents $ (269) $ (600) $ 331

Net (decrease) increase in cash and cash equivalents (49) 240 $ (289)

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

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Operating cash flow

Net cash provided by operating activities during the first six months of fiscal 2022 was $534 million as compared to $591 million during the comparable period of the prior fiscal year.

The decrease of $57 million was primarily due to a $210 million unfavorable change in working capital due to higher working capital outflows during the first six months of fiscal 2022 partially offset by an increase in net income, net of adjustments of $153 million.

Net cash provided by operating activities during the first nine months of fiscal 2022 was $1,230 million as compared to $404 million during the comparable period of the prior fiscal year.

The increase of $826 million was primarily due to an increase in net income, net of adjustments of $1,503 million, partially offset by a $677 million unfavorable change in working capital due to higher working capital outflows during the first nine months of fiscal 2022.

The following table contains certain key working capital metrics:

Six Months Ended

September 30, 2021 September 30, 2020

Nine Months Ended

December 31, 2021 December 31, 2020

Days of sales outstanding in accounts receivable 64 64

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Investing cash flow

Net cash provided by (used in) investing activities during the first six months of fiscal 2022 was $199 million as compared to $(234) million during the comparable period of the prior fiscal year.

The increase in net cash provided by investing activities of $433 million was primarily due to business dispositions of $513 million, an increase in proceeds from sale of assets of $79 million, and proceeds from short-term investing of $24 million.

This was partially offset by a decrease in cash collections related to deferred purchase price receivables of $159 million and an increase in capital expenditures of $40 million.

Net cash provided by investing activities during the first nine months of fiscal 2022 was $93 million as compared to $4,500 million during the comparable period of the prior fiscal year.

The decrease in net cash provided of $4,407 million was primarily due to a decrease in business dispositions of $4,423 million and a decrease in cash collections related to deferred purchase price receivables of $159 million.

This was partially offset by an increase in proceeds from sale of assets of $68 million, a decrease in capital expenditures of $33 million, and proceeds from short-term investing of $24 million.

Financing cash flow

Net cash used in financing activities during the first six months of fiscal 2022 was $1,063 million as compared to $963 million during the comparable period of the prior fiscal year.

The $100 million increase in cash used was primarily due to a decrease in commercial paper borrowings, net of repayments of $298 million, an increase in payments on capital leases and borrowings for asset financing of $184 million, share repurchases of $150 million, and payments for debt extinguishment costs of $344 million.

This was partially offset by an increase in borrowings on long term debt, net of repayments of $549 million and the lines of credit repayments, net of borrowings of $250 million and dividend payments of $53 million incurred only in the comparable period of fiscal 2021.

Net cash used in financing activities during the first nine months of fiscal 2022 was $1,460 million as compared to $4,671 million during the comparable period of the prior fiscal year.

The $3,211 million decrease in cash used was primarily due to increased net borrowings on long-term debt of $1,998 million, and net draws on commercial paper of $492 million.

In addition, net repayments totaling $1,500 million were made during fiscal 2021 on lines of credit that were not drawn against during fiscal 2022 and dividends of $53 million were paid in fiscal 2021, but not paid during fiscal 2022.

This was partially offset by share repurchases of $352 million, payments for debt extinguishment costs of $344 million, and an increase in payments on capital leases and borrowings for asset financing of $161 million.

Capital Resources

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The following table summarizes our total debt:

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

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

Short-term debt and current maturities of long-term debt $ 706 $ 1,167

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Total debt $ 4,942 $ 5,512

The $0.4 billion decrease in total debt during the first six months of fiscal 2022 was primarily attributed to the retirement of all the remaining $319 million of the 4.45% senior notes due fiscal 2023 using the proceeds from the sale of our HPS Business, and the repurchase of the $33 million of the 4.125% senior notes due fiscal 2026 during the first quarter of fiscal 2022.

Approximately $300 million of finance lease liabilities and borrowings for assets acquired under long-term financing were also repaid during the second quarter of fiscal 2022 using the proceeds from the divestitures of other businesses and existing cash on hand.

The $0.6 billion decrease in total debt during the first nine months of fiscal 2022 was primarily attributed to the retirement of all the remaining $319 million of the 4.45% senior notes due fiscal 2023 using the proceeds from the sale of our HPS Business, and the repurchase of the $33 million of the 4.125% senior notes due fiscal 2026 during the first quarter of fiscal 2022.

Approximately $500 million of net finance lease liabilities and borrowings for assets acquired under long-term financing were also repaid during the first nine months of fiscal 2022 using the proceeds from the divestitures of other businesses and existing cash on hand.

The decrease was partially offset by the issuance of Euro and U.S.

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The proceeds from the USD Notes were used for the repayment of our remaining 4.125% senior notes due fiscal 2026, our 4.75% senior notes due fiscal 2028 and our 7.45% senior notes due fiscal 2030.

We were in compliance with all financial covenants associated with our borrowings as of September 30, 2021 and September 30, 2020.

We were in compliance with all financial covenants associated with our borrowings as of December 31, 2021 and March 31, 2021.

Our credit ratings are as follows:

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The following table summarizes our total liquidity:

(in millions) September 30, 2021

(in millions) December 31, 2021

Cash and cash equivalents $ 2,919

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Total liquidity

In November 2021, subsequent to the end of the second quarter of fiscal 2022, we amended our revolving credit facility to among other things, decrease available borrowings from $4.0 billion to $3.0 billion.

During November 2021 we amended our revolving credit facility to among other things, decrease available borrowings from $4.0 billion to $3.0 billion.

Share Repurchases

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This program became effective on April 3, 2017 with no end date established.

During the six months ended September 30, 2021, we repurchased 3,862,212 shares of our common stock at an aggregate cost of $150 million.

During the nine months ended December 31, 2021, we repurchased 10,617,767 shares of our common stock at an aggregate cost of $363 million.

See Note 17 – “Stockholders’ Equity” to the financial statements.

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For further information see “Contractual Obligations” in Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

For our minimum purchase commitments as of September 30, 2021, in connection with our long-term purchase agreements with certain software, hardware, telecommunication, and other service providers, see Note 21 – “Commitments and Contingencies.”

For our minimum purchase commitments as of December 31, 2021, in connection with our long-term purchase agreements with certain software, hardware, telecommunication, and other service providers, see Note 21 – “Commitments and Contingencies.”

Critical Accounting Policies and Estimates

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We have discussed the selection of our critical accounting policies and the effect of estimates with the audit committee of our board of directors.

During the three months ended September 30, 2021, there were no changes to our critical accounting policies and estimates from those described in our fiscal 2021 Annual Report on Form 10-K except as mentioned in Note 1 – “Summary of Significant Accounting Policies.”

During the three months ended December 31, 2021, there were no changes to our critical accounting policies and estimates from those described in our fiscal 2021 Annual Report on Form 10-K except as mentioned in Note 1 – “Summary of Significant Accounting Policies.”

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 2. Management’s Discussion and Analysis