What changed in this filing

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Item 1. Financial Statements

2020-10-22 compared with 2020-07-23 · 109 added, 95 removed, 572 unchanged (26% of the section changed)

2 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

Three Months Ended June 30, Six Months Ended June 30,

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended September 30, Nine Months Ended September 30,

(in millions, except per share data)

9 unchanged sentences

Loss on extinguishment of debt — 24 12 24

Other (income) expense, net ( 32 ) 7 ( 45 ) —

(Loss) Income before income taxes and equity in earnings of unconsolidated affiliates

( 25 ) 78 77 187

Other income, net ( 14 ) — ( 59 ) —

Income before income taxes and equity in earnings of unconsolidated affiliates 102 69 179 256

Income tax (benefit) expense ( 3 ) ( 1 ) 9 48

(Loss) Income before equity in earnings of unconsolidated affiliates

( 20 ) 70 65 138

Equity in (loss) earnings of unconsolidated affiliates ( 1 ) 1 5 —

Net (loss) income ( 21 ) 71 70 138

Income before equity in earnings of unconsolidated affiliates 105 70 170 208

Equity in earnings (loss) of unconsolidated affiliates 3 ( 1 ) 8 ( 1 )

Net income 108 69 178 207

Net income attributable to non-controlling interests ( 7 ) ( 12 ) ( 18 ) ( 32 )

Net (loss) income attributable to IQVIA Holdings Inc.

Net income attributable to IQVIA Holdings Inc.

$ 101 $ 57 $ 160 $ 175

Loss (earnings) per share attributable to common stockholders:

Earnings per share attributable to common stockholders:

Basic $ 0.53 $ 0.29 $ 0.84 $ 0.89

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2020 2019 2020 2019

Net (loss) income

$ ( 21 ) $ 71 $ 70 $ 138

Net income $ 108 $ 69 $ 178 $ 207

Comprehensive income (loss) adjustments:

Unrealized gains (losses) on derivative instruments, net of income tax (benefit) expense of $( 3 ), $( 4 ), $( 11 ), $( 5 )

Unrealized (losses) gains on derivative instruments, net of income tax (benefit) expense of $( 8 ), $( 2 ), $( 11 ), $( 7 )

( 1 ) ( 5 ) ( 33 ) ( 23 )

Foreign currency translation, net of income tax (benefit) expense of $( 29 ), $( 22 ), $( 6 ), $ 8

Foreign currency translation, net of income tax expense (benefit) of $( 54 ), $ 57 , $( 83 ), $ 65

130 ( 162 ) 20 ( 131 )

Reclassification adjustments:

(Gains) losses on derivative instruments included in net income, net of income tax expense (benefit) of $ 1 , $ — , $ 1 , $( 1 )

( 12 ) ( 3 ) 4 ( 4 )

Losses (gains) on derivative instruments included in net income, net of income tax expense (benefit) of $ 1 , $ — , $ 2 , $( 1 )

Comprehensive income (loss)

8 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except per share data) June 30, 2020 December 31, 2019

(in millions, except per share data) September 30, 2020 December 31, 2019

Current assets:

30 unchanged sentences

Stockholders’ equity:

Common stock and additional paid-in capital, 400.0 shares authorized at June 30, 2020 and December 31, 2019, $ 0.01 par value, 254.1 shares issued and 191.3 shares outstanding at June 30, 2020;

Common stock and additional paid-in capital, 400.0 shares authorized at September 30, 2020 and December 31, 2019, $ 0.01 par value, 254.5 shares issued and 191.7 shares outstanding at September 30, 2020;

253.0 shares issued and 192.3 shares outstanding at December 31, 2019

1 unchanged sentence

Retained earnings 1,158 998

Treasury stock, at cost, 62.8 and 60.7 shares at June 30, 2020 and December 31, 2019, respectively

Treasury stock, at cost, 62.8 and 60.7 shares at September 30, 2020 and December 31, 2019, respectively

( 6,065 ) ( 5,733 )

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions)

4 unchanged sentences

Stock-based compensation

Earnings from unconsolidated affiliates ( 5 ) —

(Earnings) loss from unconsolidated affiliates ( 8 ) 1

Gain on investments, net ( 17 ) —

28 unchanged sentences

( 346 ) ( 679 )

Distributions to non-controlling interest, net

Distributions to non-controlling interests, net ( 16 ) ( 6 )

Contingent consideration and deferred purchase price payments

( 20 ) ( 21 )

Net cash provided by financing activities 34 28

Net cash (used in) provided by financing activities ( 19 ) 67

Effect of foreign currency exchange rate changes on cash

Increase in cash and cash equivalents 272 47

Increase (decrease) in cash and cash equivalents 627 ( 28 )

Cash and cash equivalents at beginning of period

18 unchanged sentences

Stock-based compensation — — — 7 — — — — 7

Distributions to non-controlling interests — — — — — — — ( 5 ) ( 5 )

Distributions to non-controlling interests, net — — — — — — — ( 5 ) ( 5 )

Net income — — — — 82 — — 9 91

11 unchanged sentences

Balance, June 30, 2020 254.1 ( 62.8 ) $ 3 $ 11,040 $ 1,057 $ ( 6,065 ) $ ( 444 ) $ 261 $ 5,852

Issuance of common stock 0.4 — — ( 3 ) — — — — ( 3 )

Stock-based compensation — — — 30 — — — — 30

Distributions to non-controlling interests, net — — — — — — — ( 11 ) ( 11 )

Net income — — — — 101 — — 7 108

Unrealized losses on derivative instruments, net of tax

— — — — — — ( 1 ) — ( 1 )

Foreign currency translation, net of tax — — — — — — 126 4 130

Reclassification adjustments, net of tax — — — — — — 2 — 2

Balance, September 30, 2020 $ 254.5 $ ( 62.8 ) $ 3 $ 11,067 $ 1,158 $ ( 6,065 ) $ ( 317 ) $ 261 $ 6,107

IQVIA HOLDINGS INC.

17 unchanged sentences

Stock-based compensation — — — 29 — — — — 29

Distribution to non-controlling interest — — — 0 — — — ( 2 ) ( 2 )

Distributions to non-controlling interests — — — — — — — ( 2 ) ( 2 )

Net income — — — — 60 — — 11 71

3 unchanged sentences

Balance, June 30, 2019 252.6 ( 56.8 ) $ 3 $ 10,961 $ 925 $ ( 5,151 ) $ ( 215 ) $ 258 $ 6,781

Issuance of common stock 0.2 — — ( 4 ) — — — — ( 4 )

Repurchase of common stock — ( 2 ) — — — ( 313 ) — — ( 313 )

Balance, Stock-based compensation — — — 30 — — — — 30

Distributions to non-controlling interests — — — — — — — ( 4 ) ( 4 )

Net income — — — — 57 — — 12 69

Unrealized losses on derivative instruments, net of tax — — — — — — ( 5 ) — ( 5 )

Foreign currency translation, net of tax — — — — — — ( 159 ) ( 3 ) ( 162 )

Reclassification adjustments, net of tax — — — — — — 2 — 2

Balance, September 30, 2019 252.8 ( 58.8 ) 3 10,987 982 ( 5,464 ) ( 377 ) 263 6,394

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

4 unchanged sentences

IQVIA Holdings Inc.

(together with its subsidiaries, the “Company” or “IQVIA”) is a leading global provider of advanced analytics, technology solutions and contract research services to the life sciences industry.

(together with its subsidiaries, the “Company” or “IQVIA”) is a leading global provider of advanced analytics, technology solutions and clinical research services to the life sciences industry.

With approximately 68,000 employees, IQVIA conducts business in more than 100 countries.

9 unchanged sentences

As COVID-19 continues to spread, we have and may continue to experience disruptions that could severely impact our business.

As such, the results for the three and six months ended June 30, 2020 may not be indicative of results for the full year.

As such, the results for the three and nine months ended September 30, 2020 may not be indicative of results for the full year.

Recently Issued Accounting Standards

18 unchanged sentences

Accounting pronouncements being evaluated

In March 2020, the FASB issued new accounting guidance that provides optional expedients and exceptions for applying U.S.

GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued.

The new accounting guidance is effective for the Company as of March 12, 2020 through December 31, 2022.

The Company is currently evaluating the impact of this new accounting guidance on its credit arrangements and derivatives that reference LIBOR.

The Company does not expect the new accounting guidance to have a material effect on the Company’s consolidated financial statements.

In January 2020, the FASB issued new accounting guidance that states any equity security transitioning from the alternative method of accounting to the equity method, or vice versa, due to an observable transaction, will be remeasured immediately before the transition.

9 unchanged sentences

Revenues by Geography, Concentration of Credit Risk and Remaining Performance Obligations

The following tables represent revenues by geographic region and reportable segment for the three and six months ended June 30, 2020 and 2019:

Three Months Ended June 30, 2020

The following tables represent revenues by geographic region and reportable segment for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30, 2020

(in millions)

9 unchanged sentences

$ 1,207 $ 1,400 $ 179 $ 2,786

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

(in millions)

9 unchanged sentences

$ 1,095 $ 1,466 $ 208 $ 2,769

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

(in millions) Technology & Analytics Solutions Research & Development Solutions Contract Sales & Medical Solutions Total

3 unchanged sentences

Total revenues $ 3,433 $ 4,076 $ 552 $ 8,061

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

(in millions) Technology &

6 unchanged sentences

Total revenues $ 3,272 $ 4,317 $ 604 $ 8,193

No customer accounted for 10% or more of consolidated revenues for the three and six months ended June 30, 2020 or 2019.

No customer accounted for 10% or more of consolidated revenues for the three and nine months ended September 30, 2020 or 2019.

Transaction Price Allocated to the Remaining Performance Obligations

As of June 30, 2020, approximately $ 22.6 billion of revenue is expected to be recognized in the future from remaining performance obligations.

As of September 30, 2020, approximately $ 23.6 billion of revenue is expected to be recognized in the future from remaining performance obligations.

The Company expects to recognize revenue on approximately 30 % of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

3 unchanged sentences

(in millions)

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Trade accounts receivable:

7 unchanged sentences

Unbilled services and unearned income were as follows:

(in millions) June 30, 2020 December 31, 2019 Change

(in millions) September 30, 2020 December 31, 2019 Change

Unbilled services

3 unchanged sentences

$ 104 $ 272 $ ( 168 )

Unbilled services, which is comprised of approximately 60 % of unbilled receivables and 40 % of contract assets as of June 30, 2020, decreased by $ 1 million as compared to December 31, 2019.

Unbilled services, which is comprised of approximately 60 % of unbilled receivables and 40 % of contract assets as of September 30, 2020, increased by $ 6 million as compared to December 31, 2019.

Contract assets are unbilled services for which invoicing is based on the timing of certain milestones related to service contracts for clinical research whereas unbilled receivables are billable upon the passage of time.

Unearned income increased by $ 47 million over the same period resulting in a decrease of $ 48 million in the net balance of unbilled services and unearned income between December 31, 2019 and June 30, 2020.

Unearned income increased by $ 174 million over the same period resulting in a decrease of $ 168 million in the net balance of unbilled services and unearned income between December 31, 2019 and September 30, 2020.

The change in the net balance is driven by the difference in timing of revenue recognition in accordance with ASC 606, Revenue from Contracts with Customers, related to the Company’s Research & Development Solutions contracts (which is based on the percentage of costs incurred) versus the timing of invoicing, which is based on certain milestones.

Bad debt expense recognized on the Company’s receivables and unbilled services was not material for the three and six months ended June 30, 2020 and 2019.

Bad debt expense recognized on the Company’s receivables and unbilled services was not material for the three and nine months ended September 30, 2020 and 2019.

The Company has operating leases for corporate offices, datacenters, motor vehicles and certain equipment, many of which contain renewal and escalation clauses.

1 unchanged sentence

The Company also has finance leases for office and lab spaces that expire in 2044.

Based on the timing of payments on the finance leases the cash flow impact is not material for the three and six months ended June 30, 2020.

Based on the timing of payments on the finance leases the cash flow impact is not material for the three and nine months ended September 30, 2020.

In determining the lease term at lease commencement, the Company includes the noncancellable term and the periods which the Company deems it is reasonably certain to exercise or not to exercise a renewal or cancellation option.

The components of lease expense were as follows:

(in millions) Classification Three Months Ended June 30, 2020 Three Months Ended June 30, 2019

(in millions) Classification Three Months Ended September 30, 2020 Three Months Ended September 30, 2019

Operating lease cost (1)

3 unchanged sentences

Total lease cost $ 52 $ 48

(in millions) Classification Six Months Ended June 30, 2020 Six Months Ended June 30, 2019

(in millions) Classification Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019

Operating lease cost (1)

5 unchanged sentences

Other information related to leases was as follows:

(in millions) Six Months Ended June 30, 2020 Six Months Ended June 30, 2019

(in millions) Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019

Supplemental Cash Flow:

10 unchanged sentences

Finance leases 3.18 % —

Future minimum lease payments under non-cancellable leases as of June 30, 2020 were as follows:

Future minimum lease payments under non-cancellable leases as of September 30, 2020 were as follows:

(in millions) Operating Leases Finance Leases

4 unchanged sentences

Total $ 541 $ 120

Reported as of June 30, 2020:

Reported as of September 30, 2020:

Other current liabilities $ 154 $ —

2 unchanged sentences

Total $ 541 $ 120

The following is a summary of goodwill by reportable segment for the six months ended June 30, 2020:

The following is a summary of goodwill by reportable segment for the nine months ended September 30, 2020:

(in millions)

6 unchanged sentences

155 ( 39 ) 4 120

Balance as of June 30, 2020 $ 10,393 $ 1,598 $ 142 $ 12,133

Balance as of September 30, 2020 $ 10,613 $ 1,607 $ 143 $ 12,363

The fair values of the Company’s derivative instruments and the line items on the accompanying condensed consolidated balance sheets to which they were recorded are summarized in the following table:

1 unchanged sentence

Balance Sheet Classification

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Derivatives designated as hedging instruments:

12 unchanged sentences

The effect of the Company’s cash flow hedging instruments on other comprehensive income is summarized in the following table:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in millions)

5 unchanged sentences

$ 3 $ ( 4 ) $ ( 36 ) $ ( 32 )

The amount of foreign exchange losses related to the net investment hedge included in the cumulative translation adjustment component of accumulated other comprehensive loss (“AOCI”) for the six months ended June 30, 2020 was $ 8 million.

Fair Value Measurements

10 unchanged sentences

This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The carrying values of cash, cash equivalents, accounts receivable and accounts payable approximated their fair values at June 30, 2020 and December 31, 2019 due to their short-term nature.

At June 30, 2020 and December 31, 2019, the fair

value of total debt approximated $ 12,135 million and $ 11,925 million, respectively, as determined under Level 1 and Level 2 measurements for these financial instruments.

The carrying values of cash, cash equivalents, accounts receivable and accounts payable approximated their fair values at September 30, 2020 and December 31, 2019 due to their short-term nature.

At September 30, 2020 and December 31, 2019, the fair value of total debt approximated $ 12,443 million and $ 11,925 million, respectively, as determined under Level 1 and Level 2 measurements for these financial instruments.

Recurring Fair Value Measurements

The following table summarizes the fair value of the Company’s financial assets and liabilities that are measured and reported at fair value on a recurring basis as of June 30, 2020:

The following table summarizes the fair value of the Company’s financial assets and liabilities that are measured and reported at fair value on a recurring basis as of September 30, 2020:

(in millions) Level 1 Level 2 Level 3 Total

12 unchanged sentences

Key assumptions used to estimate the fair value of contingent consideration include various financial metrics (revenue performance targets and operating forecasts) and the probability of achieving the specific targets.

The following table summarizes the changes in Level 3 financial assets and liabilities measured on a recurring basis for the six months ended June 30:

The following table summarizes the changes in Level 3 financial assets and liabilities measured on a recurring basis for the nine months ended September 30:

Contingent Consideration

5 unchanged sentences

Revaluations included in earnings and foreign currency translation adjustments

Balance as of June 30 $ 111 $ 108

Balance as of September 30 $ 108 $ 113

The Company used the following key assumptions when estimating the fair value of contingent considerations:

4 unchanged sentences

The current portion of contingent consideration is included within accrued expenses and the long-term portion is included within other liabilities on the accompanying condensed consolidated balance sheets.

Revaluations of the contingent

consideration are recognized in other expense (income), net on the accompanying condensed consolidated statements of income.

Revaluations of the contingent consideration are recognized in other expense (income), net on the accompanying condensed consolidated statements of income.

A change in significant unobservable inputs above could result in a significantly higher or lower fair value measurement of contingent consideration.

Credit Arrangements

The following is a summary of the Company’s revolving credit facilities at June 30, 2020:

The following is a summary of the Company’s revolving credit facilities at September 30, 2020:

Interest Rates

$ 1,500 million (revolving credit facility)

LIBOR in the relevant currency borrowed plus a margin of 1.50 % at June 30, 2020

LIBOR in the relevant currency borrowed plus a margin of 1.50 % at September 30, 2020

$ 25 million (receivables financing facility)

LIBOR Market Index Rate ( 0.16 % at June 30, 2020) plus 0.90 %

LIBOR Market Index Rate ( 0.15 % at September 30, 2020) plus 0.90 %

£ 10 million (approximately $ 13 million) (general banking facility)

Bank’s base rate of 0.10 % at June 30, 2020 plus 1 %

Bank’s base rate of 0.10 % at September 30, 2020 plus 1 %

The following table summarizes the Company’s debt at the dates indicated:

(in millions) June 30, 2020 December 31, 2019

(in millions) September 30, 2020 December 31, 2019

Senior Secured Credit Facilities:

31 unchanged sentences

Long-term debt $ 12,195 $ 11,545

Contractual maturities of long-term debt are as follows at June 30, 2020:

Contractual maturities of long-term debt are as follows at September 30, 2020:

(in millions)

1 unchanged sentence

Thereafter 8,216

At June 30, 2020, there were bank guarantees totaling approximately £ 0.9 million (approximately $ 1.1 million) issued against the availability of the general banking facility.

At September 30, 2020, there were bank guarantees totaling approximately £ 0.9 million (approximately $ 1.1 million) issued against the availability of the general banking facility.

Senior Secured Credit Facilities

At June 30, 2020, the Company’s Fourth Amended and Restated Credit Agreement, as amended (the “Credit Agreement”) provided financing through several senior secured credit facilities (collectively, the “senior secured credit facilities”) of up to approximately $ 7.6 billion, which consisted of $ 6.1 billion principal amounts of debt outstanding (as detailed in the table above), $ 1.5 billion of available borrowing capacity on the revolving credit facility and standby letters of credit.

At September 30, 2020, the Company’s Fourth Amended and Restated Credit Agreement, as amended (the “Credit Agreement”) provided financing through several senior secured credit facilities (collectively, the “senior secured credit facilities”) of up to approximately $ 7.6 billion, which consisted of $ 6.1 billion principal amounts of debt outstanding (as detailed in the table above), $ 1.5 billion of available borrowing capacity on the revolving credit facility and standby letters of credit.

On March 11, 2020, the Company entered into Amendment No.

19 unchanged sentences

The Company’s long-term debt arrangements contain other usual and customary restrictive covenants that, among other things, place limitations on the Company’s ability to declare dividends.

At June 30, 2020, the Company was in compliance with the financial covenants under its debt agreements in all material respects and does not have material uncertainty about ongoing ability to meet the covenants of the Company's credit arrangements.

At September 30, 2020, the Company was in compliance with the financial covenants under its debt agreements in all material respects and does not have material uncertainty about ongoing ability to meet the covenants of the Company’s credit arrangements.

Based on our current operating plan, and after considering the likely future impacts of COVID-19, we believe that our available cash and cash equivalents, future cash flows from operations and our ability to access funds under our revolving and other credit facilities will enable us to fund our operating requirements and capital expenditures and meet debt obligations for at least the next 12 months.

2 unchanged sentences

The Company is authorized to issue 1.0 million shares of preferred stock, $ 0.01 per share par value.

No shares of preferred stock were issued or outstanding as of June 30, 2020 or December 31, 2019.

No shares of preferred stock were issued or outstanding as of September 30, 2020 or December 31, 2019.

Equity Repurchase Program

Since the COVID-19 outbreak became a pandemic in March, the company temporarily suspended share repurchase activity.

During the six months ended June 30, 2020, the Company repurchased 2,106,403 shares of its common stock for approximately $ 321.4 million under the Repurchase Program.

During the nine months ended September 30, 2020, the Company repurchased 2,106,403 shares of its common stock for approximately $ 321.4 million under the Repurchase Program.

These amounts include 1,000,000 shares of our common stock repurchased from certain of the Company’s stockholders (the “Selling Stockholders”) in a private transaction for an aggregate purchase price of approximately $ 164.3 million.

As of June 30, 2020, the Company has remaining authorization to repurchase up to approximately $ 1.0 billion of its common stock under the Repurchase Program.

As of September 30, 2020, the Company has remaining authorization to repurchase up to approximately $ 1.0 billion of its common stock under the Repurchase Program.

In addition, from time to time, the Company has repurchased and may continue to repurchase common stock through private or other transactions outside of the Repurchase Program.

11 unchanged sentences

Foreign currency translation and other

( 2 ) — ( 2 )

Balance at June 30, 2020 $ 55 $ 2 $ 57

Balance at September 30, 2020 $ 63 $ 2 $ 65

Restructuring costs are not allocated to the Company’s reportable segments as they are not part of the segment performance measures regularly reviewed by management.

The Company expects that the majority of the restructuring accruals at June 30, 2020 will be paid in 2020 and 2021.

The effective income tax rate was 20.0 % and 10.3 % in the second quarter of 2020 and 2019, respectively, and 15.6 % and 26.2 % in the first six months of 2020 and 2019, respectively.

The effective income tax rate in the second quarter and first six months of 2020 and 2019 was favorably impacted as a result of excess tax benefits recognized upon settlement of share-based compensation awards.

For the second quarter of 2020 and 2019 this impact was $ 5 million and $ 8 million, respectively, and for the first six months of 2020 and 2019 this impact was $ 26 million and $ 17 million, respectively.

Also, the effective income tax rate in the first six months of 2020 was unfavorably impacted by a $ 10 million discrete tax expense related to change in the measurement of the U.S.

The Company expects that the majority of the restructuring accruals at September 30, 2020 will be paid in 2020 and 2021.

The effective income tax rate was ( 2.9 )% and ( 1.4 )% in the third quarter of 2020 and 2019, respectively, and 5.0 % and 18.8 % in the first nine months of 2020 and 2019, respectively.

In the third quarter 2020, the U.S.

Treasury Department issued final regulations regarding Foreign Derived Intangible Income (“FDII”) and Global Intangible Low-Taxed Income (“GILTI”).

The Company has determined it will elect the GILTI high tax exception as allowed by the final regulations and will amend its 2018 and 2019 US Federal consolidated income tax returns resulting in a favorable impact of $ 24 million.

The Company recorded this impact in the third quarter of 2020.

The effective income tax rate in the third quarter and first nine months of 2020 and 2019 was also favorably impacted as a result of excess tax benefits recognized upon settlement of share-based compensation awards.

For the third quarter of 2020 and 2019 this impact was $ 9 million and $ 3 million, respectively, and for the first nine months of 2020 and 2019 this impact was $ 35 million and $ 20 million, respectively.

Additionally, the effective income tax rate in the first nine months of 2020 was unfavorably impacted by a $ 10 million discrete tax expense related to change in the measurement of the U.S.

tax on undistributed foreign earnings.

In the first six months of 2019 the U.S.

Treasury Department issued final regulations on the transition tax and proposed regulations on Foreign Derived Intangible Income (“FDII”).

In the first nine months of 2019 the U.S.

Treasury Department issued final regulations on the transition tax and proposed regulations on FDII.

While the final regulations related to the transition tax did not have a material impact on the Company, the proposed guidance on FDII had an unfavorable impact.

Although the proposed

guidance for FDII was not authoritative and subject to change in the regulatory review process, the Company reversed a portion of the tax benefit recorded in 2019 by recording a tax expense of $ 20 million for this impact.

In July of 2020, the U.S.

Treasury Department issued final regulations regarding FDII and Global Intangible Low-Taxed Income (“GILTI”).

The Company is in the process of reviewing these regulations to determine if there will be an impact on the effective income tax rate in the subsequent period.

Although the proposed guidance for FDII was not authoritative and subject to change in the regulatory review process, the Company reversed a portion of the tax benefit related to 2018 and recorded a tax expense of $ 20 million for this impact in the first nine months of 2019.

Comprehensive Income (Loss)

6 unchanged sentences

— 8 — ( 2 ) 6

Balance at June 30, 2020 $ ( 541 ) $ ( 59 ) $ ( 16 ) $ 172 $ ( 444 )

Balance at September 30, 2020 $ ( 492 ) $ ( 57 ) $ ( 16 ) $ 248 $ ( 317 )

Below is a summary of the adjustments for (gains) losses reclassified from AOCI into the condensed consolidated statements of income and the affected financial statement line item:

1 unchanged sentence

Affected Financial Statement

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

6 unchanged sentences

Total before income taxes

( 11 ) ( 3 ) 5 ( 5 )

Income tax (benefit) expense

11 unchanged sentences

The Company’s reportable segment information is presented below:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in millions)

24 unchanged sentences

General corporate and unallocated

74 41 161 137

Total selling, general and administrative expenses

18 unchanged sentences

The following table presents the weighted average number of outstanding stock-based awards not included in the computation of diluted earnings per share because they are subject to performance conditions or the effect of including such stock-based awards in the computation would be anti-dilutive:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in millions)

2 unchanged sentences

Shares subject to anti-dilutive stock-based awards 1.1 0.4 1.3 0.7

Dilutive shares excluded from dilutive earnings per share 3.3 — — —

Total shares excluded from diluted earnings per share 2.2 1.7 2.5 2.0

2 unchanged sentences

Stock-based awards will have a dilutive effect under the treasury method when the respective period’s average market value of the Company’s common stock exceeds the exercise proceeds.

For the quarter ended June 30, 2020, all potentially dilutive securities were excluded from the diluted earnings per share calculation because the Company incurred a net loss for this period and their inclusion would be anti-dilutive.

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