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Press Release: DXC Technology Reports Third -3-

· 02/04/2021 16:15
-- Restructuring costs - reflects costs, net of reversals, related to workforce optimization and real estate charges. -- Transaction, separation and integration-related ("TSI") costs - reflects costs to execute on strategic alternatives, costs related to integration, planning, financing and advisory fees associated with the HPES Merger and other acquisitions and costs related to the separation of USPS and other divestitures.(1) -- Amortization of acquired intangible assets - reflects amortization of intangible assets acquired through business combinations. -- Gain on disposition of businesses - Reflects gains and losses related to sales of businesses. -- Pension and OPEB actuarial and settlement gains and losses - reflects pension and OPEB actuarial and settlement gains and losses. -- Goodwill impairment losses - reflects impairment losses on goodwill. -- Gain on arbitration award - reflects a gain related to the HPES merger arbitration award. -- Tax adjustment - for fiscal 2021 periods, reflects the impact of tax entries related to prior restructuring charges and an adjustment to the tax expense relating to USPS, and for fiscal 2020 periods, reflects the impact of tax entries related to prior restructuring charges. Income tax expense of non-GAAP adjustments is computed by applying the jurisdictional tax rate to the pre-tax adjustments on a jurisdictional basis. (1) TSI-Related Costs for all periods presented 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 alternatives, whether or not announced or consummated. The TSI-Related Costs for Q3 FY21 include $77 million of costs to execute the strategic alternatives (including $52M for the sale of HHS which closed in October 2020 and $23M for the sale of the healthcare software business which is expected to close later this year); $7 million in expenses related to integration projects resulting from the CSC -- HPE ES merger (including costs associated with continuing efforts to separate certain IT systems) and $12 million of costs incurred in connection with activities related to other acquisitions and divestitures.Segment Profit -------------------- Three Months Ended Nine Months Ended ----------------------- ------------------------ December December December December (in millions) 31, 2020 31, 2019 31, 2020 31, 2019 -------------------- ----------- ---------- ----------- ----------- Profit GBS profit $ 273 $353 $ 805 $ 1,078 GIS profit 88 232 147 815 All other loss (61) (57) (179) (184) Interest income 28 33 76 130 Interest expense (82) (93) (284) (288) Restructuring costs (104) (74) (441) (248) Transaction, separation and integration-related costs (96) (68) (307) (226) Amortization of acquired intangible assets (114) (146) (414) (435) Gain on disposition of businesses 2,046 -- 2,046 -- Pension and OPEB actuarial and settlement losses -- -- (2) -- Goodwill impairment losses -- (53) -- (2,940) Gain on arbitration award -- -- -- 632 ------ --- ---- ---- ------ --- ------- Income (loss) before income taxes $1,978 $127 $1,447 $(1,666) ===== === === ==== ===== === ====== Segment profit margins GBS 14.2% 15.0% 12.7% 15.8% GIS 3.7% 8.7% 2.1% 10.2%Segment Revenue --------------- Three Months Ended Percentage Change ---------------------- -------------------------------- December December Constant (in millions) 31, 2020 31, 2019 Actual Currency Organic --------------- ---------- ---------- --------- ---------- --------- Global Business Services $ 1,921 $ 2,359 (18.6)% (20.8)% (7.0)% Global Infrastructure Services 2,367 2,662 (11.1)% (13.5)% (13.2)% ---------- ---------- Total Revenues $ 4,288 $ 5,021 (14.6)% (16.9)% (10.5)% ====== ====== Nine Months Ended Percentage Change ---------------------- --------------------------------- December December Constant (in millions) 31, 2020 31, 2019 Actual Currency Organic --------------- ---------- ---------- ---------- ---------- --------- Global Business Services $ 6,337 $ 6,803 (6.8) % (7.6)% (7.4)% Global Infrastructure Services 7,007 7,959 (12.0) % (12.5)% (12.6)% ---------- ---------- Total Revenues $ 13,344 $ 14,762 (9.6) % (10.2)% (10.5)% ====== ======Borrowings under lines of credit 2,500 -- Repayment of borrowings under lines of credit (4,000) -- Borrowings on long-term debt, net of discount 993 2,198 Principal payments on long-term debt (2,926) (1,029) Payments on finance leases and borrowings for asset financing (694) (646) Proceeds from stock options and other common stock transactions 1 11 Taxes paid related to net share settlements of share-based compensation awards (5) (15) Repurchase of common stock and advance payment for accelerated share repurchase -- (736) Dividend payments (53) (161) Other financing activities, net (14) (44) ------------- ------------- Net cash used in financing activities (4,671) (305) ------------- ------------- Effect of exchange rate changes on cash and cash equivalents 20 26 ------------- ------------- Net increase (decrease) in cash and cash equivalents including cash classified within current assets held for sale 253 (339) Less: cash classified within current assets held for sale (13) -- ------------- ------------- Net increase (decrease) in cash and cash equivalents 240 (339) ------------- ------------- Cash and cash equivalents at beginning of year 3,679 2,899 ------------- ------------- Cash and cash equivalents at end of period $ 3,919 $ 2,560 ========= =========

Segment Results

The following table summarizes segment revenue for the third quarter and first nine months of fiscal 2021 and 2020:

We define segment profit as segment revenues less costs of services, segment selling, general and administrative, depreciation and amortization, and other income (excluding the movement in foreign currency exchange rates on our foreign currency denominated assets and liabilities and the related economic hedges). The Company does not allocate to its segments certain operating expenses managed at the corporate level. These unallocated costs include certain corporate function costs, stock-based compensation expense, pension and OPEB actuarial and settlement gains and losses, restructuring costs, transaction, separation and integration-related costs, and amortization of acquired intangible assets.

Reconciliation of Non-GAAP Financial Measures

Our non-GAAP adjustments include:

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February 04, 2021 16:15 ET (21:15 GMT)