EX-99.1 2 exhibit991.htm EXHIBIT 99.1 Exhibit






Exhibit 99.1


DXC TECHNOLOGY COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



On October 1, 2020, DXC Technology Company (“DXC” or the “Company”) completed the previously announced sale (the “Sale”) of its U.S. State and Local Health and Human Services (the “HHS Business”) to Veritas Capital. The Sale was accomplished by the cash purchase of all equity interests and assets attributable to the Medicaid Management Information Systems (“MMIS”) business together with future services to be provided by the Company.

The unaudited pro forma condensed consolidated balance sheet of the Company as of June 30, 2020 is presented as if the Sale occurred on June 30, 2020. The unaudited pro forma condensed consolidated statements of operations for the three months ended June 30, 2020 and for the fiscal year ended March 31, 2020 are presented as if the Sale occurred on April 1, 2019.

The unaudited pro forma condensed consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in DXC’s Form 10-K for the fiscal year ended March 31, 2020 and the unaudited condensed consolidated financial statements and accompanying notes included in DXC’s Form 10-Q for the three months ended June 30, 2020. 

The information presented in the “Historical DXC” column in the unaudited pro forma condensed consolidated financial statements reflects DXC’s historical financial statements for the periods presented and do not reflect any adjustments related to the Sale.

The information presented in the “HHS Business" column was derived from DXC’s audited consolidated financial statements and the related accounting records for the fiscal year ended March 31, 2020 and DXC’s unaudited condensed consolidated financial statements and the related accounting records as of and for the three months ended June 30, 2020.

The “Pro Forma Adjustments” column reflects adjustments to give effect to the Sale.

The unaudited pro forma condensed consolidated financial information does not include indirect costs that (a) have been conveyed with the HHS Business (b) the Company is entitled to reimbursement for in order to provide general and administrative services as part of our transition services agreements with the HHS Business and (c) are other general and administrative costs associated with the HHS business that will be reviewed and targeted for elimination. The vast majority of these indirect costs that have not been included in the pro forma consolidated financial information fall into categories (a) and (b) as outlined above.

The pro forma adjustments represent the Company's current best estimates and may differ from those that will be used to calculate the gain or loss on disposal in DXC’s future filings. The unaudited pro forma condensed consolidated financial statements are provided for illustrative and informational purposes only and are not intended to represent or be indicative of what DXC’s results of operations or financial position would have been had the Sale occurred on the dates indicated. The unaudited pro forma condensed consolidated financial statements also should not be considered representative of DXC’s future results of operations or financial position.

See notes to the unaudited pro forma condensed consolidated financial statements for a more detailed discussion of these transactions.



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DXC TECHNOLOGY COMPANY
PRO-FORMA CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
JUNE 30, 2020

(in millions)
 
Historical DXC
 
HHS Business
A
Pro-Forma Adjustments
 
Pro-Forma DXC
ASSETS
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
5,509

 
$

 
$
85

B
$
5,594

Receivables, net
 
4,271

 
(142
)
 

 
4,129

Prepaid expenses and other current assets
 
928

 
(32
)
 

 
896

Total current assets
 
10,708

 
(174
)
 
85

 
10,619

 
 
 
 
 
 
 
 
 
Intangible assets, net of accumulated amortization
 
5,540

 
(1,282
)
 

 
4,258

Operating right-of-use assets, net
 
1,602

 
(95
)
 

 
1,507

Goodwill
 
2,057

 
(1,350
)
 

 
707

Deferred income taxes, net
 
285

 

 

 
285

Property and equipment, net of accumulated depreciation
 
3,503

 
(41
)
 

 
3,462

Other assets
 
4,199

 
(35
)
 

 
4,164

Total Assets
 
$
27,894

 
$
(2,977
)
 
$
85

 
$
25,002

 
 
 
 
 
 
 
 
 
LIABILITIES and EQUITY
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
Short-term debt and current maturities of long-term debt
 
$
1,682

 
$
(1
)
 
$
(772
)
C
$
909

Accounts payable
 
1,522

 
(103
)
 

 
1,419

Accrued payroll and related costs
 
766

 
(13
)
 

 
753

Current operating lease liabilities
 
488

 
(30
)
 

 
458

Accrued expenses and other current liabilities
 
2,756

 
(53
)
 
85

D
2,788

Deferred revenue and advance contract payments
 
1,030

 
(36
)
 

 
994

Income taxes payable
 
81

 
(2
)
 

 
79

Total current liabilities
 
8,325

 
(238
)
 
(687
)
 
7,400

 
 
 
 
 
 
 
 
 
Long-term debt, net of current maturities
 
10,334

 
(1
)
 
(2,696
)
C
7,637

Non-current deferred revenue
 
733

 
(31
)
 

 
702

Non-current operating lease liabilities
 
1,208

 
(75
)
 

 
1,133

Non-current income tax liabilities and deferred tax liabilities
 
1,075

 
(267
)
 
(22
)
B, D
786

Other long-term liabilities
 
1,277

 
(10
)
 

 
1,267

Total Liabilities
 
22,952

 
(622
)
 
(3,405
)
 
18,925

Total Equity
 
4,942

 
(2,355
)
 
3,490

E
6,077

Total Liabilities and Equity
 
$
27,894

 
$
(2,977
)
 
$
85

 
$
25,002


See accompanying notes to the unaudited pro forma condensed consolidated financial information


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DXC TECHNOLOGY COMPANY
PRO-FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
TWELVE MONTHS ENDED MARCH 31, 2020

(in millions)
 
Historical DXC
 
HHS Business
A
Pro-Forma Adjustments
 
Pro-Forma DXC
 
 
 
 
 
 
 
 
 
Revenues
 
$
19,577

 
$
(1,428
)
 
$

 
$
18,149

 
 
 
 
 
 
 
 
 
Costs of services (excludes depreciation and amortization and restructuring costs)
 
14,901

 
(879
)
 

 
14,022

Selling, general and administrative (excludes depreciation and amortization and restructuring costs)
 
2,050

 
(13
)
 
(26
)
F
2,011

Depreciation and amortization
 
1,942

 
(175
)
 

 
1,767

Goodwill impairment losses
 
6,794

 
(2,486
)
 

 
4,308

Restructuring costs
 
252

 
(3
)
 

 
249

Interest expense
 
383

 

 
(43
)
G
340

Interest income
 
(165
)
 

 

 
(165
)
Gain on arbitration award
 
(632
)
 

 

 
(632
)
Other income, net
 
(720
)
 
(2
)
 

 
(722
)
Total costs and expenses
 
24,805

 
(3,558
)
 
(69
)
 
21,178

 
 
 
 
 
 
 
 
 
Loss before income taxes
 
(5,228
)
 
2,130

 
69

 
(3,029
)
Income tax expense
 
130

 
(78
)
 
18

H
70

Net (loss) income
 
(5,358
)
 
2,208

 
51

 
(3,099
)
Less: net income attributable to non-controlling interest, net of tax
 
11

 

 

 
11

Net (loss) income attributable to DXC common stockholders
 
$
(5,369
)
 
$
2,208

 
$
51

 
$
(3,110
)
 
 
 
 
 
 
 
 
 
Basic EPS
 
$
(20.76
)
 
 
 
 
 
$
(12.03
)
Diluted EPS
 
$
(20.76
)
 
 
 
 
 
$
(12.03
)
Weighted average common shares outstanding for:
 
 
 
 
 
 
 
 
Basic EPS
 
258.57

 
 
 
 
 
258.57

Diluted EPS
 
258.57

 
 
 
 
 
258.57


See accompanying notes to the unaudited pro forma condensed consolidated financial information

















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DXC TECHNOLOGY COMPANY
PRO-FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
THREE MONTHS ENDED JUNE 30, 2020

(in millions)
 
Historical DXC
 
HHS Business
A
Pro-Forma Adjustments
 
Pro-Forma DXC
 
 
 
 
 
 
 
 
 
Revenues
 
$
4,502

 
$
(380
)
 
$

 
$
4,122

 
 
 
 
 
 
 
 
 
Costs of services (excludes depreciation and amortization and restructuring costs)
 
3,629

 
(247
)
 

 
3,382

Selling, general and administrative (excludes depreciation and amortization and restructuring costs)
 
539

 
(9
)
 
(52
)
F
478

Depreciation and amortization
 
492

 
(46
)
 

 
446

Restructuring costs
 
72

 

 

 
72

Interest expense
 
106

 

 
(9
)
G
97

Interest income
 
(23
)
 

 

 
(23
)
Other income, net
 
(88
)
 

 

 
(88
)
Total costs and expenses
 
4,727

 
(302
)
 
(61
)
 
4,364

 
 
 
 
 
 
 
 
 
Loss before income taxes
 
(225
)
 
(78
)
 
61

 
(242
)
Income tax benefit
 
(26
)
 
(21
)
 
16

H
(31
)
Net (loss) income
 
(199
)
 
(57
)
 
45

 
(211
)
Less: net income attributable to non-controlling interest, net of tax
 
6

 

 

 
6

Net (loss) income attributable to DXC common stockholders
 
$
(205
)
 
$
(57
)
 
$
45

 
$
(217
)
 
 
 
 
 
 
 
 
 
Basic EPS
 
$
(0.81
)
 
 
 
 
 
$
(0.86
)
Diluted EPS
 
$
(0.81
)
 
 
 
 
 
$
(0.86
)
Weighted average common shares outstanding for:
 
 
 
 
 
 
 
 
Basic EPS
 
253.63

 
 
 
 
 
253.63

Diluted EPS
 
253.63

 
 
 
 
 
253.63


See accompanying notes to the unaudited pro forma condensed consolidated financial information

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DXC TECHNOLOGY COMPANY
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



The unaudited pro forma condensed consolidated statement of operations for the three months ended June 30, 2020 and fiscal year ended March 31, 2020 as well as the unaudited pro forma condensed consolidated balance sheet as of June 30, 2020 include the following pro forma adjustments:

(A)
The adjustments remove the assets, liabilities, equity and results of operations of the HHS Business. The adjustments to results of operations include only direct costs and exclude certain allocated general corporate overhead expenses, in the amounts of $136 million and $32 million for the fiscal year ended March 31, 2020 and the three months ended June 30, 2020, respectively.

(B)
Represents the following:

i.
estimated cash proceeds from the Sale, totaling $5,000 million including $85 million for future services to be provided by the Company, excluding any impact of closing adjustments as defined in the sale and purchase agreement;

ii.
less estimated transaction costs of $49 million;

iii.
less estimated tax liability assumed to be paid in cash of $1,123 million; and

iv.
less cash used to pay short-term debt, long-term debt, and other closing obligations of $3,743 million.

See footnote C for further discussion of the Company’s use of proceeds.
(C) Represents the Company's use of net cash proceeds from the Sale to pay down existing short-term debt and long-term debt. Cash proceeds from the Sale exclude any impact of closing adjustments as defined in the sale and purchase agreement. See footnote B for further discussion on the Company’s net cash proceeds.

(D) Represents the liability and associated tax impact related to future services to be provided by the Company, as defined in the sale and purchase agreement.

(E) Retained earnings was adjusted as a result of the pro forma adjustments and includes the gain on Sale.

(F) Represents the elimination of transaction costs directly attributable to the Sale.

(G) Represents the impact on interest expense as a result of the use of net proceeds from the Sale to repay short-term debt and long-term debt.

(H) Represents the tax impact of pro forma adjustments. Federal income taxes have not been historically allocated to the HHS Business as they were recorded by DXC. The pro forma adjustments were tax effected using an estimated statutory tax rate of 25.86% in 2020 and 25.86% for the three months ended June 30, 2020 applied to income before income taxes for HHS Business plus the other pro forma adjustments.



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