Nevada | 001-38033 | 61-1800317 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
1775 Tysons Boulevard | ||
Tysons, Virginia | 22102 | |
(Address of Principal Executive Offices) | (Zip Code) |
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit No. | Description |
99.1 |
DXC TECHNOLOGY COMPANY | |||
Dated: | November 6, 2018 | By: | /s/ Paul N. Saleh |
Name: | Paul N. Saleh | ||
Title: | Executive Vice President and Chief Financial Officer |
Moved on Business Wire | |
November 6, 2018 |
• | Q2 earnings per share from continuing operations was $0.92, including the cumulative impact of certain items of $(1.10) per share, reflecting restructuring costs, transaction, separation and integration-related costs, and amortization of acquired intangible assets |
• | Q2 non-GAAP earnings per share was $2.02 |
• | Q2 income from continuing operations was $259 million, including the cumulative impact of certain items of $(314) million, reflecting restructuring costs, transaction, separation and integration-related costs, and amortization of acquired intangible assets |
• | Q2 non-GAAP income from continuing operations was $573 million |
• | Q2 EBIT of $382 million, adjusted for certain items is $799 million and adjusted EBIT margin was 15.9%, compared with 13.6% in the prior year |
• | Q2 net cash from operating activities was $412 million |
• | Q2 adjusted free cash flow was $604 million |
• | Diluted earnings per share from continuing operations was $0.92 in the second quarter, including $(0.41) per share of restructuring costs, $(0.34) per share of transaction, separation and integration-related costs, and $(0.35) per share of amortization of acquired intangible assets. This compares with $0.67 in the year ago period. |
• | Non-GAAP diluted earnings per share from continuing operations was $2.02. This compares with $1.67 in the year ago period. |
• | Revenue in the second quarter was $5,013 million. Revenue decreased 8.1% compared with $5,453 million in the prior year, reflecting a stronger dollar, completion of several large transformation projects, and slower ramp-up on a few large Digital contracts. |
• | Income from continuing operations before income taxes was $332 million in the second quarter, including $(157) million of restructuring costs, $(128) million of transaction, separation and integration-related costs, and $(132) million of amortization of acquired intangibles. This compares with $284 million in the year ago period. |
• | Non-GAAP income from continuing operations before income taxes was $749 million compared with $683 million in the year ago period. |
• | Income from continuing operations was $259 million in the second quarter, including $(116) million of restructuring costs, $(98) million of transaction, separation and integration-related costs, and $(100) million of amortization of acquired intangibles. This compares with $205 million in the year ago period. |
• | Non-GAAP income from continuing operations was $573 million compared with $492 million in the year ago period. |
• | Adjusted EBIT was $799 million in the second quarter compared with $740 million in the prior year. Adjusted EBIT margin was 15.9% compared with 13.6% in the year ago quarter. |
• | Net cash provided by operating activities was $412 million in the second quarter, compared with $991 million in the year ago period. |
• | Adjusted free cash flow was $604 million in the second quarter. |
Three Months Ended | Six Months Ended | |||||||||||||||
(in millions, except per-share amounts) | September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | ||||||||||||
Revenues | $ | 5,013 | $ | 5,453 | $ | 10,295 | $ | 10,689 | ||||||||
Costs of services | 3,518 | 3,870 | 7,385 | 8,179 | ||||||||||||
Selling, general and administrative | 569 | 644 | 1,009 | 1,037 | ||||||||||||
Depreciation and amortization | 484 | 482 | 955 | 824 | ||||||||||||
Restructuring costs | 157 | 188 | 342 | 375 | ||||||||||||
Interest expense | 83 | 73 | 168 | 147 | ||||||||||||
Interest income | (33 | ) | (16 | ) | (65 | ) | (32 | ) | ||||||||
Other income, net | (97 | ) | (72 | ) | (191 | ) | (216 | ) | ||||||||
Total costs and expenses | 4,681 | 5,169 | 9,603 | 10,314 | ||||||||||||
Income from continuing operations before income taxes | 332 | 284 | 692 | 375 | ||||||||||||
Income tax expense | 73 | 79 | 202 | 62 | ||||||||||||
Income from continuing operations | 259 | 205 | 490 | 313 | ||||||||||||
Income from discontinued operations, net of tax | — | 60 | 35 | 125 | ||||||||||||
Net income | 259 | 265 | 525 | 438 | ||||||||||||
Less: net (loss) income attributable to non-controlling interest, net of tax | (3 | ) | 9 | 4 | 23 | |||||||||||
Net income attributable to DXC common stockholders | $ | 262 | $ | 256 | $ | 521 | $ | 415 | ||||||||
Income per common share: | ||||||||||||||||
Basic: | ||||||||||||||||
Continuing operations | $ | 0.93 | $ | 0.69 | $ | 1.72 | $ | 1.02 | ||||||||
Discontinued operations | — | 0.21 | 0.12 | 0.44 | ||||||||||||
$ | 0.93 | $ | 0.90 | $ | 1.84 | $ | 1.46 | |||||||||
Diluted: | ||||||||||||||||
Continuing operations | $ | 0.92 | $ | 0.67 | $ | 1.69 | $ | 1.00 | ||||||||
Discontinued operations | — | 0.21 | 0.12 | 0.43 | ||||||||||||
$ | 0.92 | $ | 0.88 | $ | 1.81 | $ | 1.43 | |||||||||
Cash dividend per common share | $ | 0.19 | $ | 0.18 | $ | 0.38 | $ | 0.36 | ||||||||
Weighted average common shares outstanding for: | ||||||||||||||||
Basic EPS | 281.37 | 284.87 | 282.89 | 284.35 | ||||||||||||
Diluted EPS | 285.78 | 289.29 | 287.53 | 289.38 |
As of | ||||||||
(in millions) | September 30, 2018 | March 31, 2018 | ||||||
Assets | ||||||||
Cash and cash equivalents | $ | 2,780 | $ | 2,593 | ||||
Receivables and contract assets, net | 4,928 | 5,481 | ||||||
Prepaid expenses | 630 | 496 | ||||||
Other current assets | 477 | 469 | ||||||
Assets of discontinued operations | — | 581 | ||||||
Total current assets | 8,815 | 9,620 | ||||||
Intangible assets, net | 6,602 | 7,179 | ||||||
Goodwill | 7,417 | 7,619 | ||||||
Deferred income taxes, net | 326 | 373 | ||||||
Property and equipment, net | 3,281 | 3,363 | ||||||
Other assets | 2,441 | 2,404 | ||||||
Assets of discontinued operations - non-current | — | 3,363 | ||||||
Total Assets | $ | 28,882 | $ | 33,921 | ||||
Liabilities | ||||||||
Short-term debt and current maturities of long-term debt | $ | 1,618 | $ | 1,918 | ||||
Accounts payable | 1,358 | 1,513 | ||||||
Accrued payroll and related costs | 734 | 744 | ||||||
Accrued expenses and other current liabilities | 3,268 | 3,120 | ||||||
Deferred revenue and advance contract payments | 1,442 | 1,641 | ||||||
Income taxes payable | 94 | 127 | ||||||
Liabilities of discontinued operations | — | 789 | ||||||
Total current liabilities | 8,514 | 9,852 | ||||||
Long-term debt, net of current maturities | 5,409 | 6,092 | ||||||
Non-current deferred revenue | 301 | 795 | ||||||
Non-current income tax liabilities and deferred tax liabilities | 1,219 | 1,166 | ||||||
Other long-term liabilities | 1,602 | 1,723 | ||||||
Liabilities of discontinued operations - long-term | — | 456 | ||||||
Total Liabilities | 17,045 | 20,084 | ||||||
Total Equity | 11,837 | 13,837 | ||||||
Total Liabilities and Equity | $ | 28,882 | $ | 33,921 |
Six Months Ended | ||||||||
(in millions) | September 30, 2018 | September 30, 2017 | ||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 525 | $ | 438 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 1,002 | 904 | ||||||
Share-based compensation | 41 | 58 | ||||||
Gain on dispositions | (65 | ) | — | |||||
Unrealized foreign currency exchange (gains) losses | (12 | ) | 4 | |||||
Other non-cash charges, net | (18 | ) | 15 | |||||
Changes in assets and liabilities, net of effects of acquisitions and dispositions: | ||||||||
(Increase) decrease in assets | (447 | ) | 45 | |||||
(Decrease) increase in liabilities | (141 | ) | 46 | |||||
Net cash provided by operating activities | 885 | 1,510 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (133 | ) | (123 | ) | ||||
Payments for transition and transformation contract costs | (183 | ) | (176 | ) | ||||
Software purchased and developed | (125 | ) | (86 | ) | ||||
Cash acquired through Merger | — | 974 | ||||||
Payments for acquisitions, net of cash acquired | (43 | ) | (152 | ) | ||||
Business dispositions | (65 | ) | — | |||||
Deferred purchase price receivable | 409 | 33 | ||||||
Proceeds from sale of assets | 57 | 20 | ||||||
Other investing activities, net | (1 | ) | 6 | |||||
Net cash (used in) provided by investing activities | (84 | ) | 496 | |||||
Cash flows from financing activities: | ||||||||
Borrowings of commercial paper | 1,158 | 1,182 | ||||||
Repayments of commercial paper | (1,158 | ) | (1,067 | ) | ||||
Repayment of borrowings under lines of credit | — | (335 | ) | |||||
Borrowings on long-term debt, net of discount | 483 | 615 | ||||||
Principal payments on long-term debt | (2,036 | ) | (1,109 | ) | ||||
Payments on capital leases and borrowings for asset financing | (475 | ) | (443 | ) | ||||
Borrowings for USPS spin transaction | 1,114 | — | ||||||
Proceeds from bond issuance | 753 | 647 | ||||||
Proceeds from stock options and other common stock transactions | 36 | 92 | ||||||
Taxes paid related to net share settlements of share-based compensation awards | (20 | ) | (66 | ) | ||||
Repurchase of common stock | (447 | ) | (66 | ) | ||||
Dividend payments | (105 | ) | (72 | ) | ||||
Other financing activities, net | 11 | 1 | ||||||
Net cash used in financing activities | (686 | ) | (621 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (64 | ) | 49 | |||||
Net increase in cash and cash equivalents | 51 | 1,434 | ||||||
Cash and cash equivalents at beginning of year | 2,729 | 1,268 | ||||||
Cash and cash equivalents at end of period | $ | 2,780 | $ | 2,702 |
Segment Revenue | |||||||||||||
Three Months Ended | |||||||||||||
(in millions) | September 30, 2018 | September 30, 2017 | % Change | % Change in Constant Currency | |||||||||
Global Business Services | $ | 2,111 | $ | 2,311 | (8.7 | )% | (6.9)% | ||||||
Global Infrastructure Services | 2,902 | 3,142 | (7.6 | )% | (5.7)% | ||||||||
Total Revenues | $ | 5,013 | $ | 5,453 | (8.1 | )% | (6.2)% |
Six Months Ended | |||||||||||||
(in millions) | September 30, 2018 | September 30, 2017 | % Change | % Change in Constant Currency | |||||||||
Global Business Services | $ | 4,324 | $ | 4,578 | (5.5 | )% | (5.8)% | ||||||
Global Infrastructure Services | 5,971 | 6,111 | (2.3 | )% | (2.8)% | ||||||||
Total Revenues | $ | 10,295 | $ | 10,689 | (3.7 | )% | (4.1)% |
Three Months Ended | Six Months Ended | |||||||||||||||
(in millions) | September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | ||||||||||||
Profit | ||||||||||||||||
GBS profit | $ | 400 | $ | 369 | $ | 803 | $ | 643 | ||||||||
GIS profit | 473 | 450 | 947 | 721 | ||||||||||||
All other loss | (74 | ) | (79 | ) | (148 | ) | (54 | ) | ||||||||
Interest income | 33 | 16 | 65 | 32 | ||||||||||||
Interest expense | (83 | ) | (73 | ) | (168 | ) | (147 | ) | ||||||||
Restructuring costs | (157 | ) | (188 | ) | (342 | ) | (375 | ) | ||||||||
Transaction, separation and integration-related costs | (128 | ) | (66 | ) | (198 | ) | (190 | ) | ||||||||
Amortization of acquired intangible assets | (132 | ) | (145 | ) | (267 | ) | (255 | ) | ||||||||
Income from continuing operations before income taxes | $ | 332 | $ | 284 | $ | 692 | $ | 375 | ||||||||
Segment profit margins | ||||||||||||||||
GBS | 18.9 | % | 16.0 | % | 18.6 | % | 14.0 | % | ||||||||
GIS | 16.3 | % | 14.3 | % | 15.9 | % | 11.8 | % |
• | Restructuring costs - reflects restructuring costs, net of reversals, related to workforce optimization and real estate charges. |
• | Transaction, separation and integration-related costs - reflects 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. |
• | Amortization of acquired intangible assets - reflects amortization of intangible assets acquired through business combinations. |
• | Tax adjustment - reflects the estimated non-recurring benefit of the Tax Cuts and Jobs Act of 2017 for fiscal 2019, and the application of an approximate 28% tax rate for fiscal 2018, which is within the targeted effective tax rate range for the prior year. |
Three Months Ended | Six Months Ended | |||||||||||||||
(in millions) | September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | ||||||||||||
Net income | $ | 259 | $ | 265 | $ | 525 | $ | 438 | ||||||||
Income from discontinued operations, net of taxes | — | (60 | ) | (35 | ) | (125 | ) | |||||||||
Income tax expense | 73 | 79 | 202 | 62 | ||||||||||||
Interest income | (33 | ) | (16 | ) | (65 | ) | (32 | ) | ||||||||
Interest expense | 83 | 73 | 168 | 147 | ||||||||||||
EBIT | 382 | 341 | 795 | 490 | ||||||||||||
Restructuring costs | 157 | 188 | 342 | 375 | ||||||||||||
Transaction, separation, and integration-related costs | 128 | 66 | 198 | 190 | ||||||||||||
Amortization of acquired intangible assets | 132 | 145 | 267 | 255 | ||||||||||||
Adjusted EBIT | $ | 799 | $ | 740 | $ | 1,602 | $ | 1,310 | ||||||||
Adjusted EBIT margin | 15.9 | % | 13.6 | % | 15.6 | % | 12.3 | % | ||||||||
EBIT margin | 7.6 | % | 6.3 | % | 7.7 | % | 4.6 | % |
(in millions) | Three Months Ended September 30, 2018 | Six Months Ended September 30, 2018 | ||||||
Net cash provided by operating activities | $ | 412 | $ | 885 | ||||
Net cash provided by (used in) investing activities | 200 | (84 | ) | |||||
Acquisitions, net of cash acquired | — | 43 | ||||||
Business dispositions | — | 65 | ||||||
Payments on capital leases and other long-term asset financings | (216 | ) | (475 | ) | ||||
Payments on transaction, separation and integration-related costs | 86 | 191 | ||||||
Payments on restructuring costs | 122 | 270 | ||||||
Sale of accounts receivables, net DPP | — (1) | 30 | ||||||
Adjusted free cash flow | $ | 604 | $ | 925 |
Three Months Ended September 30, 2018 | ||||||||||||||||||||
(in millions, except per-share amounts) | As Reported | Restructuring Costs | Transaction, Separation and Integration-Related Costs | Amortization of Acquired Intangible Assets | Non-GAAP Results | |||||||||||||||
Costs of services (excludes depreciation and amortization and restructuring costs) | $ | 3,518 | $ | — | $ | — | $ | — | $ | 3,518 | ||||||||||
Selling, general and administrative (excludes depreciation and amortization and restructuring costs) | 569 | — | (128 | ) | — | 441 | ||||||||||||||
Income from continuing operations before income taxes | 332 | 157 | 128 | 132 | 749 | |||||||||||||||
Income tax expense | 73 | 41 | 30 | 32 | 176 | |||||||||||||||
Income from continuing operations | 259 | 116 | 98 | 100 | 573 | |||||||||||||||
Income from discontinued operations, net of tax | — | — | — | — | — | |||||||||||||||
Net income | 259 | 116 | 98 | 100 | 573 | |||||||||||||||
Less: net loss attributable to non-controlling interest, net of tax | (3 | ) | — | — | — | (3 | ) | |||||||||||||
Net income attributable to DXC common stockholders | $ | 262 | $ | 116 | $ | 98 | $ | 100 | $ | 576 | ||||||||||
Effective tax rate | 22.0 | % | 23.5 | % | ||||||||||||||||
Basic EPS from continuing operations | $ | 0.93 | $ | 0.41 | $ | 0.35 | $ | 0.36 | $ | 2.05 | ||||||||||
Diluted EPS from continuing operations | $ | 0.92 | $ | 0.41 | $ | 0.34 | $ | 0.35 | $ | 2.02 | ||||||||||
Weighted average common shares outstanding for: | ||||||||||||||||||||
Basic EPS | 281.37 | 281.37 | 281.37 | 281.37 | 281.37 | |||||||||||||||
Diluted EPS | 285.78 | 285.78 | 285.78 | 285.78 | 285.78 |
Six Months Ended September 30, 2018 | ||||||||||||||||||||||||
(in millions, except per-share amounts) | As Reported | Restructuring Costs | Transaction, Separation and Integration-Related Costs | Amortization of Acquired Intangible Assets | Tax Adjustment | Non-GAAP Results | ||||||||||||||||||
Costs of services (excludes depreciation and amortization and restructuring costs) | $ | 7,385 | $ | — | $ | — | $ | — | $ | — | $ | 7,385 | ||||||||||||
Selling, general and administrative (excludes depreciation and amortization and restructuring costs) | 1,009 | — | (198 | ) | — | — | 811 | |||||||||||||||||
Income from continuing operations before income taxes | 692 | 342 | 198 | 267 | — | 1,499 | ||||||||||||||||||
Income tax expense (benefit) | 202 | 82 | 46 | 65 | (33 | ) | 362 | |||||||||||||||||
Income from continuing operations | 490 | 260 | 152 | 202 | 33 | 1,137 | ||||||||||||||||||
Income from discontinued operations, net of tax | 35 | — | — | — | — | 35 | ||||||||||||||||||
Net income | 525 | 260 | 152 | 202 | 33 | 1,172 | ||||||||||||||||||
Less: net income attributable to non-controlling interest, net of tax | 4 | — | — | — | — | 4 | ||||||||||||||||||
Net income attributable to DXC common stockholders | $ | 521 | $ | 260 | $ | 152 | $ | 202 | $ | 33 | $ | 1,168 | ||||||||||||
Effective Tax Rate | 29.2 | % | 24.1 | % | ||||||||||||||||||||
Basic EPS from continuing operations | $ | 1.72 | $ | 0.92 | $ | 0.54 | $ | 0.71 | $ | 0.12 | $ | 4.01 | ||||||||||||
Diluted EPS from continuing operations | $ | 1.69 | $ | 0.90 | $ | 0.53 | $ | 0.70 | $ | 0.11 | $ | 3.94 | ||||||||||||
Weighted average common shares outstanding for: | ||||||||||||||||||||||||
Basic EPS | 282.89 | 282.89 | 282.89 | 282.89 | 282.89 | 282.89 | ||||||||||||||||||
Diluted EPS | 287.53 | 287.53 | 287.53 | 287.53 | 287.53 | 287.53 |
Three Months Ended September 30, 2017 | ||||||||||||||||||||||||
(in millions, except per-share amounts) | As Reported | Restructuring Costs | Transaction, Separation and Integration-Related Costs | Amortization of Acquired Intangible Assets | Tax Adjustment | Non-GAAP Results | ||||||||||||||||||
Costs of services (excludes depreciation and amortization and restructuring costs) | $ | 3,870 | $ | — | $ | — | $ | — | $ | — | $ | 3,870 | ||||||||||||
Selling, general and administrative (excludes depreciation and amortization and restructuring costs) | 644 | — | (66 | ) | — | — | 578 | |||||||||||||||||
Income from continuing operations before income taxes | 284 | 188 | 66 | 145 | — | 683 | ||||||||||||||||||
Income tax expense | 79 | — | — | — | 112 | 191 | ||||||||||||||||||
Income from continuing operations | 205 | 188 | 66 | 145 | (112 | ) | 492 | |||||||||||||||||
Income from discontinued operations, net of tax | 60 | — | — | — | 60 | |||||||||||||||||||
Net income | 265 | 188 | 66 | 145 | (112 | ) | 552 | |||||||||||||||||
Less: net income attributable to non-controlling interest, net of tax | 9 | — | — | 9 | ||||||||||||||||||||
Net income attributable to DXC common stockholders | $ | 256 | $ | 188 | $ | 66 | $ | 145 | $ | (112 | ) | $ | 543 | |||||||||||
Effective Tax Rate | 27.8 | % | 28.0 | % | ||||||||||||||||||||
Basic EPS from continuing operations | $ | 0.69 | $ | 0.66 | $ | 0.23 | $ | 0.51 | $ | (0.39 | ) | $ | 1.70 | |||||||||||
Diluted EPS from continuing operations | $ | 0.67 | $ | 0.65 | $ | 0.23 | $ | 0.50 | $ | (0.39 | ) | $ | 1.67 | |||||||||||
Weighted average common shares outstanding for: | ||||||||||||||||||||||||
Basic EPS | 284.87 | 284.87 | 284.87 | 284.87 | 284.87 | 284.87 | ||||||||||||||||||
Diluted EPS | 289.29 | 289.29 | 289.29 | 289.29 | 289.29 | 289.29 |
Six Months Ended September 30, 2017 | ||||||||||||||||||||||||
(in millions, except per-share amounts) | As Reported | Restructuring Costs | Transaction, Separation and Integration-Related Costs | Amortization of Acquired Intangible Assets | Tax Adjustment | Non-GAAP Results | ||||||||||||||||||
Costs of services (excludes depreciation and amortization and restructuring costs) | $ | 8,179 | $ | — | $ | — | $ | — | $ | — | $ | 8,179 | ||||||||||||
Selling, general and administrative (excludes depreciation and amortization and restructuring costs) | 1,037 | — | (190 | ) | — | — | 847 | |||||||||||||||||
Income from continuing operations before income taxes | 375 | 375 | 190 | 255 | — | 1,195 | ||||||||||||||||||
Income tax expense | 62 | — | — | — | 272 | 334 | ||||||||||||||||||
Income from continuing operations | 313 | 375 | 190 | 255 | (272 | ) | 861 | |||||||||||||||||
Income from discontinued operations, net of tax | 125 | — | — | — | — | 125 | ||||||||||||||||||
Net income | 438 | 375 | 190 | 255 | (272 | ) | 986 | |||||||||||||||||
Less: net income attributable to non-controlling interest, net of tax | 23 | — | — | — | — | 23 | ||||||||||||||||||
Net income attributable to DXC common stockholders | $ | 415 | $ | 375 | $ | 190 | $ | 255 | $ | (272 | ) | $ | 963 | |||||||||||
Effective Tax Rate | 16.5 | % | 28.0 | % | ||||||||||||||||||||
Basic EPS from continuing operations | $ | 1.02 | $ | 1.32 | $ | 0.67 | $ | 0.90 | $ | (0.96 | ) | $ | 2.95 | |||||||||||
Diluted EPS from continuing operations | $ | 1.00 | $ | 1.30 | $ | 0.66 | $ | 0.88 | $ | (0.94 | ) | $ | 2.90 | |||||||||||
Weighted average common shares outstanding for: | ||||||||||||||||||||||||
Basic EPS | 284.35 | 284.35 | 284.35 | 284.35 | 284.35 | 284.35 | ||||||||||||||||||
Diluted EPS | 289.38 | 289.38 | 289.38 | 289.38 | 289.38 | 289.38 |