Divestitures

Separation of USPS

On May 31, 2018, DXC completed the USPS Separation and Mergers to form Perspecta, an independent public company.

Implementation of the Separation and DXC's post-Separation relationship with Perspecta is governed by several agreements, including the following:


•	a Separation and Distribution Agreement;


•	an Employee Matters Agreement;


•	a Tax Matters Agreement;


•	an Intellectual Property Matters Agreement;


•	a Transition Services Agreement;


•	a Real Estate Matters Agreement; and


•	a Non-US Agency Agreement.

These agreements provide for the allocation of assets, employees, liabilities and obligations (including property, employee benefits, litigation, and tax-related assets and liabilities) between DXC and Perspecta attributable to periods prior to, at and after the Separation. In addition, DXC and Perspecta have service and commercial contracts that generally extend through fiscal 2023.

Pursuant to the Separation and Distribution Agreement, immediately prior to the Separation Perspecta made a net cash payment of $984 million to DXC, which reflects transaction consideration of $1,050 million less $66 million in principal amount of debt that was outstanding at a subsidiary of Perspecta. Perspecta financed the payment through borrowings under a new senior secured term loan facility.

J. Michael Lawrie serves as DXC's Chairman and Chief Executive Officer and Paul N. Saleh serves as DXC's Chief Financial Officer. Effective as of the Separation, Mr. Lawrie also serves as Chairman of Perspecta and Mr. Saleh also serves as a Director of Perspecta. Due to Mr. Lawrie's and Mr. Saleh's leadership positions at DXC and Perspecta, Perspecta is considered a related party under ASC 850 "Related Party Disclosures" for periods subsequent to the Separation. Transactions with Perspecta were immaterial to the Company's financial statements for the three and nine months ended December 31, 2018 and balances due to and from Perspecta were immaterial to the Company's balance sheet as of December 31, 2018.

The following is a summary of the assets and liabilities distributed as part of the Separation of USPS on May 31, 2018:



	As of
(in millions)	May 31, 2018
Assets:
Cash and cash equivalents	$	95
Receivables, net	458
Prepaid expenses	82
Other current assets	35
Total current assets of discontinued operations	670
Intangible assets, net	882
Goodwill	2,029
Property and equipment, net	294
Other assets	157
Total non-current assets of discontinued operations	3,362
Total assets	$	4,032

Liabilities:
Short-term debt and current maturities of long-term debt	$	161
Accounts payable	165
Accrued payroll and related costs	17
Accrued expenses and other current liabilities	358
Deferred revenue and advance contract payments	53
Income tax payable	18
Total current liabilities of discontinued operations	772
Long-term debt, net of current maturities	1,320
Non-current deferred revenue	5
Non-current income tax liabilities and deferred tax liabilities	196
Other long-term liabilities	71
Total long-term liabilities of discontinued operations	1,592
Total liabilities	$	2,364

The following is a summary of the assets and liabilities of USPS that have been classified as assets and liabilities of discontinued operations:



	As of
(in millions)	March 31, 2018
Assets:
Cash and cash equivalents	$	68
Receivables, net	432
Prepaid expenses	75
Other current assets	6
Total current assets of discontinued operations	581
Intangible assets, net	912
Goodwill	2,033
Property and equipment, net	283
Other assets	135
Total non-current assets of discontinued operations	3,363
Total assets	$	3,944

Liabilities:
Short-term debt and current maturities of long-term debt	$	155
Accounts payable	195
Accrued payroll and related costs	22
Accrued expenses and other current liabilities	346
Deferred revenue and advance contract payments	53
Income tax payable	18
Total current liabilities of discontinued operations	789
Long-term debt, net of current maturities	214
Non-current deferred revenue	7
Non-current income tax liabilities and deferred tax liabilities	163
Other long-term liabilities	72
Total long-term liabilities of discontinued operations	456
Total liabilities	$	1,245

The following is a summary of the operating results of USPS which have been reflected within income from discontinued operations, net of tax:



	Three Months Ended		Nine Months Ended
(in millions)	December 31, 2017		December 31, 2018⁽¹⁾			December 31, 2017
Revenue	$	726	$	431		$	2,113

Costs of services	544		311			1,589
Selling, general and administrative	37		50			94
Depreciation and amortization	41		33			115
Restructuring costs	3		1			10
Interest expense	4		8			11
Other income, net	—		(25		)	—
Total costs and expenses	629		378			1,819
Total income from discontinued operations, before income taxes	97		53			294
Income tax expense	24		18			96
Total income from discontinued operations	$	73	$	35		$	198

⁽¹⁾ Results for the nine months ended December 31, 2018 reflect operations through the Separation date of May 31, 2018, not the full nine-month period as shown for prior periods.

There was no gain or loss on disposition recognized as a result of the Separation.

The following selected financial information of USPS is included in the statements of cash flows:



	Nine Months Ended
(in millions)	December 31, 2018⁽¹⁾		December 31, 2017
Depreciation	$	16	$	62
Amortization	$	17	$	53
Capital expenditures	$	—	$	(8	)
Significant operating non-cash items:
Gain on dispositions	$	24	$	—

⁽¹⁾Results for the nine months ended December 31, 2018 reflect cash flows through the Separation date of May 31, 2018, not the full nine-month period as shown for prior periods.