Form 10-Q DXC Technology Co For: Dec 31

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Business

DXC Technology Company (“DXC,” the “Company,” “we,” “us,” or “our”) helps global companies run their mission critical systems and operations while modernizing IT, optimizing data architectures, and ensuring security and scalability across public, private and hybrid clouds. With decades of driving innovation, the world’s largest companies and public sector organizations trust DXC to deploy services to drive new levels of performance, competitiveness and customer experience across their IT estates.

Basis of Presentation

In order to make this report easier to read, DXC refers throughout to (i) the interim unaudited Condensed Consolidated Financial Statements as the “financial statements,” (ii) the Condensed Consolidated Statements of Operations as the “statements of operations,” (iii) the Condensed Consolidated Statements of Comprehensive (Loss) Income as the “statements of comprehensive (loss) income,” (iv) the Condensed Consolidated Balance Sheets as the “balance sheets,” and (v) the Condensed Consolidated Statements of Cash Flows as the “statements of cash flows.” In addition, references are made throughout to the numbered Notes to the Condensed Consolidated Financial Statements (“Notes”) in this Quarterly Report on Form 10-Q.

The accompanying financial statements include the accounts of DXC, its consolidated subsidiaries, and those business entities in which DXC maintains a controlling interest. Investments in business entities in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies, are accounted for by the equity method. Other investments are accounted for by the cost method. Non-controlling interests are presented as a separate component within equity in the balance sheets. Net earnings attributable to the non-controlling interests are presented separately in the statements of operations and comprehensive (loss) income attributable to non-controlling interests are presented separately in the statements of comprehensive (loss) income. All intercompany transactions and balances have been eliminated. Certain amounts reported in the previous year have been reclassified to conform to the current year presentation.

The financial statements of the Company have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for quarterly reports and accounting principles generally accepted in the United States (“GAAP”). Certain disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules. These financial statements should therefore be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022 (“fiscal 2022”).

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Use of Estimates

The preparation of the financial statements, in accordance with GAAP, requires the Company’s management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expense during the reporting period. The Company bases its estimates on assumptions regarding historical experience, currently available information, and anticipated developments that it believes are reasonable and appropriate. However, because the use of estimates involves an inherent degree of uncertainty, actual results could differ from those estimates. Estimates are used for, but are not limited to, contracts accounted for using the percentage-of-completion method, cash flows used in the evaluation of impairment of goodwill and other long-lived assets, reserves for uncertain tax positions, valuation allowances on deferred tax assets, loss accruals for litigation, and obligations related to our pension plans. In the opinion of the Company’s management, the accompanying financial statements contain all adjustments necessary, including those of a normal recurring nature, to fairly present the financial statements. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full fiscal year.

Recent Accounting Pronouncements

Recently issued ASUs effective after December 31, 2022 are not expected to have a material effect on DXC’s condensed consolidated financial statements.

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Fiscal 2023 Divestitures

During the first nine months of fiscal 2023, the Company sold insignificant businesses that resulted in a loss of $12 million.

FDB Assets Held for Sale

During the third quarter of fiscal 2022, DXC entered into a purchase agreement to sell its German financial services subsidiary ("FDB" or the "FDB Business") to the FNZ Group ("FNZ"). The closing of the transaction was subject to certain conditions, including receipt of certain regulatory consents. During the third quarter of fiscal 2023, DXC obtained regulatory consent for the FDB sale. As of December 31, 2022, the FDB Business met the requirements for presentation as assets held for sale under GAAP.

On January 3, 2023, DXC completed the sale of its FDB Business for €308 million (approximately $323 million as of January 3, 2023) resulting in an estimated pre-tax gain of approximately $180 million to be recognized in the fourth quarter of fiscal 2023.

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Assets held for sale are reported at carrying value, which is less than fair value. FDB’s assets held for sale and related liabilities as of December 31, 2022 were as follows:

(in millions)						December 31, 2022
Assets:
Cash and cash equivalents						$	509
Receivables and contract assets						67
Prepaid expenses						1
Total current assets held for sale						577
Intangible assets, net						45
Goodwill						48
Property and equipment, net						1
Other assets						12
Total non-current assets held for sale						106
Total assets held for sale						$	683
Liabilities:
Accounts payable						$	5
Accrued expenses and other current liabilities						532
Income Taxes Payable						1
Total current liabilities related to assets held for sale						538
Non-current income tax liabilities and deferred tax liabilities						7
Other long-term liabilities						4
Total long-term liabilities related to assets held for sale						11
Total liabilities related to assets held for sale						$	549

In addition to the FDB Business, certain other insignificant divestitures are included in the Company’s balance sheets as assets held for sale.

Fiscal 2022 Divestitures

HPS Sale

On April 1, 2021, DXC completed the sale of its HPS Business to Dedalus for approximately $551 million, resulting in a pre-tax gain on sale of $337 million, net of closing costs for the nine months ended December 31, 2022.

During the first nine months of fiscal 2022, the Company also sold certain insignificant businesses that resulted in a gain of $49 million. This was partially offset by $13 million in sales price adjustments related to prior year dispositions, which resulted from changes in estimated net working capital.

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Basic earnings per share (“EPS”) is computed using the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects the incremental shares issuable upon the assumed exercise of stock options and equity awards. The following table reflects the calculation of basic and diluted EPS:

						Three Months Ended												Nine Months Ended
(in millions, except per-share amounts)						December 31, 2022						December 31, 2021						December 31, 2022						December 31, 2021
Net income attributable to DXC common stockholders:						$	59					$	98					$	188					$	188
Common share information:
Weighted average common shares outstanding for basic EPS						229.54						250.27						230.65						252.44
Dilutive effect of stock options and equity awards						3.46						4.55						3.73						5.15
Weighted average common shares outstanding for diluted EPS						233.00						254.82						234.38						257.59
Earnings per share:
Basic						$	0.26					$	0.39					$	0.82					$	0.74
Diluted						$	0.25					$	0.38					$	0.80					$	0.73

Certain share-based equity awards were excluded from the computation of dilutive EPS because inclusion of these awards would have had an anti-dilutive effect. The number of awards excluded were as follows:

						Three Months Ended												Nine Months Ended
						December 31, 2022						December 31, 2021						December 31, 2022						December 31, 2021
Stock Options						467,554						507,424						474,591						518,052
Restricted Stock Units						2,490,526						112,314						2,146,455						204,459
Performance Stock Units						1,086,398						1,937,752						850,623						1,089,869

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Allowance for Doubtful Accounts

The following table presents the change in balance for the allowance for doubtful accounts:

						As of
(in millions)						December 31, 2022						March 31, 2022
Beginning balance						$	55					$	91
Provisions for losses on accounts receivable						1						5
Other adjustments to allowance and write-offs						(10)						(41)
Ending balance						$	46					$	55

Receivables Facility

The Company has an accounts receivable sales facility (as amended, restated, supplemented or otherwise modified as of December 31, 2022, the “Receivables Facility”) with certain unaffiliated financial institutions for the sale of commercial accounts receivable in the United States. The Receivables Facility was amended on July 29, 2022 extending the termination date to July 28, 2023.

As of December 31, 2022, the total availability under the Receivables Facility was $400 million, and the amount sold to the Purchasers was $400 million, which was derecognized from the Company’s balance sheet.

The fair value of the sold receivables approximated book value due to the short-term nature, and as a result, no gain or loss on sale of receivables was recorded.

The Company has operating and finance leases for data centers, corporate offices, and certain equipment. Its leases have remaining lease terms of one to 10 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within one to three years.

Operating Leases

The components of operating lease expense were as follows:

						Three Months Ended												Nine Months Ended
(in millions)						December 31, 2022						December 31, 2021						December 31, 2022						December 31, 2021
Operating lease cost						$	97					$	117					$	311					$	371
Short-term lease cost						9						9						28						32
Variable lease cost						17						17						56						50
Sublease income						(5)						(1)						(15)						(27)
Total operating costs						$	118					$	142					$	380					$	426

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Cash payments made for variable lease costs and short-term leases are not included in the measurement of operating lease liabilities, and as such, are excluded from the supplemental cash flow information stated below.

						Nine Months Ended
(in millions)						December 31, 2022						December 31, 2021
Cash paid for amounts included in the measurement of operating lease liabilities – operating cash flows						$	311					$	371
ROU assets obtained in exchange for operating lease liabilities(1)						$	193					$	130

        

(1) Net of $911 million and $792 million in lease modifications and terminations during the nine months of fiscal 2023 and 2022, respectively. See Note 17 – “Cash Flows” for further information on non-cash activities affecting cash flows.

The following table presents operating lease balances:

												As of
(in millions)						Balance Sheet Line Item						December 31, 2022						March 31, 2022
ROU operating lease assets						Operating right-of-use assets, net						$	954					$	1,133
Operating lease liabilities						Current operating lease liabilities						$	320					$	388
Operating lease liabilities						Non-current operating lease liabilities						691						815
Total operating lease liabilities												$	1,011					$	1,203

The weighted-average operating lease term was 4.1 years and 4.4 years as of December 31, 2022 and March 31, 2022, respectively. The weighted-average operating lease discount rate was 3.7% and 3.3% as of December 31, 2022 and March 31, 2022, respectively.

The following maturity analysis presents expected undiscounted cash payments for operating leases as of December 31, 2022:

						Fiscal Year
(in millions)						Remainder of 2023						2024						2025						2026						2027						Thereafter						Total
Operating lease payments						$	99					$	325					$	258					$	169					$	85					$	159					$	1,095
Less: imputed interest																																										(84)
Total operating lease liabilities																																										$	1,011

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Finance Leases

The components of finance lease expense were as follows:

						Three Months Ended												Nine Months Ended
(in millions)						December 31, 2022						December 31, 2021						December 31, 2022						December 31, 2021
Amortization of right-of-use assets						$	50					$	85					$	166					$	271
Interest on lease liabilities						4						6						13						22
Total finance lease expense						$	54					$	91					$	179					$	293

The following table provides supplemental cash flow information related to the Company’s finance leases:

						Nine Months Ended
(in millions)						December 31, 2022						December 31, 2021
Interest paid for finance lease liabilities – Operating cash flows						$	13					$	22
Cash paid for amounts included in the measurement of finance lease obligations – financing cash flows						244						403
Total cash paid in the measurement of finance lease obligations						$	257					$	425
Capital expenditures through finance lease obligations(1)						$	73					$	180

         

(1) See Note 17 – ”Cash Flows” for further information on non-cash activities affecting cash flows.

The following table presents finance lease balances:

												As of
(in millions)						Balance Sheet Line Item						December 31, 2022						March 31, 2022
ROU finance lease assets						Property and Equipment, net						$	462					$	602
Finance lease						Short-term debt and current maturities of long-term debt						$	230					$	289
Finance lease						Long-term debt, net of current maturities						289						354
Total finance lease liabilities(1)												$	519					$	643

        

(1) See Note 10 – “Debt” for further information on finance lease liabilities.

The weighted-average finance lease term was 2.8 years and 2.8 years as of December 31, 2022 and March 31, 2022, respectively. The weighted-average finance lease discount rate was 3.1% and 2.9% as of December 31, 2022 and March 31, 2022, respectively.

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The following maturity analysis presents expected undiscounted cash payments for finance leases as of December 31, 2022:

						Fiscal Year
(in millions)						Remainder of 2023						2024						2025						2026						2027						Thereafter						Total
Finance lease payments						$	71					$	216					$	138					$	76					$	38					$	6					$	545
Less: imputed interest																																										(26)
Total finance lease liabilities																																										$	519

Fair Value Measurements on a Recurring Basis

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis, excluding pension assets and derivative assets and liabilities. See Note 7 – “Derivative Instruments” for information about the Company’s derivative instruments. Note 10 – “Debt” includes information about the estimated fair value of the Company’s long-term debt. There were no transfers between any of the levels during the periods presented.

						Fair Value Hierarchy
(in millions)						December 31, 2022
Assets:						Fair Value						Level 1						Level 2						Level 3
Money market funds and money market deposit accounts						$	28					$	28					$	—					$	—
Time deposits(1)						36						36						—						—
Other securities(2)						46						—						44						2
Total assets						$	110					$	64					$	44					$	2
Liabilities:
Contingent consideration						$	1					$	—					$	—					$	1
Total liabilities						$	1					$	—					$	—					$	1

						March 31, 2022
Assets:						Fair Value						Level 1						Level 2						Level 3
Money market funds and money market deposit accounts						$	5					$	5					$	—					$	—
Time deposits(1)						51						51						—						—
Other securities(2)						51						—						49						2
Total assets						$	107					$	56					$	49					$	2
Liabilities:
Contingent consideration						$	8					$	—					$	—					$	8
Total liabilities						$	8					$	—					$	—					$	8

        

(1) Cost basis approximated fair value due to the short period of time to maturity.

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In the normal course of business, the Company is exposed to interest rate and foreign exchange rate fluctuations. As part of its risk management strategy, the Company uses derivative instruments, primarily foreign currency forward contracts and interest rate swaps, to hedge certain foreign currency and interest rate exposures. The Company’s objective is to reduce earnings volatility by offsetting gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them. The Company does not use derivative instruments for trading or any speculative purposes.

Derivatives Designated for Hedge Accounting

Cash flow hedges

The Company has designated certain foreign currency forward contracts as cash flow hedges to reduce foreign currency risk related to certain Indian Rupee-denominated intercompany obligations and forecasted transactions. The notional amounts of foreign currency forward contracts designated as cash flow hedges as of December 31, 2022 and March 31, 2022 were $836 million and $727 million, respectively. As of December 31, 2022, the related forecasted transactions extend through December 2024.

For the three and nine months ended December 31, 2022 and December 31, 2021, respectively, the Company performed an assessment at the inception of the cash flow hedge transactions and determined that all critical terms of the hedging instruments and hedged items matched. The Company performs an assessment of critical terms on an on-going basis throughout the hedging period. During the three and nine months ended December 31, 2022 and December 31, 2021, respectively, the Company had no cash flow hedges for which it was probable that the hedged transaction would not occur. As of December 31, 2022, $5 million of the existing amount of loss related to the cash flow hedge reported in accumulated other comprehensive loss is expected to be reclassified into earnings within the next 12 months.

Amounts recognized in other comprehensive (loss) income and income before income taxes

During the three and nine months ended December 31, 2022, the pre-tax gain (loss) on derivatives designated for hedge accounting recognized in other comprehensive (loss) income was $(23) million and $(14) million, respectively, and recognized in income before income taxes was $1 million and $10 million, respectively.

Derivatives Not Designated for Hedge Accounting

The derivative instruments not designated as hedges for purposes of hedge accounting include certain short-term foreign currency forward contracts. Derivatives that are not designated as hedging instruments are adjusted to fair value through earnings in the financial statement line item to which the derivative relates.

Foreign currency forward contracts

The Company manages the exposure to fluctuations in foreign currencies by using short-term foreign currency forward contracts to hedge certain foreign currency denominated assets and liabilities, including intercompany accounts and forecasted transactions. The net notional amounts of the foreign currency forward contracts outstanding as of December 31, 2022 and March 31, 2022 were $2.0 billion and $2.1 billion, respectively.

The following table presents the pretax amounts impacting income related to foreign currency forward contracts designated and non-designated for hedge accounting:

												For the Three Months Ended												For the Nine Months Ended
(in millions)						Statement of Operations Line Item						December 31, 2022						December 31, 2021						December 31, 2022						December 31, 2021
Foreign currency forward contracts						Other (income) expense, net						$	52					$	(9)					$	(27)					$	39

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Fair Value of Derivative Instruments

All derivative instruments are recorded at fair value. The Company’s accounting treatment for these derivative instruments is based on its hedge designation. The following tables present the fair values of derivative instruments included in the balance sheets:

												As of
(in millions)						Balance Sheet Line Item						December 31, 2022						March 31, 2022
Derivatives designated for hedge accounting:
Foreign currency forward contracts						Other current assets						$	10					$	18
						Accrued expenses and other current liabilities						$	18					$	—
Derivatives not designated for hedge accounting:
Foreign currency forward contracts						Other current assets						$	7					$	9
						Accrued expenses and other current liabilities						$	51					$	15

The fair value of foreign currency forward contracts represents the estimated amount required to settle the contracts using current market exchange rates and is based on the period-end foreign currency exchange rates and forward points which are classified as Level 2 inputs.

Other Risks for Derivative Instruments

The Company is exposed to the risk of losses in the event of non-performance by the counterparties to its derivative contracts. The amount subject to credit risk related to derivative instruments is generally limited to the amount, if any, by which a counterparty’s obligations exceed the obligations of the Company with that counterparty. To mitigate counterparty credit risk, the Company regularly reviews its credit exposure and the creditworthiness of the counterparties. With respect to its foreign currency derivatives, as of December 31, 2022, there were 10 counterparties with concentration of credit risk, and based on gross fair value, the maximum amount of loss that the Company could incur is $1 million.

The Company also enters into enforceable master netting arrangements with some of its counterparties. However, for financial reporting purposes, it is the Company’s policy not to offset derivative assets and liabilities despite the existence of enforceable master netting arrangements. The potential effect of such netting arrangements on the Company’s balance sheets is not material for the periods presented.

Non-Derivative Financial Instruments Designated for Hedge Accounting

The Company applies hedge accounting for foreign currency-denominated debt used to manage foreign currency exposures on its net investments in certain non-U.S. operations. To qualify for hedge accounting, the hedging instrument must be highly effective at reducing the risk from the exposure being hedged.

Net Investment Hedges

DXC seeks to reduce the impact of fluctuations in foreign exchange rates on its net investments in certain non-U.S. operations with foreign currency-denominated debt. For foreign currency-denominated debt designated as a hedge, the effectiveness of the hedge is assessed based on changes in spot rates. For qualifying net investment hedges, all gains or losses on the hedging instruments are included in currency translation. Gains or losses on individual net investments in non-U.S. operations are reclassified to earnings from accumulated other comprehensive (loss) income when such net investments are sold or substantially liquidated.

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Intangible assets consisted of the following:

						As of December 31, 2022																		As of March 31, 2022
(in millions)						Gross Carrying Value						Accumulated Amortization						Net Carrying Value						Gross Carrying Value						Accumulated Amortization						Net Carrying Value
Software						$	3,999					$	3,198					$	801					$	4,063					$	3,039					$	1,024
Customer related						3,891						2,140						1,751						4,148						1,995						2,153
Other						309						120						189						291						90						201
Total intangible assets						$	8,199					$	5,458					$	2,741					$	8,502					$	5,124					$	3,378

The components of amortization expense were as follows:

						Three Months Ended												Nine Months Ended
(in millions)						December 31, 2022						December 31, 2021						December 31, 2022						December 31, 2021
Intangible asset amortization						$	201					$	212					$	598					$	649
Transition and transformation contract cost amortization(1)						51						56						156						166
Total amortization expense						$	252					$	268					$	754					$	815

        

(1)Transition and transformation contract costs are included within other assets on the balance sheet.

Estimated future amortization related to intangible assets as of December 31, 2022 is as follows:

Fiscal Year						(in millions)
Remainder of 2023						$	232
2024						706
2025						591
2026						526
2027						383
Thereafter						303
Total						$	2,741

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The following table summarizes the changes in the carrying amount of goodwill, by segment, as of December 31, 2022.

(in millions)						GBS						GIS						Total
Goodwill, gross						$	5,107					$	5,066					$	10,173
Accumulated impairment losses						(4,490)						(5,066)						(9,556)
Balance as of March 31, 2022, net						$	617					$	—					$	617
Divestitures						(12)						—						(12)
Assets held for sale						(48)						—						(48)
Foreign currency translation						(22)						—						(22)
Balance as of December 31, 2022, net						$	535					$	—					$	535
Goodwill, gross						5,025						5,066						10,091
Accumulated impairment losses						(4,490)						(5,066)						(9,556)
Balance as of December 31, 2022, net						$	535					$	—					$	535

The foreign currency translation amount reflects the impact of currency movements on non-U.S. dollar-denominated goodwill balances.

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The following is a summary of the Company’s debt:

			(in millions)						Interest Rates						Fiscal Year Maturities						12/31/2022(1)						3/31/2022(1)
			Short-term debt and current maturities of long-term debt
			Commercial paper(2)						1.88% - 2.49%						2023						$	401					$	362
			Current maturities of long-term debt						Various						2023 - 2024						242						249
			Current maturities of finance lease liabilities						0.30% - 14.30%						2023 - 2024						230						289
			Short-term debt and current maturities of long-term debt																		$	873					$	900
			Long-term debt, net of current maturities
			€650 million Senior notes						1.75%						2026						692						720
			$700 million Senior notes						1.80%						2027						695						694
			€750 million Senior notes						0.45%						2028						796						828
			$650 million Senior notes						2.375%						2029						645						644
			€600 million Senior notes						0.95%						2032						635						661
			Finance lease liabilities						0.30% - 14.30%						2023 - 2028						519						643
			Borrowings for assets acquired under long-term financing						0.00% - 9.78%						2023 - 2029						275						344
			Mandatorily redeemable preferred stock outstanding						6.00%						2023						64						63
			Other borrowings						Various						2023 - 2024						1						6
			Long-term debt																		4,322						4,603
			Less: current maturities																		472						538
			Long-term debt, net of current maturities																		$	3,850					$	4,065

        

(1)The carrying amounts of the senior notes as of December 31, 2022 and March 31, 2022, include the remaining principal outstanding of $3,486 million and $3,575 million, respectively, net of total unamortized debt (discounts) and premiums, and deferred debt issuance costs of $(23) million and $(28) million respectively.

(2)At DXC’s option, DXC can borrow up to a maximum of €1 billion or its equivalent in €, £, and $.

Term Loan

During the second quarter of fiscal 2023, the Company entered into a $500 million term loan credit agreement (the “USD Term Loan”) with certain unaffiliated financial institutions that matures on September 1, 2024, unless the Company exercises its option to extend for one year until September 1, 2025. The USD Term Loan is required to be drawn down by March 1, 2023. The Company did not draw on the USD Term Loan as of December 31, 2022.

Fair Value of Debt

The estimated fair value of the Company’s long-term debt, excluding finance lease liabilities, was $3.3 billion and $3.7 billion as of December 31, 2022 and March 31, 2022, respectively, compared with carrying value of $3.8 billion and $4.0 billion as of December 31, 2022 and March 31, 2022, respectively.

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Revenue Recognition

The following table presents DXC’s revenues disaggregated by geography, based on the location of incorporation of the DXC entity providing the related goods or services:

						Three Months Ended												Nine Months Ended
(in millions)						December 31, 2022						December 31, 2021						December 31, 2022						December 31, 2021
United States						$	1,054					$	1,168					$	3,278					$	3,570
United Kingdom						469						578						1,394						1,749
Other Europe						1,119						1,319						3,321						3,878
Australia						343						376						1,105						1,172
Other International						581						648						1,741						1,888
Total Revenues						$	3,566					$	4,089					$	10,839					$	12,257

The revenue by geography pertains to both of the Company’s reportable segments. Refer to Note 18 – “Segment Information” for the Company’s segment disclosures.

Remaining Performance Obligations

As of December 31, 2022, approximately $19.6 billion of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 13% of these remaining performance obligations in fiscal 2023, with the remainder of the balance recognized thereafter.

Contract Balances

The following table provides information about the balances of the Company’s trade receivables and contract assets and contract liabilities:

						As of
(in millions)						December 31, 2022						March 31, 2022
Trade receivables, net						$	2,364					$	2,694
Contract assets						$	325					$	371
Contract liabilities						$	1,773					$	1,915

Changes in contract liabilities were as follows:

						Nine Months Ended
(in millions)						December 31, 2022						December 31, 2021
Balance, beginning of period						$	1,915					$	1,701
Deferred revenue						1,699						2,287
Recognition of deferred revenue						(1,725)						(2,032)
Currency translation adjustment						(88)						(22)
Other						(28)						(51)
Balance, end of period						$	1,773					$	1,883

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The composition of restructuring liabilities by financial statement line item is as follows:

						As of
(in millions)						December 31, 2022						March 31, 2022
Accrued expenses and other current liabilities						$	79					$	113
Other long-term liabilities						24						39
Total						$	103					$	152

Summary of Restructuring Plans

Fiscal 2023 Plan

During fiscal 2023, management approved global cost savings initiatives designed to better align the Company’s workforce and facility structures (the “Fiscal 2023 Plan”).

Restructuring Liability Reconciliations by Plan

						Restructuring Liability as of March 31, 2022																		Costs Expensed, Net of Reversals						Costs Not Affecting Restructuring Liability(1)						Cash Paid						Other(2)						Restructuring Liability as of December 31, 2022
Fiscal 2023 Plan
Workforce Reductions						$	—																	$	85					$	—					$	(50)					$	—					$	35
Facilities Costs						—																		26						(17)						(7)						(1)						1
						—																		111						(17)						(57)						(1)						36
Fiscal 2022 Plan
Workforce Reductions						$	84																	$	(1)					$	—					$	(48)					$	(5)					$	30
Facilities Costs						1																		27						(6)						(22)						1						1
						85																		26						(6)						(70)						(4)						31
Other Prior Year and Acquired Plans
Workforce Reductions						$	64																	$	(1)					$	—					$	(27)					$	(3)					$	33
Facilities Costs						3																		(1)						—						—						1						3
						67																		(2)						—						(27)						(2)						36
Total						$	152																	$	135					$	(23)					$	(154)					$	(7)					$	103

        

(1) Pension benefit augmentations recorded as pension liabilities, asset impairments and restructuring costs associated with right-of-use assets.

(2) Foreign currency translation adjustments.

For the nine months ended December 31, 2022, $16 million of restructuring costs is related to amortization of the right-of-use asset and interest expense for leased facilities that we have vacated but are being actively marketed for sublease or we are in negotiations with the landlord to potentially terminate or modify those leases.

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Defined Benefit Plans

The components of net periodic pension income were:

																								Three Months Ended												Nine Months Ended
(in millions)																								December 31, 2022						December 31, 2021						December 31, 2022						December 31, 2021
Service cost																								$	18					$	22					$	55					$	67
Interest cost																								62						50						192						153
Expected return on assets																								(120)						(139)						(374)						(432)
Amortization of prior service costs																								(2)						(2)						(6)						(6)
Contractual termination benefit																								—						(3)						—						(2)
Recognition of actuarial loss																								—						7						1						7
Net periodic pension income																								$	(42)					$	(65)					$	(132)					$	(213)

The service cost component of net periodic pension income is presented in costs of services and selling, general and administrative and the other components of net periodic pension income are presented in other income, net.

The Company’s effective tax rate (“ETR”) was 40.2% and 38.6% for the three months ended December 31, 2022 and December 31, 2021, respectively, and 30.9% and 42.4% for the nine months ended December 31, 2022 and December 31, 2021, respectively. For the three months ended December 31, 2022, the primary drivers of the ETR were the global mix of income, U.S. tax on foreign income, a decrease in the base erosion and anti-abuse tax, and an increase in unrecognized tax benefits primarily related to foreign tax credits. For the nine months ended December 31, 2022, the primary drivers of the ETR were the global mix of income, U.S. tax on foreign income, a decrease in the base erosion and anti-abuse tax, and the tax impact of business divestitures. For the three months ended December 31, 2021, the primary drivers of the ETR were the global mix of income, an increase in unrecognized tax benefits primarily related to deductions taken in prior tax returns and tax rate changes in non-U.S. jurisdictions. For the nine months ended December 31, 2021, the primary drivers of the ETR were the global mix of income, gain on sale of HPS business, tax rate changes in non-U.S. jurisdictions and recording a valuation allowance on certain deferred tax assets in non-U.S. jurisdictions.

The majority of our global unremitted foreign earnings have been taxed or would be exempt from U.S. tax upon repatriation. Such earnings and all current foreign earnings are not indefinitely reinvested. The following earnings are considered indefinitely reinvested: approximately $475 million that could be subject to U.S. federal tax when repatriated to the U.S. under section 1.245A-5(b) of the final Treasury regulations; and our accumulated earnings in India as of March 31, 2021. A portion of these indefinitely reinvested earnings may be subject to foreign and U.S. state tax consequences when remitted. The Company will continue to evaluate its position based on its future strategy and cash needs.

In connection with the HPES Merger, the Company entered into a tax matters agreement with HPE. HPE generally will be responsible for tax liabilities arising prior to the HPES Merger, and DXC is liable to HPE for income tax receivables it receives related to pre-HPES Merger periods. Pursuant to the tax matters agreement, the Company recorded a $27 million tax indemnification receivable related to uncertain tax positions, a $60 million tax indemnification receivable related to other tax payables, and a $104 million tax indemnification payable related to other tax receivables.

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In connection with the spin-off of the Company’s former U.S. public sector business (the “USPS Separation”), the Company entered into a tax matters agreement with Perspecta Inc. (including its successors and permitted assigns, “Perspecta”). The Company generally will be responsible for tax liabilities arising prior to the USPS Separation, and Perspecta is liable to the Company for income tax receivables related to pre-spin-off periods. Income tax liabilities transferred to Perspecta primarily relate to pre-HPES Merger periods, for which the Company is indemnified by HPE pursuant to the tax matters agreement between the Company and HPE. The Company remains liable to HPE for tax receivables transferred to Perspecta related to pre-HPES Merger periods. Pursuant to the tax matters agreement, the Company recorded a $50 million tax indemnification receivable from Perspecta related to other tax payables and a $6 million tax indemnification payable to Perspecta related to income tax and other tax receivables.

In connection with the sale of the HPS business, the Company entered into a tax matters agreement with Dedalus. Pursuant to the tax matters agreement, the Company generally will be responsible for tax liabilities arising prior to the sale of the HPS business.

The Internal Revenue Service (the “IRS”) has examined, or is examining, the Company’s federal income tax returns for fiscal 2009 through the tax year ended October 31, 2018. With respect to CSC’s fiscal 2009 through 2017 federal tax returns, the Company participated in settlement negotiations with the IRS Office of Appeals. The IRS examined several issues for these tax years that resulted in various audit adjustments. The Company and the IRS Office of Appeals have settled various audit adjustments, and we disagree with the IRS’ disallowance of certain losses and deductions resulting from restructuring costs and tax planning strategies in previous years. As we believe we will ultimately prevail on the technical merits of the disagreed items and are challenging them in U.S. Tax Court, these matters are not fully reserved and would result in a federal and state tax expense of approximately $472 million (including estimated interest and penalties) for the unreserved portion of these items and related cash cost if we do not prevail. We have received notices of deficiency with respect to fiscal 2009, 2010, 2011 and 2013 and have timely filed petitions with the U.S. Tax Court. We do not expect the U.S. Tax Court matters to be resolved in the next 12 months.

The Company’s fiscal years 2009, 2010, 2011 and 2013 are in the U.S. Tax Court, and consequently these years will remain open until such proceedings have concluded. The statute of limitations on assessments related to a refund claim for fiscal year 2012 is open through February 28, 2025. The Company has agreed to extend the statute of limitations for fiscal years 2014 and 2015 through February 28, 2023 and fiscal and tax return years 2016 through 2020 to September 30, 2024. The statute of limitations is also open on assessments related to certain refund claims for fiscal years 2014 to 2017 through August 15, 2023.

The Company expects to reach resolution with regard to disagreed items for fiscal years 2009 through 2013 no earlier than fiscal 2025, to reach resolution for fiscal years 2014 and 2015 no earlier than fiscal 2024, and to reach resolution for fiscal years 2016 through 2020 no earlier than fiscal 2025.

The Company may settle certain other tax examinations for different amounts than the Company has accrued as uncertain tax positions. Consequently, the Company may need to accrue and ultimately pay additional amounts or pay lower amounts than previously estimated and accrued when positions are settled in the future. For the three months ended December 31, 2022, the Company’s liability for uncertain tax positions increased by $16 million (excluding interest and penalties and related tax attributes) primarily due to the benefit of U.S. foreign tax credits. The Company believes the outcomes that are reasonably possible within the next 12 months to result in a reduction in its liability for uncertain tax positions, excluding interest, penalties, and tax carryforwards, would be approximately $7 million.

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Share Repurchases

The details of shares repurchased during the nine months ended December 31, 2022 and December 31, 2021 are shown below:

						Fiscal 2023																		Fiscal 2022
Fiscal Period						Number of Shares Repurchased						Average Price Per Share						Amount (in millions)						Number of Shares Repurchased						Average Price Per Share						Amount (in millions)
1st Quarter						8,850,912						$	30.09					$	266					1,750,000						$	38.52					$	67
2nd Quarter						—						$	—					—						2,112,212						$	39.10					83
3rd Quarter						2,063,645						$	27.41					57						6,755,555						$	31.48					213
Total						10,914,557						$	29.59					$	323					10,617,767						$	34.15					$	363

Accumulated Other Comprehensive Loss

The following table shows the changes in accumulated other comprehensive loss, net of taxes:

(in millions)						Foreign Currency Translation Adjustments						Cash Flow Hedges												Pension and Other Post-retirement Benefit Plans						Accumulated Other Comprehensive Loss
Balance at March 31, 2022						$	(651)					$	10											$	256					$	(385)
Other comprehensive (loss) income before reclassifications						(329)						(7)												—						(336)
Amounts reclassified from accumulated other comprehensive loss						—						(10)												(5)						(15)
Balance at December 31, 2022						$	(980)					$	(7)											$	251					$	(736)

(in millions)						Foreign Currency Translation Adjustments						Cash Flow Hedges						Pension and Other Post-retirement Benefit Plans						Accumulated Other Comprehensive Loss
Balance at March 31, 2021						$	(554)					$	(1)					$	253					$	(302)
Other comprehensive (loss) income before reclassifications						—						12						—						12
Amounts reclassified from accumulated other comprehensive loss(1)						(86)						(3)						(6)						(95)
Balance at December 31, 2021						$	(640)					$	8					$	247					$	(385)

        

(1)Includes net cumulative foreign currency translation losses of $86 million upon sale of foreign entities primarily related to the HPS business divestiture. See Note 2 – “Divestitures” for additional information.

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Restricted Stock Units and Performance-Based Restricted Stock Units

Restricted stock units (“RSUs”) represent the right to receive one share of DXC common stock upon a future settlement date, subject to vesting and other terms and conditions of the award, plus any dividend equivalents accrued during the award period. The Company also grants Performance-based restricted stock units (“PSUs”), which generally vest over a three-year period. The number of PSUs that ultimately vest is dependent upon the Company’s achievement of certain specified market- and performance-based criteria over the three-year vesting period. The fair value of RSUs and PSUs is based on the Company’s common stock closing price on the grant date. For PSUs with a market-based condition, DXC uses a Monte Carlo simulation model to value the grants.

						Employee Equity Plan												Director Equity Plan
						Number of Shares						Weighted Average Grant Date Fair Value						Number of Shares						Weighted Average Grant Date Fair Value
Outstanding as of March 31, 2022						7,477,126						$	35.89					156,722						$	36.18
Granted						3,273,088						$	38.65					58,500						$	31.54
Settled						(2,061,787)						$	33.65					(75,335)						$	32.62
Canceled/Forfeited						(1,095,402)						$	38.72					—						$	—
Outstanding as of December 31, 2022						7,593,025						$	37.11					139,887						$	36.15

Share-Based Compensation

						Three Months Ended												Nine Months Ended
(in millions)						December 31, 2022						December 31, 2021						December 31, 2022						December 31, 2021
Total share-based compensation cost						$	26					$	26					$	81					$	77
Related income tax benefit						$	2					$	4					$	8					$	11

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Cash payments for interest on indebtedness and income taxes and other select non-cash activities are as follows:

						Nine Months Ended
(in millions)						December 31, 2022						December 31, 2021
Cash paid for:
Interest						$	115					$	177
Taxes on income, net of refunds (1)						$	289					$	326
Non-cash activities:
Operating:
ROU assets obtained in exchange for lease, net (2)						$	193					$	130
Assets acquired under long-term financing						$	74					$	111
Investing:
Capital expenditures in accounts payable and accrued expenses						$	2					$	60
Capital expenditures through finance lease obligations						$	73					$	180
Assets acquired under long-term financing						$	6					$	44
Financing:
Shares repurchased but not settled in cash						$	4					$	11

        

    

(1) Income tax refunds were $56 million and $46 million for the nine months ended December 31, 2022 and December 31, 2021, respectively.

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DXC has a matrix form of organization and is managed in several different and overlapping groupings including services, industries and geographic regions. As a result, and in accordance with accounting standards, operating segments are organized by the type of services provided. DXC's chief operating decision maker ("CODM"), the chief executive officer, obtains, reviews, and manages the Company’s financial performance based on these segments. The CODM uses these results, in part, to evaluate the performance of, and allocate resources to, each of the segments.

Global Business Services (“GBS”)

GBS provides innovative technology solutions that help our customers address key business challenges and accelerate transformations tailored to each customer’s industry and specific objectives. GBS offerings include:

•Analytics and Engineering. Our portfolio of analytics services and extensive partner ecosystem help customers gain rapid insights, automate operations, and accelerate their transformation journeys. We provide software engineering, consulting, and data analytics solutions that enable businesses to run and manage their mission-critical functions, transform their operations, and develop new ways of doing business.

•Applications. We help simplify, modernize, and accelerate mission-critical applications that support business agility and growth through our Applications services. We are the engineers that enable our customers to take advantage of the latest digital platforms with both customized and pre-packaged applications, ensure resiliency, launch new products and enter new markets with minimal disruption. We help customers define, execute and manage their enterprise applications strategy.

•Insurance Software and Business Process Services. We partner with insurance clients, to modernize and run IT systems, provide proprietary modular insurance software and platforms, and operate the full spectrum of insurance business process services. We also help operate and continuously improve bank cards, payment and lending processes and operations, and customer experience operations. We administer 13 million insurance policies and contracts, and manage 250 million customer interactions each year across industries.

Global Infrastructure Services (“GIS”)

GIS provides a portfolio of technology offerings that deliver predictable outcomes and measurable results while reducing business risk and operational costs for customers. GIS offerings include:

•Security. Our Security services help customers assess risk and proactively address all facets of the security environment, from threat intelligence to compliance. We leverage proven methodologies, intelligent automation and industry-leading partners to tailor security solutions to customers’ unique business needs. Our experts weave cyber resilience into IT security, operations and culture. Whether migrating to the cloud, protecting data with a Zero Trust strategy or managing a security operations center, our Security services enable our customers to focus on their business.

•Cloud Infrastructure and IT Outsourcing (“ITO”). We enable customers to do Cloud Right™, making the right investments at the right time and on the right platforms. We orchestrate hybrid cloud and multicloud environments, ensuring private and public clouds, servers and mainframes operate effectively together. We provide companies with tailored plans for cloud migration and optimization to enable successful transformation. We leverage our deep expertise in legacy IT and drive innovation with reliable, secure, mission-critical IT Outsourcing services – from compute and data center, to storage and backup, to network, to mainframe and to business continuity – providing a clear path to modernization.

•Modern Workplace. Our Modern Workplace services put the employee experience first, helping them achieve new levels of productivity, engagement and collaboration while working seamlessly and securely on any device. Organizations are empowered to deliver a consumer-like experience, centralize IT management and support services, and improve the total cost of ownership.

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Segment Measures

The following table summarizes operating results regularly provided to the CODM by reportable segment and a reconciliation to the financial statements:

(in millions)						GBS						GIS												Total Reportable Segments						All Other						Totals
Three Months Ended December 31, 2022
Revenues						$	1,738					$	1,828											$	3,566					$	—					$	3,566
Segment profit						$	244					$	123											$	367					$	(58)					$	309
Depreciation and amortization(1)						$	42					$	209											$	251					$	24					$	275
Three Months Ended December 31, 2021
Revenues						$	1,946					$	2,143											$	4,089					$	—					$	4,089
Segment profit						$	315					$	102											$	417					$	(62)					$	355
Depreciation and amortization(1)						$	39					$	252											$	291					$	27					$	318

(in millions)						GBS						GIS												Total Reportable Segments						All Other						Totals
Nine Months Ended December 31, 2022
Revenues						$	5,209					$	5,630											$	10,839					$	—					$	10,839
Segment profit						$	672					$	364											$	1,036					$	(199)					$	837
Depreciation and amortization(1)						$	123					$	643											$	766					$	73					$	839
Nine Months Ended December 31, 2021
Revenues						$	5,706					$	6,551											$	12,257					$	—					$	12,257
Segment profit						$	885					$	351											$	1,236					$	(203)					$	1,033
Depreciation and amortization(1)						$	130					$	755											$	885					$	84					$	969

        

    

(1) Depreciation and amortization as presented excludes amortization of acquired intangible assets of $100 million and $106 million for the three months ended December 31, 2022 and 2021, respectively, and $305 million and $325 million for the nine months ended December 31, 2022 and 2021, respectively.

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Reconciliation of Reportable Segment Profit to Consolidated Total

The Company's management uses segment profit as the measure for assessing performance of its segments. Segment profit is defined as segment revenues less cost of services, segment selling, general and administrative, depreciation and amortization, and other income (excluding the movement in foreign currency exchange rates on DXC's 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 generally 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.

						Three Months Ended												Nine Months Ended
(in millions)						December 31, 2022						December 31, 2021						December 31, 2022						December 31, 2021
Profit
Total profit for reportable segments						$	367					$	417					$	1,036					$	1,236
All other loss						(58)						(62)						(199)						(203)
Subtotal						$	309					$	355					$	837					$	1,033
Interest income						41						15						89						51
Interest expense						(56)						(38)						(137)						(161)
Restructuring costs						(49)						(36)						(135)						(248)
Transaction, separation and integration-related costs						(6)						(11)						(12)						(23)
Amortization of acquired intangible assets						(100)						(106)						(305)						(325)
Merger related indemnification						(11)						—						(21)						—
SEC Matter						—						—						(8)						—
(Losses) gains on dispositions						(9)						(4)						(12)						343
Arbitration loss						(9)						—						(9)						—
Impairment losses						(8)						—						(8)						(10)
Debt extinguishment costs						—						(2)						—						(311)
Pension and OPEB actuarial and settlement losses						—						(7)						(1)						(7)
Income before income taxes						$	102					$	166					$	278					$	342

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Commitments

Minimum purchase commitments as of December 31, 2022 were as follows:

Fiscal year						Minimum Purchase Commitment
(in millions)
Remainder of 2023						$	159
2024						440
2025						271
2026						256
2027						27
Total						$	1,153

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Contingencies

Forsyth, et al. v. HP Inc. and Hewlett Packard Enterprise: On August 18, 2016, this purported class and collective action was filed in the U.S. District Court for the Northern District of California, against HP and HPE alleging violations of the Federal Age Discrimination in Employment Act (“ADEA”) and California state law, in connection with workforce reductions that occurred in or after August 2012 in California, and in or after as early as December 2014 in other U.S. locations. Former business units of HPE now owned by the Company, and former business units of the Company now owned by Peraton (formerly Perspecta), may be proportionately liable for any recovery by plaintiffs in this matter.

In December 2020, Plaintiffs filed a motion for preliminary certification of the collective action, which Defendants opposed. In April 2021, the court granted Plaintiffs’ motion for preliminary certification and lifted the previously imposed stay of the action. In November 2021, notice was sent to putative members of the ADEA collectives regarding participation in the case. In February 2022, the notice period closed. The litigation is currently in discovery.

Oracle America, Inc., et al. v. Hewlett Packard Enterprise Company: On March 22, 2016, Oracle filed a complaint against HPE in the U.S. District Court for the Northern District of California, alleging copyright infringement, interference with contract, intentional interference with prospective economic relations, and unfair competition. The litigation relates in part to former business units of HPE that are now owned by the Company. The Company may be required to indemnify HPE for a portion of any recovery by Oracle in the litigation related to these business units.

Oracle’s claims arise primarily out of HPE’s prior relationship with a third-party maintenance provider named Terix Computer Company, Inc. (“Terix”). Oracle claims that Terix infringed its copyrights while acting as HPE’s subcontractor for certain customers of HPE’s multivendor support business. Oracle claims that HPE is liable for vicarious and contributory infringement arising from the alleged actions of Terix and for direct infringement arising from HPE’s own alleged conduct.

On January 29, 2019, the court granted HPE’s motion for summary judgment and denied Oracle’s motion for summary judgment, resolving the matter in HPE’s favor. Oracle appealed the judgment to the U.S. Court of Appeals for the Ninth Circuit. In August 2020, the court granted Oracle’s appeal in part. The case was then remanded to the District Court for further proceedings.

In January 2021, the District Court entered a scheduling order that provided for summary judgment briefing to be completed by May 2021 and a trial date in November 2021. In June 2021, the Court issued a decision denying HPE’s motion for summary judgment and granting Oracle’s motion for summary judgment on various HPE defenses. In November 2021, the court issued an order continuing the trial to May 2022.

A jury trial was held in May - June 2022, after which a jury awarded Oracle $30 million in damages. In September 2022, Oracle filed a motion seeking $27 million in attorneys’ fees and prejudgment interest. In November 2022, the Company entered into a settlement agreement with Oracle and HPE, resolving all matters in the litigation and the Company’s indemnification obligations to HPE. In January 2023, the Court entered an order dismissing the case with prejudice. The matter is now closed.

In re DXC Technology Company Securities Litigation: Previously disclosed securities litigation matters have been dismissed, with one case remaining, in the Superior Court of the State of California.

On August 20, 2019, a purported class action lawsuit was filed in the Superior Court of the State of California, County of Santa Clara, against the Company, directors of the Company, and a former officer of the Company, among other defendants. The action asserts claims under Sections 11, 12 and 15 of the Securities Act of 1933, as amended, and is premised on allegedly false and/or misleading statements, and alleged non-disclosure of material facts, regarding the Company’s prospects and expected performance. The putative class of plaintiffs includes all persons who acquired shares of the Company’s common stock pursuant to the offering documents filed with the Securities and Exchange Commission in connection with the April 2017 transaction that formed DXC.

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The State of California action had been stayed pending the outcome of the substantially similar federal action filed in the United States District Court for the Northern District of California. The federal action was dismissed with prejudice in December 2021. Thereafter, the state court lifted the stay and entered an order permitting additional briefing by the parties. In March 2022, Plaintiffs filed an amended complaint, which the Company moved to dismiss. In August 2022, the Court granted the Company’s motion to dismiss, but permitted Plaintiffs to amend and refile their complaint. In September 2022, Plaintiffs filed a second amended complaint, which the Company moved to dismiss. In January 2023, the Court issued an order denying the Company’s motion to dismiss the second amended complaint. The Court has scheduled a case management conference in February 2023 to discuss how the matter will progress.

The Company believes that the final remaining lawsuit described above is also without merit, and intends to vigorously defend it.

Tax Examinations: The Company is under IRS examination in the U.S. on its federal income tax returns for certain fiscal years and is in disagreement with the IRS on certain tax positions. For more detail, see Note 14 – “Income Taxes” for further information.

SEC Matter: In December 2019, the Company received a request for voluntary production of information in connection with an informal investigation by the U.S. Securities and Exchange Commission. The current focus of the investigation is the Company’s historical reporting related to its non-GAAP adjustment for “transaction, separation, and integration-related costs,” including whether the disclosure the Company previously used to describe the non-GAAP adjustment was sufficiently broad to cover certain expenses the Company included as transaction, separation, and integration-related costs. The non-GAAP costs at issue primarily consist of expenses associated with the business combination that formed DXC in 2017. The Company has cooperated fully with the SEC’s informal investigation, and the new management team appointed beginning in September of 2019 has proactively clarified and expanded the disclosure of the Company’s non-GAAP transaction, separation, and integration-related costs. In addition, the new management team significantly reduced the transaction, separation, and integration-related costs.

The Company intends to continue its voluntary cooperation with the SEC while seeking to resolve the matter. There can be no guarantee that any final resolution will be reached or, if one is reached, as to the timing or final terms of any such resolution. However, in the second quarter of the Company’s fiscal year 2023, the Company accrued $8 million, representing its current estimate of the settlement costs based on its ongoing discussions with the SEC.

In addition to the matters noted above, the Company is currently subject in the normal course of business to various claims and contingencies arising from, among other things, disputes with customers, vendors, employees, contract counterparties and other parties, as well as securities matters, environmental matters, matters concerning the licensing and use of intellectual property, and inquiries and investigations by regulatory authorities and government agencies. Some of these disputes involve or may involve litigation. The financial statements reflect the treatment of claims and contingencies based on management’s view of the expected outcome. DXC consults with outside legal counsel on issues related to litigation and regulatory compliance and seeks input from other experts and advisors with respect to matters in the ordinary course of business. Although the outcome of these and other matters cannot be predicted with certainty, and the impact of the final resolution of these and other matters on the Company’s results of operations in a particular subsequent reporting period could be material and adverse, management does not believe based on information currently available to the Company, that the resolution of any of the matters currently pending against the Company will have a material adverse effect on the financial position of the Company or the ability of the Company to meet its financial obligations as they become due. Unless otherwise noted, the Company is unable to determine at this time a reasonable estimate of a possible loss or range of losses associated with the foregoing disclosed contingent matters.

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