DXC TECHNOLOGY COMPANY Introduction
The purpose of the Management's Discussion and Analysis of Financial Condition
and Results of Operations ("MD&A") is to present information that management
believes is relevant to an assessment and understanding of our results of
operations and cash flows for the first quarter of fiscal 2023 and our financial
condition as of June 30, 2022 . The MD&A is provided as a supplement to, and
should be read in conjunction with, our financial statements and accompanying
notes.
The MD&A is organized in the following sections:
•Background
•Results of Operations
•Liquidity and Capital Resources
•Critical Accounting Estimates
The following discussion includes a comparison of our results of operations and
liquidity and capital resources for the first quarters of fiscal 2023 and fiscal
2022. References are made throughout to the numbered Notes to the Condensed
Consolidated Financial Statements ("Notes") in this Quarterly Report on Form
10-Q.
Background
DXC 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. 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.
We generate revenue by offering a wide range of information technology services
and solutions primarily in North America , Europe , Asia , and Australia . We
operate through two segments: Global Business Services ("GBS") and Global
Infrastructure Services ("GIS"). We market and sell our services directly to
customers through our direct sales offices around the world. Our customers
include commercial businesses of many sizes and in many industries and public
sector clients.
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--------------------------------------------------------------------------------Results of Operations
The following table sets forth certain financial data for the first quarters of fiscal 2023 and fiscal 2022:
Three Months Ended
(In millions, except per-share amounts)
Revenues $ 3,707 $ 4,141
Income before income taxes 122 424
Income tax expense 19 142
Net income $ 103 $ 282
Diluted earnings per share $ 0.43 $ 1.07
Fiscal 2023 First Quarter Highlights
Financial highlights for the first quarter of fiscal 2023 include the following:
•Revenues for the first quarter of fiscal 2023 were$3.7 billion , a decrease of 10.5% as compared to the first quarter of fiscal 2022. See "Revenues" below for additional information. •Net income and diluted earnings per share for the first quarter of fiscal 2023 were$103 million and$0.43 , respectively. Net income decreased by$179 million during the first quarter of fiscal 2023 as compared to the first quarter of fiscal 2022. Net income for the first quarter of fiscal 2022 included$377 million of gain on disposition of business. •Our cash and cash equivalents were$2.2 billion as ofJune 30, 2022 . •We generated$163 million of net cash provided by operating activities during the first quarter of fiscal 2023, a change of$192 million as compared to$29 million of net cash used in operating activities during the first quarter of fiscal 2022. 32 --------------------------------------------------------------------------------
Revenues
During the first quarters of fiscal 2023 and fiscal 2022, the distribution of our revenues across operating segments and geographies were as follows:
Three Months
Three Months Ended Ended
Constant
Currency
June 30, Percentage Change in
(in millions) June 30, 2022 June 30, 2021 Percentage Change 2022(1) Constant Currency(1)
Geographic Market
United States $ 1,131 $ 1,209 (6.5) % $ 1,131 (6.5) %
U.K. 473 602 (21.4) % 527 (12.5) %
Other Europe 1,138 1,305 (12.8) % 1,262 (3.3) %
Australia 391 401 (2.5) % 422 5.2 %
Other International 574 624 (8.0) % 606 (2.9) %
Total Revenues $ 3,707 $ 4,141 (10.5) % $ 3,948 (4.7) %
Reportable Segments
GBS $ 1,758 $ 1,887 (6.8) % $ 1,869 (1.0) %
GIS 1,949 2,254 (13.5) % 2,079 (7.8) %
Total Revenues $ 3,707 $ 4,141 (10.5) % $ 3,948 (4.7) %
(1) Constant currency revenues are a non-GAAP measure calculated by translating
current period activity into U.S. dollars using the comparable prior period's
currency conversion rates. This information is consistent with how management
views our revenues and evaluates our operating performance and trends. For more
information, see "Non-GAAP Financial Measures."
The decrease in revenues for the first quarter of fiscal 2023, compared with the
first quarter of fiscal 2022 included an unfavorable foreign currency exchange
rate impact of 5.8%, primarily driven by the strengthening of the U.S. dollar
against the Euro, British Pound and Australian Dollar.
For the discussion of risks associated with our foreign operations, see Part 1,
Item 1A "Risk Factors" of our Annual Report on Form 10-K for the fiscal year
ended March 31, 2022 .
Global Business Services
Our GBS revenues were $1.8 billion in the first quarter of fiscal 2023, a
decrease of 6.8% compared to the same period in fiscal 2022. GBS revenue in
constant currency decreased 1.0% compared to the same period in fiscal 2022. The
decrease in GBS revenues was primarily due to project completions and the
disposition of businesses during fiscal 2022 and the first quarter of fiscal
2023. The decrease in GBS revenues was partially offset by additional services
provided to new and existing customers and an increase in run-rate project
volumes.
For the first quarter of fiscal 2023, GBS contract awards were
Global Infrastructure Services
Our GIS revenues were$1.9 billion in the first quarter of fiscal 2023, a decrease of 13.5% compared to the same period of fiscal 2022. GIS revenue in constant currency decreased 7.8% compared to the same period of fiscal 2022. The decrease in GIS revenues primarily reflects project completions, project terminations, and a decrease in pass-through revenue associated with the resale of hardware and software. The decrease in GIS revenues was partially offset by additional services provided to new and existing customers and an increase in run-rate project volumes. 33 --------------------------------------------------------------------------------
For the first quarter of fiscal 2023, GIS contract awards were
Costs and Expenses
Our total costs and expenses is shown in the tables below:
Three Months Ended
(in millions) June 30, 2022 June 30, 2021 Change Percentage Change
Costs of services (excludes depreciation and $ 2,930 $ 3,255 $ (325) (10.0) %
amortization and restructuring costs)
Selling, general and administrative (excludes
depreciation and amortization and 349 383 (34) (8.9) %
restructuring costs)
Depreciation and amortization 389 422 (33) (7.8) %
Restructuring costs 33 67 (34) (50.7) %
Interest expense 37 62 (25) (40.3) %
Interest income (20) (20) - - %
Debt extinguishment costs - 28 (28) (100.0) %
Gain on disposition of businesses (29) (377) 348 (92.3) %
Other income, net (104) (103) (1) 1.0 %
Total Costs and Expenses $ 3,585 $ 3,717 $ (132) (3.6) %
Total costs and expenses as a percentage of revenue increased 690 basis points
for the first quarter of fiscal 2023 as compared to the first quarter of fiscal
2022, reflecting a reduction of $348 million in gain on disposition of
businesses. Total costs and expenses for the first quarter of fiscal 2023
included a favorable foreign currency exchange rate impact of $216 million .
Costs of Services
Costs of services, excluding depreciation and amortization and restructuring
costs ("COS"), were $2,930 million for the first quarter of fiscal 2023. COS
decreased $325 million during the first quarter of fiscal 2023 as compared to
the same period of the prior fiscal year. The decrease was primarily due to a
favorable foreign currency exchange rate impact of $195 million . The decrease in
COS was also driven by cost optimization savings realized during the first
quarter of fiscal 2023, partially offset by increased labor investments. COS as
a percentage of revenue increased 40 basis points primarily driven by a decline
in revenue exceeding the associated decline in costs compared to the same period
in the prior fiscal year.
Selling, General and Administrative
Selling, general and administrative expense, excluding depreciation and
amortization and restructuring costs ("SG&A"), was $349 million for the first
quarter of fiscal 2023, a decrease of $34 million compared to the same period of
the prior fiscal year. The decrease in SG&A during the first quarter of fiscal
2023 was primarily driven by reductions in payroll and related expenses and real
estate costs, and included a favorable foreign currency exchange rate impact of
$13 million . The decrease in SG&A was partially offset by a $10 million charge
for merger related indemnification costs.
Transaction, separation and integration-related costs of
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--------------------------------------------------------------------------------Depreciation and Amortization
Depreciation expense was$138 million for the first quarter of fiscal 2023, as compared to$158 million in the same period of the prior fiscal year, a decrease of$20 million primarily due to lower average net property and equipment balances. The decrease in depreciation expense included a favorable foreign currency exchange rate impact of$7 million . Amortization expense was$251 million for the first quarter of fiscal 2023, as compared to$264 million in the same period of the prior fiscal year, a decrease of$13 million primarily due to a favorable change in foreign currency exchange rate impact of$10 million .
Restructuring Costs
Restructuring costs represent severance related to workforce optimization programs and expense associated with facilities and data center rationalization.
During fiscal 2023, management approved global cost savings initiatives designed to better align our workforce and facility structures. Total restructuring costs recorded, net of reversals, was$33 million for the first quarter of fiscal 2023, as compared to$67 million in the same period of the prior fiscal year, a decrease of$34 million .
See Note 12 - "Restructuring Costs" for additional information about our restructuring actions.
Interest Expense and Interest Income
Interest expense for the first quarter of fiscal 2023 was
Interest income for the first quarter of fiscal 2023 was
Debt Extinguishment Costs
During the first quarter of fiscal 2022, we recorded$28 million of debt extinguishment costs within the consolidated statement of operations, which consists primarily of costs related to the full redemption of two series of 4.45% senior notes due in fiscal 2023, partial redemption of 4.125% senior notes due in fiscal 2026, and extinguishment of debt associated with borrowings for asset financing. There were no debt extinguishment costs during the first quarter of fiscal 2023.
Gain on Disposition of Businesses
During the first quarter of fiscal 2023, DXC sold insignificant businesses that resulted in a gain of$38 million . This gain was partially offset by a loss of$9 million related to certain insignificant businesses classified as held for sale as ofJune 30, 2022 . During the first quarter of fiscal 2022, DXC sold its HPS business for$551 million which resulted in an estimated pre-tax gain on sale of$341 million , net of closing costs. The pre-tax gain on sale was further adjusted during subsequent quarters of fiscal 2022 resulting in a final pre-tax gain on sale of$331 million for fiscal 2022. Insignificant businesses were also sold during the first quarter of fiscal 2022 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 projected closing net working capital. 35 --------------------------------------------------------------------------------
Other Income, Net
Other income, net comprises non-service cost components of net periodic pension income, movement in foreign currency exchange rates on our foreign currency denominated assets and liabilities and the related economic hedges, equity earnings of unconsolidated affiliates and other miscellaneous gains and losses.
Three Months Ended
(in millions) June 30, 2022 June 30, 2021
Non-service cost components of net periodic pension
income $ (67) $ (97)
Foreign currency loss (2) 1
Other gain (35) (7)
Total $ (104) $ (103)
The $1 million increase in other income, net, for the first quarter of fiscal
2023, as compared to the same period of the prior fiscal year, was due to a
year-over-year increase of $28 million in other gains from sales of
non-operating assets and a year-over-year favorable foreign currency impact of
$3 million offset by a year-over-year decrease of $30 million in non-service
cost components of net periodic pension income attributable to changes in
expected returns on assets and other actuarial assumptions.
Taxes
Our effective tax rate ("ETR") was 15.6% and 33.5% for the first quarter of
fiscal 2023 and the first quarter of fiscal 2022, respectively. For the first
quarter of fiscal 2023, the primary drivers of the ETR were the global mix of
income, U.S. tax on foreign income and base erosion payments, and a decrease in
uncertain tax positions due to statute of limitation expirations. For the first
quarter of fiscal 2022, the primary drivers of the ETR were the global mix of
income, gain on sale of the HPS business, and tax rate changes in non-U.S.
jurisdictions.
Earnings Per Share
Diluted EPS for the first quarter of fiscal 2023 was$0.43 , as compared to$1.07 in the first quarter of fiscal 2022, a decrease of$0.64 due to a decrease of$176 million in net income attributable to DXC common stockholders. Diluted EPS for the first quarter of fiscal 2023 includes$0.11 per share of restructuring costs,$0.01 per share of transaction, separation and integration-related costs,$0.34 per share of amortization of acquired intangible assets,$0.03 per share of merger related indemnification costs, and$(0.16) per share of net gains on dispositions. Diluted EPS for the first quarter of fiscal 2022 includes$0.22 per share of restructuring costs,$0.02 per share of transaction, separation and integration-related costs,$0.33 per share of amortization of acquired intangible assets,$(0.98) per share of net gains on dispositions,$0.08 per share of debt extinguishment costs, and$0.11 per share of tax adjustments relating to the net revaluation of deferred taxes resulting from changes in non-US jurisdiction tax rates. 36 --------------------------------------------------------------------------------
Non-GAAP Financial Measures
We present non-GAAP financial measures of performance which are derived from the
statements of operations of DXC. These non-GAAP financial measures include
earnings before interest and taxes ("EBIT"), adjusted EBIT, non-GAAP income
before income taxes, non-GAAP net income, non-GAAP net income attributable to
DXC common stockholders, and non-GAAP EPS, and constant currency revenues.
We believe EBIT, adjusted EBIT, non-GAAP income before income taxes, non-GAAP
net income, non-GAAP net income attributable to DXC common stockholders, and
non-GAAP EPS provide investors with useful supplemental information about our
operating performance after excluding certain categories of expenses.
We believe constant currency revenues provides investors with useful
supplemental information about our revenues after excluding the effect of
currency exchange rate fluctuations for currencies other than U.S. dollars in
the periods presented. See below for a description of the methodology we use to
present constant currency revenues.
One category of expenses excluded from adjusted EBIT, non-GAAP income before
income tax, non-GAAP net income, non-GAAP net income attributable to DXC common
stockholders, and non-GAAP EPS, incremental amortization of intangible assets
acquired through business combinations, if included, may result in a significant
difference in period over period amortization expense on a GAAP basis. We
exclude amortization of certain acquired intangible assets as these non-cash
amounts are inconsistent in amount and frequency and are significantly impacted
by the timing and/or size of acquisitions. Although DXC management excludes
amortization of acquired intangible assets, primarily customer-related
intangible assets, from its non-GAAP expenses, we believe that it is important
for investors to understand that such intangible assets were recorded as part of
purchase accounting and support revenue generation. Any future transactions may
result in a change to the acquired intangible asset balances and associated
amortization expense.
Another category of expenses excluded from adjusted EBIT, non-GAAP income before
income tax, non-GAAP net income, non-GAAP net income attributable to DXC common
stockholders, and non-GAAP EPS is impairment losses, which, if included, may
result in a significant difference in period over period expense on a GAAP
basis. We exclude impairment losses as these non-cash amounts reflect generally
an acceleration of what would be multiple periods of expense and are not
expected to occur frequently. Further, assets such as goodwill may be
significantly impacted by market conditions outside of management's control.
There are limitations to the use of the non-GAAP financial measures presented in
this report. One of the limitations is that they do not reflect complete
financial results. We compensate for this limitation by providing a
reconciliation between our non-GAAP financial measures and the respective most
directly comparable financial measure calculated and presented in accordance
with GAAP. Additionally, other companies, including companies in our industry,
may calculate non-GAAP financial measures differently than we do, limiting the
usefulness of those measures for comparative purposes between companies.
Selected references are made on a "constant currency basis" so that certain
financial results can be viewed without the impact of fluctuations in foreign
currency rates, thereby providing comparisons of operating performance from
period to period. Financial results on a "constant currency basis" are non-GAAP
measures calculated by translating current period activity into U.S. dollars
using the comparable prior period's currency conversion rates. This approach is
used for all results where the functional currency is not the U.S. dollar.
Please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Results of Operations-Fiscal 2023 First Quarter
Highlights."
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--------------------------------------------------------------------------------
Certain non-GAAP financial measures and the respective most directly comparable
financial measures calculated and presented in accordance with GAAP include:
Three Months Ended
(in millions) June 30, 2022 June 30, 2021 Change Percentage Change
Income before income taxes $ 122 $ 424 $ (302) (71.2) %
Non-GAAP income before income taxes $ 242 $ 290 $ (48) (16.6) %
Net income $ 103 $ 282 $ (179) (63.5) %
Adjusted EBIT $ 259 $ 332 $ (73) (22.0) %
Reconciliation of Non-GAAP Financial Measures
Our non-GAAP adjustments include:
•Restructuring costs - includes costs, net of reversals, related to workforce
and real estate optimization and other similar charges.
•Transaction, separation and integration-related ("TSI") costs - includes costs
related to integration, planning, financing and advisory fees and other similar
charges associated with mergers, acquisitions, strategic investments, joint
ventures, and dispositions and other similar transactions.(1)
•Amortization of acquired intangible assets - includes amortization of
intangible assets acquired through business combinations.
•Merger related indemnification - represents the Company's current estimate of
potential liability to HPE for indemnification following the outcome of the
Oracle v. HPE litigation in June 2022 ; obligation pursuant to ES-CSC merger.(2)
•Gains and losses on dispositions - gains and losses related to dispositions of
businesses, strategic assets and interests in less than wholly-owned
entities.(3)
•Debt extinguishment costs - costs associated with early retirement, redemption,
repayment or repurchase of debt and debt-like items including any breakage,
make-whole premium, prepayment penalty or similar costs as well as solicitation
and other legal and advisory expenses.(4)
•Tax adjustments - discrete tax adjustments to impair or recognize certain
deferred tax assets, adjustments for changes in tax legislation and the impact
of merger and divestitures. Income tax expense of all other (non-discrete)
non-GAAP adjustments is based on the difference in the GAAP annual effective tax
rate (AETR) and overall non-GAAP provision (consistent with the GAAP
methodology).(5)
(1) TSI-Related costs for both periods presented include fees and other internal
and external expenses associated with legal, accounting, consulting, due
diligence, investment banking advisory, and other services, as well as financing
fees, retention incentives, and resolution of transaction related claims in
connection with, or resulting from, exploring or executing potential
acquisitions, dispositions and strategic investments, whether or not announced
or consummated.
The TSI-Related costs for the first quarter of fiscal 2023 include
The TSI-Related costs for the first quarter of fiscal 2022 include$11 million of costs to execute the strategic alternatives;$4 million legal costs and$(12) million credit towards Perspecta Arbitration settlement,$4 million in expenses related to integration projects resulting from the CSC - HP ES merger (including costs associated with continuing efforts to separate certain IT systems) and$2 million of costs incurred in connection with activities related to other acquisitions and divestitures.
(2) See Note 19 - "Commitments and Contingencies,"
(3) Gains and losses on dispositions for the first quarter of fiscal 2023
include a net gain of
Gains and losses on dispositions for the first quarter of fiscal 2022 include a$341 million gain on sale of the HPS business, gains of$19 million on other dispositions and$(13) million of adjustments relating to the sale of the HHS business. (4) Debt extinguishment costs adjustments for the first quarter of fiscal 2022 include$18 million to fully redeem two series of our 4.45% senior notes due fiscal 2023,$3 million to partially redeem our 4.125% senior notes due fiscal 2026, and$7 million of debt associated with borrowings for asset financing. 38 --------------------------------------------------------------------------------
(5) Tax adjustment for the first quarter of fiscal 2022 reflects net revaluation of deferred taxes resulting from changes in non-US jurisdiction tax rates.
A reconciliation of reported results to non-GAAP results is as follows:
Three Months Ended June 30, 2022
Amortization
Transaction, of Acquired Gains and
(in millions, except per-share As Restructuring Separation and Intangible Merger Related Losses on Non-GAAP
amounts) Reported Costs Integration-Related Costs Assets Indemnification Dispositions Results
Income before income taxes $ 122 $ 33 $ 2 $ 104 $ 10 $ (29) $ 242
Income tax expense 19 8 - 24 2 9 62
Net income 103 25 2 80 8 (38) 180
Less: net income attributable to
non-controlling interest, net of 1 - - - - - 1
tax
Net income attributable to DXC$ 102 $ 25 $ 2 $ 80 $ 8 $ (38)$ 179 common stockholders Effective Tax Rate 15.6 % 25.6 % Basic EPS$ 0.44 $ 0.11 $ 0.01$ 0.34 $ 0.03$ (0.16) $ 0.77 Diluted EPS$ 0.43 $ 0.11 $ 0.01$ 0.34 $ 0.03$ (0.16) $ 0.75 Weighted average common shares outstanding for: Basic EPS 232.48 232.48 232.48 232.48 232.48 232.48 232.48 Diluted EPS 237.38 237.38 237.38 237.38 237.38 237.38 237.38 Three Months Ended June 30, 2021 Amortization Transaction, of Acquired Gains and Debt (in millions, except per-share As Restructuring Separation and Intangible Losses on Extinguishment Tax Non-GAAP amounts) Reported Costs Integration-Related Costs Assets Dispositions Costs Adjustment
Results
Income before income taxes$ 424 $ 67 $ 9$ 109 $ (347) $ 28 -$ 290 Income tax expense 142 10 4 24 (91) 7 (28) 68 Net income 282 57 5 85 (256) 21 28 222 Less: net income attributable to non-controlling interest, net of 4 - - - - - - 4
tax
Net income attributable to DXC$ 278 $ 57 $ 5 $ 85$ (256) $ 21$ 28 $ 218 common stockholders Effective Tax Rate 33.5 % 23.4 % Basic EPS$ 1.09 $ 0.22 $ 0.02$ 0.33 $ (1.01) $ 0.08$ 0.11 $ 0.86 Diluted EPS$ 1.07 $ 0.22 $ 0.02$ 0.33 $ (0.98) $ 0.08$ 0.11 $ 0.84 Weighted average common shares outstanding for: Basic EPS 254.67 254.67 254.67 254.67 254.67 254.67 254.67 254.67 Diluted EPS 260.32 260.32 260.32 260.32 260.32 260.32 260.32 260.32 39
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Reconciliations of net income to adjusted EBIT are as follows:
Three Months Ended
(in millions) June 30, 2022 June 30, 2021
Net income $ 103 $ 282
Income tax expense 19 142
Interest income (20) (20)
Interest expense 37 62
EBIT 139 466
Restructuring costs 33 67
Transaction, separation and integration-related costs 2 9
Amortization of acquired intangible assets 104 109
Merger related indemnification 10 -
Gains on dispositions (29) (347)
Debt extinguishment costs - 28
Adjusted EBIT $ 259 $ 332
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Liquidity and Capital Resources
Cash and Cash Equivalents and Cash Flows
As ofJune 30, 2022 , our cash and cash equivalents ("cash") were$2.2 billion , of which$1.0 billion was held outside of theU.S. As ofMarch 31, 2022 , our cash was$2.7 billion , of which$1.3 billion was held outside of theU.S. We maintain various multi-currency, multi-entity, cross-border, physical and notional cash and pool arrangements with various counterparties to manage liquidity efficiently that enable participating subsidiaries to draw on the Company's pooled resources to meet liquidity needs. A significant portion of the cash held by our foreign subsidiaries is not expected to be impacted byU.S. federal income tax upon repatriation. However, a portion of this cash may still be subject to foreign andU.S. state income tax consequences upon future remittance. Therefore, if additional funds held outside theU.S. are needed for our operations in theU.S. , we plan to repatriate these funds not designated as indefinitely reinvested. We have$0.2 billion in cash held by foreign subsidiaries used for local operations that is subject to country-specific limitations which may restrict or result in increased costs in the repatriation of these funds. In addition, other practical considerations may limit our use of consolidated cash. This includes cash of$0.6 billion held in a German financial services subsidiary subject to regulatory requirements, and$0.1 billion held by majority owned consolidated subsidiaries where third-parties or public shareholders hold minority interests.
The following table summarizes our cash flow activity:
Three Months Ended
(in millions) June 30, 2022 June 30, 2021 Change
Net cash provided by (used in):
Operating activities$ 163 $ (29)$ 192 Investing activities (192) 311 (503) Financing activities (394) (866) 472 Effect of exchange rate changes on cash and (50) 13 (63) cash equivalents Cash classified within current assets held 10 63 (53) for sale Net decrease in cash and cash equivalents$ (463)
$ (508) $ 45
Cash and cash equivalents at beginning of 2,672
2,968
year
Cash and cash equivalents at the end of$ 2,209 $ 2,460 period Operating cash flow Net cash provided by (used in) operating activities during the first quarter of fiscal 2023 was$163 million as compared to$(29) million during the comparable period of the prior fiscal year. The change of$192 million was primarily due to a increase in net income, net of adjustments of$141 million , and a$51 million favorable change in working capital due to lower working capital outflows during the first quarter of fiscal 2023.
The following table contains certain key working capital metrics:
As of
June 30, 2022 June 30, 2021
Days of sales outstanding in accounts receivable 70 70
Days of purchases outstanding in accounts payable (48) (44)
Cash conversion cycle 22 26
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Investing cash flow
Net cash (used in) provided by investing activities during the first quarter of fiscal 2023 was$(192) million as compared to$311 million during the comparable period of the prior fiscal year. The change of$503 million was primarily due to decreases in cash from business dispositions of$549 million and in proceeds from sale of assets of$53 million . These decreases were partially offset by a decrease in capital expenditures of$100 million .
Financing cash flow
Net cash used in financing activities during the first quarter of fiscal 2023 was$394 million as compared to$866 million during the comparable period of the prior fiscal year. The$472 million decrease was primarily due to a decrease in payments on capital leases and borrowings for asset financing of$335 million , an increase in commercial paper borrowings, net of repayments of$31 million , payments for debt extinguishment costs of$28 million and net repayments on long term debt of$333 million in the first quarter of fiscal 2022. This was partially offset by an increase in share repurchases of$224 million .
Capital Resources
See Note 19 - "Commitments and Contingencies" for disclosure of certain commitments. The anticipated sources of funds to fulfill such commitments are listed below and under the "Liquidity" subheading.
The following table summarizes our total debt:
As of
(in millions) June 30, 2022 March 31, 2022
Short-term debt and current maturities of long-term debt $ 904 $ 900
Long-term debt, net of current maturities 3,874 4,065
Total debt $ 4,778 $ 4,965
The $187 million decrease in total debt during the first quarter of fiscal 2023
was primarily attributable to the favorable foreign currency exchange rate of
U.S. dollar against the Euro. The decrease in total debt also included decreases
in finance leases and borrowings for asset financing attributable to payments
exceeding additions, partially offset by an increase in commercial paper
borrowings.
We were in compliance with all financial covenants associated with our
borrowings as of
Our credit ratings are as follows:
Rating Agency Long Term Ratings Short Term Ratings Outlook
Fitch BBB F-2 Stable
Moody's Baa2 P-2 Stable
S&P BBB- - Stable
For information on the risks of ratings downgrades, see Part I, Item 1A "Risk
Factors" of our Annual Report on Form 10-K for the fiscal year ended March 31,
2022 .
42
--------------------------------------------------------------------------------Liquidity
We expect our existing cash and cash equivalents, together with cash generated from operations, will be sufficient to meet our normal operating requirements for the next 12 months. We expect to continue using cash generated by operations as a primary source of liquidity; however, should we require funds greater than that generated from our operations to fund discretionary investment activities, such as business acquisitions, we have the ability to raise capital through borrowing under our revolving credit facility, issuance of capital market debt instruments such as commercial paper, term loans, and bonds. In addition, we currently utilize, and will further utilize our cross currency cash pool for liquidity needs. However, there is no guarantee that we will be able to obtain debt financing, if required, on terms and conditions acceptable to us, if at all, in the future. Our exposure to operational liquidity risk is primarily from long-term contracts which require significant investment of cash during the initial phases of the contracts. The recovery of these investments is over the life of the contracts and is dependent upon our performance as well as customer acceptance. Our total liquidity of$5.2 billion as ofJune 30, 2022 , includes$2.2 billion of cash and cash equivalents and$3.0 billion of available borrowings under our revolving credit facility. Share Repurchases
See Note 15 - "Stockholders' Equity".
Dividends
To maintain our financial flexibility we continue to suspend payment of quarterly dividends for fiscal 2023.
Off-Balance Sheet Arrangements
In the normal course of business, we are party to arrangements that include guarantees, the receivables securitization facility and certain other financial instruments with off-balance sheet risk, such as letters of credit and surety bonds. We also use performance letters of credit to support various risk management insurance policies. No liabilities related to these arrangements are reflected in our condensed consolidated balance sheets. There have been no material changes to our off-balance-sheet arrangements reported under Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year endedMarch 31, 2022 , other than as disclosed in Note 4 - "Receivables" and Note 19 - "Commitments and Contingencies".
Contractual Obligations
There have been no material changes, outside the ordinary course of business, to our contractual obligations sinceMarch 31, 2022 . For further information see "Contractual Obligations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year endedMarch 31, 2022 For our minimum purchase commitments as ofJune 30, 2022 , in connection with our long-term purchase agreements with certain software, hardware, telecommunication, and other service providers, see Note 19 - "Commitments and Contingencies." 43 --------------------------------------------------------------------------------
Critical Accounting Estimates
The preparation of consolidated financial statements in accordance withU.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities. These estimates may change in the future if underlying assumptions or factors change. Accordingly, actual results could differ materially from our estimates under different assumptions, judgments or conditions. We consider the following policies to be critical because of their complexity and the high degree of judgment involved in implementing them: revenue recognition, income taxes, business combinations, defined benefit plans and valuation of assets. We have discussed the selection of our critical accounting policies and the effect of estimates with the audit committee of our board of directors. During the three months endedJune 30, 2022 , there were no changes to our critical accounting policies and estimates from those described in our fiscal 2022 Annual Report on Form 10-K except as mentioned in Note 1 - "Summary of Significant Accounting Policies."
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