Acquisitions

Fiscal 2016 Acquisitions

UXC Acquisition

On February 26, 2016, CSC acquired all outstanding capital stock of UXC Limited (UXC), a publicly owned IT services company which is a leading provider of enterprise application capabilities, consulting, applications management, professional services, connect infrastructure and health services in Australia. UXC was listed on the Australian Securities Exchange under the symbol "UXC". UXC was acquired for total purchase consideration of $289 million (net of cash acquired of $13 million). The purchase consideration included cash paid at closing to and on behalf of the UXC shareholders of $302 million and was funded from existing cash balances.

The acquisition continues CSC’s process of rebalancing its offering portfolio, strengthening CSC’s next-generation delivery model, and expanding its client base around the world. Transaction costs associated with the acquisition of $7 million are included within selling, general and administrative expenses in the Company's Consolidated Statements of Operations.

The preliminary allocation of the UXC purchase price to the assets acquired and liabilities assumed is presented below as of the acquisition date:



(Amounts in millions)	Estimated Fair Value
Accounts receivable and other current assets	$	125
Intangible assets - software	4
Intangible assets - customer relationships	74
Intangible assets - trade names	13
Deferred tax asset, long-term	15
Property and equipment and other noncurrent assets	20
Accounts payable	(32		)
Accrued payroll and other current liabilities	(22		)
Accrued expenses and other current liabilities	(32		)
Deferred revenue	(23		)
Debt	(45		)
Deferred tax liability, long-term	(37		)
Other long-term liabilities	(12		)
Total identifiable net assets acquired	48
Goodwill	254
Total estimated consideration	$	302

As of the acquisition date, the fair value of trade receivables approximated book value and was considered fully recoverable. The amortizable lives associated with the intangible assets acquired includes customer relationships which have a ten-year estimated useful life.

The goodwill recognized with the acquisition is attributable to the intellectual capital and the acquired assembled work force, none of which qualify for recognition as a separate intangible asset. The goodwill arising from the acquisition was allocated to the Company's reportable segments based on the relative fair value of the expected incremental cash flows that the acquisition was expected to provide to each reporting unit within the Company's reportable segments. The goodwill associated with this acquisition is not deductible for tax purposes. The Company’s purchase price allocation for the UXC acquisition is preliminary and subject to revision as additional information related to the fair value of assets and liabilities becomes available.

For the fiscal year ended April 1, 2016, UXC contributed revenues of $42 million and operating loss of $1 million. Disclosure of proforma information required under ASC Topic 805, “Business Combinations" is impracticable, due to different fiscal year-ends and financial records that are not available in GAAP.

Axon Acquisition

On December 11, 2015, CSC acquired all of the outstanding capital stock of Axon Puerto Rico, Inc. (Axon), a provider of enterprise application and infrastructure managed services to aerospace and defense, and other commercial industries, for cash consideration of $29 million (net of cash acquired of $5 million), which was funded from existing cash balances. The acquisition further advances CSC’s position as a leader in providing cost effective, highly-secure IT managed services to firms worldwide, strengthens CSC’s next-generation delivery model and expands its network of regional delivery centers. The preliminary purchase price was allocated to assets acquired and liabilities assumed based upon the current determination of fair values at the date of acquisition, as follows: $5 million to current assets, $3 million to noncurrent assets, $11 million to an intangible asset other than goodwill, $2 million to current liabilities, and $12 million to goodwill. The goodwill is associated with the Company's GBS segment and is tax deductible. The amortizable lives associated with the intangible assets acquired includes customer relationships which have a ten-year estimated useful life. Transaction costs associated with the acquisition were less than $1 million and are included within selling, general and administrative expenses in the Company's Consolidated Statements of Operations.

Fixnetix Acquisition

On September 24, 2015, CSC acquired all of the outstanding capital stock of Fixnetix, Limited (Fixnetix), a privately held provider of front-office managed trading solutions for capital markets, for total purchase consideration of $112 million. The acquisition enhances CSC's ability to offer capital market clients an expanded range of as-a-service front office capabilities and address the growing demand for greater efficiency and innovation in trading, market data, hosting, infrastructure, connectivity and risk management.

The purchase consideration included cash of $88 million (net of $1 million of cash acquired) paid at closing, the estimated fair value of contingent consideration as of the acquisition date of $21 million, and $2 million of adjustments to the acquisition final net working capital in the fourth quarter of fiscal 2016. The estimated amount of contingent consideration was based on a contractually defined multiple of Fixnetix's revenues during two specified periods, as well as other considerations.

The acquisition was funded from CSC's existing cash balances. Transaction costs of approximately $1 million are included within selling, general and administrative expenses in the Company's Consolidated Statements of Operations.

The allocation of the Fixnetix purchase price to the assets acquired and liabilities assumed is presented below:



(Amounts in millions)	Estimated Fair Value at Acquisition Date
Accounts receivable and other current assets	$	13
Intangible asset - developed technology	4
Intangible assets - customer relationships and trade names	44
Property and equipment and other noncurrent assets	8
Trade payables, accrued expenses and deferred revenue	(26		)
Leases and other long-term liabilities	(6		)
Deferred tax liability, net	(2		)
Total identifiable net assets acquired	35
Goodwill	77
Total consideration	$	112

The amortizable lives associated with the intangible assets acquired are as follows:



Description		Estimated Useful Lives (Years)
Developed technology		9
Customer relationships		3-8
Trade names		6

As of April 1, 2016, the Company determined that the estimated contingent consideration would be not be earned in relation to this acquisition, primarily due to the current determination of the forecasted Fixnetix revenues. As a result, total contingent consideration liability of $19 million, including foreign currency adjustments, was released as a reduction to selling, general, and administrative expenses within the Consolidated Statements of Operations.

Fruition Acquisition

On September 17, 2015, CSC acquired all of the outstanding capital stock of Fruition Partners (Fruition), a privately-held company that is a leading provider of technology-enabled solutions for the service management sector and the largest ServiceNow-exclusive service management consulting firm. The acquisition bolsters CSC's ability to offer enterprise and emerging clients an expanded range of cloud-based service-management solutions to improve their business through organizational efficiency and lower operating costs.

Cash consideration of $148 million (net of cash acquired of $2 million) was paid at closing for this acquisition. The acquisition was funded from CSC's existing cash balances. The Company incurred transaction costs of approximately $2 million associated with this acquisition which are included within selling, general and administrative expenses in the Company's Consolidated Statements of Operations.

The allocation of the Fruition purchase price to the assets acquired and liabilities assumed is presented below:



(Amounts in millions)	Estimated Fair Value at Acquisition Date
Accounts receivable and other current assets	$	19
Deferred tax assets	3
Intangible asset - developed technology	7
Intangible assets - customer relationships and trade names	35
Intangible assets - noncompete agreements	2
Property and equipment and other noncurrent assets	1
Trade payables, accrued expenses and deferred revenue	(12		)
Deferred tax liabilities, net	(8		)
Total identifiable net assets acquired	47
Goodwill	103
Total consideration	$	150

The amortizable lives associated with the intangible assets acquired are as follows:



Description		Estimated Useful Lives (Years)
Developed technology		5
Customer relationships		11-13
Trade names		Indefinite

Pro forma financial information for the UXC, Axon, Fixnetix, and Fruition acquisitions have not been presented as they were neither individually nor in the aggregate material to the Company’s consolidated results.

Fiscal 2015 Acquisitions

During fiscal 2015, CSC acquired Autonomic Resources, LLC (Autonomic) and a privately held entity for cash consideration of $14 million and $35 million, respectively. Autonomic and the privately held entity were components of the Company's former NPS segment which was spun-off during the third quarter of fiscal 2016.

Fiscal 2014 Acquisitions

ServiceMesh Acquisition

On November 15, 2013, CSC acquired ServiceMesh Inc. (SMI), a privately-held cloud services management company, headquartered in Santa Monica, California, with operations in the United States, Australia and the United Kingdom, for total purchase consideration of $282 million. The acquisition enhances CSC's ability to help its clients migrate their applications into cloud computing environments and to automate the deployment and management of enterprise applications and platforms across private, public and hybrid cloud environments.

Purchase consideration included: 1) cash of $163 million paid at closing to and on behalf of the SMI shareholders, including $10 million paid to retire SMI's debt and 2) additional consideration of $119 million contingent on the achievement of contractually agreed revenue targets. The Company incurred transaction costs of $4 million associated with this acquisition, which are included within selling, general and administrative expenses in the Consolidated Statements of Operations. The acquisition was funded from CSC's existing cash balances.

The amount of contingent consideration was based on a contractually defined multiple of SMI’s revenues during a specified period ending January 31, 2014. The Company determined the fair value of the contingent consideration payable using a probability-weighted approach, which at the end of the third quarter of fiscal 2014 was preliminarily estimated to be $137 million, representing the maximum amount of contingent consideration payable. During the fourth quarter of fiscal 2014, the Company reduced the fair value of the contingent consideration payable and goodwill by $18 million, based on additional facts and circumstances that existed as of the acquisition date but which were not known until the fourth quarter of fiscal 2014. These facts, had they been known, would have reduced the Company's original acquisition-date estimate of the fair value of contingent consideration to $119 million.

After the expiration of the contractual period, the final amount of the contingent consideration payable was determined to be $98 million, which was paid during the fourth quarter of fiscal 2014. The $21 million difference between the revised fair value of contingent consideration liability of $119 million and the actual amount paid of $98 million, was primarily due to the deferral of revenues related to certain software license sales to periods beyond the specified earn-out measurement period. The entire difference of $21 million was recognized as a reduction to selling, general and administrative expenses in the Consolidated Statements of Operations during the fourth quarter of fiscal 2014.

The results of SMI are included in the Consolidated Financial Statements from the date of acquisition, within its GIS segment. For the fiscal year ended March 28, 2014, SMI contributed revenues of $18 million, and operating income of $17 million (primarily due to the $21 million adjustment described above) offset by $4 million of amortization of the acquired intangibles.

The allocation of purchase consideration to assets acquired and liabilities assumed, including the fourth quarter fiscal 2014 adjustments to the estimated fair value of contingent consideration, is presented below:



(Amounts in millions)	Estimated Fair Value
Accounts receivable and other current assets	$	3
Deferred tax assets	31
Intangible asset - developed technology	94
Intangible assets - customer relationships and trade names	10
Property and equipment and other non-current assets	2
Deferred revenue and other current liabilities	(4		)
Deferred tax liabilities	(38		)
Total identifiable net assets acquired	98
Goodwill ⁽¹⁾	184
Total consideration	$	282

⁽¹⁾As part of the Separation of CSRA, $36 million of goodwill that was allocated to the former NPS reporting segment was divested in the third quarter of fiscal 2016.

As of the acquisition date, the fair value of trade receivables approximated book value and was considered fully recoverable.

The amortizable lives associated with the intangible assets acquired are as follows:



Description		Estimated Useful Lives (Years)
Developed technology		9
Customer relationships		3
Trade names		4 - 6

The goodwill recognized with the acquisition is attributable to the intellectual capital, the acquired assembled work force, and expected cost synergies, none of which qualify for recognition as a separate intangible asset. The goodwill arising from the acquisition was allocated to the Company's reportable segments based on the relative fair value of the expected incremental cash flows that the acquisition was expected to provide to each reporting unit within the Company's reportable segments. Goodwill was allocated as follows: GBS: $28 million and GIS: $120 million. The goodwill associated with this acquisition is not deductible for tax purposes.

In connection with the SMI acquisition, the Company granted RSUs to certain SMI employees with a grant-date fair value of $41 million. Awards associated with the continuing employment of the SMI employees generally vest over a three-year period, beginning from the date of acquisition, and are recorded as compensation expense ratably over the three-year period.

Infochimps Acquisition

On August 5, 2013, CSC acquired Infochimps, Inc. (Infochimps), a privately held company, in an all-cash transaction for $27 million. The acquisition complements CSC’s existing big data business by providing a flexible, scalable, platform-as-a-service offering. The purchase price was allocated to assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition: $2 million to current and other long-term assets, $2 million to current and long-term liabilities, and $27 million to goodwill. As of the acquisition date, the fair value of trade receivables approximated book value and was considered fully recoverable. The goodwill is associated with the Company's GBS segment and is not tax-deductible.

Pro forma financial information for the fiscal 2014 acquisitions was not presented as the effect of the acquisitions was neither individually nor in the aggregate material to CSC's consolidated results.