Segment information

12 Months Ended

Dec. 31, 2019

Effective January 1, 2018, the company adopted the requirements of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which resulted in an adjustment to Technology revenue and profit of $53.0 million in the first quarter of 2018. The adjustment represents revenue from software license extensions and renewals, which were contracted for in the fourth quarter of 2017 and properly recorded as revenue at that time under the revenue recognition rules then in effect (Topic 605). Topic 606 requires revenue related to software license renewals or extensions to be recorded when the new license term begins, which in the case of the $53.0 million, is January 1, 2018.

The company has two business segments: Services and Technology. Revenue classifications within the Services and Technology segment are as follows:


•	Cloud and infrastructure services. This represents revenue from helping clients apply cloud and as-a-service delivery models to capitalize on business opportunities, make their end users more productive and manage and secure their IT infrastructure and operations more economically.


•	Application services. This represents revenue from helping clients transform their business processes by developing and managing new leading-edge applications for select industries, offering advanced data analytics and modernizing existing enterprise applications.


•	Business process outsourcing (BPO) services. This represents revenue from the management of critical processes and functions for clients in target industries, helping them improve performance and reduce costs.


•	Technology. This represents revenue from designing and developing software and offering hardware and other related products to help clients improve security, reduce costs and flexibility and improve the efficiency of their data-center environments.

The accounting policies of each business segment are the same as those followed by the company as a whole. Intersegment sales and transfers are priced as if the sales or transfers were to third parties. Accordingly, the Technology segment recognizes intersegment revenue and manufacturing profit on software and hardware shipments to customers under Services contracts. The

Services segment, in turn, recognizes customer revenue and marketing profits on such shipments of company software and hardware to customers. The Services segment also includes the sale of software and hardware products sourced from third parties that are sold to customers through the company’s Services channels. In the company’s consolidated statements of income, the manufacturing costs of products sourced from the Technology segment and sold to Services customers are reported in cost of revenue for Services.

Also included in the Technology segment’s sales and operating profit are sales of software and hardware sold to the Services segment for internal use in Services engagements. The amount of such profit included in operating income of the Technology segment for the years ended December 31, 2019, 2018 and 2017 was $5.7 million, $4.2 million and $6.3 million, respectively. The profit on these transactions is eliminated in Corporate.

The company evaluates business segment performance based on operating income exclusive of postretirement income or expense, restructuring charges and unusual and nonrecurring items, which are included in Corporate. All other corporate and centrally incurred costs are allocated to the business segments based principally on revenue, employees, square footage or usage. No single customer accounts for more than 10% of revenue. Revenue from various agencies of the U.S. Government, which is reported in both business segments, was approximately $726 million, $574 million and $571 million in 2019, 2018 and 2017, respectively.

Corporate assets are principally cash and cash equivalents, prepaid postretirement assets and deferred income taxes. The expense or income related to corporate assets is allocated to the business segments.

Customer revenue by classes of similar products or services, by segment, is presented below:



Year ended December 31,	2019		2018		2017
Services
Cloud & infrastructure services	$	1,567.7	$	1,363.4	$	1,334.3
Application services	750.4		772.4		791.0
BPO services	234.6		250.5		202.9
Total Services	2,552.7		2,386.3		2,328.2
Technology	396.0		438.7		413.6
Total customer revenue	$	2,948.7	$	2,825.0	$	2,741.8

Presented below is a reconciliation of segment operating income to consolidated income (loss) before income taxes:



Year ended December 31,	2019			2018			2017
Total segment operating income	$	280.4		$	305.4		$	235.4
Interest expense	(62.1		)	(64.0		)	(52.8		)
Other income (expense), net	(136.4		)	(76.9		)	(116.4		)
Cost reduction charges⁽ⁱ⁾	(28.7		)	(19.7		)	(135.0		)
Corporate and eliminations	(13.5		)	(1.6		)	(3.3		)
Total income (loss) before income taxes	$	39.7		$	143.2		$	(72.1	)

⁽ⁱ⁾ Year ended December 31, 2017 excludes $11.8 million for net foreign currency losses related to exiting foreign countries which are reported in other income (expense), net in the consolidated statements of income.

Presented below is a reconciliation of total business segment assets to consolidated assets:



As of December 31,	2019		2018		2017
Total segment assets	$	1,450.9	$	1,436.6	$	1,364.5
Cash and cash equivalents	538.8		605.0		733.9
Deferred income taxes	114.0		109.3		119.9
Operating lease right-of-use assets	127.1		—		—
Prepaid postretirement assets	136.2		147.6		148.3
Other corporate assets	137.0		159.1		175.8
Total assets	$	2,504.0	$	2,457.6	$	2,542.4

A summary of the company’s operations by business segment for 2019, 2018 and 2017 is presented below:



	Total		Corporate			Services		Technology
2019
Customer revenue	$	2,948.7	$	—		$	2,552.7	$	396.0
Intersegment	—		(15.2		)	—		15.2
Total revenue	$	2,948.7	$	(15.2	)	$	2,552.7	$	411.2
Operating income (loss)	$	238.2	$	(42.2	)	$	108.2	$	172.2
Depreciation and amortization	147.4		—			91.9		55.5
Total assets	2,504.0		1,053.1			1,037.7		413.2
Capital expenditures	159.8		7.1			74.0		78.7
2018
Customer revenue	$	2,825.0	$	—		$	2,386.3	$	438.7
Intersegment	—		(24.7		)	—		24.7
Total revenue	$	2,825.0	$	(24.7	)	$	2,386.3	$	463.4
Operating income (loss)	$	284.1	$	(21.3	)	$	67.6	$	237.8
Depreciation and amortization	164.1		—			97.2		66.9
Total assets	2,457.6		1,021.0			1,013.1		423.5
Capital expenditures	189.3		8.0			92.9		88.4
2017
Customer revenue	$	2,741.8	$	—		$	2,328.2	$	413.6
Intersegment	—		(25.9		)	—		25.9
Total revenue	$	2,741.8	$	(25.9	)	$	2,328.2	$	439.5
Operating income (loss)	$	97.1	$	(138.3	)	$	64.8	$	170.6
Depreciation and amortization	156.5		—			84.6		71.9
Total assets	2,542.4		1,177.9			985.9		378.6
Capital expenditures	176.5		4.3			102.7		69.5

Geographic information about the company’s revenue, which is principally based on location of the selling organization, properties and outsourcing assets, is presented below:



Year ended December 31,	2019		2018		2017
Revenue
United States	$	1,549.9	$	1,240.0	$	1,257.0
United Kingdom	334.3		360.7		315.8
Other foreign	1,064.5		1,224.3		1,169.0
Total Revenue	$	2,948.7	$	2,825.0	$	2,741.8
Properties, net
United States	$	90.7	$	85.3	$	85.8
United Kingdom	10.5		5.3		16.7
Other foreign	23.2		30.7		40.0
Total Properties, net	$	124.4	$	121.3	$	142.5
Outsourcing assets, net
United States	$	99.9	$	97.6	$	81.1
United Kingdom	71.7		86.5		89.9
Australia	21.5		21.7		18.1
Other foreign	9.4		10.6		13.2
Total Outsourcing assets, net	$	202.5	$	216.4	$	202.3