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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-Q
_______________  
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                        to
Commission File Number 001-37817
https://cdn.kscope.io/cb35d51e0b67ab5b457a7581381c35c1-conduentlogoq2a04.jpg
CONDUENT INCORPORATED
(Exact Name of Registrant as specified in its charter)
New York
 
81-2983623
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer
Identification No.)
 
 
 
 
 
100 Campus Drive,
Suite 200,
Florham Park,
New Jersey
07932
(Address of principal executive offices)
(Zip Code)
(844) 663-2638
(Registrant’s telephone number, including area code)
_________________________________________________  

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
CNDT
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Small reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No 
Class
 
Outstanding at July 31, 2019
Common Stock,
$0.01 par value
 
211,330,037


CNDT Q2 2019 Form 10-Q
1

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and any exhibits to this Report may contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-looking statements. These statements reflect management's current beliefs, assumptions and expectations and are subject to a number of factors that could cause actual results to differ materially. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. Our actual results may vary materially from those expressed or implied in our forward-looking statements.

Important factors and uncertainties that could cause our actual results to differ materially from those in our forward-looking statements include, but are not limited to: our ability to successfully manage the leadership transition and the potential for disruptions to our business from the transition; government appropriations and termination rights contained in our government contracts; our ability to renew commercial and government contracts awarded through competitive bidding processes; our ability to recover capital and other investments in connection with our contracts; our ability to attract and retain necessary technical personnel and qualified subcontractors; our ability to deliver on our contractual obligations properly and on time; competitive pressures; our significant indebtedness; changes in interest in outsourced business process services; our ability to obtain adequate pricing for our services and to improve our cost structure; claims of infringement of third-party intellectual property rights; the failure to comply with laws relating to individually identifiable information and personal health information and laws relating to processing certain financial transactions, including payment card transactions and debit or credit card transactions; breaches of our information systems or security systems or any service interruptions; our ability to estimate the scope of work or the costs of performance in our contracts; our continuing emphasis on and shift toward technology-led digital transactions; customer decision-making cycles and lead time for customer commitments; our ability to collect our receivables for unbilled services; a decline in revenues from or a loss or failure of significant clients; fluctuations in our non-recurring revenue; our failure to maintain a satisfactory credit rating; our ability to attract and retain key employees; increases in the cost of telephone and data services or significant interruptions in such services; our failure to develop new service offerings; our ability to modernize our information technology infrastructure and consolidate data centers; our ability to comply with data security standards; our ability to receive dividends or other payments from our subsidiaries; changes in tax and other laws and regulations; changes in government regulation and economic, strategic, political and social conditions; changes in U.S. GAAP or other applicable accounting policies; and other factors that are set forth in the “Risk Factors” section, the “Legal Proceedings” section, the “Management's Discussion and Analysis of Financial Condition and Results of Operations” section and other sections of this Quarterly Report on Form 10-Q, our quarterly report on Form 10-Q for the quarter ended March 31, 2019, as well as in our 2018 Annual Report on Form 10-K filed with the Securities and Exchange Commission and any current Report on Form 8-K. Any forward-looking statements made by us in this Quarterly Report on Form 10-Q speak only as of the date on which they are made. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise.




 


CNDT Q2 2019 Form 10-Q
1

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CONDUENT INCORPORATED
FORM 10-Q
June 30, 2019
TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

For additional information about Conduent Incorporated and access to our Annual Reports to Shareholders and SEC filings, free of charge, please visit our website at https://investor.conduent.com/. Any information on or linked from the website is not incorporated by reference into this Form 10-Q.


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PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS (UNAUDITED)

CONDUENT INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(in millions, except per share data)
 
2019
 
2018
 
2019
 
2018
Revenue
 
$
1,112

 
$
1,387

 
$
2,270

 
$
2,807

 
 
 
 
 
 
 
 
 
Operating Costs and Expenses
 
 
 
 
 
 
 
 
Cost of Services (excluding depreciation and amortization)
 
879

 
1,073

 
1,785

 
2,188

Selling, general and administrative (excluding depreciation and amortization)
 
121

 
145

 
248

 
288

Research and development (excluding depreciation and amortization)
 
2

 
3

 
5

 
5

Depreciation and amortization
 
112

 
116

 
227

 
232

Restructuring and related costs
 
26

 
17

 
42

 
37

Interest expense
 
20

 
37

 
40

 
70

Goodwill impairment
 
1,067

 

 
1,351

 

(Gain) loss on divestitures and transaction costs
 
2

 
(60
)
 
16

 
(45
)
Litigation costs (recoveries), net
 
1

 
4

 
13

 
35

Other (income) expenses, net
 
1

 
(2
)
 

 
(3
)
Total Operating Costs and Expenses
 
2,231

 
1,333

 
3,727

 
2,807

 
 
 
 
 
 
 
 
 
Income (Loss) Before Income Taxes
 
(1,119
)
 
54

 
(1,457
)
 

 
 
 
 
 
 
 
 
 
Income tax expense (benefit)
 
(90
)
 
43

 
(120
)
 
39

Net Income (Loss)
 
$
(1,029
)
 
$
11

 
$
(1,337
)
 
$
(39
)
 
 
 
 
 
 
 
 
 
Net Income (Loss) per Share:
 
 
 
 
 
 
 
 
Basic
 
$
(4.94
)
 
$
0.05

 
$
(6.44
)
 
$
(0.21
)
Diluted
 
$
(4.94
)
 
$
0.04

 
$
(6.44
)
 
$
(0.21
)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


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CONDUENT INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(in millions)
 
2019
 
2018
 
2019
 
2018
Net Income (Loss)
 
$
(1,029
)
 
$
11

 
$
(1,337
)
 
$
(39
)
Other Comprehensive Income (Loss), Net
 
 
 
 
 

 

Currency translation adjustments, net
 
(1
)
 
(32
)
 
6

 
(23
)
Reclassification of currency translation adjustments on divestitures
 

 

 
15

 
5

Reclassification of divested benefit plans and other
 

 

 
(1
)
 

Unrecognized gains (losses), net
 

 
(2
)
 
1

 
(3
)
Changes in benefit plans, net
 

 
3

 

 
3

Other Comprehensive Income (Loss), Net
 
(1
)
 
(31
)
 
21

 
(18
)
 
 
 
 
 
 
 
 
 
Comprehensive Income (Loss), Net
 
$
(1,030
)
 
$
(20
)
 
$
(1,316
)
 
$
(57
)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.




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CONDUENT INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in millions, except share data in thousands)
 
June 30,
2019
 
December 31,
2018
Assets
 
 
 
 
Cash and cash equivalents
 
$
276

 
$
756

Accounts receivable, net
 
824

 
782

Assets held for sale
 

 
15

Contract assets
 
192

 
177

Other current assets
 
315

 
234

Total current assets
 
1,607

 
1,964

Land, buildings and equipment, net
 
333

 
328

Operating lease right-of-use assets
 
317

 

Intangible assets, net
 
566

 
651

Goodwill
 
2,105

 
3,408

Other long-term assets
 
375

 
329

Total Assets
 
$
5,303

 
$
6,680

Liabilities and Equity
 
 
 
 
Current portion of long-term debt
 
$
52

 
$
55

Accounts payable
 
161

 
230

Accrued compensation and benefits costs
 
165

 
193

Unearned income
 
92

 
112

Liabilities held for sale
 

 
40

Other current liabilities
 
747

 
567

Total current liabilities
 
1,217

 
1,197

Long-term debt
 
1,488

 
1,512

Deferred taxes
 
186

 
327

Operating lease liabilities
 
264

 

Other long-term liabilities
 
105

 
280

Total Liabilities
 
3,260

 
3,316

 
 
 
 
 
Contingencies (See Note 13)
 


 


Series A convertible preferred stock
 
142

 
142

 
 
 
 
 
Common stock
 
2

 
2

Additional paid-in capital
 
3,886

 
3,878

Retained earnings (deficit)
 
(1,583
)
 
(233
)
Accumulated other comprehensive loss
 
(404
)
 
(425
)
Total Equity
 
1,901

 
3,222

Total Liabilities and Equity
 
$
5,303

 
$
6,680

 
 
 
 
 
Shares of common stock issued and outstanding
 
210,417

 
211,306

Shares of series A convertible preferred stock issued and outstanding
 
120

 
120



The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
 

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CONDUENT INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 
Six Months Ended
June 30,
(in millions)
 
2019
 
2018
Cash Flows from Operating Activities:
 
 
 
 
Net income (loss)
 
$
(1,337
)
 
$
(39
)
Adjustments required to reconcile net income (loss) to cash flows from operating activities:
 
 
 
 
Depreciation and amortization
 
227

 
232

Contract inducement amortization
 
1

 
2

Deferred income taxes
 
(140
)
 
(47
)
Goodwill impairment
 
1,351

 

(Gain) loss from investments
 
(1
)
 
(1
)
Amortization of debt financing costs
 
3

 
8

(Gain) loss on divestitures and transaction costs
 
16

 
(45
)
Stock-based compensation
 
14

 
19

Changes in operating assets and liabilities:
 
 
 
 
(Increase) decrease in accounts receivable
 
(64
)
 
14

(Increase) decrease in other current and long-term assets
 
(79
)
 
(95
)
Increase (decrease) in accounts payable and accrued compensation
 
(82
)
 
(25
)
Increase (decrease) in restructuring liabilities
 
8

 
4

Increase (decrease) in other current and long-term liabilities
 
(142
)
 
(11
)
Net change in income tax assets and liabilities
 
(9
)
 
48

Other operating, net
 

 
(4
)
Net cash provided by (used in) operating activities
 
(234
)
 
60

Cash Flows from Investing Activities:
 
 
 
 
Cost of additions to land, buildings and equipment
 
(76
)
 
(76
)
Proceeds from sale of land, buildings and equipment
 
2

 
12

Cost of additions to internal use software
 
(37
)
 
(14
)
Payments for acquisitions, net of cash acquired
 
(90
)
 

Proceeds from divestitures and sale of assets, net of cash
 

 
400

Payments from divestitures, including cash sold
 
(8
)
 

Net cash provided by (used in) investing activities
 
(209
)
 
322

Cash Flows from Financing Activities:
 
 
 
 
Debt issuance fee payments
 

 
(3
)
Payments on debt
 
(28
)
 
(29
)
Taxes paid for settlement of stock based compensation
 
(6
)
 
(3
)
Dividends paid on preferred stock
 
(5
)
 
(5
)
Net cash provided by (used in) financing activities
 
(39
)
 
(40
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
 
2

 
(6
)
Increase (decrease) in cash, cash equivalents and restricted cash
 
(480
)
 
336

Cash, Cash Equivalents and Restricted Cash at Beginning of Period
 
765

 
667

Cash, Cash Equivalents and Restricted Cash at End of period(1)
 
$
285

 
$
1,003

 ___________
(1)
Includes $9 million and $10 million of restricted cash as of June 30, 2019 and 2018, respectively, that were included in Other current assets on the Condensed Consolidated Balance Sheets.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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CONDUENT INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
(in millions)
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings (Deficit)
 
AOCL(1)
 
Shareholders'
Equity
Balance at March 31, 2019
$
2

 
$
3,879

 
$
(551
)
 
$
(403
)
 
$
2,927

Cash dividends paid - preferred stock, $20/share

 

 
(3
)
 

 
(3
)
Stock option and incentive plans, net

 
7

 

 

 
7

Comprehensive Income (Loss):
 
 
 
 
 
 
 
 
 
Net Income (Loss)

 

 
(1,029
)
 

 
(1,029
)
Other comprehensive income (loss), net

 

 

 
(1
)
 
(1
)
Total Comprehensive Income (Loss), Net

 

 
(1,029
)
 
(1
)
 
(1,030
)
Balance at June 30, 2019
$
2

 
$
3,886

 
$
(1,583
)
 
$
(404
)
 
$
1,901

(in millions)
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings (Deficit)
 
AOCL(1)
 
Shareholders'
Equity
Balance at March 31, 2018
$
2

 
$
3,853

 
$
136

 
$
(481
)
 
$
3,510

Cash dividends paid - preferred stock, $20/share

 

 
(3
)
 

 
(3
)
Stock option and incentive plans, net

 
12

 

 

 
12

Comprehensive Income (Loss):
 
 
 
 
 
 
 
 
 
Net Income (Loss)

 

 
11

 

 
11

Other comprehensive income (loss), net

 

 

 
(31
)
 
(31
)
Total Comprehensive Income (Loss), Net

 

 
11

 
(31
)
 
(20
)
Balance at June 30, 2018
$
2

 
$
3,865

 
$
144

 
$
(512
)
 
$
3,499


(in millions)
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings (Deficit)
 
AOCL(1)
 
Shareholders'
Equity
Balance at December 31, 2018
$
2

 
$
3,878

 
$
(233
)
 
$
(425
)
 
$
3,222

Cash dividends paid - preferred stock, $40/per share

 

 
(5
)
 

 
(5
)
Cumulative impact of adopting the new lease standard

 

 
(8
)
 

 
(8
)
Stock option and incentive plans, net

 
8

 

 

 
8

Comprehensive Income (Loss):
 
 
 
 
 
 
 
 
 
Net Income (Loss)

 

 
(1,337
)
 

 
(1,337
)
Other comprehensive income (loss), net

 

 

 
21

 
21

Total Comprehensive Income (Loss), Net

 

 
(1,337
)
 
21

 
(1,316
)
Balance at June 30, 2019
$
2

 
$
3,886

 
$
(1,583
)
 
$
(404
)
 
$
1,901

(in millions)
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings (Deficit)
 
AOCL(1)
 
Shareholders'
Equity
Balance at December 31, 2017
$
2

 
$
3,850

 
$
171

 
$
(494
)
 
$
3,529

Cash dividends paid - preferred stock, $40/per share

 

 
(5
)
 

 
(5
)
Cumulative impact of adopting the new revenue standard

 

 
17

 

 
17

Stock option and incentive plans, net

 
15

 

 

 
15

Comprehensive Income (Loss):
 
 
 
 
 
 
 
 
 
Net Income (Loss)

 

 
(39
)
 

 
(39
)
Other comprehensive income (loss), net

 

 

 
(18
)
 
(18
)
Total Comprehensive Income (Loss), Net

 

 
(39
)
 
(18
)
 
(57
)
Balance at June 30, 2018
$
2

 
$
3,865

 
$
144

 
$
(512
)
 
$
3,499

 ___________
(1)
AOCL - Accumulated other comprehensive loss.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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CONDUENT INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 – Basis of Presentation

References herein to “we,” “us,” “our,” the “Company” and “Conduent” refer to Conduent Incorporated and its consolidated subsidiaries unless the context suggests otherwise.

Description of Business

The Company is a global enterprise and leading provider of business process services with expertise in transaction-intensive processing, analytics and automation. The Company serves as a trusted business partner in both the front office and the back office, enabling personalized, seamless interactions on a massive scale that improve end-user experience. The Company creates value for its commercial and government clients by applying its expertise, technology and innovation to help them drive customer and constituent satisfaction and loyalty, increase process efficiency and respond rapidly to changing market dynamics. The Company's portfolio includes industry-focused service offerings in attractive growth markets such as healthcare and transportation, as well as multi-industry service offerings such as transaction processing, customer care and payment services.

Basis of Presentation

The unaudited interim Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) on a basis consistent with reporting interim financial information in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). The year-end Condensed Consolidated Balance Sheet was derived from the audited Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018. Certain reclassifications have been made to prior year information to conform to current year presentation. Intercompany balances and transactions have been eliminated. In the opinion of management, all adjustments necessary for a fair statement of the financial position, results of operations and cash flows have been made. These adjustments consist of normal recurring items. The interim results of operations are not necessarily indicative of the results of the full year. These financial statements should be read in conjunction with the Company’s Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Note 2 – Recent Accounting Pronouncements

The Company's significant accounting policies are described in Note 1–Basis of Presentation and Summary of Significant Accounting Policies in the Company’s 2018 Annual Report on Form 10-K. Summarized below are the accounting pronouncements adopted subsequent to December 31, 2018 that were applicable and material to the Company.

New Accounting Standards Adopted

Leases: The Company adopted the new lease guidance as of January 1, 2019, using the cumulative-effect adjustment transition method, which applies the provisions of the standard at the effective date without adjusting the comparative periods presented. The Company has elected the package of practical expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are, or contain, leases, (2) lease classification for any expired or existing leases as of the adoption date and (3) initial direct costs for any existing leases as of the adoption date. The Company did not elect to apply the hindsight practical expedient. Additionally, the Company has elected not to include short-term leases, with a term of 12 months or less, on its Condensed Consolidated Balance Sheets.


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The impact of adopting this new guidance resulted in establishing Operating lease right-of-use (ROU) assets of $387 million, an increase to Other current liabilities of $103 million, a decrease to Other long-term liabilities of $21 million, establishing Operating lease liabilities of $316 million and a net decrease to opening retained earnings (deficit) of $8 million as of January 1, 2019. The adoption did not have an impact on the Company’s Condensed Consolidated Statements of Income (Loss) or Condensed Consolidated Statements of Cash Flows.

Summary of Accounting Policies

Leases
 
The Company determines if an arrangement is a lease at the inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. The Company has operating and finance leases for real estate and equipment. Operating leases are included in Operating lease ROU assets, Other current liabilities, and Operating lease liabilities in our Condensed Consolidated Balance Sheets. Finance leases are included in Land, buildings and equipment, net, Current portion of long-term debt, and Long-term debt in our Condensed Consolidated Balance Sheets.

ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the net present value of lease payments over the lease term using the Company’s incremental borrowing rates or implicit rates. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option based on economic factors. The Company recognizes operating fixed lease expense and finance lease depreciation on a straight-line basis over the lease term. Variable lease expense is recognized in the period in which the obligation for those payments is incurred. The Company accounts for lease and non-lease components separately for its equipment leases, based on the estimated standalone price of each component, and combines lease and non-lease components for its real estate leases.

The components of lease costs were as follows:

(in millions)
 
Three Months Ended
June 30, 2019
 
Six Months Ended
June 30, 2019
Finance Lease Costs:
 
 
 
 
Amortization of right of use assets
 
$
3

 
$
6

Interest on lease liabilities
 
1

 
1

Total Finance Lease Costs
 
$
4

 
$
7

Operating lease costs:
 
 
 
 
Base rent
 
$
29

 
$
60

Short-term lease costs
 
4

 
7

Variable lease costs(1)
 
8

 
15

Sublease income
 
(1
)
 
(2
)
Total Operating Lease Costs
 
$
40

 
$
80


__________
(1)
Primarily related to taxes, insurance and common area and other maintenance costs for real estate leases.


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Supplemental cash flow information related to leases was as follows:

(in millions)
 
Six Months Ended
June 30, 2019
Cash paid for the amounts included in the measurement of lease liabilities:
 
 
Operating cash flows from operating leases
 
$
(65
)
Operating cash flows from finance leases
 
(1
)
Total Cash Flow from Operating Activities
 
$
(66
)
 
 
 
Financing cash flow from finance leases
 
$
(6
)
 
 
 
Supplemental non-cash information on right of use assets obtained in exchange for new lease obligations:
 
 
Operating leases
 
$
16



Supplemental balance sheet information related to leases was as follows:

(in millions)
 
June 30, 2019
Operating Leases:
 
 
Operating lease right-of-use assets
 
$
317

 
 
 
Other current liabilities
 
$
106

Operating lease liabilities
 
264

Total Operating Lease Liabilities
 
$
370

 
 
 
Finance Leases:
 
 
Land, buildings and equipment, net
 
$
18

 
 
 
Current portion of long-term debt
 
$
8

Long-term debt
 
11

Total Finance Lease Liabilities
 
$
19



The Company's leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment. The weighted average discount rates for operating and finance leases were 5.3% and 4.8%, respectively.

The weighted average remaining lease terms for operating and finance leases at June 30, 2019, were 5 years and 3 years, respectively.


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The aggregate future lease payments for operating leases were as follows:

 
 
June 30, 2019
(in millions)
 
Operating Lease Payments
Maturity Of Lease Liabilities:
 
 
2019 (remaining)
 
$
66

2020
 
107

2021
 
77

2022
 
53

2023
 
35

Thereafter
 
86

Total undiscounted operating lease payments
 
424

Less imputed interest
 
54

Present value of operating lease liabilities
 
$
370



Maturities of finance lease liabilities were as follows:

 
 
June 30, 2019
(in millions)
 
Finance Lease Payments
2019 (remaining)
 
$
5

2020
 
6

2021
 
5

2022
 
3

2023
 
1

Thereafter
 

Total undiscounted finance lease payments
 
20

Less imputed interest
 
1

Present value of finance lease liabilities
 
$
19



As of June 30, 2019, the Company had entered into an additional operating lease agreement for real estate of $14 million, which has not commenced and has not been recognized on the Company's Consolidated Balance Sheet. This operating lease is expected to commence in 2019 with a lease term of 10 years.

As previously disclosed in Note 5 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018, under the previous lease accounting standard, future minimum lease payments for operating leases having initial or remaining non-cancelable lease term in excess of one year were as follows:

 
 
December 31, 2018
(in millions)
 
Operating Lease Payments
Maturity Of Lease Liabilities:
 
 
2019
 
$
153

2020
 
113

2021
 
78

2022
 
53

2023
 
33

Thereafter
 
76

Total minimum operating lease payments
 
$
506




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New Accounting Standards To Be Adopted

Credit Losses: In June 2016, the FASB updated the accounting guidance related to measurement of credit losses on financial instruments, which requires financial assets measured at amortized cost to be presented at the net amount expected to be collected. This updated guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact on its Consolidated Financial Statements.
 
Note 3 – Revenue, Contract Assets and Liabilities

Disaggregation of Revenue

During the second quarter, the Company changed how it presents the disaggregated revenue by major service line for Government Services and Healthcare and Payment Services to reflect how the businesses are managed. This change had no impact on disaggregated revenue by reportable segment or the timing of revenue recognition. All prior periods presented have been revised to reflect this change.

The following table provides information about disaggregated revenue by major service line, the timing of revenue recognition and a reconciliation of the disaggregated revenue by reportable segments. Refer to Note 4 – Segment Reporting for additional information on the Company's reportable segments.
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(in millions)
 
2019
 
2018
 
2019
 
2018
Commercial Industries:
 
 
 
 
 
 
 
 
Omni-channel communications
 
$
192

 
$
199

 
$
403

 
$
418

Human resource services
 
182

 
189

 
364

 
376

Industry services
 
218

 
238

 
437

 
486

Total Commercial Industries
 
592

 
626

 
1,204

 
1,280

Government Services:
 
 
 
 
 
 
 
 
Government Services and Healthcare
 
176

 
182

 
355

 
360

Payment Services
 
75

 
83

 
149

 
165

State and Local
 
61

 
62

 
120

 
124

Federal
 
14

 
14

 
27

 
27

Total Government Services
 
326

 
341

 
651

 
676

Transportation:
 
 
 
 
 
 
 
 
Tolling
 
81

 
71

 
160

 
143

Transit
 
62

 
57

 
116

 
111

Photo and Parking
 
48

 
48

 
96

 
94

Commercial Vehicle
 
3

 
4

 
6

 
8

Total Transportation
 
194

 
180

 
378

 
356

Other:
 
 
 
 
 
 
 
 
Divestitures
 

 
238

 
36

 
486

Education
 

 
2

 
1

 
9

Total Other
 

 
240

 
37

 
495

Total Consolidated Revenue
 
$
1,112

 
$
1,387

 
$
2,270

 
$
2,807

 
 
 
 
 
 
 
 
 
Timing of Revenue Recognition:
 
 
 
 
 
 
 
 
Point in time
 
$
34

 
$
34

 
$
73

 
$
70

Over time
 
1,078

 
1,353

 
2,197

 
2,737

Total Revenue
 
$
1,112

 
$
1,387

 
$
2,270

 
$
2,807




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Contract Balances

The Company receives payments from customers based upon contractual billing schedules. Accounts receivable are recorded when the right to consideration becomes unconditional. Contract assets are the Company’s rights to consideration for services provided when the right is conditioned on something other than passage of time (for example, meeting a milestone for the right to bill under the cost-to-cost measure of progress). Contract assets are transferred to Accounts receivable, net when the rights to consideration become unconditional. Unearned income includes payments received in advance of performance under the contract, which are realized when the associated revenue is recognized under the contract.

The following table provides information about the balances of the Company's contract assets, unearned income and receivables from contracts with customers:

(in millions)
 
June 30, 2019
 
December 31, 2018
Contract Assets (Unearned Income)
 
 
 
 
Current contract assets
 
$
192

 
$
177

Long-term contract assets(1)
 
15

 
7

Current unearned income
 
(92
)
 
(112
)
Long-term unearned income(2)
 
(26
)
 
(32
)
Net Contract Assets (Unearned Income)
 
$
89

 
$
40

Accounts receivable, net
 
$
824

 
$
782

__________
(1)
Presented in Other long-term assets in the Condensed Consolidated Balance Sheets
(2)
Presented in Other long-term liabilities in the Condensed Consolidated Balance Sheets

Revenues of $28 million and $81 million were recognized during the three and six months ended June 30, 2019, respectively, related to the Company's unearned income at December 31, 2018. Revenues of $98 million and $181 million were recognized during the three and six months ended June 30, 2018, respectively, related to the Company's unearned income at January 1, 2018.

Transaction Price Allocated to the Remaining Performance Obligations

Estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially satisfied at June 30, 2019, was approximately $2 billion. The Company expects to recognize approximately 65% of this revenue over the next 2 years and the remainder thereafter.

Note 4 – Segment Reporting

The Company's reportable segments correspond to how the Company organizes and manages the business and are aligned to the industries in which the Company's clients operate.

Our financial performance is based on Segment Profit / (Loss) and Segment Adjusted EBITDA for the following three reportable segments: Commercial Industries, Government Services and Transportation.

Commercial Industries: Our Commercial Industries segment provides business process services and customized solutions to clients in a variety of industries. Across the Commercial Industries segment, we deliver end-to-end, business-to-business and business-to-customer services that enable our clients to optimize their key processes. Our multi-industry competencies include omni-channel communications, human resource management and finance and accounting services.


CNDT Q2 2019 Form 10-Q
13

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Government Services: Our Government Services segment provides government-centric business process services to U.S. federal, state and local and foreign governments for public assistance, program administration, transaction processing and payment services.

Transportation: Our Transportation segment provides systems and support services to transportation departments and agencies globally. Offerings include support for electronic toll collection, public transit, parking and photo enforcement.

Other includes our divestitures and our Student Loan business, which the Company exited in the third quarter of 2018.

Selected financial information for our reportable segments is as follows:

 
 
Three Months Ended
June 30,
(in millions)
 
Commercial Industries
 
Government Services
 
Transportation
 
Other
 
Shared IT / Infrastructure & Corporate Costs
 
Total
2019
 
 
 
 
 
 
 
Divestitures
 
Other
 
 
 
 
Revenue
 
$
592

 
$
326

 
$
194

 
$

 
$

 
$

 
$
1,112

Segment profit (loss)
 
$
108

 
$
103

 
$
31

 
$

 
$

 
$
(183
)
 
$
59

Segment depreciation and amortization
 
$
21

 
$
6

 
$
8

 
$

 
$

 
$
16

 
$
51

Adjusted EBITDA
 
$
129

 
$
109

 
$
43

 
$

 
$

 
$
(167
)
 
$
114

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2018