CONDUENT Inc 10-K

ITEM 9A. CONTROLS AND PROCEDURES Management's Responsibility for Financial Statements Management is responsible for the integrity and objectivity of all information presented in this Annual Report on Form 10-K. The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on management's best estimates and judgments. Management believes the consolidated financial statements fairly reflect the form and substance of transactions and that the financial statements fairly represent the Company's financial position and results of operations. The Audit Committee of the Board of Directors, which is composed solely of independent directors, meets regularly with the independent registered public accountants, PricewaterhouseCoopers LLP, the internal auditors and representatives of management to review accounting, financial reporting, internal control and audit matters, as well as the nature and extent of the audit effort. The Audit Committee is responsible for the engagement of the independent registered public accountants. The independent registered public accountants and internal auditors have access to the Audit Committee. Disclosure Controls and Procedures The Company’s management evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of December 31, 2021, the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were effective to ensure that information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms relating to Conduent Incorporated, including our consolidated subsidiaries, and was accumulated and communicated to the Company’s management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management's Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended. Under the supervision and with the participation of our management, including our principal executive officer, principal financial officer and principal accounting officer, we have conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in "Internal Control - Integrated Framework" (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the above evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2021. The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in Part II, Item 8 of this Form 10-K. CNDT 2021 Annual Report 96 Table of Contents Changes in Internal Control over Financial Reporting In connection with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange Act, there was no change identified in our internal control over financial reporting that occurred during the last fiscal quarter ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not Applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information regarding our executive officers required by Item 10 of Part III is set forth in Item 1 of Part I "Business–Information About Our Executive Officers." The information regarding directors is incorporated herein by reference to the section entitled “Proposal 1 - Election of Directors” in our definitive Proxy Statement to be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, for our 2022 Annual Meeting of Stockholders (the 2022 Proxy Statement). The 2022 Proxy Statement is expected to be filed within 120 days after the end of our fiscal year ended December 31, 2021. The information regarding compliance with Section 16(a) of the Securities and Exchange Act of 1934 is incorporated herein by reference to the section entitled “Delinquent Section 16(a) Report" of our 2022 Proxy Statement. The information required by this Item regarding the Audit Committee, its members and the Audit Committee financial experts is incorporated by reference herein from the subsection entitled “Committee Functions, Membership and Meetings” in the section entitled “Proposal 1 - Election of Directors” in our 2022 Proxy Statement. We have adopted a code of ethics applicable to our principal executive officer, principal financial officer and principal accounting officer (Finance Code of Conduct). The Finance Code of Conduct can be found on our website at: https://www.conduent.com/corporate-governance/ethics-and-compliance/. Information concerning our Finance Code of Conduct can be found under "Corporate Governance" in our 2022 Proxy Statement and is incorporated here by reference. The reference to our website address does not constitute incorporation by reference of any of the information contained on the website, and such information is not a part of this Annual Report. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item included under the following captions under “Proposal 1 - Election of Directors” in our 2022 Proxy Statement is incorporated herein by reference: “Compensation Discussion and Analysis”, “Summary Compensation Table”, “Grants of Plan-Based Awards in 2021”, “Outstanding Equity Awards at 2021 Fiscal Year-End”, “Option Exercises and Stock Vested in 2021”, “Potential Payments upon Termination or Change in Control”, “Annual Director Compensation", "Equity Compensation Plan Information", "Compensation Committee Interlocks and Insider Participation” and “Compensation Committee”. The information included under the heading “Compensation Committee Report” in our 2022 Proxy Statement is incorporated herein by reference; however, this information shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS CNDT 2021 Annual Report 97 Table of Contents Information required by this Item is incorporated herein by reference to the subsections entitled "Securities Ownership," and “Equity Compensation Plan Information” under “Proposal 1 - Election of Directors” in our 2022 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE Information required by this Item is incorporated herein by reference to the subsection entitled “Certain Relationships and Related Person Transactions” under “Proposal 1 - Election of Directors” in our 2022 Proxy Statement. The information regarding director independence is incorporated herein by reference to the subsections entitled “Corporate Governance” and “Director Independence” in the section entitled “Proposal 1 - Election of Directors” in our 2022 Proxy Statement. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this Item is incorporated herein by reference to the section entitled “Proposal 2 - Ratification of Appointment of Independent Registered Public Accounting Firm” in our 2022 Proxy Statement. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) 1. Index to Financial Statements filed as part of this report: • Report of Independent Registered Public Accounting Firm (PCAOB ID: 238 ); ▪ Consolidated Statements of Income (Loss) for each of the years in the three-year period ended December 31, 2021; ▪ Consolidated Statements of Comprehensive Income (Loss) for each of the years in the three-year period ended December 31, 2021; ▪ Consolidated Balance Sheets as of December 31, 2021 and 2020; ▪ Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2021; ▪ Consolidated Statements of Shareholders' Equity for each of the years in the three-year period ended December 31, 2021; ▪ Notes to the Consolidated Financial Statements; and ▪ All other schedules are omitted as they are not applicable, or the information required is included in the financial statements or notes thereto. 2. Financial Statement Schedules: ▪ Schedule II–Valuation and Qualifying Accounts for each of the three years in the period ended December 31, 2021. 3. The exhibits filed herewith are set forth in the exhibit Index included herein. (b) Management contracts or compensatory plans or arrangements listed that are applicable to the executive officers named in the Summary Compensation Table which appears in the Registrant's 2022 Proxy Statement or to our directors are preceded by an asterisk (*). CNDT 2021 Annual Report 98 Table of Contents SCHEDULE II Valuation and Qualifying Accounts For the three years ended December 31, 2021 (in millions) Balance at beginning of period Additions charged to expense (1)(4) Amounts (credited) charged to other income statement accounts (2) Deductions and other, net of recoveries (3)(4) Balance at end of period Allowance for Credit Losses: 2021 Accounts Receivable $ 2 $ 1 $ — $ ( 3 ) $ — 2020 Accounts Receivable 2 1 — ( 1 ) 2 2019 Accounts Receivable 1 3 — ( 2 ) 2 Tax Valuation Allowance: 2021 Tax Valuation 83 10 — ( 11 ) 82 2020 Tax Valuation 72 17 — ( 6 ) 83 2019 Tax Valuation 44 38 — ( 10 ) 72 __________ (1) Account Receivables/Contract Assets: additions charged to expense represent bad debt provisions relate to estimated losses due to credit and similar collectability issues. (2) Account Receivables: Other charges (credits) relate to adjustments to reserves necessary to reflect events of non-payment such as customer accommodations and contract terminations. (3) Account Receivables/Contract Assets: Deductions and other, net of recoveries primarily relates to receivable and contract asset write-offs, but also includes reclassification to other balance sheet accounts, the impact of foreign currency translation adjustments and recoveries of previously written off receivables and contract assets. (4) Tax Valuation: tax valuation allowance are primarily related to certain net operating loss carryforwards, tax credit carryforwards and deductible temporary differences for which we have concluded it is more-likely-than-not that these items will not be realized in the ordinary course of operations. ITEM 16. FORM 10-K SUMMARY None CNDT 2021 Annual Report 99 Table of Contents EXHIBIT INDEX Document and Location Exhibit No. 3.1 Restated Certificate of Incorporation of Registrant as of December 23, 2016. Incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K dated December 23, 2016. (See SEC File Number 001-37817). 3.2 Amended and Restated By-Laws of Registrant as amended through December 31, 2016. Incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K dated December 23, 2016. (See SEC File Number 001-37817). 4.1 Indenture, dated as of October 15, 2021, among Conduent Incorporated, Conduent Business Services, LLC, Conduent State & Local Solutions, Inc., Affiliated Business Services International, B.V., the Guarantors party thereto from time to time, the Lenders and L/C Issuers party thereto from time to time and Bank of America, N.A., as Administrative Agent. Incorporated by reference to Exhibit 4.4(g) to Registrant’s Quarterly Report on Form 10-Q dated November 4, 2021. (See SEC File Number 001-37817). 4.2 4.2 Description of Securities. Incorporated by reference to Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K dated February 26, 2020. (See SEC File Number 001-37817) 10.1 Credit Agreement, dated as of October 15, 2021, among Conduent Incorporated, Conduent Business Services, LLC, Conduent State & Local Solutions, Inc., Affiliated Computer Services International B.V., the Guarantors party thereto from time to time, the Lenders and L/C Issuers party thereto from time to time and Bank of America, N.A., as Administrative Agent. Incorporated by reference to Exhibit 10.6(f) to Registrant’s Quarterly Report on Form 10-Q dated November 14, 2021. (See SEC File Number 001-37817). 10.4(a) Joinder Agreement to Agreement, dated December 31, 2016, among Conduent Incorporated, Xerox Corporation, Icahn Partners Master Fund LP, Icahn Partners LP, Icahn Onshore LP, Icahn Offshore LP, Icahn Capital LP, IPH GP LLC, Icahn Enterprises Holdings L.P., Icahn Enterprises G.P. Inc., Beckton Corp., High River Limited Partnership, Hopper Investments LLC, Barberry Corp., Jonathan Christodoro and Carl C. Icahn. Incorporated by reference to Exhibit 10.6 to Registrant’s Current Report on Form 8-K dated January 3, 2017. (See SEC File Number 001-37817). 10.4(b) Agreement, dated January 28, 2016, among Xerox Corporation, Icahn Partners Master Fund LP, Icahn Partners LP, Icahn Onshore LP, Icahn Offshore LP, Icahn Capital LP, IPH GP LLC, Icahn Enterprises Holdings L.P., Icahn Enterprises G.P. Inc., Beckton Corp., High River Limited Partnership, Hopper Investments LLC, Barberry Corp., Jonathan Christodoro and Carl C. Icahn. Incorporated by reference to Exhibit 10.6 to Registrant’s Amendment No. 1 to Form 10 dated August 15, 2016. (See SEC File Number 001-37817). 10.5(a) Exchange Agreement dated October 27, 2016 by and among Darwin A. Deason, Conduent Incorporated and Xerox Corporation. Incorporated by reference to Exhibit 10.14 to Registrant’s Amendment No. 5 to Form 10 dated October 28, 2016. (See SEC File Number 001-37817). 10.5(b) Shareholders Agreement dated December 18, 2018 by and between Darwin Deason and Conduent Incorporated. Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated December 18, 2018. (See SEC File Number 001-37817). The management contracts or compensatory plans or arrangements listed below that are applicable to the executive officers named in the Summary Compensation Table which will appear in the Registrant’s 2022 Proxy Statement or to our directors are preceded by an asterisk (*). *10.6(a)(i) Registrant’s Performance Incentive Plan dated as of December 15, 2016 (“PIP”). Incorporated by reference to Exhibit 4.3 to Registrant’s Registration Statement No. 333-215361 dated December 29, 2016. (See SEC File Number 001-37817). *10.6(a)(ii) Form of Restricted Stock Unit Award Agreement 2020 under the PIP. Incorporated by reference to Exhibit 10 6(a)(vi) to the Registrant’s Quarterly Report on form 10-Q dated May 8, 2020. (See SEC File Number 001-37817). CNDT 2021 Annual Report 100 Table of Contents *10.6(a)(iii) Form of Performance Restricted Stock Unit Award Agreement 2020 under the PIP. Incorporated by reference to Exhibit 10 6(a)(vii) to the Registrant’s Quarterly Report on form 10-Q dated May 8, 2020. (See SEC File Number 001-37817). *10.6(a)(iv) Registrant’s 2021 Performance Incentive Plan (“ 2021 PIP”). Incorporated by reference to Annex A to Registrant’s Proxy Filing on Schedule 14 dated April 9, 2021. (See SEC File Number 001-37817). *10.6(a)(v) Form of Restricted Stock Unit Award Agreement 2021 under the 2021 PIP. Incorporated by reference to Exhibit 10 6(a)(x) to the Registrant’s Quarterly Report on form 10-Q dated August 5, 2021. (See SEC File Number 001-37817). *10.6(a)(vi) Form of Performance Stock Unit Award Agreement 2021 (Revenue Metric) under the 2021 PIP. Incorporated by reference to Exhibit 10 6(a)(xi) to the Registrant’s Quarterly Report on form 10-Q dated August 5, 2021. (See SEC File Number 001-37817). *10.6(a)(vii) Form of Performance Stock Unit Award Agreement 2021 (Share Hurdle Metric) under the 2021 PIP. Incorporated by reference to Exhibit 10 6(a)(xii) to the Registrant’s Quarterly Report on form 10-Q dated August 5, 2021. (See SEC File Number 001-37817). *10.6(a)(viii) Form of Agreement for Non-Employee Directors under 2021 PIP. Incorporated by reference to Exhibit 10 6(a)(xiii) to the Registrant’s Quarterly Report on form 10-Q dated August 5, 2021. (See SEC File Number 001-37817). *10.6(b)(i) Registrant’s Equity Compensation Plan for Non-Employee Directors dated as of December 15, 2016 (“ECPNED”). Incorporated by reference to Exhibit 4.4 to Registrant’s Registration Statement No. 333-215361 dated December 29, 2016. (See SEC File Number 001-37817). *10.6(b)(ii) Form of Agreement under the ECPNED. Incorporated by reference to Exhibit 10.6(b)(ii) to the Registrant's Annual Report on Form 10-K dated March 10, 2017. (See SEC File Number 001-37817). *10.6.(c) Registrant's Executive Change in Control Severance Plan dated as of April 25, 2017. Incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated August 28, 2017. (See SEC File Number 001-37817). *10.6(d) Letter Agreement dated May 21, 2019 between Conduent Incorporated and Clifford Skelton regarding compensation arrangements. Incorporated by reference to Exhibit 10.6(h) to the Registrant’s Current Report on Form 8-K dated May 28, 2019. (See SEC File Number 001-37817). *10.6(d)(i) Letter Agreement dated August 6, 2019 between Conduent Incorporated and Clifford Skelton regarding compensation arrangements. Incorporated by reference to Exhibit 10.6(j) to the Registrant’s Current Report on Form 8-K dated August 7, 2019. (See SEC File Number 001-37817). *10.6(d)(ii) Letter Agreement dated February 25, 2020 between Conduent Incorporated and Clifford Skelton regarding compensation arrangements. Incorporated by reference to Exhibit 10.6(e)(ii) to the Registrant’s Annual Report on Form 10-K dated February 26, 2020. (See SEC File Number 001-37817). *10.6(d)(iii) Letter Agreement dated February 23, 2021 between Conduent Incorporated and Clifford Skelton regarding compensation arrangements. Incorporated by reference to Exhibit 10.6(d)(iii) to the Registrant’s Annual Report on Form 10-K dated February 24, 2021. (See SEC File Number 001-37817). *10.6(e) Letter Agreement dated May 5, 20 2 1 between Conduent Incorporated and Stephen Wood regarding compensation arrangements. Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated May 5, 2021. (See SEC File Number 001-37817). *10.6(f) Letter Agreement dated May 15, 2019 between Conduent Incorporated and Mark S. Brewer. Incorporated by reference to Exhibit 10.6(h) to the Registrant’s Annual Report on Form 10-K dated February 26, 2020. (See SEC File Number 001-37817). CNDT 2021 Annual Report 101 Table of Contents *10.6(g) Letter Agreement dated November 5, 2019 between Conduent Incorporated and Michael Krawitz . Incorporated by reference to Exhibit 10.6(i) to the Registrant’s Annual Report on Form 10-K dated February 26, 2020. (See SEC File Number 001-37817). 21.1 List of subsidiaries of Registrant . 23 Consent of PricewaterhouseCoopers LLP. 31(a) Certification of CEO pursuant to Rule 13a-14(a) or Rule 15d-14(a) . 31(b) Certification of CFO pursuant to Rule 13a-14(a) or Rule 15d-14(a) . 32 Certification of CEO and CFO pursuant to 18 U.S.C. §1350 as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002 . 101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase. 101.SCH Inline XBRL Taxonomy Extension Schema Linkbase. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). CNDT 2021 Annual Report 102 Table of Contents Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CONDUENT INCORPORATED /s/ CLIFFORD SKELTON Clifford Skelton Chief Executive Officer February 23, 2022 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. February 23, 2022 Signature Title Principal Executive Officer: /s/ CLIFFORD SKELTON Chief Executive Officer and Director Clifford Skelton Principal Financial and Accounting Officer: /s/ STEPHEN WOOD Executive Vice President, Chief Financial Officer and Principal Accounting Officer Stephen Wood /s/ HUNTER GARY Director Hunter Gary /s/ KATHY HIGGINS VICTOR Director Kathy Higgins Victor /s/ SCOTT LETIER Director and Chairman of the Board Scott Letier /s/ JESSE LYNN Director Jesse Lynn /s/ STEVEN MILLER Director Steven Miller /s/ MICHAEL MONTELONGO Director Michael Montelongo /s/ MARGARITA PALÁU-HERNÁNDEZ Director Margarita Paláu-Hernández CNDT 2021 Annual Report 103