32 unchanged sentences
The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
−Removed: Realizability of Deferred Tax Assets
−Removed: As described in Note 20 to the consolidated financial statements, the Company has recorded $705 million of deferred tax assets, net of a valuation allowance of $357 million, as of December 31, 2021 .
+Added: Realizability of Deferred Tax Assets - U.S.
+Added: Foreign Tax Credit Carryforwards
+Added: As described in Note 19 to the consolidated financial statements, the Company has recorded $772 million of deferred tax assets, net of a valuation allowance of $366 million, as of December 31, 2022 , which includes U.S.
+Added: foreign tax credit carryforwards with a limited life.
Management records the estimated future tax effects of temporary differences between the tax bases of assets and amounts reported, as well as net operating loss and tax credit carryforwards.
1 unchanged sentence
Management applied judgment in assessing the realizability of these deferred tax assets and the need for any valuation allowances, in particular the realizability of U.S.
−Removed: tax credit carryforwards with a limited life.
+Added: foreign tax credit carryforwards with a limited life.
In determining the amount of deferred tax assets that are more-likely-than-not to be realized, management considered historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies.
−Removed: The principal considerations for our determination that performing procedures relating to the realizability of deferred tax assets is a critical audit matter are the significant judgment by management in assessing the realizability of deferred tax assets related to the Company's U.S.
−Removed: tax credit carryforwards with a limited life, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating management’s significant assumptions related to projected future taxable income.
−Removed: In addition, the audit effort involved the use of professionals with specialized skill and knowledge.
+Added: The principal considerations for our determination that performing procedures relating to the realizability of deferred tax assets related to the U.S.
+Added: foreign tax credit carryforwards is a critical audit matter are (i) the significant judgment by management in assessing the realizability of deferred tax assets related to the Company's U.S.
+Added: foreign tax credit carryforwards with a limited life;
+Added: (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating management’s significant assumptions related to projected future taxable income;
+Added: (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.
1 unchanged sentence
These procedures also included, among others, evaluating management’s assessment of the realizability of deferred tax assets related to the Company's U.S.
−Removed: tax credit carryforwards with a limited life, including evaluating the reasonableness of the assumptions related to projected future taxable income.
+Added: foreign tax credit carryforwards with a limited life, including evaluating the reasonableness of the assumptions related to projected future taxable income.
Evaluating management’s assumptions related to projected future taxable income involved evaluating whether the assumptions were reasonable by considering historical profitability as well as other audit evidence related to management’s forecasts.
Professionals with specialized skill and knowledge were used to assist in the evaluation of management’s application of income tax law in determining projected future taxable income and the assessment of the realizability of deferred tax assets related to the Company's U.S.
−Removed: tax credit carryforwards with a limited life.
−Removed: Goodwill Impairment Assessment
−Removed: As described in Notes 1 and 13 to the consolidated financial statements, the Company has recorded $3,287 million of goodwill as of December 31, 2021 for its single reporting unit.
+Added: foreign tax credit carryforwards with a limited life.
+Added: Interim Goodwill Impairment Assessment - Print and Other Reporting Unit
+Added: As described in Notes 1, 2 and 12 to the consolidated financial statements, the Company has recorded $2,820 million of goodwill as of December 31, 2022 which is allocated to the Print and Other reporting unit.
Management assesses goodwill for impairment at least annually, during the fourth quarter based on balances as of October 1st, and more frequently if indicators of impairment exist or if a decision is made to sell or exit a business.
1 unchanged sentence
If the carrying value exceeds the fair value, goodwill is considered impaired and management would recognize an impairment loss for the excess.
−Removed: Management performs an assessment of goodwill, utilizing either a qualitative or quantitative impairment test.
−Removed: The qualitative impairment test assesses several factors to determine whether it is more-likely-than-not that the fair value of the entity is less than its carrying amount.
In a quantitative impairment test, management assesses goodwill by comparing the carrying amount of the entity to its fair value, and the fair value of the entity is determined by using a weighted combination of an income approach and a market approach.
−Removed: After completing the annual quantitative test in the fourth quarter 2021, management concluded that the fair value of the Company had declined below its carrying value.
−Removed: As a result, the
+Added: In the third quarter 2022, management determined there was a triggering event requiring an interim quantitative assessment of goodwill.
+Added: After completing the interim impairment test, management concluded that the estimated fair value of the Print and Other reporting unit had declined below its carrying value and
Xerox 2022 Annual Report 69
−Removed: Company recognized an after-tax non-cash impairment charge of $750 million ($781 million pre-tax) for the year ended December 31, 2021.
−Removed: As disclosed by management, the income approach is based on the discounted cash flow method that uses management's estimates of forecasted future financial performance including revenues, gross margins, operating expenses, taxes, working capital, and capital asset requirements.
−Removed: Projected cash flows are then discounted to a present value employing a discount rate that properly accounts for the estimated market weighted-average cost of capital, as well as any risk unique to the subject cash flows.
−Removed: The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment is a critical audit matter are the significant judgment by management in determining the fair value estimate of the reporting unit, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating management’s discounted cash flow method and significant assumptions related to forecasted revenues, gross margins and operating expenses, and the discount rate.
−Removed: In addition, the audit effort involved the use of professionals with specialized skill and knowledge.
+Added: recognized an after-tax non-cash impairment charge of $395 million ($412 million pre-tax) in the third quarter 2022.
+Added: As disclosed by management, the income approach is based on the discounted cash flow method that uses management's estimates of forecasted future financial performance including revenues, gross margins, operating expenses, and taxes.
+Added: Projected cash flows are then discounted to a present value employing a discount rate that properly accounts for the estimated market weighted-average cost of capital, as well as any risks unique to the subject cash flows.
+Added: The principal considerations for our determination that performing procedures relating to the interim goodwill impairment assessment of the Print and Other reporting unit is a critical audit matter are (i) the significant judgment by management in developing the fair value estimate of the Print and Other reporting unit;
+Added: (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating management’s discounted cash flow method and significant assumptions related to forecasted revenues, gross margins, operating expenses, and taxes, and the discount rate;
+Added: and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.
−Removed: These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Company’s reporting unit and the controls over the development of the assumptions related to forecasted revenues, gross margins and operating expenses, and the discount rate.
−Removed: These procedures also included, among others (i) testing management’s process for determining the fair value estimate;
+Added: These procedures included testing the effectiveness of controls relating to management’s interim goodwill impairment assessment, including controls over the valuation of the Print and Other reporting unit and the controls over the development of the significant assumptions used in developing the fair value estimate.
+Added: These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the Print and Other reporting unit;
(ii) evaluating the appropriateness of the discounted cash flow method;
−Removed: (iii) testing the completeness and accuracy of underlying data used in the estimate;
−Removed: and (iv) evaluating the reasonableness of the significant assumptions used by management related to the forecasted revenues, gross margins and operating expenses, and the discount rate.
−Removed: Evaluating management’s assumptions related to forecasted revenues, gross margins and operating expenses involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.
−Removed: Professionals with specialized skill and knowledge were also used to assist in the evaluation of the Company’s discounted cash flow method and the discount rate assumption.
+Added: (iii) testing the completeness and accuracy of underlying data used in the discounted cash flow method;
+Added: and (iv) evaluating the reasonableness of the significant assumptions used by management related to forecasted revenues, gross margins, operating expenses, and taxes, and the discount rate.
+Added: Evaluating management’s assumptions related to forecasted revenues, gross margins, operating expenses, and taxes involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the Print and Other reporting unit;
+Added: (ii) the consistency with external market and industry data;
+Added: and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.
+Added: Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the discounted cash flow method and the reasonableness of the discount rate significant assumption.
/s/ PricewaterhouseCoopers LLP
28 unchanged sentences
and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
−Removed: Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Xerox 2022 Annual Report 71
+Added: Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
2 unchanged sentences
The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
−Removed: Realizability of Deferred Tax Assets
−Removed: As described in Note 20 to the consolidated financial statements, the Company has recorded $705 million of deferred tax assets, net of a valuation allowance of $357 million, as of December 31, 2021 .
+Added: Realizability of Deferred Tax Assets - U.S.
+Added: Foreign Tax Credit Carryforwards
+Added: As described in Note 19 to the consolidated financial statements, the Company has recorded $772 million of deferred tax assets, net of a valuation allowance of $366 million, as of December 31, 2022 , which includes U.S.
+Added: foreign tax credit carryforwards with a limited life.
Management records the estimated future tax effects of temporary differences between the tax bases of assets and amounts reported, as well as net operating loss and tax credit carryforwards.
1 unchanged sentence
Management applied judgment in assessing the realizability of these deferred tax assets and the need for any valuation allowances, in particular the realizability of U.S.
−Removed: tax credit carryforwards with a limited life.
+Added: foreign tax credit carryforwards with a limited life.
In determining the amount of deferred tax assets that are more-likely-than-not to be realized, management considered historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies.
−Removed: The principal considerations for our determination that performing procedures relating to the realizability of deferred tax assets is a critical audit matter are the significant judgment by management in assessing the realizability of deferred tax assets related to the Company's U.S.
−Removed: tax credit carryforwards with a limited life, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating management’s significant assumptions related to projected future taxable income.
−Removed: In addition, the audit effort involved the use of professionals with specialized skill and knowledge.
+Added: The principal considerations for our determination that performing procedures relating to the realizability of deferred tax assets related to the U.S.
+Added: foreign tax credit carryforwards is a critical audit matter are (i) the significant judgment by management in assessing the realizability of deferred tax assets related to the Company's U.S.
+Added: foreign tax credit carryforwards with a limited life;
+Added: (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating management’s significant assumptions related to projected future taxable income;
+Added: (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.
1 unchanged sentence
These procedures also included, among others, evaluating management’s assessment of the realizability of deferred tax assets related to the Company's U.S.
−Removed: tax credit carryforwards with a limited life, including evaluating the reasonableness of the assumptions related to projected future taxable income.
+Added: foreign tax credit carryforwards with a limited life, including evaluating the reasonableness of the assumptions related to projected future taxable income.
Evaluating management’s assumptions related to projected future taxable income involved evaluating whether the assumptions were reasonable by considering historical profitability as well as other audit evidence related to management’s forecasts.
Professionals with specialized skill and knowledge were used to assist in the evaluation of management’s application of income tax law in determining projected future taxable income and the assessment of the realizability of deferred tax assets related to the Company's U.S.
−Removed: tax credit carryforwards with a limited life.
−Removed: Goodwill Impairment Assessment
−Removed: As described in Notes 1 and 13 to the consolidated financial statements, the Company has recorded $3,287 million of goodwill as of December 31, 2021 for its single reporting unit.
+Added: foreign tax credit carryforwards with a limited life.
+Added: Interim Goodwill Impairment Assessment - Print and Other Reporting Unit
+Added: As described in Notes 1, 2 and 12 to the consolidated financial statements, the Company has recorded $2,820 million of goodwill as of December 31, 2022 which is allocated to the Print and Other reporting unit.
Management assesses goodwill for impairment at least annually, during the fourth quarter based on balances as of October 1st, and more frequently if indicators of impairment exist or if a decision is made to sell or exit a business.
1 unchanged sentence
If the carrying value exceeds the fair value, goodwill is considered impaired and management would recognize an impairment loss for the excess.
−Removed: Management performs an assessment of goodwill, utilizing either a qualitative or quantitative impairment test.
−Removed: The qualitative impairment test assesses several factors to determine whether it is more-likely-than-not that the fair value of the entity is less than its carrying amount.
In a quantitative impairment test, management assesses goodwill by comparing the carrying amount of the entity to its fair value, and the fair value of the entity is determined by using a weighted combination of an income approach and a market approach.
−Removed: After completing the annual quantitative test in the fourth quarter 2021, management concluded that the fair value of the Company had declined below its carrying value.
−Removed: As a result, the Company recognized an after-tax non-cash impairment charge of $750 million ($781 million pre-tax) for the year
+Added: In the third quarter 2022, management determined there was a triggering event requiring an interim quantitative assessment of goodwill.
+Added: After completing the interim impairment test, management
Xerox 2022 Annual Report 72
−Removed: ended December 31, 2021.
−Removed: As disclosed by management, the income approach is based on the discounted cash flow method that uses management’s estimates of forecasted future financial performance including revenues, gross margins, operating expenses, taxes, working capital, and capital asset requirements.
−Removed: Projected cash flows are then discounted to a present value employing a discount rate that properly accounts for the estimated market weighted-average cost of capital, as well as any risk unique to the subject cash flows.
−Removed: The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment is a critical audit matter are the significant judgment by management in determining the fair value estimate of the reporting unit, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating management’s discounted cash flow method and significant assumptions related to forecasted revenues, gross margins and operating expenses, and the discount rate.
−Removed: In addition, the audit effort involved the use of professionals with specialized skill and knowledge.
+Added: concluded that the estimated fair value of the Print and Other reporting unit had declined below its carrying value and recognized an after-tax non-cash impairment charge of $395 million ($412 million pre-tax) in the third quarter 2022.
+Added: As disclosed by management, the income approach is based on the discounted cash flow method that uses management’s estimates of forecasted future financial performance including revenues, gross margins, operating expenses, and taxes.
+Added: Projected cash flows are then discounted to a present value employing a discount rate that properly accounts for the estimated market weighted-average cost of capital, as well as any risks unique to the subject cash flows.
+Added: The principal considerations for our determination that performing procedures relating to the interim goodwill impairment assessment of the Print and Other reporting unit is a critical audit matter are (i) the significant judgment by management in developing the fair value estimate of the Print and Other reporting unit;
+Added: (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating management’s discounted cash flow method and significant assumptions related to forecasted revenues, gross margins, operating expenses, and taxes, and the discount rate;
+Added: and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.
−Removed: These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Company’s reporting unit and the controls over the development of the assumptions related to forecasted revenues, gross margins and operating expenses, and the discount rate.
−Removed: These procedures also included, among others (i) testing management’s process for determining the fair value estimate;
+Added: These procedures included testing the effectiveness of controls relating to management’s interim goodwill impairment assessment, including controls over the valuation of the Print and Other reporting unit and the controls over the development of the significant assumptions used in developing the fair value estimate.
+Added: These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the Print and Other reporting unit;
(ii) evaluating the appropriateness of the discounted cash flow method;
−Removed: (iii) testing the completeness and accuracy of underlying data used in the estimate;
−Removed: and (iv) evaluating the reasonableness of the significant assumptions used by management related to the forecasted revenues, gross margins and operating expenses, and the discount rate.
−Removed: Evaluating management’s assumptions related to forecasted revenues, gross margins and operating expenses involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.
−Removed: Professionals with specialized skill and knowledge were also used to assist in the evaluation of the Company’s discounted cash flow method and the discount rate assumption.
+Added: (iii) testing the completeness and accuracy of underlying data used in the discounted cash flow method;
+Added: and (iv) evaluating the reasonableness of the significant assumptions used by management related to forecasted revenues, gross margins, operating expenses, and taxes, and the discount rate.
+Added: Evaluating management’s assumptions related to forecasted revenues, gross margins, operating expenses, and taxes involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the Print and Other reporting unit;
+Added: (ii) the consistency with external market and industry data;
+Added: and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.
+Added: Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the discounted cash flow method and the reasonableness of the discount rate significant assumption.
/s/ PricewaterhouseCoopers LLP
17 unchanged sentences
The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included herein.
−Removed: /s/ G IOVANNI V ISENTIN
+Added: /s/ S TEVEN J.
/s/ X AVIER H EISS
−Removed: /s/ J OSEPH H.
−Removed: M ANCINI , J R .
+Added: /s/ M IRLANDA G ECAJ
Chief Executive Officer Chief Financial Officer Chief Accounting Officer
14 unchanged sentences
The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included herein.
−Removed: /s/ G IOVANNI V ISENTIN
+Added: /s/ S TEVEN J.
/s/ X AVIER H EISS
−Removed: /s/ J OSEPH H.
−Removed: M ANCINI , J R .
+Added: /s/ M IRLANDA G ECAJ
Chief Executive Officer Chief Financial Officer Chief Accounting Officer
20 unchanged sentences
Total Costs and Expenses 7,435 7,513 6,770
−Removed: Income before Income Taxes and Equity (Loss) Income ( 475 ) 252 822
+Added: (Loss) Income before Income Taxes and Equity Income ( 328 ) ( 475 ) 252
Income tax (benefit) expense ( 3 ) ( 17 ) 64
Equity in net income of unconsolidated affiliates 3 3 4
−Removed: (Loss) Income from Continuing Operations ( 455 ) 192 651
−Removed: Income from discontinued operations, net of tax — — 710
Net (Loss) Income ( 322 ) ( 455 ) 192
−Removed: Income from continuing operations attributable to noncontrolling interests — — 3
−Removed: Income from discontinued operations attributable to noncontrolling interests — — 5
−Removed: Net (Loss) Income Attributable to Xerox Holdings $ ( 455 ) $ 192 $ 1,353
−Removed: Amounts attributable to Xerox Holdings:
−Removed: (Loss) Income from continuing operations $ ( 455 ) $ 192 $ 648
−Removed: Income from discontinued operations — — 705
+Added: Net Income attributable to noncontrolling interests — — —
Net (Loss) Income Attributable to Xerox Holdings $ ( 322 ) $ ( 455 ) $ 192
Basic (Loss) Earnings per Share $ ( 2.15 ) $ ( 2.56 ) $ 0.85
−Removed: Continuing operations $ ( 2.56 ) $ 0.85 $ 2.86
−Removed: Discontinued operations — — 3.17
−Removed: Total Basic (Loss) Earnings per Share $ ( 2.56 ) $ 0.85 $ 6.03
Diluted (Loss) Earnings per Share $ ( 2.15 ) $ ( 2.56 ) $ 0.84
−Removed: Continuing operations $ ( 2.56 ) $ 0.84 $ 2.78
−Removed: Discontinued operations — — 3.02
−Removed: Total Diluted (Loss) Earnings per Share $ ( 2.56 ) $ 0.84 $ 5.80
The accompanying notes are an integral part of these Consolidated Financial Statements.
5 unchanged sentences
Net (Loss) Income $ ( 322 ) $ ( 455 ) $ 192
−Removed: Income from continuing operations attributable to noncontrolling interests — — 3
−Removed: Income from discontinued operations attributable to noncontrolling interests — — 5
+Added: Net Income attributable to noncontrolling interests — — —
Net (Loss) Income Attributable to Xerox Holdings ( 322 ) ( 455 ) 192
3 unchanged sentences
Changes in defined benefit plans, net ( 171 ) 489 69
−Removed: Other Comprehensive Income, Net Attributable to Xerox Holdings $ 344 $ 314 $ 46
+Added: Other Comprehensive (Loss) Income, Net ( 550 ) 344 314
+Added: Other comprehensive loss, net attributable to noncontrolling interests ( 1 ) — —
+Added: Other Comprehensive (Loss) Income, Net Attributable to Xerox Holdings ( 549 ) 344 314
Comprehensive (Loss) Income, Net ( 872 ) ( 111 ) 506
−Removed: Comprehensive income, net from continuing operations attributable to noncontrolling interests — — 3
−Removed: Comprehensive income, net from discontinued operations attributable to noncontrolling interests — — 5
+Added: Comprehensive loss, net attributable to noncontrolling interests ( 1 ) — —
Comprehensive (Loss) Income, Net Attributable to Xerox Holdings $ ( 871 ) $ ( 111 ) $ 506
_____________
−Removed: (1) Refer to Note 25 - Other Comprehensive Income (Loss) for gross components of Other Comprehensive Income, reclassification adjustments out of Accumulated Other Comprehensive Loss and related tax effects.
+Added: (1) Refer to Note 24 - Other Comprehensive (Loss) Income for gross components of Other Comprehensive (Loss) Income, reclassification adjustments out of Accumulated Other Comprehensive Loss and related tax effects.
The accompanying notes are an integral part of these Consolidated Financial Statements.
14 unchanged sentences
Intangible assets, net 208 211
−Removed: Goodwill 3,287 4,071
+Added: Goodwill, net 2,820 3,287
Deferred tax assets 582 519
35 unchanged sentences
Net (Loss) Income $ ( 322 ) $ ( 455 ) $ 192
−Removed: Income from discontinued operations, net of tax — — ( 710 )
−Removed: (Loss) income from continuing operations ( 455 ) 192 651
−Removed: Adjustments required to reconcile Net (loss) income to Cash flows from operating activities
+Added: Adjustments required to reconcile Net (loss) income to Cash flows provided by operating activities
Depreciation and amortization 270 327 368
6 unchanged sentences
Payments for restructurings ( 52 ) ( 72 ) ( 81 )
−Removed: Defined benefit pension cost ( 10 ) 58 109
−Removed: Contributions to defined benefit pension plans ( 135 ) ( 139 ) ( 141 )
−Removed: Decrease in accounts receivable and billed portion of finance receivables 41 369 10
−Removed: Decrease (increase) in inventories 88 ( 134 ) 109
+Added: Non-service retirement-related costs (1)
+Added: ( 12 ) ( 89 ) ( 29 )
+Added: Contributions to retirement plans (1)
+Added: ( 124 ) ( 160 ) ( 164 )
+Added: (Increase) decrease in accounts receivable and billed portion of finance receivables ( 48 ) 41 369
+Added: (Increase) decrease in inventories ( 143 ) 88 ( 134 )
Increase in equipment on operating leases ( 112 ) ( 129 ) ( 118 )
−Removed: Decrease in finance receivables 20 183 101
−Removed: Decrease (increase) in other current and long-term assets 68 8 ( 14 )
+Added: (Increase) decrease in finance receivables ( 141 ) 20 183
+Added: Decrease in other current and long-term assets 27 68 8
Increase (decrease) in accounts payable 278 118 ( 123 )
−Removed: Decrease in accrued compensation ( 95 ) ( 189 ) ( 94 )
+Added: Increase (decrease) in accrued compensation (1)
Increase (decrease) in other current and long-term liabilities 9 89 ( 165 )
2 unchanged sentences
Other operating, net 13 ( 17 ) 40
−Removed: Net cash provided by operating activities of continuing operations 629 548 1,244
−Removed: Net cash provided by operating activities of discontinued operations — — 89
Net cash provided by operating activities 159 629 548
4 unchanged sentences
Other investing, net ( 15 ) ( 8 ) 1
−Removed: Net cash used in investing activities of continuing operations ( 85 ) ( 246 ) ( 85 )
−Removed: Net cash provided by investing activities of discontinued operations — — 2,233
−Removed: Net cash (used in) provided by investing activities ( 85 ) ( 246 ) 2,148
+Added: Net cash used in investing activities ( 78 ) ( 85 ) ( 246 )
Cash Flows from Financing Activities
6 unchanged sentences
Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 29 ) ( 16 ) 10
−Removed: (Decrease) increase in cash, cash equivalents and restricted cash ( 782 ) ( 104 ) 1,647
+Added: Decrease in cash, cash equivalents and restricted cash ( 770 ) ( 782 ) ( 104 )
Cash, cash equivalents and restricted cash at beginning of year 1,909 2,691 2,795
Cash, Cash Equivalents and Restricted Cash at End of Year $ 1,139 $ 1,909 $ 2,691
+Added: _____________
+Added: (1) Captions were changed in 2022 to reflect the inclusion of expense and contributions for our Retiree Health plans, which were previously reported as part of the Increase (decrease) in accrued compensation.
+Added: There was no change to Net cash provided by operating activities as a result of the reclassification.
+Added: Prior year amounts have been revised to conform to this presentation.
+Added: Refer to Note 18 - Employee Benefit Plans for additional information.
The accompanying notes are an integral part of these Consolidated Financial Statements.
9 unchanged sentences
Balance at December 31, 2019 $ 215 $ 2,782 $ ( 76 ) $ 6,312 $ ( 3,646 ) $ 5,587 $ 7 $ 5,594
−Removed: Cumulative effect of change in accounting principle — — — 127 ( 127 ) — — —
Comprehensive income, net — — — 192 314 506 — 506
7 unchanged sentences
Distributions to noncontrolling interests — — — — — — ( 3 ) ( 3 )
−Removed: Divestiture (4)
−Removed: — — — — — — ( 32 ) ( 32 )
Balance at December 31, 2020 $ 198 $ 2,445 $ — $ 6,281 $ ( 3,332 ) $ 5,592 $ 4 $ 5,596
−Removed: Comprehensive income, net — — — 192 314 506 — 506
+Added: Comprehensive (loss) income, net — — — ( 455 ) 344 ( 111 ) — ( 111 )
Cash dividends declared-common (2)
5 unchanged sentences
Cancellation of treasury stock ( 32 ) ( 679 ) 711 — — — — —
+Added: Investment from noncontrolling interests — 1 — — — 1 4 5
Distributions to noncontrolling interests — — — — — — ( 1 ) ( 1 )
Balance at December 31, 2021 $ 168 $ 1,802 $ ( 177 ) $ 5,631 $ ( 2,988 ) $ 4,436 $ 7 $ 4,443
−Removed: Comprehensive (loss) income, net — — — ( 455 ) 344 ( 111 ) — ( 111 )
+Added: Comprehensive loss, net — — — ( 322 ) ( 549 ) ( 871 ) ( 1 ) ( 872 )
Cash dividends declared-common (2)
6 unchanged sentences
Investment from noncontrolling interests — — — — — — 5 5
−Removed: — 1 — — — 1 4 5
Distributions to noncontrolling interests — — — — — — ( 1 ) ( 1 )
4 unchanged sentences
(3) Cash dividends declared on preferred stock for 2022, 2021 and 2020 were $ 20 per share on a quarterly basis and $ 80 per share on an annual basis.
−Removed: (4) Refer to Note 1 - Basis of Presentation and Summary of Significant Accounting Policies and Note 6 - Divestitures for additional information regarding divestitures.
−Removed: (5) Refer to Note 5 - Acquisitions and Investments for additional information regarding this noncontrolling interests.
The accompanying notes are an integral part of these Consolidated Financial Statements.
20 unchanged sentences
Total Costs and Expenses 7,435 7,513 6,770
−Removed: Income before Income Taxes and Equity (Loss) Income ( 475 ) 252 822
+Added: (Loss) Income before Income Taxes and Equity Income ( 328 ) ( 475 ) 252
Income tax (benefit) expense ( 3 ) ( 17 ) 64
Equity in net income of unconsolidated affiliates 3 3 4
−Removed: (Loss) Income from Continuing Operations ( 455 ) 192 651
−Removed: Income from discontinued operations, net of tax — — 710
Net (Loss) Income ( 322 ) ( 455 ) 192
−Removed: Income from continuing operations attributable to noncontrolling interests — — 3
−Removed: Income from discontinued operations attributable to noncontrolling interests — — 5
−Removed: Net (Loss) Income Attributable to Xerox $ ( 455 ) $ 192 $ 1,353
−Removed: Amounts attributable to Xerox:
−Removed: (Loss) Income from continuing operations $ ( 455 ) $ 192 $ 648
−Removed: Income from discontinued operations — — 705
+Added: Net Income attributable to noncontrolling interests — — —
Net (Loss) Income Attributable to Xerox $ ( 322 ) $ ( 455 ) $ 192
6 unchanged sentences
Net (Loss) Income $ ( 322 ) $ ( 455 ) $ 192
−Removed: Income from continuing operations attributable to noncontrolling interests — — 3
−Removed: Income from discontinued operations attributable to noncontrolling interests — — 5
+Added: Net Income attributable to noncontrolling interests — — —
Net (Loss) Income Attributable to Xerox ( 322 ) ( 455 ) 192
3 unchanged sentences
Changes in defined benefit plans, net ( 171 ) 489 69
−Removed: Other Comprehensive Income, Net Attributable to Xerox $ 344 $ 314 $ 46
+Added: Other Comprehensive (Loss) Income, Net ( 550 ) 344 314
+Added: Other comprehensive loss, net attributable to noncontrolling interests ( 1 ) — —
+Added: Other Comprehensive (Loss) Income, Net Attributable to Xerox ( 549 ) 344 314
Comprehensive (Loss) Income, Net ( 872 ) ( 111 ) 506
−Removed: Comprehensive income, net from continuing operations attributable to noncontrolling interests — — 3
−Removed: Comprehensive income, net from discontinued operations attributable to noncontrolling interests — — 5
+Added: Comprehensive loss, net attributable to noncontrolling interests ( 1 ) — —
Comprehensive (Loss) Income, Net Attributable to Xerox $ ( 871 ) $ ( 111 ) $ 506
_____________
−Removed: (1) Refer to Note 25 - Other Comprehensive Income (Loss) for gross components of Other Comprehensive Income, reclassification adjustments out of Accumulated Other Comprehensive Loss and related tax effects.
+Added: (1) Refer to Note 24 - Other Comprehensive (Loss) Income for gross components of Other Comprehensive (Loss) Income, reclassification adjustments out of Accumulated Other Comprehensive Loss and related tax effects.
The accompanying notes are an integral part of these Consolidated Financial Statements.
14 unchanged sentences
Intangible assets, net 208 211
−Removed: Goodwill 3,287 4,071
+Added: Goodwill, net 2,820 3,287
Deferred tax assets 582 519
30 unchanged sentences
Net (Loss) Income $ ( 322 ) $ ( 455 ) $ 192
−Removed: Income from discontinued operations, net of tax — — ( 710 )
−Removed: (Loss) income from continuing operations ( 455 ) 192 651
−Removed: Adjustments required to reconcile Net (loss) income to Cash flows from operating activities
+Added: Adjustments required to reconcile Net (loss) income to Cash flows provided by operating activities
Depreciation and amortization 270 327 368
6 unchanged sentences
Payments for restructurings ( 52 ) ( 72 ) ( 81 )
−Removed: Defined benefit pension cost ( 10 ) 58 109
−Removed: Contributions to defined benefit pension plans ( 135 ) ( 139 ) ( 141 )
−Removed: Decrease in accounts receivable and billed portion of finance receivables 41 369 10
−Removed: Decrease (increase) in inventories 88 ( 134 ) 109
+Added: Non-service retirement-related costs (1)
+Added: ( 12 ) ( 89 ) ( 29 )
+Added: Contributions to retirement plans (1)
+Added: ( 124 ) ( 160 ) ( 164 )
+Added: (Increase) decrease in accounts receivable and billed portion of finance receivables ( 48 ) 41 369
+Added: (Increase) decrease in inventories ( 143 ) 88 ( 134 )
Increase in equipment on operating leases ( 112 ) ( 129 ) ( 118 )
−Removed: Decrease in finance receivables 20 183 101
−Removed: Decrease (increase) in other current and long-term assets 68 8 ( 14 )
+Added: (Increase) decrease in finance receivables ( 141 ) 20 183
+Added: Decrease in other current and long-term assets 27 68 8
Increase (decrease) in accounts payable 278 118 ( 123 )
−Removed: Decrease in accrued compensation ( 95 ) ( 189 ) ( 94 )
+Added: Increase (decrease) in accrued compensation (1)
Increase (decrease) in other current and long-term liabilities 9 89 ( 165 )
2 unchanged sentences
Other operating, net 13 ( 17 ) 40
−Removed: Net cash provided by operating activities of continuing operations 629 548 1,244
−Removed: Net cash provided by operating activities of discontinued operations — — 89
Net cash provided by operating activities 159 629 548
4 unchanged sentences
Other investing, net ( 2 ) — 1
−Removed: Net cash used in investing activities of continuing operations ( 77 ) ( 246 ) ( 85 )
−Removed: Net cash provided by investing activities of discontinued operations — — 2,233
−Removed: Net cash (used in) provided by investing activities ( 77 ) ( 246 ) 2,148
+Added: Net cash used in investing activities ( 65 ) ( 77 ) ( 246 )
Cash Flows from Financing Activities
1 unchanged sentence
Payments on long-term debt ( 1,723 ) ( 519 ) ( 2,213 )
−Removed: Dividends — — ( 181 )
−Removed: Payments to acquire treasury stock, including fees — — ( 300 )
Contributions from parent — — 1,494
3 unchanged sentences
Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 29 ) ( 16 ) 10
−Removed: (Decrease) increase in cash, cash equivalents and restricted cash ( 782 ) ( 104 ) 1,647
+Added: Decrease in cash, cash equivalents and restricted cash ( 770 ) ( 782 ) ( 104 )
Cash, cash equivalents and restricted cash at beginning of year 1,909 2,691 2,795
Cash, Cash Equivalents and Restricted Cash at End of Year $ 1,139 $ 1,909 $ 2,691
+Added: _____________
+Added: (1) Captions were changed in 2022 to reflect the inclusion of expense and contributions for our Retiree Health plans, which were previously reported as part of the Increase (decrease) in accrued compensation.
+Added: There was no change to Net cash provided by operating activities as a result of the reclassification.
+Added: Prior year amounts have been revised to conform to this presentation.
+Added: Refer to Note 18 - Employee Benefit Plans for additional information.
The accompanying notes are an integral part of these Consolidated Financial Statements.
2 unchanged sentences
Consolidated Statements of Shareholder's Equity
−Removed: (in millions) Common Stock Additional
−Removed: Capital Treasury Stock Retained
+Added: (in millions) Additional
+Added: Capital Retained
Earnings AOCL (1)
2 unchanged sentences
Balance at December 31, 2019 $ 3,266 $ 6,247 $ ( 3,646 ) $ 5,867 $ 7 $ 5,874
−Removed: Cumulative effect of change in accounting principle — — — 127 ( 127 ) — — —
Comprehensive income, net — 192 314 506 — 506
−Removed: Cash dividends declared-common — — — ( 115 ) — ( 115 ) — ( 115 )
−Removed: Cash dividends declared-preferred — — — ( 7 ) — ( 7 ) — ( 7 )
Dividends declared to parent — ( 605 ) — ( 605 ) — ( 605 )
−Removed: Transfers to parent — ( 175 ) — — — ( 175 ) — ( 175 )
−Removed: Stock option and incentive plans, net — 18 — — — 18 — 18
−Removed: Payments to acquire treasury stock, including fees — — ( 300 ) — — ( 300 ) — ( 300 )
−Removed: Cancellation of treasury stock ( 11 ) ( 344 ) 355 — — — — —
−Removed: Distributions to noncontrolling interests — — — — — — ( 3 ) ( 3 )
−Removed: Reorganization ( 221 ) 446 — — — 225 — 225
−Removed: Divestiture (2)
−Removed: — — — — — — ( 32 ) ( 32 )
−Removed: Balance at December 31, 2019 $ — $ 3,266 $ — $ 6,247 $ ( 3,646 ) $ 5,867 $ 7 $ 5,874
−Removed: Comprehensive income, net — — — 192 314 506 — 506
−Removed: Dividends declared to parent — — — ( 605 ) — ( 605 ) — ( 605 )
Capital contributions from parent (2)
9 unchanged sentences
Investment from noncontrolling interests 1 — — 1 4 5
−Removed: — 1 — — — 1 4 5
Distributions to noncontrolling interests — — — — ( 1 ) ( 1 )
Balance at December 31, 2021 $ 3,202 $ 4,476 $ ( 2,988 ) $ 4,690 $ 7 $ 4,697
+Added: Comprehensive loss, net — ( 322 ) ( 549 ) ( 871 ) ( 1 ) ( 872 )
+Added: Dividends declared to parent — ( 727 ) — ( 727 ) — ( 727 )
+Added: Transfers from parent 491 — — 491 — 491
+Added: Investment from noncontrolling interests — — — — 5 5
+Added: Distributions to noncontrolling interests — — — — ( 1 ) ( 1 )
+Added: Balance at December 31, 2022 $ 3,693 $ 3,427 $ ( 3,537 ) $ 3,583 $ 10 $ 3,593
_____________
(1) AOCL - Accumulated other comprehensive loss.
−Removed: (2) Refer to Note 1 - Basis of Presentation and Summary of Significant Accounting Policies and Note 6 - Divestitures for additional information regarding divestitures.
(2) Primarily represents the contribution by Xerox Holdings Corporation of aggregate net debt proceeds received from its Senior Notes offerings in the third quarter of 2020 to Xerox Corporation.
1 unchanged sentence
(3) Refer to Note 15 - Debt for information regarding capitalization of balance to Intercompany Loan with Xerox Holdings Corporation.
−Removed: (5) Refer to Note 5 - Acquisitions and Investments for additional information regarding this investment from noncontrolling interests.
The accompanying notes are an integral part of these Consolidated Financial Statements.
4 unchanged sentences
(in millions, except per-share data and where otherwise noted)
−Removed: Note 1 – Basis of Presentation and Summary of Significant Accounting Policies
+Added: Note 1 – Basis of Presentation
References to “Xerox Holdings” refer to Xerox Holdings Corporation and its consolidated subsidiaries while references to “Xerox” refer to Xerox Corporation and its consolidated subsidiaries.
9 unchanged sentences
Xerox is a global enterprise for document management solutions.
−Removed: We provide advanced document technology, services, software and genuine Xerox supplies for a range of customers including small and mid-size businesses, large enterprises, governments and graphic communications providers, and for our partners who serve them.
−Removed: We operate in approximately 160 countries worldwide.
+Added: We provide advanced document technology, services, software and genuine Xerox supplies for a range of customers including small and mid-sized businesses, large enterprises, governments and graphic communications providers, and for our partners who serve them.
+Added: Xerox serves customers globally in North America, Central and South America, Brazil, Europe, Eurasia, the Middle East, Africa and India.
Xerox Holdings' other direct subsidiary is Xerox Ventures LLC, which was established in 2021 solely to invest in startups and early/mid-stage growth companies aligned with the Company’s innovation focus areas and targeted adjacencies.
−Removed: Xerox Ventures LLC had investments of approximately $ 8 at December 31, 2021.
+Added: The investments are normally equity or equity-linked and for less than 20% ownership.
+Added: Since the investments normally do not have readily determinable fair values, they are accounted for under the measurement alternative per ASC Topic 321-10-35-2.
+Added: Xerox Ventures LLC had investments of approximately $ 21 and $ 8 at December 31, 2022 and 2021, respectively.
Basis of Consolidation
4 unchanged sentences
Operating results for variable interest entities in which we are determined to be the primary beneficiary are included in the Consolidated Statements of (Loss) Income from the date such determination is made.
−Removed: For convenience and ease of reference, we refer to the financial statement caption “Income before Income Taxes and Equity Income” as “pre-tax (loss) income” throughout the Notes to the Consolidated Financial Statements.
−Removed: Transfer of CareAR Holdings LLC to Xerox
−Removed: In August 2021, in connection with Xerox Holdings Corporation's announcement of the formation of the CareAR software business, the ownership of CareAR Holdings LLC was transferred from Xerox Holdings Corporation to Xerox Corporation.
−Removed: The transfer was accounted for as a transfer of an entity under common control with retrospective adjustment of Xerox's prior period financial statements to reflect the ownership of the business from its acquisition in the fourth quarter 2020.
−Removed: The impact of this retrospective adjustment was not material to Xerox as the acquisition value was $ 9 and the entity incurred approximately $ 1 of expenses in 2020.
−Removed: Discontinued Operations
−Removed: In November 2019, Xerox Holdings completed a series of transactions to restructure its relationship with FUJIFILM Holdings Corporation (FH), including the sale of its indirect 25 % equity interest in Fuji Xerox (now known as FUJIFILM Business Innovation Corp.) as well as the sale of its indirect 51 % partnership interest in Xerox
+Added: For convenience and ease of reference, we refer to the financial statement caption “(Loss) Income before Income Taxes and Equity Income” as “pre-tax (loss) income” throughout the Notes to the Consolidated Financial Statements.
+Added: During the first quarter of 2022, the Company made a change to its reportable segments from one reportable segment to two reportable segments - Print and Other, and Financing (FITTLE) - to align with a change in how the Chief Operating Decision Maker (CODM), our Chief Executive Officer (CEO), allocates resources and assesses performance against the Company’s key growth strategies.
+Added: As such, prior period reportable segment results and related disclosures have been conformed to reflect the Company’s current reportable segments.
+Added: Refer to Note 4 - Segment and Geographic Reporting for additional information regarding this change.
Xerox 2022 Annual Report 86
−Removed: International Partners (XIP) (collectively the Sales).
−Removed: As a result of the Sales of FX and XIP and the related strategic shift in our business, the historical financial results of our equity method investment in FX and our XIP business (which was consolidated) for 2019 are reflected as a discontinued operation and as such, their impact is excluded from continuing operations for 2019.
−Removed: The historical statements of Comprehensive Income and Shareholders' Equity have not been revised to reflect the Sales and instead reflect the Sales as an adjustment to the balances at December 31, 2019.
−Removed: Refer to Note 6 - Divestitures for additional information regarding discontinued operations.
+Added: We assess Goodwill for impairment at least annually during the fourth quarter and whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
+Added: Impairment Evaluation - 2022
+Added: During 2022, we had events and conditions in the first quarter and third quarter that required an interim assessment of Goodwill.
+Added: During the first quarter 2022 the Company made a change to its operating and reportable segments from one operating/reportable segment - Printing - to two operating/reportable segments - Print and Other, and Financing (FITTLE).
+Added: As a result of the new operating and reportable segments, we also reassessed our reporting units for the evaluation of Goodwill.
+Added: Prior to this change, we determined that we had one operating/reportable segment and one reporting unit for Goodwill assessment purposes.
+Added: Our reassessment during the first quarter of 2022 determined that, we had two operating/reportable segments and two reporting units – Print and Other, and Financing (FITTLE) for Goodwill assessment purposes.
+Added: As a result of the change in reporting units, effective January 1, 2022, we estimated the fair value of our new reporting units and, based on an assessment of the relative fair values of our new reporting units after the change, we determined that no Goodwill was allocable to the Financing (FITTLE) segment.
+Added: This determination was largely based on the fact that at this stage in the stand-up of the Financing (FITTLE) business, its separate valuation is constrained and limited because the operation is significantly integrated with the Print and Other segment and is primarily an extension or enabler to facilitate the sale of the Company’s products.
+Added: The change in reporting units was also considered a triggering event indicating a test for Goodwill impairment was required as of January 1, 2022 before and after the change in reporting units.
+Added: The Company performed those impairment tests, which did not result in the identification of an impairment loss as of January 1, 2022.
+Added: In 2022, the Company continued to encounter operational challenges due to unfavorable product and services mix associated with supply chain constraints as well the impacts of unfavorable macroeconomic conditions including inflationary pressure on product and labor costs, geopolitical uncertainty in Europe and the continued impacts from the COVID-19 recovery.
+Added: Additionally, higher interest rates continued to put downward pressure on the Company’s valuation.
+Added: As a result of these negative financial impacts and a sustained market capitalization below our book value, in the third quarter 2022 we determined there was a triggering event requiring an interim quantitative assessment of Goodwill.
+Added: After completing our interim impairment test, we concluded that the estimated fair value of the Print and Other reporting unit (the only reporting unit with Goodwill) had declined below its carrying value and we recognized an after-tax non-cash impairment charge of $ 395 ($ 412 pre-tax) related to our Goodwill in the third quarter 2022.
+Added: The estimated fair value of the Print and Other reporting unit is based on estimates and assumptions that are considered Level 3 inputs under the fair value hierarchy.
+Added: Consistent with our policy for an annual review, we also assessed Goodwill in the fourth quarter 2022.
+Added: As a result of the quantitative assessment of Goodwill in the third quarter 2022, we performed our annual Goodwill assessment in the fourth quarter 2022 qualitatively.
+Added: After completing this qualitative impairment review, we concluded that it is more likely-than-not that the fair value of the Print and Other reporting unit is higher than its carrying amount and that it is not necessary to perform a quantitative Goodwill impairment test.
+Added: Impairment Evaluation - 2021
+Added: The COVID-19 pandemic continued to have a significant effect on the Company’s operations impacting revenues, expenses, cash flows and market capitalization in 2021.
+Added: As a result of these impacts on our future operating results, as well as a sustained market capitalization below book value, we elected to utilize a quantitative model for the assessment of the recoverability of our Goodwill balance for our annual fourth quarter 2021 impairment test.
+Added: After completing our annual impairment test, we concluded that the fair value of the Company - our single reporting unit in 2021 - had declined below its carrying value.
+Added: As a result, we recognized an after-tax non-cash impairment charge of $ 750 ($ 781 pre-tax) related to our Goodwill for the year ended December 31, 2021.
+Added: The estimated fair value of our single reporting unit is based on estimates and assumptions that are considered Level 3 inputs under the fair value hierarchy.
Use of Estimates
1 unchanged sentence
Future events and their effects cannot be predicted with certainty;
−Removed: accordingly, our accounting estimates require the exercise of judgment.
+Added: accordingly, our accounting estimates
+Added: Xerox 2022 Annual Report 87
+Added: require the exercise of judgment.
The accounting estimates used in the preparation of our Consolidated Financial Statements will change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes.
3 unchanged sentences
Such changes and refinements in estimation methodologies are reflected in reported results of operations in the period in which the changes are made and, if material, their effects are disclosed in the Notes to the Consolidated Financial Statements and in Management's Discussion and Analysis of Financial Condition and Results of Operations.
−Removed: As of December 31, 2021, the impact of the COVID-19 pandemic continues to have varying and divergent impacts across various regions and countries in which we operate and a degree of economic uncertainty still remains.
−Removed: We expect the pandemic's effects will likely continue to impact our financial results into at least the first half of 2022.
−Removed: Accordingly, many of our estimates and assumptions continue to require a greater degree of judgment and may change in the future as events continue to evolve and additional information becomes available.
+Added: Note 2 – Recent Accounting Pronouncements and Summary of Significant Accounting Policies
New Accounting Standards and Accounting Changes
+Added: Xerox Holdings and Xerox consider the applicability and impact of all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB).
+Added: The ASUs listed below apply to both registrants.
Except for the Accounting Standard Updates (ASUs) discussed below, the new ASUs issued by the FASB during the last two years did not have any significant impact on the Company.
Accounting Standard Updates to be Adopted:
+Added: In September 2022, the FASB issued ASU 2022-04 , Liabilities - Supplier Finance Programs (Subtopic 405-50):
+Added: Disclosure of Supplier Finance Program Obligations that requires entities that use supplier finance programs in connection with the purchase of goods and services to disclose the key terms of the programs and information about obligations outstanding at the end of the reporting period, including a rollforward of those obligations.
+Added: The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations.
+Added: The new standard’s requirements to disclose the key terms of the programs and information about obligations outstanding are effective for all interim and annual periods of our fiscal year beginning on January 1, 2023.
+Added: The new standard’s requirement to disclose a rollforward of obligations outstanding will be effective for our fiscal year beginning on January 1, 2024.
+Added: Since this standard primarily relates to new disclosure, we do not expect the adoption to have a material impact on our financial condition, results of operations, and cash flows in future periods.
+Added: Financial Instruments
+Added: In March 2022, the FASB issued ASU 2022-02 , Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures - Gross Write-offs.
+Added: The amendments in this update eliminate the accounting guidance for Troubled Debt Restructurings (TDRs) by creditors while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors made to borrowers experiencing financial difficulty.
+Added: The amendments also require disclosure of current-period gross write-offs by year of origination for financing receivables.
+Added: The disclosure of current-period gross write-offs by year of origination is applicable for financing receivables and net investments in leases that are within the scope of ASC 326-20 , Financial Instruments - Credit Losses - Measured at Amortized Cost .
+Added: This update is effective for our fiscal year beginning on January 1, 2023.
+Added: The provisions of this amendment are to be applied on a prospective basis.
+Added: We are currently evaluating the impact of the adoption of this standard on the Company's consolidated financial statements and related disclosures.
+Added: Since this standard primarily relates to new disclosure, we do not expect the adoption to have a material impact on our financial condition, results of operations, and cash flows in future periods.
+Added: Reference Rate Reform
+Added: In March 2020, the FASB issued ASU 2020-04 , Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S.
+Added: GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (LIBOR) or by another reference rate expected to be discontinued.
+Added: In January 2021, the FASB issued ASU 2021-01 , Reference Rate Reform (Topic 848), Scope, which provided clarification to ASU 2020-04.
+Added: These ASUs were effective commencing with our quarter ended March 31, 2020 through December 31, 2022.
+Added: In December 2022, the FASB issued ASU 2022-06 , Reference Rate Reform (Topic 848), Deferral of the
+Added: Xerox 2022 Annual Report 88
+Added: Sunset Date of Topic 848, which defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.
+Added: There has been no material impact to date as a result of adopting these ASUs on reference rate reform.
+Added: However, we continue to evaluate potential future impacts that may result from the discontinuation of LIBOR or other reference rates as well as the accounting provided in this update on our financial condition, results of operations, and cash flows.
+Added: Accounting Standard Updates Recently Adopted:
Government Assistance
1 unchanged sentence
The update increases the transparency surrounding government assistance by requiring disclosure of 1) the types of assistance received, 2) an entity’s accounting for the assistance, and 3) the effect of the assistance on the entity’s financial statements.
−Removed: We expect to adopt this update effective for our fiscal year beginning January 1, 2022.
−Removed: We are currently evaluating the impact of the adoption of this update on our Consolidated Financial Statements, which will largely depend on the amounts of government assistance expected to be received in the future.
−Removed: However, prior to the COVID pandemic, the amounts of government assistance the Company received were not material and since the update is limited to increased disclosures, we do not expect the adoption to have a material impact on our financial condition, results of operations, and cash flows.
+Added: We adopted this update effective for our fiscal year beginning January 1, 2022.
+Added: The impact of adoption was not material to our Consolidated Financial Statements.
+Added: Impacts on future periods will depend on the amounts of government assistance received.
+Added: Prior to the COVID-19 pandemic, the amounts of government assistance the Company received were not material and since the update is limited to increased disclosures, we do not expect the adoption to have a material impact on our financial condition, results of operations, and cash flows in future periods.
+Added: Refer to Note 14 - Supplementary Financial Information - Government Assistance - for additional information.
Business Combinations
2 unchanged sentences
This approach differs from the current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value.
−Removed: This update is effective for our fiscal year beginning January 1, 2023, with early adoption permitted.
+Added: We early adopted this update effective for our fiscal year beginning January 1, 2022.
The impact of adopting the new standard will depend on the magnitude of future acquisitions.
−Removed: The standard will not impact contract assets or liabilities acquired in business combinations that occurred prior to the adoption date.
−Removed: Xerox 2021 Annual Report 84
−Removed: Reference Rate Reform
−Removed: In March 2020, the FASB issued ASU 2020-04 , Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S.
−Removed: GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (LIBOR) or by another reference rate expected to be discontinued.
−Removed: In January 2021, the FASB issued ASU 2021-01 , Reference Rate Reform (Topic 848), Scope, which provided clarification to ASU 2020-04.
−Removed: These ASUs were effective commencing with our quarter ended March 31, 2020 and will continue through December 31, 2022.
−Removed: There has been no impact to date as a result of adopting ASU 2020-04 or ASU 2021-01 and subsequent amendments on reference rate reform.
−Removed: However, we continue to evaluate potential future impacts that may result from the discontinuation of LIBOR or other reference rates as well as the accounting provided in this update on our financial condition, results of operations, and cash flows.
−Removed: Accounting Standard Updates Recently Adopted:
+Added: The standard will not impact contract assets or liabilities acquired in business combinations that occurred prior to the adoption date and the adoption has not had a material impact on acquisitions made year to date.
In August 2020, the FASB issued ASU 2020-06 , Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40).
−Removed: This update simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock.
−Removed: This update also amends the guidance for the derivatives scope exception for contracts in an entity's own equity to reduce form-over-substance-based accounting conclusions and requires the application of the if-converted method for calculating diluted earnings per share.
+Added: This update simplified the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock.
+Added: This update also amended the guidance for the derivatives scope exception for contracts in an entity's own equity to reduce form-over-substance-based accounting conclusions and required the application of the if-converted method for calculating diluted earnings per share.
We adopted this update effective for our fiscal year beginning January 1, 2022.
−Removed: The adoption of this standard did not have a material impact on our Consolidated Financial Statements and related disclosures.
+Added: The adoption of this update did not have a material impact on the Company’s consolidated financial statements and related disclosures.
In December 2019, the FASB issued ASU 2019-12 , Income Taxes (Topic 740):
4 unchanged sentences
In April 2020, the FASB staff issued a question and answer (Q&A) document on the application of lease accounting guidance related to lease concessions provided as a result of the economic disruption caused by the COVID-19 pandemic (Topic 842 Q&A).
−Removed: Topic 842 Q&A provides interpretive guidance allowing companies the option to account for lease concessions related to the COVID-19 pandemic consistent with how those concessions would be accounted for under ASU 2016-02, Leases (Topic 842), discussed below, as though enforceable rights and obligations for those concessions existed at the beginning of the contract (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract).
−Removed: This interpretive guidance was issued in order to reduce the costs and complexities of applying lease modification accounting under Topic 842 to leases impacted by the effects of the COVID-19 pandemic.
+Added: Topic 842 Q&A provides interpretive guidance allowing companies the option to account for lease concessions related to the COVID-19 pandemic consistent with how those concessions would be accounted for under ASU 2016-02, Leases (Topic 842) as though enforceable rights and obligations for those concessions existed at the beginning of the contract (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract).
+Added: This interpretive guidance was issued in order to reduce the
+Added: Xerox 2022 Annual Report 89
+Added: costs and complexities of applying lease modification accounting under Topic 842 to leases impacted by the effects of the COVID-19 pandemic.
This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee.
We have elected to apply the interpretive guidance provided in Topic 842 Q&A to rent concessions related to the COVID-19 pandemic provided as a Lessor to our customers and as received as a Lessee.
−Removed: Through September 30, 2020 we provided rent deferrals as a Lessor that were primarily offered to customers with sales type lease receivables.
−Removed: This special program was discontinued in the fourth quarter of 2020.
−Removed: We elected to account for the deferrals in the timing of lease payments as if there were no changes in the lease contracts.
−Removed: Under this approach, assuming that collectibility of future lease payments is still probable, the classification of the leases was not updated and we retained the balance of the deferral as a receivable and will settle that receivable at the revised payment date or dates.
−Removed: Through September 30, 2020, we approved payment deferrals of up to 3 months for approximately $ 33 or approximately 1 % of our total finance receivable portfolio.
−Removed: Rent abatements to the extent provided were not material and were accounted for as write-offs as part of our normal bad debt reserve assessment.
−Removed: With respect to rent deferrals and abatements received as a Lessee, we elected to account for the deferrals and abatements as a resolution of a contingency within the lease.
−Removed: Under this approach, we follow the resolution of a contingency model in ASC 842 without reclassifying the lease or updating the discount rate.
−Removed: We remeasure the remaining consideration in the contract, reallocate it to the lease and non-lease components as applicable, and remeasure the lease liability with an adjustment to the right-of-use asset for the same amount.
−Removed: If the total lease
−Removed: Xerox 2021 Annual Report 85
−Removed: payments remain exactly the same, the lease cost remains unchanged.
−Removed: The impact of this election was not material to our financial condition, results of operations or cash flows, as rent concessions provided to Xerox in 2021 or 2020 were not material, individually or in the aggregate.
−Removed: On January 1, 2019, we adopted ASU 2016-02 , Leases (ASC Topic 842).
−Removed: This update, as well as additional amendments and targeted improvements issued in 2018 and early 2019, supersedes existing lease accounting guidance found under ASC 840, Leases (ASC 840) and requires the recognition of right-to-use assets and lease obligations by lessees for those leases originally classified as operating leases under prior lease guidance.
−Removed: Effective with the adoption, leases are classified as either finance or operating, with such classification affecting the pattern of expense recognition.
−Removed: Short-term leases with a term of 12 months or less are not required to be recognized.
−Removed: The update also requires qualitative and quantitative disclosure of key information regarding the amount, timing and uncertainty of cash flows arising from leasing arrangements in order to increase transparency and comparability among companies.
−Removed: The accounting for lessors does not fundamentally change with this update except for changes to conform and align guidance to the lessee guidance, as well as to the revenue recognition guidance in ASU 2014-09.
−Removed: Some of these conforming changes, such as those related to the definition of lease term and minimum lease payments, resulted in certain lease arrangements that would have been previously accounted for as operating leases, to instead be classified and accounted for as sales-type leases with a corresponding up-front recognition of equipment sales revenue.
−Removed: Upon adoption, we applied the transition option, whereby prior comparative periods are not retrospectively presented in the Consolidated Financial Statements.
−Removed: We also elected the package of practical expedients not to reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs and the lessee practical expedient to combine lease and non-lease components for certain asset classes (real estate lease arrangements for offices and warehouses).
−Removed: Additionally, we made a policy election to not recognize right-of-use assets and lease liabilities for short-term leases for all asset classes.
−Removed: We elected the package of practical expedients from both the Lessee and Lessor prospective, to the extent applicable.
−Removed: Lessee accounting - the adoption of this update resulted in an increase to assets and related liabilities of approximately $ 385 (approximately $ 440 undiscounted) primarily related to leases of facilities.
−Removed: Refer to Note 11 - Lessee for additional information related to our lessee accounting.
−Removed: Lessor accounting - the adoption of this update resulted in an increase to equipment sales by approximately $ 30 in 2019 as compared to 2018.
−Removed: Refer to Note 4 - Lessor for additional information related to our lessor accounting.
+Added: The impact of this Q&A both as a Lessor or Lessee was not material to our financial condition, results of operations, cash flows or related disclosures.
Financial Instruments - Credit Losses
4 unchanged sentences
The impact recorded on our initial adoption of ASU 2016-13 was not material as our previous methodology for assessing the adequacy of our Allowance for doubtful accounts for Finance Receivables, the larger component of our receivable reserves, incorporated an expected loss model and the methodology for both allowances included an assessment of current economic conditions.
−Removed: However, as previously disclosed, the future impact from this update is highly dependent on future economic conditions.
Refer to Note 7 - Accounts Receivable, Net and Note 8 - Finance Receivables, Net for additional discussion regarding the impacts from the adoption of this update during the first quarter 2020.
5 unchanged sentences
The update also clarifies the presentation requirements for reporting such costs in the entity’s financial statements.
−Removed: The adoption of ASU 2018-15 did not have a material impact on our financial condition, results of operations or cash flows as we had previously capitalized these implementation costs and such amounts were not material.
−Removed: Xerox 2021 Annual Report 86
+Added: The adoption of ASU 2018-15 did not have a material impact on our financial condition, results of operations, cash flows or related disclosures as we had previously capitalized these implementation costs and such amounts were not material.
Other Updates
−Removed: The FASB also issued the following Accounting Standards Updates, which have not had, and are not expected to have, a material impact on our financial condition, results of operations or cash flows upon adoption.
+Added: The FASB also issued the following Accounting Standards Updates, which have not had, and are not expected to have, a material impact on our financial condition, results of operations, cash flows or related disclosures upon adoption.
+Added: • Fair Value Measurement:
+Added: ASU 2022-03 , Fair Value Measurement (Topic 820), Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.
+Added: This update is effective for our fiscal year beginning January 1, 2024.
+Added: • Derivatives and Hedging:
+Added: ASU 2022-01 , Derivatives and Hedging (Topic 815), Fair Value Hedging - Portfolio Layer Method.
+Added: This update is effective for our fiscal year beginning January 1, 2023.
• Equity Instruments:
ASU 2021-04 , Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options).
−Removed: This update is effective for our fiscal year beginning January 1, 2022.
+Added: This update was effective for our fiscal year beginning January 1, 2022.
ASU 2021-05 , Leases - Certain Lease Payments with Variable Lease Payments (ASC 842).
−Removed: This update is effective for our fiscal year beginning January 1, 2022.
+Added: This update was effective for our fiscal year beginning January 1, 2022.
• Investments:
4 unchanged sentences
This update was effective for our fiscal year beginning January 1, 2020.
+Added: Xerox 2022 Annual Report 90
Summary of Accounting Policies
4 unchanged sentences
As a result of the application of this practical expedient for the substantial portion of our revenue, the disclosure of the value of unsatisfied performance obligations for our services is not required.
−Removed: Significant judgments primarily include the identification of performance obligations in our Document management services arrangements as well the pattern of delivery for those services.
+Added: Significant judgments primarily include the identification of performance obligations in our Document management services arrangements as well as the pattern of delivery for those services.
More specifically, revenue related to our products and services is generally recognized as follows:
10 unchanged sentences
A substantial portion of our products are sold with full service maintenance agreements, accordingly, other than the product warranty obligations associated with certain of our entry level products, we do not have any significant warranty obligations, including any obligations under customer satisfaction programs.
−Removed: Document management services:
−Removed: Revenues associated with our document management services are generally recognized as printing services are rendered, which is generally on the basis of the number of images produced.
+Added: Print outsourcing services:
+Added: Revenues associated with our print outsourcing services are generally recognized as the printing services are rendered, which is generally on the basis of the number of images produced.
Revenues on unit-price contracts are recognized at the contractual selling prices as work is completed by the customer.
We account for these arrangements as a single performance obligation for printing services being delivered in a series with delivery being measured by usage as billed to the customer .
−Removed: Xerox 2021 Annual Report 87
Our services contracts may also include the sale or lease of equipment and software.
10 unchanged sentences
Distributors and resellers participate in various rebate, price-protection, cooperative marketing and other programs.
−Removed: We estimate the variable consideration associated with these programs and record those amounts as a reduction to revenue when sales occur.
+Added: We estimate the variable consideration associated with these programs and record those amounts as a reduction to
+Added: Xerox 2022 Annual Report 91
+Added: revenue when sales occur.
Similarly, we account for our estimates of sales returns and other allowances when sales occur based on our historical experience.
18 unchanged sentences
The revenue associated with the non-lease elements are normally accounted for as a single performance obligation being delivered in a series, with delivery being measured as the usage billed to the customer.
−Removed: Accordingly, revenue from these agreements is recognized in a manner consistent with the guidance for Maintenance and Services agreements.
−Removed: Xerox 2021 Annual Report 88
+Added: Accordingly, revenue from these agreements is recognized in a manner consistent with the guidance for Maintenance or Print outsourcing services agreements.
The two primary accounting provisions we use to classify transactions as sales-type or operating leases are:
9 unchanged sentences
The range of cash selling prices must be reasonably consistent with the lease selling prices in order for us to determine that such lease prices reflect stand-alone value.
+Added: Xerox 2022 Annual Report 92
Our lease pricing interest rates, which are used in determining customer payments in a bundled lease arrangement, are developed based upon a variety of factors including local prevailing rates in the marketplace, cost of funds and the customer’s credit history, industry and credit class.
21 unchanged sentences
This is the level at which we develop and document our methodology to determine the allowance for credit losses.
−Removed: These projected loss rates are primarily based upon historical loss experience adjusted for judgments about the probable
−Removed: Xerox 2021 Annual Report 89
−Removed: effects of relevant observable data including current and future economic conditions as well as delinquency trends, resolution rates, the aging of receivables, credit quality indicators and the financial health of specific customer classes or groups.
+Added: These projected loss rates are primarily based upon historical loss experience adjusted for judgments about the probable effects of relevant observable data including current and future economic conditions as well as delinquency trends, resolution rates, the aging of receivables, credit quality indicators and the financial health of specific customer classes or groups.
The allowance for finance receivables is inherently more difficult to estimate than the allowance for trade accounts receivable because the underlying lease portfolio has an average maturity, at any time, of approximately two to three years and contains past due billed amounts, as well as unbilled amounts.
2 unchanged sentences
The identification of account-specific exposure is not a significant factor in establishing the allowance for doubtful finance receivables.
−Removed: Receivable Sales
−Removed: We transfer certain portions of our receivable portfolios to third parties and normally account for those transfers as sales based on meeting the criteria for derecognition in accordance with ASC Topic 860 "Transfer and Servicing" of Financial Assets.
−Removed: Gains or losses on the sale of receivables depend, in part, on both (a) the cash proceeds and (b) the net non-cash proceeds received or paid.
−Removed: When we sell receivables, we normally receive beneficial interests in the transferred receivables from the purchasers as part of the proceeds.
−Removed: We may refer to these beneficial interests as a deferred purchase price.
−Removed: The beneficial interests obtained are initially measured at their fair value.
−Removed: We generally estimate fair value based on the present value of expected future cash flows, which are calculated using management ' s best estimates of the key assumptions including credit losses, prepayment rate and discount rates commensurate with the risks involved.
−Removed: Refer to Note 7 - Accounts Receivable, Net for additional information on our receivable sales .
+Added: Receivable Sales and Securitization
+Added: The Company securitizes certain finance lease receivables by transferring them to Special Purpose Entities (SPEs) that meet the definition of a Variable Interest Entity (VIE) and are consolidated into our financial statements.
+Added: These SPEs are bankruptcy-remote legal entities with separate assets and liabilities.
+Added: The purpose of the SPEs is to facilitate the funding of customer loan and lease payments and associated equipment in the capital markets.
+Added: These securitizations qualify as collateral for secured borrowings and no gains or losses are recognized at the time of
+Added: Xerox 2022 Annual Report 93
+Added: securitization.
+Added: The receivables remain on the balance sheet and classified as Finance receivables, net.
+Added: The Company continues recognize finance income over the lives of these receivables.
+Added: We also transfer certain portions of our finance receivable portfolios to third parties and account for those transfers of financial assets as sales when we have surrendered control over the related assets.
+Added: Whether control has been relinquished requires, among other things, an evaluation of relevant legal considerations and an assessment of the nature and extent of the Company’s continuing involvement with the assets transferred.
+Added: Gains and losses stemming from transfers reported as sales are normally included in revenue in the accompanying statements of income.
+Added: Gains or losses on the sale of finance receivables depend, in part, on both (a) the cash proceeds and (b) the net non-cash proceeds received or paid.
+Added: Assets obtained and liabilities incurred in connection with transfers reported as sales are initially recognized in the balance sheet at fair value.
+Added: Refer to Note 8 – Finance Receivables, Net for additional information on our finance receivable sales.
Inventories are carried at the lower of average cost or net realizable value.
22 unchanged sentences
This assessment first considers whether there is an implicitly or explicitly identified asset in the arrangement and then whether there is a right to control the use of the asset.
−Removed: If there is an embedded lease within a
−Removed: Xerox 2021 Annual Report 90
−Removed: contract, the Company determines the classification of the lease at the lease inception date consistent with standalone leases of assets.
+Added: If there is an embedded lease within a contract, the Company determines the classification of the lease at the lease inception date consistent with standalone leases of assets.
Operating leases are included in Other long-term assets, Accrued expenses and other current liabilities, and Other long-term liabilities in our Consolidated Balance Sheets.
2 unchanged sentences
Since the implicit rate for almost all of our leases is not readily determinable, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.
−Removed: The incremental borrowing rate is the rate of interest that we would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environment and over a similar term.
+Added: The incremental borrowing rate is the rate of interest that we would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar
+Added: Xerox 2022 Annual Report 94
+Added: economic environment and over a similar term.
The rate is dependent on several factors, including the lease term and currency of the lease payments.
28 unchanged sentences
Impairment testing for Goodwill is done at the reporting unit level.
−Removed: A reporting unit is an operating segment or one level below an
−Removed: Xerox 2021 Annual Report 91
−Removed: operating segment (a component) if the component constitutes a business for which discrete financial information is available, and segment management regularly reviews the operating results of that component.
−Removed: Consistent with the determination that we had one operating segment, we determined that there is one reporting unit and tested goodwill for impairment at the entity level.
+Added: A reporting unit is an operating segment or one level below an operating segment (a component) if the component constitutes a business for which discrete financial information is available, and segment management regularly reviews the operating results of that component.
+Added: Consistent with the determination that we had two operating/reportable segments we determined that we had two reporting units – Print and Other, and Financing (FITTLE).
We perform an assessment of Goodwill, utilizing either a qualitative or quantitative impairment test.
4 unchanged sentences
Fair value of the entity is determined by using a weighted combination of an income approach and a market approach.
−Removed: If the fair value exceeds the carrying value, goodwill is not considered impaired.
+Added: If the fair value
+Added: Xerox 2022 Annual Report 95
+Added: exceeds the carrying value, Goodwill is not considered impaired.
If the carrying value exceeds the fair value, Goodwill is considered impaired, and we would recognize an impairment loss for the excess.
−Removed: The COVID-19 pandemic continued to have a significant effect on the Company’s operations impacting revenues, expenses, cash flows and market capitalization in 2021.
−Removed: Although business results improved in the first half of 2021 and the Company was meeting expectations, the emergence of new COVID-19 variants during the year resulted in many of our customers delaying their plans to return employees to workplaces and allowing employees to continue to work remotely and in a hybrid environment.
−Removed: This impact combined with the global supply chain and logistic issues, created in part by the COVID-19 pandemic, had a negative effect on the Company’s results particularly in the third and fourth quarter of 2021.
−Removed: As a result of these impacts and projections of these impacts on our future operating results, as well as a sustained market capitalization below book value, we elected to utilize a quantitative model for the assessment of the recoverability of our Goodwill balance for our annual fourth quarter 2021 impairment test.
−Removed: After completing our annual impairment test, we concluded that the fair value of the Company - our single reporting unit - had declined below its carrying value.
−Removed: As a result, we recognized an after-tax non-cash impairment charge of $ 750 ($ 781 pre-tax) related to our goodwill for the year ended December 31, 2021.
Other intangible assets primarily consist of assets obtained in connection with business acquisitions, including installed customer base and distribution network relationships, existing technology, trademarks and non-compete agreements.
2 unchanged sentences
We believe that the straight-line method of amortization reflects an appropriate allocation of the cost of the intangible assets to earnings in proportion to the amount of economic benefits obtained annually by the Company.
−Removed: Refer to Note 13 - Goodwill and Intangible Assets, Net for further information.
+Added: Refer to Note 12 - Goodwill, Net and Intangible Assets, Net for further information.
Impairment of Long-Lived Assets
4 unchanged sentences
Long-lived assets to be disposed of by sale are reported at the lower of carrying amount or fair value less costs to sell.
−Removed: Long-lived assets to be disposed of other than by sale (e.g., by abandonment, cease-use) would continue to be classified as held and used until the long-lived asset is disposed of (e.g.
−Removed: abandoned or when asset ceases to be used).
−Removed: In 2021, we evaluated the recoverability of our Long-Lived Assets and Other Intangible Assets to be held and used by comparing the carrying amount of those assets to the net undiscounted cash flows expected to be generated by the business unit/component using those assets to determine if the carrying value was not recoverable.
−Removed: The recoverability test/income approach indicated that our Long-Lived assets and Other Intangible Assets were not impaired.
+Added: Long-lived assets to be disposed of other than by sale (e.g., by abandonment, cease-use) would continue to be classified as held and used until the long-lived asset is disposed of (e.g., abandoned or when the asset ceases to be used).
+Added: In 2022, 2021 and 2020 we evaluated the recoverability of our Long-Lived Assets and Other Intangible Assets to be held and used by comparing the carrying amount of those assets to the net undiscounted cash flows expected to be generated by the business unit/component using those assets to determine if the carrying value was recoverable.
+Added: The recoverability test/income approach indicated that our Long-Lived assets and Other Intangible Assets to be held and used were not impaired.
+Added: Refer to Note 13 - Restructuring Programs for additional information regarding the impairment of long-lived assets in connection with our restructuring programs and initiatives.
Pension and Post-Retirement Benefit Obligations
3 unchanged sentences
We employ a delayed recognition feature in measuring the costs of pension and post-retirement benefit plans.
−Removed: This requires changes in the benefit obligations and changes in the value of assets set aside to meet
−Removed: Xerox 2021 Annual Report 92
−Removed: those obligations to be recognized not as they occur, but systematically and gradually over subsequent periods.
+Added: This requires changes in the benefit obligations and changes in the value of assets set aside to meet those obligations to be recognized not as they occur, but systematically and gradually over subsequent periods.
All changes are ultimately recognized as components of net periodic benefit cost, except to the extent they may be offset by subsequent changes.
8 unchanged sentences
The market-related value approach reduces the volatility in net periodic pension cost that would result from using the fair market value approach.
+Added: Xerox 2022 Annual Report 96
The discount rate is used to present value our future anticipated benefit obligations.
19 unchanged sentences
Government grants related to income are recognized as a reduction of related expenses in the Consolidated Statements of (Loss) Income when there is a reasonable assurance that the entity will comply with the conditions attached to the grant and that the grants will be received.
−Removed: The timing and pattern of recognition of government
−Removed: Xerox 2021 Annual Report 93
−Removed: grants is made on a systematic basis over the periods in which the Company recognizes the related expenses or losses that the grants are intended to compensate.
+Added: The timing and pattern of recognition of government grants is made on a systematic basis over the periods in which the Company recognizes the related expenses or losses that the grants are intended to compensate.
Foreign Currency Translation and Remeasurement
6 unchanged sentences
dollar effects of rate changes recorded in Currency (gains) and losses within Other expenses, net together with other foreign currency remeasurements.
+Added: Xerox 2022 Annual Report 97
Note 3 – Revenue
27 unchanged sentences
(1) Geographic area data is based upon the location of the subsidiary reporting the revenue.
−Removed: (2) Includes revenues from maintenance agreements on sold equipment as well as revenues associated with service agreements sold through our channel partners as Xerox Partner Print Services (XPPS).
−Removed: (3) Primarily includes revenues from our Managed Services arrangements.
−Removed: Also includes revenues from embedded operating leases in our Managed Services arrangements, which were not significant.
+Added: (2) Includes revenues from maintenance agreements on sold equipment as well as revenues associated with service agreements sold through our channel partners.
+Added: (3) Primarily includes revenues from our Print outsourcing arrangements including revenues from embedded operating leases in those arrangements, which were not significant.
(4) Primarily reflects sales through bundled lease arrangements.
5 unchanged sentences
Contract Costs:
−Removed: Incremental direct costs of obtaining a contract primarily include sales commissions paid to sales people and agents in connection with the placement of equipment with associated post sale services arrangements.
+Added: Incremental direct costs of obtaining a contract primarily include sales commissions paid to salespeople and agents in connection with the placement of equipment with associated post sale services arrangements.
These costs are deferred and amortized on the straight-line basis over the estimated contract term , which is currently estimated to be approximately four years .
We pay commensurate sales commissions upon customer renewals, therefore our amortization period is aligned to our initial contract term.
−Removed: Xerox 2021 Annual Report 94
Incremental direct costs are as follows:
6 unchanged sentences
We may also incur costs associated with our services arrangements to generate or enhance resources and assets that will be used to satisfy our future performance obligations included in these arrangements.
−Removed: These costs are considered contract fulfillment costs and are amortized over the contractual service period of the arrangement to cost of services.
+Added: These costs are considered contract fulfillment costs and are amortized over the contractual service period of the arrangement to
+Added: Xerox 2022 Annual Report 98
+Added: cost of services.
In addition, we also provide inducements to certain customers in various forms, including contractual credits, which are capitalized and amortized as a reduction of revenue over the term of the contract.
2 unchanged sentences
Note 4 – Segment and Geographic Area Reporting
−Removed: Segment Discussion
−Removed: We manage our operations on a geographic basis and are primarily organized from a sales perspective on the basis of “go-to-market” sales channels.
−Removed: These sales channels are structured to serve a range of customers for our products and services.
−Removed: As a result of this structure, we concluded that for 2021 we had one operating and reportable segment - the design, development and sale of document management systems and solutions.
−Removed: Our chief executive officer was identified as the chief operating decision maker (CODM).
−Removed: All of the company’s activities are interrelated, and each activity is dependent upon and supportive of the other, including product development, supply chain and back-office support services.
−Removed: In addition, all significant operating decisions made by management and the Board, are largely based upon the analysis of Xerox Holdings and Xerox on a total company basis, including assessments related to our incentive compensation plans.
+Added: Our reportable segments are aligned with how we manage the business and view the markets we serve.
+Added: During the first quarter of 2022, the Company changed its reportable segments from one reportable segment to two reportable segments – Print and Other , and Financing (FITTLE) to align with a change in how the Chief Operating Decision Maker (CODM), our Chief Executive Officer (CEO), allocates resources and assesses performance against the Company’s key growth strategies.
+Added: Our two reportable segments are based on the information reviewed by the CODM together with the Company’s management to evaluate performance of the business and allocate resources.
+Added: As such, prior period reportable segment results and related disclosures have been conformed to reflect the Company’s current reportable segments.
+Added: Our Print and Other segment includes the sale of document systems, supplies and technical services and managed services.
+Added: The segment also includes the delivery of managed services that involve a continuum of solutions and services that help our customers optimize their print and communications infrastructure, apply automation and simplification to maximize productivity, and ensure the highest levels of security.
+Added: This segment also includes IT services and software.
+Added: Our product groupings range from:
+Added: • “Entry” , which include A4 devices and desktop printers and multifunction devices that primarily serve small and medium workgroups/work teams.
+Added: • “Mid-Range” , which include A3 devices that generally serve large workgroup/work teams environments as well as products in the Light Production product groups serving centralized print centers, print for pay and lower volume production print establishments.
+Added: • “High-End” , which include production printing and publishing systems that generally serve the graphic communications marketplace and print centers in large enterprises.
+Added: Customers range from small and mid-sized businesses to large enterprises.
+Added: Customers also include graphic communication enterprises as well as channel partners including distributors and resellers.
+Added: Segment revenues also include commissions and other payments from the Financing (FITTLE) segment for the exclusive right to provide lease financing for Xerox products.
+Added: These revenues are reported as part of Intersegment Revenues, which are eliminated in consolidated revenues.
+Added: The Financing (FITTLE) segment provides leasing solutions through either bundled or unbundled lease agreements of Xerox and non-Xerox products and IT services equipment.
+Added: These leasing solutions support a wide range of customers, from government to graphic communications and the small and mid-sized markets to Enterprise as well as financing for direct channel customer purchases of both Xerox and non-Xerox equipment.
+Added: Segment revenues primarily includes financing income on sales-type leases, operating lease income (including month-to-month rentals and extensions) and leasing fees.
+Added: Segment Policy
+Added: We derive the results of our business segments directly from our internal management reporting system.
+Added: The accounting policies that the Company uses to derive its segment results are substantially the same as those used by the Company in preparing its consolidated financial statements.
+Added: The segment results include a significant level of management estimates regarding the allocation of revenues such as finance income in bundled lease arrangements and other leasing revenues and operating lease revenues embedded in our managed services contracts as well as the allocation of expenses for shared selling and administrative services.
+Added: Accordingly, the financial results for the segments may not be indicative of the results the businesses would have as on a standalone basis or what might be presented for the businesses in stand-alone financial statements.
+Added: The CODM measures the performance of each segment based on several metrics, including segment revenues and profit.
+Added: The CODM uses these results, in part, to evaluate the performance of, and to allocate resources to each segment.
+Added: The Financing (FITTLE) segment also includes interest expense associated with allocated debt of the Company in support of its Finance assets, while no interest expense is allocated to the Print and Other segment.
+Added: Xerox 2022 Annual Report 99
+Added: Selected financial information for our reportable segments was as follows:
+Added: Year Ended December 31,
+Added: 2022 2021 2020
+Added: Print and Other Financing (FITTLE) Total Print and Other Financing (FITTLE) Total Print and Other Financing (FITTLE) Total
+Added: External revenue $ 6,509 $ 598 $ 7,107 $ 6,355 $ 683 $ 7,038 $ 6,290 $ 732 $ 7,022
+Added: Intersegment revenue (1)
+Added: 158 12 170 193 12 205 199 12 211
+Added: Total Segment revenue $ 6,667 $ 610 $ 7,277 $ 6,548 $ 695 $ 7,243 $ 6,489 $ 744 $ 7,233
+Added: Segment profit $ 238 $ 37 $ 275 $ 293 $ 82 $ 375 $ 461 $ 3 $ 464
+Added: Segment margin (2)
+Added: 3.7 % 6.2 % 3.9 % 4.6 % 12.0 % 5.3 % 7.3 % 0.4 % 6.6 %
+Added: Interest income $ — $ 207 $ 207 $ — $ 221 $ 221 $ — $ 226 $ 226
+Added: Interest expense (3)
+Added: — 116 116 — 121 121 — 133 133
+Added: Depreciation and amortization 113 115 228 117 155 272 129 183 312
+Added: Capital expenditures (4)
+Added: 57 — 57 68 — 68 74 — 74
+Added: Total Assets 8,004 3,539 11,543 9,690 3,533 13,223
+Added: _____________
+Added: (1) Intersegment revenue is primarily commissions and other payments made by the Financing (FITTLE) Segment to the Print and Other Segment for the lease of Xerox equipment placements.
+Added: (2) Segment margin based on External revenue only.
+Added: (3) Interest expense for the Financing (FITTLE) Segment includes non-financing interest expense on allocated debt associated with Equipment on operating lease of $ 8 , $ 10 and $ 12 for the three years ended December 31, 2022, 2021 and 2020, respectively .
+Added: (4) Capital expenditures are allocated fully to the Print and Other segment since primarily managed and controlled through that segment together with related assets.
+Added: Selected financial information for our reportable segments was as follows:
+Added: Year Ended December 31,
+Added: 2022 2021 2020
+Added: Pre-tax (Loss) Income
+Added: Total Segment profit $ 275 $ 375 $ 464
+Added: Goodwill impairment ( 412 ) ( 781 ) —
+Added: Restructuring and related costs, net ( 65 ) ( 38 ) ( 93 )
+Added: Amortization of intangible assets ( 42 ) ( 55 ) ( 56 )
+Added: Accelerated share vesting ( 21 ) — —
+Added: Transaction and related costs, net — — ( 18 )
+Added: Other expenses, net ( 63 ) 24 ( 45 )
+Added: Total Pre-tax (loss) income $ ( 328 ) $ ( 475 ) $ 252
+Added: Depreciation and Amortization
+Added: Total reported segments $ 228 $ 272 $ 312
+Added: Amortization of intangible assets 42 55 56
+Added: Total Depreciation and amortization $ 270 $ 327 $ 368
+Added: Interest Expense
+Added: Total reported segments $ 116 $ 121 $ 133
+Added: Corporate 83 86 82
+Added: Total Interest expense $ 199 $ 207 $ 215
+Added: Interest Income
+Added: Total reported segments $ 207 $ 221 $ 226
+Added: Corporate 11 4 14
+Added: Total Interest income $ 218 $ 225 $ 240
+Added: Xerox 2022 Annual Report 100
Geographic Area Data
10 unchanged sentences
(1) Long-lived assets are comprised of (i) Land, buildings and equipment, net, (ii) Equipment on operating leases, net, (iii) Leased right-of-use (ROU) assets, net, (iv) Internal use software, net, and v) Capitalized product software, net.
−Removed: Xerox 2021 Annual Report 95
Note 5 – Lessor
10 unchanged sentences
Profit at lease commencement on sales type leases was estimated to be approximately $ 229 , $ 221 and $ 207 for the three years ended December 31, 2022, 2021 and 2020, respectively.
+Added: Xerox 2022 Annual Report 101
Note 6 – Acquisitions and Investments
The following table summarizes the purchase price allocations for our acquisitions as of the acquisition dates:
−Removed: Year Ended December 31, 2021 Year Ended December 31, 2020
−Removed: Weighted-Average Life Acquisitions Weighted-Average Life Acquisitions
+Added: Year Ended December 31, 2022 Year Ended December 31, 2021 Year Ended December 31, 2020
+Added: Weighted-Average Life Acquisitions Weighted-Average Life Acquisitions Weighted-Average Life Acquisitions
Accounts/finance receivables $ 29 $ 5 $ 20
Intangible assets:
−Removed: Customer relationships 9 years 27 9 years 69
−Removed: Trademarks 5 years 3 9 years 9
+Added: Customer relationships 10 years 41 9 years 27 9 years 69
+Added: Trademarks 5 years 7 5 years 3 9 years 9
Technology — 3 years 1 3 years 9
3 unchanged sentences
Liabilities assumed (1)
−Removed: Total Purchase Price $ 53 $ 203
+Added: ( 76 ) ( 12 ) ( 59 )
+Added: Total Cash Purchase Price $ 93 $ 53 $ 203
+Added: _____________
+Added: (1) Includes estimated contingent consideration liabilities of approximately $ 11 as of December 31, 2022 .
2022 Acquisitions
+Added: During 2022, Xerox acquired two businesses that totaled $ 93 , net of cash acquired.
+Added: In February 2022, Xerox acquired Powerland, a leading IT services provider in Canada, for approximately $ 52 (CAD 66 million), net of cash.
+Added: The acquisition also included contingent consideration up to approximately $ 22 (CAD 28 million) based on future performance of the acquisition over the two-year period following the date of acquisition.
+Added: The acquisition strengthens Xerox’s IT services offerings in North America, which include cloud, cyber security, end user computing and managed services.
+Added: In July 2022, Xerox acquired Go Inspire, a U.K.-based print and digital marketing and communication services provider, for approximately $ 41 (GBP 34 million), net of cash.
+Added: The acquisition strengthens Xerox’s strategy to grow its global Digital Services presence in EMEA.
+Added: Both of our 2022 acquisitions resulted in 100 % ownership of the acquired companies.
+Added: The operating results of these acquisitions are not material to our financial statements and are included within our results from the respective acquisition dates.
+Added: The purchase prices were primarily allocated to Intangible assets, net and Goodwill, net, of which, approximately $ 20 is expected to be deductible for tax purposes.
+Added: The allocations for the Powerland acquisition were finalized during 2022, however, the allocations for the Go Inspire acquisition are based on preliminary management estimates, which continue to be reviewed, and are expected to be finalized by second quarter of 2023 and may include input and support from third-party valuations.
+Added: Any adjustments to the preliminary allocations are not expected to be material.
+Added: The Goodwill associated with both acquisitions is included in our Print and Other segment.
+Added: 2021 Acquisitions
In 2021, Xerox continued its strategy of focusing on further penetrating the small-to-medium sized business (SMB) market through acquisitions of local area resellers and partners, including multi-brand dealers as well as companies with an adjacent or sole IT services business.
4 unchanged sentences
The operating results of these acquisitions are not material to our financial statements and are included within our results from the respective acquisition dates.
−Removed: The purchase prices were all cash and were primarily allocated to Intangible assets, net and Goodwill, of which, none is expected to be deductible for tax purposes.
+Added: The purchase prices were all cash and were primarily allocated to Intangible assets, net and Goodwill, net, of which, none is expected to be deductible for tax purposes.
2020 Acquisitions
3 unchanged sentences
2020 also included the acquisition of CareAR for $ 9 .
−Removed: All of our 2020 acquisitions resulted in 100 % ownership of the acquired companies.
−Removed: The operating results of these acquisitions are not material to our financial statements and are included within our results from the respective
Xerox 2022 Annual Report 102
−Removed: acquisition dates.
−Removed: The purchase prices were all cash and were primarily allocated to Intangible assets, net and Goodwill, of which, none is expected to be deductible for tax purposes.
−Removed: 2019 Acquisitions
−Removed: Business acquisitions in 2019 totaled $ 38 and included Rabbit Office Automation (ROA), a San Francisco Bay area dealer, and Heritage Business Systems, Inc.
−Removed: (HBS), a Delaware Valley dealer.
−Removed: The acquisition of these dealers in 2019 expanded our distribution capabilities of office technology sales, services and supplies to SMB customers in these markets.
−Removed: 2019 acquisitions also include $ 4 related to an acquisition of assets.
All of our 2020 acquisitions resulted in 100 % ownership of the acquired companies.
−Removed: The operating results of the 2019 acquisitions are not material to our financial statements and were included within our results from the respective acquisition dates.
−Removed: The purchase prices for these acquisitions were all cash and were primarily allocated to Intangible assets, net and Goodwill.
+Added: The operating results of these acquisitions are not material to our financial statements and are included within our results from the respective acquisition dates.
+Added: The purchase prices were all cash and were primarily allocated to Intangible assets, net and Goodwill, net, of which, none is expected to be deductible for tax purposes.
Revenue Summary
4 unchanged sentences
2020 132 137 99
−Removed: 2019 17 21 18
Total Contributed Aggregate Revenue $ 332 $ 156 $ 99
2 unchanged sentences
Under the terms of the agreement, Xerox contributed approximately $ 5 in cash, along with technology and intellectual property for a controlling interest in the entity, whereas VicGov contributed approximately $ 5 in cash, along with technology and intellectual property for a noncontrolling interest in the entity.
−Removed: As a result of Xerox’s controlling interest in the newly formed entity, beginning with the second quarter 2021, Xerox consolidated the new entity and the VicGov investment was reported as a noncontrolling interest.
−Removed: The revenues and expenses of the new entity post formation did not materially impact the Company’s reported results for the year ended December 31, 2021.
+Added: The revenues and expenses of the new entity post formation were not material for the years ended December 31, 2022 and December 31, 2021.
+Added: In the third quarter of 2022, it was determined that development and commercialization of Eloque’s infrastructure/bridge monitoring solution would require significantly more efforts and capital than initially expected.
+Added: As a result of this determination, we mutually agreed with our partner VicGov to shut down the Eloque joint venture.
+Added: The impacts from this shutdown were not material.
ServiceNow Inc.
7 unchanged sentences
Xerox 2022 Annual Report 103
−Removed: Note 6 – Divestitures
−Removed: Discontinued Operations
−Removed: Sales of Ownership Interests in Fuji Xerox Co., Ltd.
−Removed: and Xerox International Partners
−Removed: In November 2019, Xerox Holdings completed a series of transactions to restructure its relationship with FUJIFILM Holdings Corporation (FH), including the sale of its indirect 25 % equity interest in Fuji Xerox (now known as FUJIFILM Business Innovation Corp.) for approximately $ 2.2 billion as well as the sale of its indirect 51 % partnership interest in Xerox International Partners (XIP) for approximately $ 23 (collectively the Sales).
−Removed: As a result of the Sales and the related strategic shift in our business, the financial results of our equity method investment in Fuji Xerox and our XIP business (which was consolidated) are reflected as a discontinued operation and as such, their impact is excluded from continuing operations for 2019.
−Removed: The Sales resulted in a pre-tax gain of $ 629 ($ 539 after-tax), and included a reclassification from Accumulated other comprehensive loss of $ 165 (Refer to Note 25 - Other Comprehensive Income (Loss)) as well as approximately $ 9 of transaction costs and $ 9 of allocated goodwill associated with our XIP business (Refer to Note 13 - Goodwill and Intangible Assets, Net).
−Removed: The XIP allocated goodwill was based on the relative fair value of our XIP business, as evidenced by the sales price, as compared to the total estimated fair value of Xerox.
−Removed: No Goodwill was allocated for our investment in Fuji Xerox based on consideration of the guidance in ASC 350-20-40-2 and the fact that an equity investment is not considered a business in accordance with ASC 805-10-55, as Fuji Xerox was not controlled by Xerox.
−Removed: The transactions with FH also included an OEM license agreement by and between Fuji Xerox and Xerox, granting Fuji Xerox the right to use specific Xerox Intellectual Property (IP) in providing certain named original equipment manufacturers (OEM’s) with products (such as printer engines) in exchange for a one-time upfront license fee of $ 77 .
−Removed: The license fee is recorded within Rental and other revenues for 2019.
−Removed: Our Technology Agreement (TA) with Fuji Xerox expired on March 31, 2021.
−Removed: The TA included a provision that allowed Fuji Xerox continued use of the Xerox brand trademark for two years after the date of termination of the TA as it transitions to a new brand in exchange for an upfront prepaid fixed royalty of $ 100 .
−Removed: Fuji Xerox elected to continue its use of the Xerox brand trademark over the two year period and, therefore, in April 2021, made the $ 100 upfront payment due under the TA, which is included in Operating cash flows for the year ended December 31, 2021.
−Removed: We are recognizing the revenue associated with this extended brand license ratably over the two year transition period in Service, maintenance and rental revenues.
−Removed: Accordingly, any potential entry by Xerox for Xerographic products into the Fuji Xerox territory under the Xerox brand will be deferred to at least April 1, 2023.
−Removed: The product supply agreements with Fuji Xerox will continue to be effective despite the termination of the TA, and Fuji Xerox and Xerox will continue to operate as each other’s product supplier under existing purchase/supply agreements.
−Removed: Prior to the sale of our investment in Fuji Xerox, pricing of the transactions under these arrangements were based on terms the Company believed to be negotiated at arm's length.
−Removed: Our purchase commitments with Fuji Xerox are in the normal course of business and typically have a lead time of three months .
−Removed: In addition, we pay Fuji Xerox and they pay us for unique research and development costs.
−Removed: There were no discontinued operations in 2021 or 2020, nor were there any adjustments to the 2019 Discontinued Operation.
−Removed: Summarized financial information for our Discontinued Operations is as follows:
−Removed: Year Ended December 31, 2019
−Removed: Income from operations $ 176
−Removed: Gain on disposal 629
−Removed: Income before income taxes 805
−Removed: Income tax expense 95
−Removed: Income from discontinued operations, net of tax 710
−Removed: Income from discontinued operations attributable to noncontrolling interests, net of tax 5
−Removed: Income from discontinued operations, attributable to Xerox, net of tax $ 705
−Removed: Xerox 2021 Annual Report 98
−Removed: The following is a summary of selected financial information for our Discontinued Operations:
−Removed: Year Ended December 31, 2019
−Removed: Cost and Expenses:
−Removed: Cost of revenues $ 44
−Removed: Other expenses 6
−Removed: Total Costs and Expenses $ 50
−Removed: Selected amounts included in Costs and Expenses:
−Removed: Depreciation and amortization $ —
−Removed: Restructuring and related costs, net —
−Removed: Equity in net income of FX $ 147
−Removed: Net income attributable to noncontrolling interest - XIP 5
−Removed: Capital expenditures —
−Removed: Refer to Note 12 - Investments in Affiliates, at Equity for additional information regarding Fuji Xerox, including summarized financial information of Fuji Xerox.
Note 7 – Accounts Receivable, Net
14 unchanged sentences
(1) Includes the impacts of foreign currency translation and adjustments to reserves necessary to reflect events of non-payment such as customer accommodations and contract terminations.
−Removed: The allowance for doubtful accounts as a percentage of gross receivables was 6.6 % at December 31, 2021 and 7.2 % at December 31, 2020.
−Removed: The allowance for doubtful accounts as a percent of gross accounts receivable remains at an elevated level as compared to historical levels primarily as a result of the macroeconomic and market disruption caused by the COVID-19 pandemic.
+Added: We perform ongoing credit evaluations of our customers and adjust credit limits based upon customer payment history and current creditworthiness.
+Added: The allowance for uncollectible accounts receivable is determined based on an assessment of past collection experience as well as consideration of current and future economic conditions and changes in our customer collection trends.
+Added: Based on that assessment the allowance for doubtful accounts as a percentage of gross receivables was 5.7 % at December 31, 2022 and 6.6 % at December 31, 2021.
+Added: The decrease in the allowance is primarily due to a reduction in estimated losses for customer accommodations and other billing adjustments.
Accounts Receivable Sale Arrangements
2 unchanged sentences
We have one facility in Europe that enables us to sell accounts receivable associated with our distributor network on an ongoing basis, without recourse.
−Removed: Under this arrangement, we sell our entire
−Removed: Xerox 2021 Annual Report 99
−Removed: interest in the related accounts receivable for cash and no portion of the payment is held back or deferred by the purchaser.
+Added: Under this arrangement, we sell our entire interest in the related accounts receivable for cash and no portion of the payment is held back or deferred by the purchaser.
Of the accounts receivable sold and derecognized from our balance sheet, $ 159 and $ 102 remained uncollected as of December 31, 2022 and 2021, respectively.
9 unchanged sentences
The activity associated with these arrangements is not reflected in this disclosure, as payments under these arrangements have not been material and these are customer directed arrangements.
+Added: Xerox 2022 Annual Report 104
Note 8 – Finance Receivables, Net
12 unchanged sentences
A summary of our gross finance receivables' future contractual maturities, including those previously billed, is as follows:
−Removed: 12 Months $ 1,357 $ 1,426
−Removed: 24 Months 972 1,006
−Removed: 36 Months 668 697
−Removed: 48 Months 396 395
−Removed: 60 Months 157 152
+Added: 2023 $ 1,325 972
Thereafter 31 18
4 unchanged sentences
Customer credit limits are based upon an initial evaluation of the customer's credit quality, and we adjust that limit accordingly based upon ongoing credit assessments of the customer, including payment history and changes in credit quality.
−Removed: The allowance for doubtful credit losses as a percentage of gross financial receivables (net of unearned income) was 3.7 % at December 31, 2021 and 4.0 % at December 31, 2020.
−Removed: In determining the level of reserve required, we critically assessed current and forecasted economic conditions in light of the COVID-19 pandemic to ensure we objectively included those expected impacts in the determination of our reserve.
−Removed: Our assessment also included a
−Removed: Xerox 2021 Annual Report 100
−Removed: review of current portfolio credit metrics and the level of write-offs incurred over the past year of the COVID-19 pandemic.
+Added: The allowance for doubtful credit losses is principally determined based on an assessment of origination year and past collection experience as well as consideration of current and future economic conditions and changes in our customer collection trends.
+Added: Based on that assessment, the allowance for doubtful credit losses as a percentage of gross finance receivables (net of unearned income) was 3.6 % at December 31, 2022 and 3.7 % at December 31, 2021.
+Added: In determining the level of reserve required, we critically assessed current and forecasted economic conditions and trends to ensure we objectively considered those expected impacts in the determination of our reserve.
+Added: Our assessment also included a review of current portfolio credit metrics and the level of write-offs incurred over the past year.
Our allowance for doubtful finance receivables is effectively determined by geography.
1 unchanged sentence
Since EMEA is comprised of various countries and regional economies, the risk profile within that portfolio segment is somewhat more diversified due to the varying economic conditions among and within the countries.
−Removed: The bad debt provision of $( 1 ) for the year ended December 31, 2021 included a reserve reduction of approximately $ 31 reflecting improvements in the macroeconomic environment as well as lower write-offs as a result of the COVID-19 pandemic.
−Removed: This compares to a bad debt provision of $ 81 for the year ended December 31, 2020, which included a first quarter 2020 charge of approximately $ 60 to initially record expected losses from the COVID-19 pandemic.
−Removed: Actual write-offs incurred to date have lagged expectations but we believe estimates of additional losses are in line with current and future economic conditions including the estimated impacts from the on-going COVID-19 pandemic.
−Removed: Despite improvement in the global economy, local economies continue to recover from the impacts of the COVID-19 pandemic including the cessation of government support as well as labor, interest rate and inflation risks and the potential for higher taxes.
−Removed: As a result of these uncertainties, we continue to also consider these various adverse macroeconomic impacts in our models.
−Removed: Accordingly, although our reserves as a percent of receivables have declined from the prior year, they remain elevated as compared to pre-pandemic levels.
+Added: The bad debt provision was $ 26 for the year ended December 31, 2022.
+Added: This compares to the bad debt provision of $( 1 ) for the year ended December 31, 2021.
+Added: The provision for the year ended December 31, 2021 included a reserve reduction of approximately $ 31 , which was the result of improvements in the macroeconomic environment in 2021 as well as lower write-offs as a result of the COVID-19 pandemic.
+Added: Xerox 2022 Annual Report 105
+Added: Although write-offs incurred to date continue to lag expectations, we believe our current reserve position remains sufficient to cover expected future losses that may result from current and future macroeconomic conditions including higher inflation, interest rates and the potential for recessions in the geographic areas of our customers.
+Added: In addition, there continues to be geopolitical uncertainty in Europe from the Ukraine/Russia conflict and continued impacts from the COVID-19 recovery.
+Added: As a result of these uncertainties, our reserve as a percent of receivables has remained elevated as compared to our reserve prior to the onset of the COVID-19 pandemic.
+Added: We continue to monitor developments in future economic conditions and trends, and as a result, our reserves may need to be updated in future periods.
The allowance for doubtful accounts as well as the related investment in finance receivables were as follows:
Allowance for Credit Losses:
−Removed: United States Canada (1)
−Removed: Europe (1)(2)
+Added: United States Canada Europe (1)
Balance at December 31, 2020 $ 77 $ 15 $ 41 $ 133
6 unchanged sentences
Recoveries and other (2)
+Added: 1 1 ( 3 ) ( 1 )
Balance at December 31, 2022 $ 83 $ 7 $ 27 $ 117
5 unchanged sentences
_____________
−Removed: (1) 2019 amounts have been recast to include the Other geographic region, which was previously disclosed as a separate grouping, conforming to the current year's presentation .
(1) Includes developing market countries.
2 unchanged sentences
In the U.S., customers are further evaluated by class based on the type of lease origination.
−Removed: The primary categories are direct, which primarily includes leases originated directly with end-user customers through bundled lease arrangements, and indirect, which primarily includes leases originated through our XBS sales channel that utilizes a combination of internal and third-party leasing in its lease arrangements with end-user customers.
−Removed: Indirect also includes lease financing to end-user customers who purchased equipment we sold to distributors or resellers.
+Added: The primary categories are direct, which primarily includes leases originated directly with end-user customers through bundled lease arrangements, and indirect, which primarily includes leases originated through our XBS sales channel and lease financing to end-user customers who purchased equipment we sold to distributors or resellers.
We evaluate our customers based on the following credit quality indicators:
8 unchanged sentences
Although we experience higher loss rates associated with this customer class, we believe the risk is somewhat mitigated by the fact that our leases are fairly well dispersed across a large and diverse customer base.
−Removed: Xerox 2021 Annual Report 101
−Removed: addition, the higher loss rates are largely offset by the higher rates of return we obtain with such leases.
+Added: In addition, the higher loss rates are largely offset by the higher rates of return we obtain with such leases.
Loss rates in this category in the normal course are generally in the range of 2 % to 5 %.
6 unchanged sentences
Credit quality indicators are updated at least annually, or more frequently to the extent required by economic conditions, and the credit quality of any given customer can change during the life of the portfolio.
+Added: Xerox 2022 Annual Report 106
Details about our finance receivables portfolio based on geography, origination year and credit quality indicators are as follows:
86 unchanged sentences
(1) Includes developing market countries.
+Added: Sales of Receivables
+Added: In December 2022, the Company entered into a Receivables Funding Agreement with an affiliate of HPS Investment Partners (the Purchaser) pursuant to which the Company agreed to offer for sale, and Purchaser agreed to purchase, certain eligible pools of finance receivables on a monthly basis in transactions intended to be structured as "true sales at law," and we have received an opinion to that effect from outside legal counsel.
+Added: Accordingly, the receivables sold were derecognized from our financial statements and the Purchaser does not have recourse back to the Company for uncollectible receivables.
+Added: The Receivables Funding Agreement has an initial term through January 31, 2024, with automatic one-year extensions thereafter, unless terminated by either the Company or the Purchaser.
+Added: The Receivables Funding Agreement contemplates lease receivable sales totaling approximately $ 600 during the initial term.
+Added: Additionally, the Company will continue to service the lease receivables for a specified fee and will also be paid a commission on lease receivables sold under the Receivables Funding Agreement.
+Added: During the year ended December 31, 2022, the Company sold approximately $ 60 in principal balances of lease receivables under the Receivables Funding Agreement for approximately $ 60 in cash and received and recognized commissions of approximately $ 2 , which are recorded in Services, maintenance and rentals as Other revenue.
+Added: The cash proceeds were recorded in Net cash provided by operating activities.
Secured Borrowings and Collateral
−Removed: In September 2021, we sold $ 331 of U.S.
−Removed: based finance receivables to a consolidated special purpose entity (SPE).
−Removed: At December 31, 2021 the SPE holds $ 308 of total Finance receivables, net, which are included in our Consolidated Balance Sheet as collateral for the secured loan.
−Removed: In December 2020, we sold $ 610 of U.S.
−Removed: based finance receivables to a consolidated SPE.
−Removed: As of December 31, 2021 the SPE holds $ 380 of total Finance receivables, net, which are included in our Consolidated Balance Sheet as collateral for the secured loan.
−Removed: Refer to Note 16 - Debt, for additional information related to these arrangements including the related secured loan agreement.
+Added: In 2022, 2021, and 2020 we sold certain finance receivables to consolidated special purpose entities included in our Consolidated Balance Sheet as collateral for secured loans.
+Added: Refer to Note 15 - Debt, for additional information related to these arrangements.
Xerox 2022 Annual Report 109
6 unchanged sentences
The transfer of equipment from our inventories to equipment subject to an operating lease is presented in our Consolidated Statements of Cash Flows in the operating activities section.
−Removed: Equipment on operating leases and similar arrangements consists of our equipment rented to customers and depreciated to estimated salvage value at the end of the lease term.
+Added: Equipment on operating lease and similar arrangements consists of our equipment rented to customers and depreciated to estimated salvage value at the end of the lease term.
Equipment on operating leases and the related accumulated depreciation were as follows:
4 unchanged sentences
Estimated minimum future revenues associated with Equipment on operating leases are as follows:
−Removed: 12 months $ 202 $ 215
−Removed: 24 months 110 129
−Removed: 36 months 61 74
−Removed: 48 months 32 32
−Removed: 60 months 10 12
+Added: 2023 $ 185 110
Thereafter 4 2
1 unchanged sentence
Total contingent rentals on operating leases, consisting principally of usage charges in excess of minimum contracted amounts, for the years ended December 31, 2022, 2021 and 2020 amounted to $ 63 , $ 62 and $ 66 , respectively.
−Removed: The decrease in contingent rentals for the year ended December 31, 2020 is primarily the result of lower equipment usage during 2020 as a result of business closures related to the COVID-19 pandemic.
Secured Borrowings and Collateral
−Removed: In September 2021, we sold the rights to payments under operating leases with an equipment net book value of $ 9 to a consolidated SPE, which funded the purchase through a secured loan agreement with a financial institution.
−Removed: As of December 31, 2021 the SPE holds $ 8 of Equipment on operating leases, net, which are included in our Consolidated Balance Sheet as collateral for the secured loan agreement.
+Added: In 2021, we sold the rights to payments under operating leases to a consolidated special purpose entity included in our Consolidated Balance Sheet as collateral for a secured loan.
Refer to Note 15 - Debt, for additional information related to this arrangement.
3 unchanged sentences
Estimated Useful Lives (Years) 2022 2021
−Removed: Land $ 9 $ 13
Building and building equipment 25 to 50
2 unchanged sentences
Office furniture and equipment 3 to 15
−Removed: Finance leases (1)
+Added: Finance leases 1 to 12
+Added: Other 4 to 20
Construction in progress 15 17
2 unchanged sentences
Land, buildings and equipment, net $ 320 $ 358
−Removed: _____________
−Removed: (1) Prior year amounts have been recast to conform to the current year's presentation to separately report finance lease ROU assets.
Depreciation expense was $ 68 , $ 76 and $ 87 for the three years ended December 31, 2022, 2021 and 2020, respectively.
5 unchanged sentences
Useful lives of our internal use software generally vary from three to seven years .
+Added: Amortization expense was $ 45 , $ 41 and $ 42 for the three years ended December 31, 2022, 2021 and 2020, respectively.
Note 11 – Lessee
2 unchanged sentences
Additionally, we have identified embedded operating leases within certain supply chain contracts for warehouses, primarily within our domestic operations.
−Removed: Our leases have remaining terms of up to eleven years and a variety of renewal and/or termination options.
+Added: Our leases have remaining terms of up to twelve years and a variety of renewal and/or termination options.
The components of lease expense are as follows:
10 unchanged sentences
Xerox 2022 Annual Report 111
−Removed: Operating leases ROU assets, net and operating lease liabilities were reported in the Consolidated Balance Sheets as follows:
+Added: Operating lease ROU assets, net and operating lease liabilities were reported in the Consolidated Balance Sheets as follows:
Other long-term assets $ 215 $ 264
7 unchanged sentences
Right-of-use assets obtained in exchange for new lease liabilities (1)
+Added: $ 45 $ 41 $ 76
Weighted-average remaining lease term 4 years 5 years 5 years
3 unchanged sentences
Maturities and additional information related to operating lease liabilities are as follows:
−Removed: 12 months $ 98 $ 104
−Removed: 24 months 78 88
−Removed: 36 months 45 68
−Removed: 48 months 31 37
−Removed: 60 months 26 25
Thereafter 30 35
9 unchanged sentences
Xerox 2022 Annual Report 112
−Removed: Note 12 – Investment in Affiliates, at Equity
−Removed: As disclosed in Note 6 - Divestitures, in November 2019 Xerox Holdings sold its remaining indirect 25 % equity interest in Fuji Xerox (now known as FUJIFILM Business Innovation Corp.), which had been previously accounted for as an equity method investment.
−Removed: Accordingly, our remaining Investment in Affiliates, at Equity largely consists of several minor investments in entities in the Middle East region.
−Removed: Investments in corporate joint ventures and other companies in which we generally have a 20% to 50% ownership interest were $ 45 and $ 47 at December 31, 2021 and 2020, respectively.
−Removed: Our equity in net income of our unconsolidated affiliates is as follows:
−Removed: Year Ended December 31,
−Removed: 2021 2020 2019
−Removed: Fuji Xerox (1)
−Removed: $ — $ — $ 147
−Removed: Total Equity in net income of unconsolidated affiliates $ 3 $ 4 $ 155
+Added: Note 12 - Goodwill, Net and Intangible Assets, Net
+Added: Goodwill, Net
+Added: The following table presents the changes in the carrying amount of Goodwill, net:
2022 2021 2020
−Removed: (1) Equity in net income for Fuji Xerox is reported in Income from discontinued operations, net of tax for 2019 and is through the date of sale.
−Removed: We received dividends of $ 69 from Fuji Xerox for the year ended December 31, 2019, which was reflected as a reduction in our investment upon receipt.
−Removed: No dividends were received from Fuji Xerox in 2021 or 2020 due to the Sale of our equity interest in Fuji Xerox in 2019.
−Removed: Summarized financial information for Fuji Xerox was as follows:
−Removed: Through Date of Sale
−Removed: Summary of Operations
−Removed: Revenues $ 7,667
−Removed: Costs and expenses 6,814
−Removed: Income before income taxes 853
−Removed: Income tax expense 258
−Removed: Net Income 595
−Removed: Net income - noncontrolling interests 3
−Removed: Net Income - Fuji Xerox $ 592
−Removed: Dollar exchange rate used to translate was as follows:
−Removed: Financial Statement Exchange Basis 2019
−Removed: Summary of Operations Weighted average rate 109.03
−Removed: Xerox 2021 Annual Report 108
−Removed: Note 13 - Goodwill and Intangible Assets, Net
−Removed: The following table presents the changes in the carrying amount of Goodwill:
−Removed: Balance at December 31, 2018 $ 3,858
−Removed: Foreign currency translation 28
−Removed: Acquisitions 14
−Removed: Balance at December 31, 2019 $ 3,900
+Added: Goodwill $ 4,068 $ 4,071 $ 3,900
+Added: Accumulated impairment losses ( 781 ) — —
+Added: Goodwill, net at January 1 $ 3,287 $ 4,071 $ 3,900
+Added: Goodwill Activity:
Foreign currency translation ( 120 ) ( 23 ) 60
1 unchanged sentence
Acquisitions — 9 —
−Removed: Canada Acquisition 10
−Removed: Balance at December 31, 2020 (1)
−Removed: Foreign currency translation ( 23 )
Acquisitions 28 — 98
−Removed: Acquisitions 9
−Removed: Canada Acquisition 16
+Added: Canada Acquisitions 34 16 10
+Added: Other 3 ( 5 ) 3
Goodwill impairment ( 412 ) ( 781 ) —
−Removed: Balance at December 31, 2021 $ 3,287
+Added: Goodwill $ 4,013 $ 4,068 $ 4,071
+Added: Accumulated impairment losses ( 1,193 ) ( 781 ) —
+Added: Goodwill, net at December 31 $ 2,820 $ 3,287 $ 4,071
_____________
−Removed: (1) CareAR Holdings, LLC was transferred from Xerox Holdings to Xerox in 2021.
−Removed: Accordingly, the balance at December 31, 2020 reflects the balance for both Xerox Holdings and Xerox.
−Removed: (2) Non-cash, pre-tax Goodwill impairment charge of $ 781 ($ 750 after-tax).
−Removed: After completing our annual impairment test in the fourth quarter of 2021, we concluded that the estimated fair value of the Company had declined below its carrying value.
+Added: (1) Refer to Note 6 - Acquisitions and Investments for additional information related to acquisitions.
+Added: No Goodwill has been allocated to the Financing (FITTLE) segment for the three years ended December 31, 2022, 2021 or 2020, respectively.
+Added: Accordingly, amounts above represent the Goodwill allocated to the Print and Other segment, as well as Goodwill on a Total Company basis.
+Added: Refer to Note 1 - Basis of Presentation for additional information regarding the allocation of Goodwill.
+Added: In the third quarter of 2022, we concluded that an interim impairment test of Goodwill was required.
+Added: Based on that test, we determined that the estimated fair value of the Print and Other reporting unit (the only reporting unit with Goodwill) had declined below its carrying value and, as a result, we recognized an after-tax non-cash impairment charge of $ 395 ($ 412 pre-tax) related to our Goodwill for the year ended December 31, 2022.
+Added: In the fourth quarter of 2021, after completing our annual impairment test, we concluded that the estimated fair value of the Company had declined below its carrying value.
As a result, we recognized an after-tax non-cash impairment charge of $ 750 ($ 781 pre-tax) related to our Goodwill for the year ended December 31, 2021.
−Removed: Refer to Note 1 - Basis of Presentation and Summary of Significant Accounting Policies for additional information related to the Goodwill impairment.
+Added: Refer to Note 1 - Basis of Presentation for additional information related to the Goodwill impairment charges and our annual impairment assessment performed during the fourth quarter 2022.
Intangible Assets, Net
−Removed: Intangible assets, net were $ 211 at December 31, 2021.
+Added: Intangible assets, net were $ 208 at December 31, 2022, all of which relate to our Print and Other segment.
Intangible assets were comprised of the following:
11 unchanged sentences
Total Intangible Assets $ 553 $ 345 $ 208 $ 586 $ 375 $ 211
−Removed: _____________
−Removed: (1) CareAR Holdings, LLC was transferred from Xerox Holdings to Xerox in 2021.
−Removed: Accordingly, the balances at December 31, 2020 reflect the balances for both Xerox Holdings and Xerox.
Amortization expense related to intangible assets was $ 42 , $ 55 and $ 56 for the three years ended December 31, 2022, 2021 and 2020, respectively.
−Removed: Excluding the impact of future acquisitions, amortization expense is expected to approximate $ 43 in 2022, $ 40 in 2023, $ 38 in 2024, $ 33 in 2025 and $ 33 in 2026.
−Removed: Distribution network assets are expected to be fully amortized by 2025.
+Added: The decrease in amortization expense in 2022 primarily related to the write-off of certain XBS trade names in prior years as part of our continued efforts to realign and consolidate this sales unit as part of Project Own It.
+Added: Excluding the impact of future acquisitions, amortization expense is expected to approximate $ 40 in 2023, $ 37 in 2024 and $ 32 in 2025, 2026 and in 2027, respectively.
+Added: Technology and non-compete assets are expected to be fully amortized by 2024 and distribution network assets are expected to be fully amortized by 2025.
Xerox 2022 Annual Report 113
4 unchanged sentences
In those geographies where we have either a formal severance plan or a history of consistently providing severance benefits representing a substantive plan (on-going benefit arrangements), we recognize employee severance and related costs when they are both probable and reasonably estimable.
−Removed: In the event employees are required to perform future service beyond their minimum retention period, we record severance charges ratably over the remaining service period of those employees.
Severance payments made under a one-time benefit arrangement are recorded upon communication to the affected employees.
+Added: In the event employees are required to perform future service beyond their minimum retention period, we record severance charges ratably over the remaining service period of those employees.
Contractual termination costs, including facility exit costs, are generally recognized when it has been determined that a liability has been incurred.
3 unchanged sentences
At the end of each reporting period, we evaluate the remaining accrued balances to ensure they are properly stated, and the utilization of the reserves are for their intended purpose in accordance with developed exit plans.
+Added: Restructuring charges primarily relate to the Print and Other segment as amounts related to the Financing (FITTLE) segment were immaterial for all periods presented.
A summary of our restructuring program activity for the three years ended December 31, 2022, 2021 and 2020 is as follows:
2 unchanged sentences
Termination Costs (2)
−Removed: Asset Impairments (3)(4)
Balance at December 31, 2019 $ 66 $ 4 $ 70
12 unchanged sentences
Net Current Period Charges (1)
−Removed: 17 ( 3 ) 13 27
Charges against reserve and currency ( 52 ) — ( 52 )
1 unchanged sentence
_____________
−Removed: (1) Represents net amount recognized within the Consolidated Statements of (Loss) Income for the years shown for restructuring and asset impairment charges.
−Removed: Reversals of prior charges primarily includes net changes in estimated reserves from prior period initiatives.
−Removed: Net reversals for 2021 also include a $ 4 gain on the sale of surplus land.
+Added: (1) Represents net amount recognized within the Consolidated Statements of (Loss) Income for the years shown for restructuring.
+Added: Reversals of prior charges primarily include net changes in estimated reserves from prior period initiatives.
(2) Primarily includes additional costs incurred upon the exit from our facilities including decommissioning costs and associated contractual termination costs.
−Removed: (3) Charges associated with asset impairments represent the write-down of the related assets to their new cost basis and are recorded concurrently with the recognition of the provision.
−Removed: (4) Amounts primarily relate to the exit and abandonment of leased and owned facilities.
−Removed: For the year ended December 31, 2021, 2020 and 2019, the charge includes the accelerated write-off of $ 3 , $ 4 and $ 39 , respectively, for leased right-of-use assets and $ 12 , $ 2 and $ 22 , respectively, for owned assets.
−Removed: Impairments are net of any potential sublease income or other recovery amounts .
Xerox 2022 Annual Report 114
3 unchanged sentences
Charges against reserve and currency $ ( 52 ) $ ( 73 ) $ ( 75 )
−Removed: Asset impairments 13 — 56
Effects of foreign currency and other non-cash items — 1 ( 6 )
Restructuring Cash Payments $ ( 52 ) $ ( 72 ) $ ( 81 )
+Added: Charges associated with asset impairments represent the write-down of the related assets to their new cost basis and are recorded concurrently with the recognition of the provision.
+Added: Impairments are net of any potential sublease income or other recovery amounts.
+Added: A summary of our restructuring-related asset impairment activity is as follows:
+Added: Year Ended December 31,
+Added: 2022 2021 2020
+Added: Lease right of use assets (1)
+Added: Owned assets (1)
+Added: Asset impairments 17 15 6
+Added: Gain on sales of owned assets (2)
+Added: ( 22 ) ( 4 ) —
+Added: Adjustments/Reversals ( 1 ) ( 2 ) ( 6 )
+Added: Net asset impairment (credit) charge $ ( 6 ) $ 9 $ —
+Added: _____________ _
+Added: (1) Primarily related to the exit and abandonment of leased and owned facilities, net of any potential sublease income and recoveries.
+Added: (2) Reflect gain on the sales of exited surplus facilities and land.
In connection with our restructuring programs, we also incurred certain related costs as follows:
4 unchanged sentences
Consulting and other costs (2)
−Removed: $ 11 $ 6 $ 102
+Added: Total $ 3 $ 11 $ 6
_____________
(1) Includes retention related severance and bonuses for employees expected to continue working beyond their minimum retention period before termination.
−Removed: (2) 2019 costs include approximately $ 38 for estimated severance and other related costs we were contractually required to pay in connection with employees transferred (approximately 2,200 ) as part of the shared service arrangement entered into with HCL Technologies.
(2) Represents professional support services associated with our business transformation initiatives.
21 unchanged sentences
Investments at cost - Xerox Holdings 21 8
−Removed: Other 103 137
Total Other Long-term Assets (2)
9 unchanged sentences
Product warranties 5 5
−Removed: Dividends payable (3)
+Added: Dividends payable - Xerox Holdings (3)
Distributor and reseller rebates/commissions 145 112
10 unchanged sentences
Restructuring reserves 4 1
−Removed: Other 114 137
Total Other Long-term Liabilities $ 411 $ 481
_____________
−Removed: (1) Refer to Note 12 - Investments in Affiliates, at Equity for additional information.
−Removed: (2) Xerox's balance of 1,952 at December 31, 2021 excludes Investments at cost.
+Added: (1) Investments in affiliates, at equity largely consists of several minor investments in entities in the Middle East region.
+Added: Xerox's ownership interest in investments in corporate joint ventures and other companies is generally between 20% and 50%.
+Added: (2) Xerox's balances of $ 1,302 and $ 1,952 at December 31, 2022 and 2021, respectively, excludes Investments at cost.
(3) Represents dividends payable by Xerox Holdings Corporation on Common and Preferred Stock.
−Removed: (4) Xerox's balance of $ 823 at December 31, 2021 excludes Dividends Payable of $ 48 .
−Removed: Xerox's balance of $ 749 at December 31, 2020 excludes Interest Payable of $ 32 and Dividends Payable of $ 59 .
+Added: (4) Xerox's balances of $ 834 and $ 823 at December 31, 2022 and 2021, respectively, excludes Dividends payable of $ 47 and $ 48 , respectively.
Xerox 2022 Annual Report 116
+Added: Government Assistance
+Added: In response to the COVID-19 pandemic, various governments employed temporary measures to provide aid and economic stimulus to companies through cash grants and credits or indirectly through payments to temporarily furloughed employees.
+Added: Estimated savings from these various government assistance programs are recorded as follows in the Consolidated Statements of (Loss) Income:
+Added: Year Ended December 31,
+Added: 2022 2021 2020
+Added: Cost of sales $ — $ — $ 1
+Added: Cost of services, maintenance and rentals — 20 73
+Added: Research, development and engineering expenses — 1 1
+Added: Selling, administrative and general expenses — 13 32
+Added: Total Estimated savings $ — $ 34 $ 107
Cash, Cash Equivalents and Restricted Cash
26 unchanged sentences
Refer to Note 17 - Fair Value of Financial Assets and Liabilities for additional information regarding deferred compensation liabilities.
+Added: Xerox 2022 Annual Report 117
Summarized Cash Flow Information
Summarized cash flow information is as follows:
−Removed: Year Ended December 31,
+Added: Source/(Use) Location in Statement of Cash Flows Year Ended December 31,
2022 2021 2020
−Removed: Provision for receivables $ 12 $ 116 $ 49
−Removed: Provision for inventories 34 31 24
−Removed: Provision for product warranties 8 8 12
−Removed: Depreciation of buildings and equipment 76 87 101
−Removed: Depreciation and obsolescence of equipment on operating leases 155 183 225
−Removed: Amortization of internal use software 41 42 59
−Removed: Amortization of acquired intangible assets 55 56 45
+Added: Provision for receivables Operating $ 36 $ 12 $ 116
+Added: Provision for inventories Operating 29 34 31
+Added: Provision for product warranties Operating 7 8 8
+Added: Depreciation of buildings and equipment Operating 68 76 87
+Added: Depreciation and obsolescence of equipment on operating leases Operating 115 155 183
+Added: Amortization of internal use software Operating 45 41 42
+Added: Amortization of acquired intangible assets Operating 42 55 56
Amortization of customer contract costs (1)
−Removed: Cost of additions to land, buildings and equipment 29 44 41
−Removed: Cost of additions to internal use software 39 30 24
−Removed: Common stock dividends - Xerox Holdings 192 216 229
−Removed: Preferred stock dividends - Xerox Holdings 14 14 14
−Removed: Payments to noncontrolling interests 1 3 14
−Removed: Repurchases related to stock-based compensation - Xerox Holdings 18 19 28
−Removed: Investments from noncontrolling interests 15 — —
+Added: Operating 73 79 85
+Added: Cost of additions to land, buildings and equipment Investing ( 36 ) ( 29 ) ( 44 )
+Added: Cost of additions to internal use software Investing ( 21 ) ( 39 ) ( 30 )
+Added: Payments to acquire noncontrolling interests - Xerox Holdings Investing ( 13 ) ( 8 ) —
+Added: Common stock dividends - Xerox Holdings Financing ( 160 ) ( 192 ) ( 216 )
+Added: Preferred stock dividends - Xerox Holdings Financing ( 14 ) ( 14 ) ( 14 )
+Added: Payments to noncontrolling interests Financing ( 1 ) ( 1 ) ( 3 )
+Added: Proceeds from noncontrolling interests Financing 6 15 —
+Added: Repurchases related to stock-based compensation - Xerox Holdings Financing ( 12 ) ( 18 ) ( 19 )
__________________________
−Removed: (1) Amortization of customer contract costs is reported in Decrease (increase) in other current and long-term assets on the Consolidated Statements of Cash Flows.
+Added: (1) Amortization of customer contract costs is reported in Decrease in other current and long-term assets on the Consolidated Statements of Cash Flows.
Refer to Note 3 - Revenue - Contract Costs for additional information.
27 unchanged sentences
Xerox - Other Subsidiaries (3)
−Removed: Secured Borrowing - July 2020 1.76 % — % $ — $ 267
−Removed: Secured Borrowing - December 2020 1.74 % 1.74 % 268 500
−Removed: Secured Borrowing - September 2021 1.40 % 1.40 % 293 —
−Removed: Subtotal - Xerox - Other Subsidiaries $ 561 $ 767
+Added: United States $ 790 $ 561
+Added: Subtotal Secured Borrowings $ 1,042 $ 561
Principal debt balance $ 3,742 $ 4,261
4 unchanged sentences
Unamortized premium 2 3
−Removed: Fair value adjustments (4)
−Removed: Terminated swaps — 1
−Removed: Current swaps — —
current maturities ( 860 ) ( 650 )
2 unchanged sentences
(1) Represents the weighted average effective interest rate, which includes the effect of discounts and premiums on issued debt.
−Removed: (2) As a result of the downgrade of our debt ratings in August 2020, the coupon rate of 4.125 % increased by 0.25 % to 4.375 % effective September 15, 2020.
−Removed: (3) The rates disclosed for Other Subsidiaries of Xerox Corporation are variable interest rates.
+Added: (2) As a result of the downgrade of our debt ratings in February 2022, the coupon rate of 4.375 % increased by 0.25 % to 4.625 % effective March 15, 2022.
(3) Refer to the Secured Borrowings and Collateral section below for additional information.
−Removed: (4) Fair value adjustments include the following:
−Removed: (i) fair value adjustments to debt associated with terminated interest rate swaps, which are being amortized to interest expense over the remaining term of the related notes;
−Removed: and (ii) changes in fair value of hedged debt obligations attributable to movements in benchmark interest rates.
−Removed: Hedge accounting requires hedged debt instruments to be reported inclusive of any fair value adjustment.
−Removed: Xerox 2021 Annual Report 114
Scheduled principal payments due on our long-term debt for the next five years and thereafter are as follows:
8 unchanged sentences
(2) Represents subsidiaries of Xerox Corporation.
+Added: Xerox 2022 Annual Report 119
Xerox Holdings Corporation/Xerox Corporation Intercompany Loan
3 unchanged sentences
In February 2021, Xerox Holdings Corporation and Xerox Corporation entered into an Intercompany Loan agreement for the net proceeds of $ 1,494 contributed by Xerox Holdings Corporation to Xerox Corporation in 2020.
−Removed: The intercompany loan, which did not involve the exchange of cash in the current period, resulted in capitalization of the amount as Related Party Debt for Xerox Corporation.
+Added: The intercompany loan resulted in the capitalization of the amount contributed in 2020 as Related Party Debt for Xerox Corporation and did not involve the exchange of cash in the current period.
The amount was originally recorded as Additional paid-in capital in 2020 when the cash was contributed by Xerox Holdings Corporation.
1 unchanged sentence
The intercompany interest expense also includes a ratable amount to reimburse Xerox Holdings Corporation for its debt issuance costs and premium.
−Removed: At December 31, 2021, the balance of the Intercompany Loan reported in Xerox Corporation’s Consolidated Balance Sheet was $ 1,495 , which is net of related debt issuance costs, and the intercompany interest payable was $ 30 .
−Removed: Xerox Corporation’s interest expense included interest expense associated with this Intercompany Loan of $ 80 and $ 32 for the years ended December 31, 2021 and 2020, respectively.
+Added: At December 31, 2022 and 2021, the balance of the Intercompany Loan reported in Xerox Corporation’s Consolidated Balance Sheet was $ 1,496 and $ 1,494 , respectively, which is net of related debt issuance costs, and the intercompany interest payable was $ 30 and $ 30 , respectively.
+Added: Xerox Corporation’s interest expense included interest expense associated with this Intercompany Loan of $ 80 , $ 80 and $ 32 for the three years ended December 31, 2022, 2021 and 2020, respectively.
Credit Facility
−Removed: We have a $ 1.8 billion unsecured revolving Credit Facility with a group of lenders, that matures in August 2022.
−Removed: The Credit Facility includes a $ 250 letter of credit sub-facility.
−Removed: Proceeds from any borrowings under the Credit Facility can be used to provide working capital for the Company and its subsidiaries and for general corporate purposes.
−Removed: The Credit Facility is available, without sublimit, to certain of our qualifying subsidiaries.
−Removed: Our obligations under the Credit Facility are unsecured and are not currently guaranteed by any of our subsidiaries.
−Removed: Any borrowings under the Credit Facility by Xerox Corporation will be guaranteed by Xerox Holdings Corporation.
−Removed: Any domestic subsidiary that guarantees more than $ 100 of Xerox Corporation debt must also guaranty Xerox Corporation's obligations under the Credit Facility.
−Removed: In the event that any of our subsidiaries borrows under the Credit Facility, its borrowings thereunder would be guaranteed by us.
−Removed: At December 31, 2021 and 2020, we had no outstanding borrowings or letters of credit under the amended and restated Credit Facility.
−Removed: On July 31, 2020, Xerox and Xerox Holdings entered into Amendment No.
−Removed: 3 to the Credit Facility, which modified the facility's financial covenants.
−Removed: During a specified covenant modification period, which began on the effective date of July 31, 2020 and ended effective and inclusive of December 31, 2021 (the Covenant Modification Period), Xerox was required to maintain unrestricted cash (as defined in the Amendment) in an amount not less than $ 1.0 billion.
−Removed: Further, the Amendment modified the financial maintenance leverage covenant in the Credit Agreement by requiring that, during the Covenant Modification Period, Xerox was required to maintain a ratio of net debt for borrowed money to consolidated EBITDA of not greater than 4.25 x (with a cap on cash netting of $ 1.75 billion), in lieu of the 4.25 x total debt for borrowed money to consolidated EBITDA ratio requirement applicable prior to the Amendment.
−Removed: The Covenant Modification Period ended effective and inclusive of December 31, 2021.
−Removed: Accordingly, for the quarter ended March 31, 2022, the financial maintenance covenants return to the covenants in effect prior to the July 31, 2020 amendment to the Credit Facility.
+Added: In July 2022, Xerox Corporation, as borrower, and its parent company, Xerox Holdings Corporation, entered into a new Credit Agreement with several participating lending banks.
+Added: The new Credit Agreement provided Xerox Corporation with a $ 500 Revolving Credit Facility and has a maturity date of July 7, 2024.
+Added: We deferred $ 3 of debt issuance costs in connection with this credit agreement, which will be amortized over the two-year term of the arrangement.
+Added: This new facility replaced our prior $ 1.5 billion Credit Facility.
+Added: In December 2022, Xerox Corporation amended the Revolving Credit Facility to reduce the aggregate amount of the commitment under the Credit Agreement to $ 250 .
+Added: The reduction in borrowing capacity resulted in a debt extinguishment loss of approximately $ 1 related to the write-off of deferred debt issuance costs.
+Added: The new revolving Credit Facility includes an uncommitted accordion feature that allows the Company to increase the facility by a total of up to $ 150 , subject to obtaining additional commitments from existing lenders or new lending institutions.
+Added: The new revolving Credit Agreement also includes a $ 150 letter of credit sub-facility.
+Added: At December 31, 2022, we had no outstanding borrowings or letters of credit under the new revolving Credit Facility.
+Added: At Xerox Corporation’s election, the borrowings under the new revolving Credit Facility in U.S.
+Added: dollars will bear interest at either (i) a rate per annum equal to the highest of Citibank’s prime rate or a rate 0.5 % in excess of the Federal Funds Rate or a rate 1.0 % in excess of one-month Term SOFR (the Base Rate), in each case plus an applicable margin, or (ii) the one-, three-, or six-month per annum Term SOFR (the Term SOFR Rate), as selected by the Company, plus an applicable margin.
+Added: The applicable margin for Base Rate loans, varies from 0.50 % to 1.25 % depending on the Company’s consolidated total net leverage ratio (as defined in the New Credit Agreement).
+Added: The applicable margin for Term SOFR Rate loans varies from 1.50 % to 2.25 % depending on the Company’s consolidated total net leverage ratio.
+Added: Xerox Corporation may also borrow in currencies other than U.S.
+Added: dollars pursuant to the credit agreement, and such borrowings will bear interest calculated under a construct similar to that described above.
+Added: Principal outstanding would be payable in full at maturity on July 7, 2024.
+Added: Xerox Corporation’s borrowings under the new revolving Credit Facility are supported by guarantees from the Company and its subsidiary guarantors, and by security interests in substantially all of the assets of Xerox Holdings Corporation, as well as Xerox Corporation and its subsidiary guarantors, subject to certain exceptions.
+Added: If an event of default occurs under the new revolving Credit Facility, the entire principal amount outstanding under the New Revolving Credit Facility, together with all accrued unpaid interest and other amounts owing in respect thereof, may be declared immediately due and payable, subject, in certain instances, to the expiration of applicable cure periods.
Xerox 2022 Annual Report 120
−Removed: Borrowings under the Credit Facility bear interest at our choice, at either (a) a Base Rate as defined in the Credit Facility agreement, plus a spread that varies between 0.000 % and 0.700 % depending on our credit rating at the time of borrowing, or (b) LIBOR plus an all-in spread that varies between 1.000 % and 1.700 % depending on our credit rating at the time of borrowing.
−Removed: Based on our credit rating as of December 31, 2021, the applicable all-in spreads for the Base Rate and LIBOR borrowing were 0.375 % and 1.375 %, respectively.
−Removed: Effective December 31, 2021 the Credit Facility was modified to acknowledge certain LIBOR currencies and tenors would cease to be available as of January 1, 2022, and therefore, the Company agreed to suspend rights to request borrowings under those currencies and tenors for the remainder of the term of the Credit Facility.
−Removed: An annual facility fee is payable to each lender in the Credit Facility at a rate that varies between 0.125 % and 0.300 % depending on our credit rating.
−Removed: Based on our credit rating as of December 31, 2021 the applicable rate is 0.25 %.
−Removed: The Credit Facility contains various conditions to borrowing and affirmative, negative and financial maintenance covenants.
−Removed: Certain of the more significant covenants are summarized below:
−Removed: (a) Minimum Unrestricted Cash during the Covenant Modification Period, at all times, maintain Unrestricted Cash (as defined in the amended and restated Credit Facility) in an amount not less than $ 1.0 billion.
−Removed: This covenant expired December 31, 2021.
−Removed: (b) Maximum leverage ratio during the Covenant Modification Period (a quarterly test that is calculated as net debt for borrowed money divided by consolidated EBITDA, both as defined in the amended and restated Credit Facility - with a cap on cash netting of $ 1.75 billion) of 4.25 x.
−Removed: This ratio had temporarily replaced the pre-amendment maximum leverage ratio (a quarterly test that is calculated as debt for borrowed money divided by consolidated EBITDA, both as defined in the amended and restated Credit Facility) of 4.25 x, which is effective for the quarter ended March 31, 2022.
−Removed: (c) Minimum interest coverage ratio (a quarterly test that is calculated as consolidated EBITDA divided by consolidated interest expense, both as defined in the amended and restated Credit Facility) may not be less than 3.00x .
−Removed: (d) Limitations on (i) liens securing debt, (ii) mergers, consolidations and liquidations, (iii) limitations on debt incurred by certain subsidiaries, (iv) sale of all or substantially all our assets, (v) payment restrictions affecting subsidiaries, (vi) non-arm's length transactions with affiliates, (vii) change in nature of business, (viii) actions that may violate OFAC and anti-corruption laws.
−Removed: The Credit Facility contains various events of default, the occurrence of which could result in termination of the lenders' commitments to lend and the acceleration of all our obligations under the amended and restated Credit Facility.
−Removed: These events of default include, without limitation:
−Removed: (i) payment defaults, (ii) breaches of covenants under the amended and restated Credit Facility (certain of which breaches do not have any grace period), (iii) cross-defaults and acceleration to certain of our other obligations and (iv) a change of control of Xerox Holdings.
+Added: The new revolving Credit Facility requires the Company to comply with the following financial covenants measured as of the end of each fiscal quarter:
+Added: (a) Total Net Leverage Ratio - a quarterly test that is calculated as net debt for borrowed money divided by consolidated EBITDA, both as defined in the new revolving Credit Agreement - with a cap on cash netting of $ 1.0 billion.
+Added: The required Total Net Leverage Ratio is 5.00 :1.00 at December 31, 2022;
+Added: 4.75 :1.00 at March 31, 2023;
+Added: 4.50 :1:00 at June 30, 2023 and 4.25 :1.00 thereafter.
+Added: (b) Interest Coverage Ratio - a quarterly test that is calculated as consolidated EBITDA divided by consolidated interest expense, both as defined in the new revolving Credit Agreement.
+Added: The Interest Coverage Ratio is 2.50 :1.00 at December 31, 2022;
+Added: and 2.75 :1.00 thereafter.
+Added: The new revolving Credit Facility also imposes restrictions on the Company and its subsidiaries, including on the amount of dividends the Company is permitted to pay and the amount of shares the Company is permitted to repurchase.
+Added: Pursuant to the credit agreement, provided there is no event of default existing, the Company may declare and pay cash dividends on shares of its common stock and its preferred stock, and may repurchase shares of its common stock and its preferred stock (i) in an unlimited amount if, at the time such dividend or repurchase is made, the Company’s Total Net Leverage ratio is 3.5 to 1.00 or less or (ii) in an aggregate amount in any fiscal year not to exceed the greater of (x) $ 200 or (y) 50 % of free cash flow, which is operating cash flows less capital expenditures, for the prior fiscal year, commencing with the fiscal year ending December 31, 2022.
Secured Borrowings and Collateral
−Removed: In September 2021, we entered into a secured loan agreement with a financial institution where we sold $ 331 of U.S.
−Removed: based finance receivables and the rights to payments under operating leases with an equipment net book value of $ 9 to a special purpose entity (SPE).
−Removed: The purchase by the SPE was funded through a $ 311 amortizing secured loan to the SPE from the financial institution.
−Removed: The secured loan was an amendment of the July 2020 secured borrowing with the same financial institution, which had a remaining balance of $ 136 , and we received the incremental net cash.
−Removed: The transaction was accounted for as an extinguishment of debt and the issuance of new debt and associated collateral.
−Removed: The new loan has a variable interest rate based on LIBOR plus a spread (current rate of 1.40 % at December 31, 2021) and an expected life of approximately 2.5 years with half projected to be repaid within the first year based on collections of the underlying portfolio of receivables.
−Removed: In October 2021, we entered into an interest rate hedge agreement to cap LIBOR over the life of the loan.
−Removed: In December 2020, we entered into a secured loan agreement with a financial institution where we sold $ 610 of U.S.
−Removed: based finance receivables to an SPE.
−Removed: The purchase by the SPE was funded through an amortizing secured loan to the SPE from the financial institution of $ 500 .
−Removed: The debt has a variable interest rate based on the financial institution's cost of funds plus a spread (current rate of 1.74 % at December 31, 2021).
−Removed: Refer to Note 27 - Subsequent Events for additional information related to this arrangement.
+Added: Over the past three years, we have entered into secured loan agreements with various financial institutions where we sold finance receivables and rights to payments under our equipment on operating leases.
+Added: In certain transactions, the sales were made to special purpose entities (SPEs), owned and controlled by Xerox, where the SPEs funded the purchase through amortizing secured loans from the financial institutions.
+Added: The loans have variable interest rates and expected lives of approximately 2.5 years, with half projected to be repaid within the first year based on collections of the underlying portfolio of receivables.
+Added: For certain loans, we entered into interest rate hedge agreements to either fix or cap the interest rate over the life of the loan.
The sales of the receivables to the SPEs were structured as "true sales at law," and we have received opinions to that effect from outside legal counsel.
−Removed: However, the transactions were accounted for as secured borrowings as we consolidate the SPEs since we have both the power to direct the activities that most significantly impact the SPEs' economic performance through our role as servicer of all the receivables held by the SPEs, and the obligation through variable interests in the SPEs to absorb losses or receive benefits that could potentially be significant to the
−Removed: Xerox 2021 Annual Report 116
+Added: However, the transactions were accounted for as secured borrowings as we fully consolidate the SPEs in our financial statements.
As a result, the assets of the SPEs are not available to satisfy any of our other obligations.
Conversely, the credit holders of these SPEs do not have legal recourse to the Company’s general credit.
−Removed: Below are the assets and liabilities held by the consolidated SPEs, which are included in our Consolidated Balance Sheet:
+Added: Below are the secured assets and obligations held by subsidiaries of Xerox, which are included in our Consolidated Balance Sheets.
+Added: Balance at December 31, 2022
+Added: Finance Receivables, Net (1)
+Added: Equipment on Operating Leases, Net Secured Debt (2)
+Added: Interest Rate (4)
+Added: Expected Maturity
+Added: United States (3)
December 2022 $ 370 $ — $ 247 7.43 % 2025
−Removed: Assets held by SPEs
−Removed: Billed portion of finance receivables, net $ 27 $ 28
+Added: January 2022 528 — 407 5.83 % 2024
+Added: September 2021 180 5 136 5.65 % 2024
+Added: $ 1,078 $ 5 $ 790
+Added: April 2022 $ 63 $ — $ 57 5.45 % 2025
+Added: December 2022 $ 235 $ — $ 195 3.03 % 2025
+Added: Total $ 1,376 $ 5 $ 1,042
+Added: Xerox 2022 Annual Report 121
+Added: Balance at December 31, 2021
Finance Receivables, Net (1)
−Removed: Finance receivables due after one year, net 362 510
−Removed: Equipment on operating leases, net 8 8
−Removed: Restricted cash (1)
−Removed: Liabilities held by SPEs
−Removed: Current portion of long-term debt, net (2)
−Removed: Long term debt, net 210 370
−Removed: Total Liabilities $ 560 $ 764
+Added: Equipment on Operating Leases, Net Secured Debt (2)
+Added: Interest Rate (4)
+Added: Expected Maturity
+Added: United States (3)
+Added: September 2021 $ 308 $ 8 $ 293 1.40 % 2024
+Added: December 2020 380 — 268 1.74 % 2023
$ 688 $ 8 $ 561
−Removed: (1) Restricted cash is included in Other current assets in our Consolidated Balance Sheet.
−Removed: (2) Amounts net of unamortized debt issuance costs of $ 1 .
+Added: ____________ _
+Added: (1) Includes (i) Billed portion of finance receivables, net (ii) Finance receivables, net and (iii) Finance receivables due after one year, net as included in the consolidated balance sheets as of December 31, 2022 and 2021 .
+Added: (2) Represents Principal Balance and excludes debt issuance costs of $ 5 and $ 1 as of December 31, 2022 and 2021 , respectively.
+Added: (3) Secured assets and obligations held by SPEs.
+Added: (4) Represents the pre-hedged rate - refer to Note 16 - Financial Instruments for details regarding hedging of these borrowings.
Interest paid on our short-term and long-term debt amounted to $ 201 , $ 203 and $ 181 for the years ended December 31, 2022, 2021 and 2020, respectively.
7 unchanged sentences
(1) Includes Equipment financing interest as well as non-financing interest expense included in Other expenses, net in the Consolidated Statements of (Loss) Income.
−Removed: (2) Interest expense of Xerox Corporation included intercompany expense associated with the Xerox Holdings Corporation/Xerox Corporation Intercompany Loan of $ 80 and $ 32 for the years ended December 31, 2021 and 2020, respectively.
+Added: (2) Interest expense of Xerox Corporation included intercompany expense associated with the Xerox Holdings Corporation/Xerox Corporation Intercompany Loan of $ 80 , $ 80 and $ 32 for the three years ended December 31, 2022, 2021 and 2020, respectively.
(3) Includes Finance income, as well as other interest income that is included in Other expenses, net in the Consolidated Statements of (Loss) Income.
19 unchanged sentences
These derivatives may be designated as fair value hedges or cash flow hedges depending on the nature of the risk being hedged.
−Removed: At December 31, 2021, there was one interest rate cap contract outstanding.
−Removed: Fair Value Hedges
−Removed: In 2020 we terminated our remaining pay variable/receive fixed interest rate swaps with the notional amount of $ 200 and net asset fair value of $ 4 prior to termination.
−Removed: In 2019, we terminated an interest rate swap with a notional amount of $ 100 and an immaterial net asset fair value.
−Removed: In both instances, the swaps had been designated and accounted for as fair value hedges prior to termination.
−Removed: The swaps were structured to hedge the fair value of related debt by converting them from fixed rate instruments to variable rate instruments.
−Removed: Prior to termination no ineffective portion was recorded to earnings for the years ended December 31, 2020 and 2019.
−Removed: The corresponding net fair value adjustment to the hedged debt of ($ 4 ) is being recognized in earnings concurrently with the remaining term of the related debt, which may include early extinguishment.
−Removed: The remaining unamortized debt fair value adjustment associated with all terminated swaps was $ 0 and $ 1 at December 31, 2021 and 2020, respectively.
−Removed: In 2021, 2020 and 2019, the amortization of these fair value adjustments reduced interest expense by $ 1 , $ 2 and $ 1 , respectively, and the loss on early extinguishment of debt in 2020 by $ 2 .
+Added: We had no fair value hedges for the three-year period ended December 31, 2022.
+Added: Cash Flow Hedges
+Added: We use interest rate swaps and caps to manage the exposure to variability in the interest rate payments on our secured loan agreements entered into over the last two years.
+Added: The interest rate swaps convert the interest paid on certain loans to a fixed amount while the caps limit the maximum amount of interest paid.
+Added: At December 31, 2022 there were four interest rate derivatives outstanding as follows:
+Added: Secured Borrowing Derivative Type Principal Debt (1)
+Added: Notional Amount
+Added: Expected Maturity Pre-Hedged Rate Hedged Rate Net Fair Value
+Added: United States N/A $ 407 $ — 2024 5.83 % — % $ —
+Added: United States Cap 136 129 2024 5.65 % 0.50 % 4
+Added: United States Cap 247 247 2025 7.43 % 4.50 % 1
+Added: Canada Swap 57 52 2025 5.45 % 2.57 % 1
+Added: France Cap 195 195 2025 3.03 % 3.00 % 1
+Added: Total $ 1,042 $ 623 $ 7
+Added: _____________
+Added: (1) Excludes debt issuance costs of $ 5 at December 31, 2022.
+Added: No amount of ineffectiveness was recorded in the Consolidated Statements of (Loss) Income for these designated cash flow hedges and all components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
Foreign Exchange Risk Management
3 unchanged sentences
• Forecasted purchases, and sales in foreign currency
+Added: Xerox 2022 Annual Report 123
At December 31, 2022, we had outstanding forward exchange and purchased option contracts with gross notional values of $ 1,541 , with terms of less than 12 months.
At December 31, 2022, approximately 86 % of these contracts mature within three months, 7 % in three to six months and 7 % in six to twelve months.
−Removed: The associated exposures being hedged at December 31, 2021 were lower by 4.1 %, as compared to December 31, 2020.
−Removed: There has not been any material changes in our hedging strategy during 2021.
−Removed: Xerox 2021 Annual Report 118
+Added: The associated exposures being hedged at December 31, 2022 were higher by 38.5 %, as compared to December 31, 2021.
+Added: There have not been any material changes in our hedging strategy during 2022.
The following is a summary of the primary hedging positions and corresponding fair values as of December 31, 2022:
5 unchanged sentences
Japanese Yen/Euro 250 ( 1 )
+Added: Euro/Canadian Dollar 131 —
Dollar/Euro 127 ( 1 )
Dollar/Canadian Dollar 53 1
−Removed: Euro/Danish Krone 34 —
−Removed: Euro/Canadian Dollar 28 —
−Removed: Pound Sterling/Euro 23 —
−Removed: Dollar/Russian Ruble 10 —
−Removed: Dollar/Brazilian Real 10 —
−Removed: Dollar/Israeli Shekel 8 —
−Removed: Russian Ruble/U.S.
+Added: Swedish Krona/Euro 49 —
+Added: Euro/Swedish Krona 45 —
All Other 130 —
Total Foreign exchange hedging $ 1,541 $ 8
+Added: _____________
(1) Represents the net receivable (payable) amount included in the Consolidated Balance Sheet at December 31, 2022.
2 unchanged sentences
No amount of ineffectiveness was recorded in the Consolidated Statements of (Loss) Income for these designated cash flow hedges and all components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
−Removed: The net (liability) asset fair value of these contracts were $( 3 ) and $ 2 as of December 31, 2021 and 2020, respectively.
+Added: The net liability fair value of these contracts was $ 4 and $ 3 as of December 31, 2022 and 2021, respectively.
Summary of Derivative Instruments Fair Value
4 unchanged sentences
Accrued expenses and other current liabilities ( 9 ) ( 6 )
−Removed: Foreign currency options Other current assets — 1
Interest rate cap Other long-term assets 6 1
−Removed: Net Designated Derivative (Liability) Asset $ ( 2 ) $ 2
+Added: Interest rate swap Other long-term assets 1 —
+Added: Net Designated Derivative Asset (Liability) $ 3 $ ( 2 )
Derivatives NOT Designated as Hedging Instruments
1 unchanged sentence
Accrued expenses and other current liabilities ( 2 ) ( 5 )
−Removed: Net Undesignated Derivative Liability $ ( 4 ) $ —
+Added: Net Undesignated Derivative Asset (Liability) $ 12 $ ( 4 )
Summary of Derivatives Total Derivative Assets $ 26 $ 5
Total Derivative Liabilities ( 11 ) ( 11 )
−Removed: Net Derivative (Liability) Asset $ ( 6 ) $ 2
+Added: Net Derivative Asset (Liability) $ 15 $ ( 6 )
Xerox 2022 Annual Report 124
3 unchanged sentences
Designated Derivative Instruments Gains (Losses)
−Removed: The following tables provide a summary of gains (losses) on derivative instruments:
−Removed: Derivative (Loss) Gain Recognized in Income Hedged Item Gain (Loss) Recognized in Income
−Removed: Derivatives in Fair Value
−Removed: Relationships Location of Gain (Loss)
−Removed: Recognized in Income Year Ended December 31,
−Removed: 2021 2020 2019 2021 2020 2019
−Removed: Interest rate contracts Interest expense $ — $ ( 1 ) $ 4 $ — $ 1 $ ( 4 )
+Added: The following table provide a summary of gains (losses) on derivative instruments:
Derivative (Loss) Gain Recognized in OCI (Effective Portion) (Loss) Gain Reclassified from AOCI to Income (Effective Portion)
6 unchanged sentences
Foreign exchange contracts – forwards/options $ ( 41 ) $ ( 12 ) $ 4 Cost of sales $ ( 36 ) $ ( 7 ) $ ( 1 )
+Added: Interest rate contracts 6 — — Interest expense 1 — —
+Added: Total $ ( 35 ) $ ( 12 ) $ 4 $ ( 35 ) $ ( 7 ) $ ( 1 )
For the three years ended December 31, 2022, 2021 and 2020 no amount of ineffectiveness was recorded in the Consolidated Statements of (Loss) Income for these designated cash flow hedges.
All components of each derivative’s gain or (loss) were included in the assessment of hedge effectiveness.
−Removed: In addition, no amount was recorded for an underlying exposure that did not occur or was not expected to occur.
At December 31, 2022, a net after-tax loss of $ 4 was recorded in Accumulated other comprehensive loss associated with our cash flow hedging activity.
5 unchanged sentences
Year Ended December 31,
−Removed: Derivatives NOT Designated as Hedging Instruments Location of Derivative (Loss) Gain 2021 2020 2019
−Removed: Foreign exchange contracts – forwards Other expense – Currency (losses) gains, net $ ( 26 ) $ 14 $ ( 6 )
+Added: Derivatives NOT Designated as Hedging Instruments Location of Derivative Gain (Loss) 2022 2021 2020
+Added: Foreign exchange contracts – forwards Other expense – Currency gains (losses), net $ 17 $ ( 26 ) $ 14
For the three years ended December 31, 2022, 2021 and 2020, we recorded Currency losses, net of $ 13 , $ 7 and $ 3 , respectively.
6 unchanged sentences
Foreign exchange contracts - forwards $ 19 $ 4
−Removed: Foreign currency options — 1
Interest rate cap 6 1
+Added: Interest rate swap 1 —
Deferred compensation investments in mutual funds 15 18
34 unchanged sentences
plans, we are required to continue to consider salary increases and inflation in determining the benefit obligation related to prior service.
−Removed: Our pension plan in the Netherlands was changed to a Collective Defined Contribution (CDC) plan.
−Removed: From a Company risk perspective, this plan operates just like a defined contribution plan as the company is only responsible for a contribution for annual benefit accruals under 5-year agreements.
+Added: Effective January 1, 2023, our pension plan in the Netherlands was changed to a Defined Contribution Plan for future service.
+Added: We recorded this change as a curtailment effective December 31, 2022.
+Added: The benefits accrued prior to 2023 under the Netherlands Pension Plan remain in a Collective Defined Contribution (CDC) plan.
+Added: From a Company risk perspective, this portion of the plan operates just like a defined contribution plan as the company is only responsible for a contribution for annual benefit accruals under 5-year agreements.
Although the Company's risk has been mitigated, under U.S.
−Removed: GAAP this plan doesn’t meet the definition of a defined contribution plan and therefore is accounted for as a defined benefit plan.
+Added: GAAP this plan doesn’t meet the definition of a defined contribution plan and therefore is continues to be accounted for as a defined benefit plan.
Prior to the freeze of current benefits, most of our defined benefit pension plans generally provided employees a benefit, depending on eligibility, calculated under a highest average pay and years of service formula.
2 unchanged sentences
The combined investment results for our primary domestic plans, along with the results for our other defined benefit plans, are shown below in the “actual return on plan assets” caption.
−Removed: To the extent that investment results relate to TRA assets, such results are charged directly to these accounts as a component of interest cost.
+Added: To the extent that investment results relate to TRA assets, such results are charged directly to these accounts as a component of interest cost and expected return.
Xerox 2022 Annual Report 127
6 unchanged sentences
Service cost 1 2 16 20 1 2
−Removed: Interest cost 80 196 88 113 8 12
+Added: Interest (income) cost ( 65 ) 80 123 88 8 8
Plan participants' contributions — — 2 3 9 8
−Removed: Actuarial (gain) loss ( 86 ) 240 ( 233 ) 439 ( 1 ) 4
+Added: Actuarial gain ( 643 ) ( 86 ) ( 1,697 ) ( 233 ) ( 59 ) ( 1 )
Currency exchange rate changes — — ( 534 ) ( 193 ) ( 7 ) —
−Removed: Plan Amendments/Curtailments — — ( 4 ) 2 ( 50 ) ( 11 )
+Added: Plan amendment — — 72 — ( 26 ) ( 50 )
+Added: Plan curtailments — — ( 20 ) ( 4 ) — —
Benefits paid/settlements ( 320 ) ( 371 ) ( 265 ) ( 297 ) ( 27 ) ( 34 )
27 unchanged sentences
Net actuarial loss (gain) $ 692 $ 745 $ 1,202 $ 939 $ ( 79 ) $ ( 25 )
−Removed: Prior service (credit) cost — ( 1 ) 29 27 ( 83 ) ( 99 )
−Removed: Total Pre-tax loss (gain) $ 745 $ 873 $ 968 $ 1,498 $ ( 108 ) $ ( 122 )
+Added: Prior service cost (credit) — — 99 29 ( 94 ) ( 83 )
+Added: Total loss (gain) - Pre-tax $ 692 $ 745 $ 1,301 $ 968 $ ( 173 ) $ ( 108 )
Xerox 2022 Annual Report 128
12 unchanged sentences
Total $ 2,693 $ 1,556 $ 3,993 $ 2,688
−Removed: Aggregate information for pension plans with a benefit obligation in excess of plan assets is presented below:
+Added: Aggregate information for pension plans with a projected benefit obligation in excess of plan assets is presented below:
December 31, 2022 December 31, 2021
−Removed: Benefit Obligation Fair Value of Plan Assets Benefit Obligation Fair Value of Plan Assets
+Added: Projected Benefit Obligation Fair Value of Plan Assets Projected Benefit Obligation Fair Value of Plan Assets
Underfunded Plans:
9 unchanged sentences
December 31, 2022 December 31, 2021
−Removed: Fair Value of Pension Plan Assets Pension Benefit Obligations Net Funded Status Fair Value of Pension Plan Assets Pension Benefit Obligations Net Funded Status
+Added: Fair Value of Pension Plan Assets Projected Benefit Obligation Net Funded Status Fair Value of Pension Plan Assets Projected Benefit Obligation Net Funded Status
funded $ 1,518 $ 2,098 $ ( 580 ) $ 2,544 $ 3,056 $ ( 512 )
16 unchanged sentences
Service cost $ 1 $ 2 $ 2 $ 16 $ 20 $ 20 $ 1 $ 2 $ 2
−Removed: Interest cost (1)
+Added: Interest (income) cost (1)
( 65 ) 80 196 123 88 113 8 8 12
8 unchanged sentences
Net Periodic Benefit Cost (Credit) 96 35 60 ( 50 ) ( 27 ) 17 ( 3 ) ( 55 ) ( 63 )
−Removed: Other changes in plan assets and benefit obligations recognized in Other Comprehensive Income (Loss):
−Removed: Net actuarial (gain) loss
+Added: Other changes in plan assets and benefit obligations recognized in Other Comprehensive (Loss) Income:
+Added: Net actuarial loss (gain)
16 ( 57 ) ( 105 ) 368 ( 425 ) ( 9 ) ( 57 ) ( 1 ) 4
−Removed: Prior service (credit) cost — — — ( 4 ) 4 — ( 50 ) ( 11 ) —
+Added: Prior service cost (credit) — — — 72 ( 4 ) 4 ( 26 ) ( 50 ) ( 11 )
Amortization of net actuarial (loss) gain ( 69 ) ( 71 ) ( 80 ) ( 23 ) ( 60 ) ( 59 ) 4 ( 1 ) 1
1 unchanged sentence
Curtailment gain — — — 4 4 1 — — —
−Removed: Total Recognized in Other Comprehensive Income (Loss) (3)
+Added: Total Recognized in Other Comprehensive (Loss) Income (3)
( 53 ) ( 127 ) ( 183 ) 420 ( 484 ) ( 62 ) ( 64 ) 14 70
−Removed: Total Recognized in Net Periodic Benefit Cost and Other Comprehensive Income (Loss) $ ( 92 ) $ ( 123 ) $ 279 $ ( 511 ) $ ( 45 ) $ ( 11 ) $ ( 41 ) $ 7 $ 25
+Added: Total Recognized in Net Periodic Benefit Cost (Credit) and Other Comprehensive (Loss) Income $ 43 $ ( 92 ) $ ( 123 ) $ 370 $ ( 511 ) $ ( 45 ) $ ( 67 ) $ ( 41 ) $ 7
_____________
−Removed: (1) Interest cost for Pension Benefits includes interest expense on non-TRA obligations of $ 150 , $ 184 and $ 243 and interest expense (income) directly allocated to TRA participant accounts of $ 18 , $ 125 and $ 128 for the years ended December 31, 2021, 2020 and 2019, respectively.
−Removed: (2) Expected return on plan assets includes expected investment income on non-TRA assets of $ 307 , $ 283 and $ 315 and actual investment income (loss) on TRA assets of $ 18 , $ 125 and $ 128 for the years ended December 31, 2021, 2020 and 2019, respectively.
+Added: (1) Interest cost for Pension Benefits includes interest expense on non-TRA obligations of $ 205 , $ 150 and $ 184 and interest (income)/expense directly allocated to TRA participant accounts of $( 147 ), $ 18 and $ 125 for the years ended December 31, 2022, 2021 and 2020, respectively.
+Added: (2) Expected return on plan assets includes expected investment income on non-TRA assets of $ 302 , $ 307 and $ 283 and actual investment (loss)/income on TRA assets of $( 147 ), $ 18 and $ 125 for the years ended December 31, 2022, 2021 and 2020, respectively.
(3) Amounts represent the pre-tax effect included in Other comprehensive income.
−Removed: Refer to Note 25 - Other Comprehensive Income (Loss) for the related tax effects and the net of tax amounts.
+Added: Refer to Note 24 - Other Comprehensive (Loss) Income for the related tax effects and the net of tax amounts.
+Added: Xerox 2022 Annual Report 130
Plan Amendments
3 unchanged sentences
defined benefit pension plans.
−Removed: Based on the above ruling, we estimated the cost of equalization under the minimum cost approach permitted by the High Court’s ruling to be approximately 1.2 % of our U.K.
−Removed: defined benefit plan obligation at December 31, 2018 or approximately GBP 33 million (approximately USD $ 42 ).
+Added: Based on the above ruling, we estimated the cost of equalization under the minimum cost approach permitted by the High Court’s ruling to be approximately GBP 33 million (approximately USD $ 42 ).
This increase in the benefit obligation was recorded as a plan amendment in 2018.
In November 2020, the High Court made another ruling in this matter related to benefit transfers out of the plan prior to the date of the 2018 ruling, which increased our estimated cost of equalization by a further GBP 3 million (approximately USD $ 4 ).
−Removed: Consistent with our approach to the estimate in 2018, the increase in the benefit obligation was recorded as a plan amendment in 2020 and together with the 2018 adjustment will be amortized to future net periodic benefit costs as a prior service cost (total approximately USD $ 2 per year covering both adjustments).
−Removed: At December 31, 2021, the aggregate cost for this matter is estimated to be approximately 0.8 % of the U.K.
−Removed: defined benefit plan obligation before equalization or approximately GBP 23 million (approximately USD $ 31 ) a reduction of
−Removed: Xerox 2021 Annual Report 125
−Removed: approximately GBP 13 million (approximately USD $ 18 ) from prior estimates, which was accounted for as an actuarial gain.
−Removed: This latest estimate reflects a more recent analysis completed by the Plan Actuary.
−Removed: However, several significant uncertainties remain and therefore our estimate is subject to future change and adjustment.
−Removed: In particular, the cost is very sensitive to i) the method of GMP equalization;
−Removed: ii) actuarial assumptions and market conditions;
−Removed: iii) the benefit structure of our plan and operational practices;
−Removed: and iv) the demographic profile of our plan.
−Removed: In addition, we are continuing to evaluate the acceptable methodologies that the High Court has determined, and we still need to agree upon the appropriate methodology with our plan trustees.
+Added: Consistent with our approach to the estimate in 2018, the increase in the benefit obligation was recorded as a plan amendment in 2020 and together with the 2018 adjustment will be amortized to future net periodic benefit costs as a prior service cost.
+Added: At December 31, 2022, the aggregate cost for this matter was estimated to be approximately GBP 16 million (approximately USD $ 19 ) a reduction of approximately GBP 20 million (approximately USD $ 24 ) from prior estimates, which was accounted for as an actuarial gain cumulatively through 2022.
+Added: This latest estimate reflects a more recent analysis completed by the Plan Actuary adjusted approximately for market conditions at December 31, 2022.
+Added: The equalization method has now been agreed between the Company and Trustee and is now in the process of being implemented.
+Added: The method decision does not materially impact the estimated cost.
+Added: In April 2022, our U.K.
+Added: defined benefit pension plan was amended, at the sole discretion of the Plan Trustees as legally allowed, to increase the capped inflation indexation for the April 2022 pension increase award to 7.5 % in line with the December 2021 U.K.
+Added: Retail Price Index (RPI).
+Added: This amendment resulted in an increase of approximately $ 73 in the projected benefit obligation (PBO) for this plan.
Retiree Health Plans:
+Added: During 2022, we amended our U.S.
+Added: Retiree Health Plan to reduce benefits and eliminate coverage for existing union retirees and for certain union employees as a result of contract negotiations.
+Added: These negative plan amendments resulted in a reduction of approximately $ 30 in the Company's postretirement benefit obligation.
In December 2021, we amended our U.S.
1 unchanged sentence
This negative plan amendment resulted in a reduction of $ 50 in the postretirement benefit obligation.
−Removed: The amount for the plan amendment will be amortized to future net periodic benefit costs as a prior service credit beginning in 2022.
In October 2020, we reduced the level of Company cost sharing for retiree health care benefits provided to certain existing non-union retirees.
1 unchanged sentence
Retiree Health Plan was effective January 1, 2021.
−Removed: The change in cost sharing is considered a negative plan amendment resulting in a reduction in the postretirement benefit obligation of $ 11 .
−Removed: The amount for the plan amendment will be amortized to future net periodic benefit costs as a prior service credit.
+Added: This negative plan amendment resulted in a reduction in the postretirement benefit obligation of $ 11 .
+Added: The reductions in the postretirement benefit obligation resulting from these plan amendments are being amortized to future net periodic benefit costs as prior service credits.
+Added: Xerox 2022 Annual Report 131
Current Allocation
23 unchanged sentences
(2) Other NAV includes mutual funds of $ 94 (measured at NAV) which are invested approximately 30 % in fixed income securities and approximately 70 % in equity securities.
−Removed: (3) Other Level 1 includes mutual funds of $ 93 , which are invested in equity securities, and net non-financial assets of $ 2 U.S.
−Removed: and $ 22 Non-U.S., respectively, such as due to/from broker, interest receivables and accrued expenses.
+Added: (3) Other Level 1 includes net non-financial, Non-U.S.
+Added: assets of $ 22 , such as due to/from broker, interest receivables and accrued expenses.
Xerox 2022 Annual Report 132
20 unchanged sentences
(2) Other NAV includes mutual funds of $ 73 (measured at NAV) which are invested approximately 75 % in fixed income securities and approximately 25 % in equity securities.
−Removed: (3) Other Level 1 includes net non-financial (liabilities) assets of $ 7 U.S.
+Added: (3) Other Level 1 includes mutual funds of $ 93 , which are invested in equity securities, and net non-financial (liabilities) assets of $ 2 U.S.
and $ 22 Non-U.S., respectively, such as due to/from broker, interest receivables and accrued expenses.
−Removed: The following tables represents a roll-forward of the defined benefit plans assets measured at fair value using significant unobservable inputs (Level 3 assets):
+Added: The following tables represents a rollforward of the defined benefit plans assets measured at fair value using significant unobservable inputs (Level 3 assets):
Real Estate Real Estate Private Equity/Venture Capital Guaranteed Insurance Contracts Total
2 unchanged sentences
Sales — ( 33 ) — ( 5 ) ( 38 )
−Removed: Unrealized losses ( 1 ) ( 8 ) ( 4 ) ( 8 ) ( 20 )
+Added: Unrealized gains (losses) 5 ( 12 ) 1 1 ( 10 )
Currency translation — ( 9 ) — ( 7 ) ( 16 )
6 unchanged sentences
Level 3 Valuation Method
−Removed: Our primary Level 3 assets are Real Estate and Private Equity/Venture Capital investments.
+Added: Our primary Level 3 assets are Real Estate, Private Equity/Venture Capital investments, and Guaranteed Insurance Contracts.
The fair value of our real estate investment funds is based on the Net Asset Value (NAV) of our ownership interest in the funds.
1 unchanged sentence
The fair value for our private equity/venture capital partnership investments are based on our share of the estimated fair values of the underlying investments held by these partnerships as reported (or expected to be reported) in their audited financial statements.
+Added: 2022 purchases of Guaranteed Insurance Contracts (GICs) include the purchase of a buy-in annuity contract, which has been valued based on the member benefits covered by the contract adjusted for current market factors.
The valuation techniques and inputs for our Level 3 assets have been consistently applied for all periods presented.
28 unchanged sentences
Peer data and historical returns are reviewed periodically to assess reasonableness and appropriateness.
−Removed: Contributions
+Added: Contributions Disclosure
The following table summarizes cash contributions to our defined benefit pension plans and retiree health benefit plans.
2 unchanged sentences
Plans $ 24 $ 50
−Removed: Plans 111 110
−Removed: Total $ 135 $ 135
+Added: Total Pension Plans $ 105 $ 75
Retiree Health 19 25
+Added: Total Retirement Plans $ 124 $ 100
The 2022 U.S.
Defined benefit plans contributions did not include any contributions for our domestic tax-qualified defined benefit plans because none were required to meet the minimum funding requirements.
−Removed: There are no contributions required in 2022 for our U.S.
−Removed: tax-qualified defined benefit plans to meet the minimum funding requirements.
+Added: Approximately $ 25 of estimated contributions are included in 2023 for our U.S.
+Added: tax-qualified defined benefit plans.
+Added: However, once the January 1, 2023 actuarial valuations and projected results as of the end of the 2023 measurement year are available, actual contributions required to meet minimum funding requirements will be determined and finalized and may change from the current estimate.
+Added: In addition, the decrease in non-U.S.
+Added: plan contributions in 2023 is due to further contributions to our U.K.
+Added: defined benefit pension plan not being required after October 2022 following agreement of the triennial valuation of the Plan with the Plan Trustees.
Xerox 2022 Annual Report 134
40 unchanged sentences
We recorded charges related to our defined contribution plans of $ 37 in 2022, $ 18 in 2021 and $ 19 in 2020.
−Removed: During 2021, the Company suspended, and did not make, its full year 2021 employer matching contribution for its U.S.
+Added: During 2021 and 2020, the Company suspended its full year employer matching contribution for its U.S.
based 401(k) plan for salaried (non-union) employees.
−Removed: The suspension resulted in savings of $ 20 for the year ended December 31, 2021.
+Added: The employer matching contribution was reinstated for 2022 and was made in the first quarter of 2023.
Xerox 2022 Annual Report 135
Note 19 - Income and Other Taxes
−Removed: (Loss) income before income taxes and equity income (pre-tax (loss) income) from continuing operations was as follows:
+Added: (Loss) income before income taxes and equity income (pre-tax (loss) income) was as follows:
Year Ended December 31,
3 unchanged sentences
(Loss) Income before Income Taxes and Equity Income $ ( 328 ) $ ( 475 ) $ 252
−Removed: The components of Income tax (benefit) expense from continuing operations were as follows:
+Added: The components of Income tax (benefit) expense were as follows:
Year Ended December 31,
33 unchanged sentences
subsidiaries.
−Removed: On a consolidated basis, including discontinued operations, we paid a total of $ 61 , $ 32 and $ 94 in income taxes to federal, foreign and state jurisdictions during the three years ended December 31, 2021, 2020 and 2019, respectively.
−Removed: Xerox 2021 Annual Report 130
+Added: On a consolidated basis, we paid a total of $ 50 , $ 61 and $ 32 in income taxes to federal, foreign and state jurisdictions during the three years ended December 31, 2022, 2021 and 2020, respectively.
Total income tax expense (benefit) was allocated to the following items:
2 unchanged sentences
Pre-tax (loss) income $ ( 3 ) $ ( 17 ) $ 64
−Removed: Discontinued operations (1)
Common shareholders' equity:
2 unchanged sentences
Translation adjustments — ( 4 ) ( 3 )
−Removed: Retained Earnings — — —
Total Income Tax Expense $ 66 $ 121 $ 105
−Removed: _____________
−Removed: (1) Refer to Note 6 - Divestitures for additional information regarding discontinued operations.
+Added: Xerox 2022 Annual Report 136
Unrecognized Tax Benefits and Audit Resolutions
18 unchanged sentences
Settlements with taxing authorities (1)
−Removed: 7 ( 8 ) ( 1 )
Reductions related to lapse of statute of limitations ( 3 ) ( 7 ) ( 7 )
10 unchanged sentences
With respect to our major foreign jurisdictions, we are no longer subject to tax examinations by tax authorities for years before 2011.
−Removed: Xerox 2021 Annual Report 131
Deferred Income Taxes
4 unchanged sentences
A determination of the unrecognized deferred taxes related to these components is not practicable.
+Added: Xerox 2022 Annual Report 137
The tax effects of temporary differences that give rise to significant portions of the deferred taxes were as follows:
6 unchanged sentences
Deferred and share-based compensation 26 24
−Removed: Pension 7 211
Depreciation 2 31
22 unchanged sentences
The deferred tax assets requiring significant judgment are U.S.
−Removed: tax credit carryforwards with a limited life.
−Removed: The net change in the total valuation allowance for the years ended December 31, 2021, 2020 and 2019 was a decrease of $ 39 , a decrease of $ 3 and an increase of $ 2 , respectively.
+Added: foreign tax credit carryforwards with a limited life.
+Added: The net change in the total valuation allowance for the years ended December 31, 2022, 2021 and 2020 was an increase of $ 9 , a decrease of $ 39 and a decrease of $ 3 , respectively.
The valuation allowance relates primarily 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.
−Removed: Although realization is not assured, we have concluded that it is more-likely-than-not that the deferred tax assets, for which a valuation allowance was determined to be unnecessary, will be realized in the ordinary course of
−Removed: Xerox 2021 Annual Report 132
−Removed: operations based on the available positive and negative evidence, including scheduling of deferred tax liabilities and projected income from operating activities.
+Added: Although realization is not assured, we have concluded that it is more-likely-than-not that the deferred tax assets, for which a valuation allowance was determined to be unnecessary, will be realized in the ordinary course of operations based on the available positive and negative evidence, including scheduling of deferred tax liabilities and projected income from operating activities.
The amount of the net deferred tax assets considered realizable, however, could change in the near term if future income or income tax rates are higher or lower than currently estimated, or if there are differences in the timing or amount of future reversals of existing taxable or deductible temporary differences.
−Removed: At December 31, 2021, we had tax credit carryforwards of $ 143 available to offset future income taxes, of which $ 2 are available to carryforward indefinitely while the remaining $ 141 will expire 2022 through 2042 if not utilized.
+Added: At December 31, 2022, we had tax credit carryforwards of $ 122 available to offset future income taxes, of which $ 3 are available to carryforward indefinitely while the majority of the remaining $ 119 will expire 2024 through 2026 if not utilized.
We also had net operating loss carryforwards for income tax purposes of $ 513 that will expire 2023 through 2043, if not utilized, and $ 1.6 billion available to offset future taxable income indefinitely.
+Added: Xerox 2022 Annual Report 138
Note 20 – Contingencies and Litigation
29 unchanged sentences
Liens on Brazilian assets — —
−Removed: The decrease in the unreserved portion of the tax contingency, inclusive of any related interest, was primarily related to closed cases and currency, partially offset by interest.
+Added: The increase in the unreserved portion of the tax contingency, inclusive of any related interest, was primarily related to currency and interest.
With respect to the unreserved tax contingency, the majority has been assessed by management as being remote as to the likelihood of ultimately resulting in a loss to the Company.
1 unchanged sentence
Generally, any escrowed amounts would be refundable and any liens on assets would be removed to the extent the matters are resolved in our favor.
−Removed: Xerox 2021 Annual Report 133
−Removed: also involved in certain disputes with contract and former employees.
+Added: We are also involved in certain disputes with contract and former employees.
Exposures related to labor matters are not material to the financial statements as of December 31, 2022 and 2021.
We routinely assess all these matters as to probability of ultimately incurring a liability against our Brazilian operations and record our best estimate of the ultimate loss in situations where we assess the likelihood of an ultimate loss as probable.
−Removed: Litigation Against the Company
+Added: Xerox 2022 Annual Report 139
+Added: Litigation Matters
Miami Firefighters’ Relief & Pension Fund v.
Icahn, et al.:
−Removed: On December 13, 2019, alleged shareholder Miami Firefighters’ Relief & Pension Fund (“Miami Firefighters”) filed a purported derivative complaint in New York State Supreme Court, New York County on behalf of Xerox Holdings Corporation ("Xerox Holdings") (as nominal defendant) against Carl Icahn and his affiliated entities High River Limited Partnership and Icahn Capital LP (the "Icahn defendants"), Xerox Holdings, and all then-current Xerox Holdings directors (the "Directors").
−Removed: Plaintiff made no demand on the Board before bringing the action, but instead alleges that doing so would be futile because the Directors lack independence due to alleged direct or indirect relationships with Icahn.
−Removed: Among other things, the complaint alleges that Icahn controls and dominates Xerox Holdings and therefore owes a fiduciary duty of loyalty to Xerox Holdings, which he breached by acquiring HP stock at a time when he knew that Xerox Holdings was considering an offer to acquire HP or had knowledge of the "obvious merits" of such potential acquisition, and that the Icahn defendants’ holdings of HP common stock have risen in market value by approximately $ 128 since disclosure of the offer.
+Added: On December 13, 2019, alleged shareholder Miami Firefighters’ Relief & Pension Fund (Miami Firefighters) filed a purported derivative complaint in New York State Supreme Court, New York County on behalf of Xerox Holdings Corporation (Xerox Holdings) against Carl Icahn and his affiliated entities High River Limited Partnership and Icahn Capital LP (the Icahn defendants), Xerox Holdings, and all then-current Xerox Holdings directors (the Directors).
+Added: Xerox Holdings was named as a nominal defendant in the case but no monetary damages are sought against it.
The complaint includes four causes of action:
3 unchanged sentences
and breach of fiduciary duty of loyalty against the Directors (for any consent to the Icahn defendants’ purchases of HP common stock while Xerox Holdings was considering acquiring HP).
−Removed: The complaint seeks a judgment of breach of fiduciary duties against the Icahn defendants and the Directors;
−Removed: a declaration that Icahn breached his confidentiality agreement with Xerox Holdings;
−Removed: a constructive trust on Icahn Capital and High River's investments in HP securities;
+Added: The complaint seeks, among other things, a judgment of breach of fiduciary duties against the Icahn defendants and the Directors, and;
disgorgement to Xerox Holdings of profits Icahn Capital and High River earned from trading in HP stock.
−Removed: payment of unspecified damages by the Directors for breaching fiduciary duties;
−Removed: and attorneys' fees, costs, and other relief the Court deems just and proper.
−Removed: On January 15, 2020, the Court entered an order granting plaintiff’s unopposed motion to consolidate with Miami Firefighters a similar action filed on December 26, 2019 by alleged shareholder Steven J.
+Added: The Court subsequently granted plaintiff’s unopposed motion to consolidate a similar action filed on December 26, 2019 by alleged shareholder Steven J.
Reynolds against the same parties in the same court, and designating Miami Firefighters’ counsel as lead counsel in the consolidated action.
−Removed: Discovery commenced.
−Removed: On August 10, 2020, the Xerox defendants and the Icahn defendants filed separate motions to dismiss.
−Removed: Briefing on the motions was completed on October 21, 2020.
−Removed: On December 14, 2020, following oral argument, the Court issued a decision and order granting defendants’ motions and dismissing the action in its entirety as to all defendants.
−Removed: Dismissal as to the Icahn defendants was conditioned on the filing of an affidavit, which the Icahn defendants filed on December 16, 2020, indicating whether defendant Icahn gained a profit or incurred a loss on purchases of HP stock during the relevant time period.
−Removed: On December 23, 2020, plaintiff filed a motion seeking discovery related to the Icahn defendants’ losses resulting from their investment in HP.
−Removed: The motion was fully briefed on January 7, 2021.
−Removed: On January 15, 2021, the Court issued a decision and order denying the motion.
−Removed: Also on January 15, 2021, plaintiff filed a notice of appeal of the December 14, 2020 dismissal order to the Appellate Division, First Department.
−Removed: On January 20, 2021, plaintiff filed a notice of appeal of the January 15, 2021 order denying its motion for discovery to the Appellate Division, First Department.
−Removed: On July 15, 2021, plaintiff filed its brief in connection with the appeals of the December 14, 2020 dismissal order and the January 15, 2021 discovery order.
−Removed: On November 18, 2021, the Appellate Division issued its decision.
−Removed: The Court reversed the lower court’s ruling to the extent that it dismissed the claims asserted against the Icahn defendants.
+Added: Defendants moved to dismiss in August 2020, and the Court granted defendants’ motions and dismissed the action in its entirety.
+Added: Following an appeal, the appellate court, reversed the lower court’s ruling to the extent that it dismissed the claims asserted against the Icahn defendants.
The claims asserted against the Directors remain dismissed.
−Removed: On December 8, 2021, the Xerox Board approved the formation of a Special Litigation Committee to investigate and evaluate the claims and allegations asserted in the Miami Firefighters’ case and determine the course of action that would be in the best interests of the Company and its shareholders.
−Removed: The Special Litigation Committee moved to stay the litigation pending its investigation and on January 25, 2022, the Court issued an order staying all discovery until February 28, 2022, except as related to the issue of the alleged damages sustained by Xerox.
−Removed: Xerox 2021 Annual Report 134
+Added: In December 2021, the Xerox Board approved the formation of a Special Litigation Committee to investigate and evaluate the claims and allegations asserted in the case and determine the course of action that would be in the best interests of the Company and its shareholders.
+Added: In March 2022, following the conclusion of its investigation, the Special Litigation Committee filed a motion to dismiss plaintiffs’ claims on the grounds that the claims are without merit and pursuing the claims would not be in the best interest of Xerox or its shareholders.
+Added: The Icahn Defendants subsequently filed a motion for summary judgment seeking dismissal of all claims against them.
Xerox Holdings Corporation v.
1 unchanged sentence
On March 10, 2021, Xerox Holdings Corporation (Xerox Holdings) filed a complaint for breach of contract and declaratory judgment against Factory Mutual Insurance Company in Rhode Island Superior Court, Providence County seeking insurance coverage for business interruption losses resulting from the coronavirus/COVID-19 pandemic.
−Removed: The complaint alleges that defendant agreed to provide Xerox Holdings with up to $ 1 billion in per-occurrence coverage for losses resulting from pandemic-related loss or damage to certain real and other property, including business interruption loss resulting from insured property damage;
−Removed: that the pandemic had inflicted significant physical loss or damage to property of Xerox Holdings and its direct and indirect customers;
−Removed: that Xerox Holdings’ worldwide actual and projected losses through the end of 2020 totaled in excess of $ 300 (and is still increasing);
−Removed: and that following Xerox Holdings' timely and proper claim in March 2020 for coverage under the “all risk” commercial property insurance policy it had purchased from defendant, defendant improperly denied and rejected coverage for most of the claim.
−Removed: The complaint seeks a jury trial, a declaratory judgment against defendant declaring that Xerox is entitled to full coverage of costs and losses under defendant’s policy and declaring that defendant is required to pay for such costs and losses, subject to any applicable limits;
−Removed: damages in an amount to be determined at trial;
−Removed: consequential damages;
−Removed: attorneys’ fees and costs;
−Removed: pre- and post-judgment interest;
−Removed: and other relief the Court deems just and proper.
−Removed: Also on March 10, 2021, subsidiaries of Xerox Holdings filed similar complaints and related requests for arbitration in Toronto, London, and Amsterdam for Canadian, UK and European losses.
−Removed: Xerox Holdings consented to defendant’s request for an extension of its time in which to answer or otherwise respond to the complaint.
−Removed: On May 6, 2021, FMG filed its answer to the complaint.
−Removed: The parties thereafter agreed to stay all non-U.S.
+Added: The complaint alleges, among other things, that defendant agreed to provide Xerox Holdings with up to $ 1 billion in per-occurrence coverage for losses resulting from pandemic-related loss or damage to certain real and other property, including business interruption loss resulting from insured property damage;
+Added: that Xerox Holdings’ worldwide actual and projected losses through the end of 2020 totaled in excess of $ 300 ;
+Added: and that defendant improperly denied and rejected coverage following Xerox Holdings' claim for coverage.
+Added: The complaint seeks against defendant declaring that Xerox is entitled to full coverage of costs and losses under defendant’s policy and declaring that defendant is required to pay for such costs and losses.
+Added: Subsidiaries of Xerox Holdings filed similar complaints and related requests for arbitration in Toronto, London, and Amsterdam for Canadian, UK and European losses.
+Added: The parties have agreed to stay all non-U.S.
proceedings pending the outcome of the U.S.
+Added: litigation is presently in abeyance as the Rhode Island Supreme Court prepares to hear another COVID-19 insurance coverage case against a Factory Mutual affiliate with certain overlapping issues.
Guarantees, Indemnifications and Warranty Liabilities
4 unchanged sentences
Where appropriate, an obligation for such indemnifications is recorded as a liability at the time of the acquisition or divestiture.
−Removed: Since the obligated amounts of these types of indemnifications are often not explicitly stated and/or are contingent on the occurrence of future events, the overall maximum amount of the obligation under such indemnifications cannot be reasonably estimated.
+Added: Since the obligated amounts of these types of indemnifications are often not explicitly stated and/or are contingent on the occurrence of future events, the overall
+Added: Xerox 2022 Annual Report 140
+Added: maximum amount of the obligation under such indemnifications cannot be reasonably estimated.
Other than obligations recorded as liabilities at the time of divestiture, we have not historically made significant payments for these indemnifications.
11 unchanged sentences
In the case of lease guarantees, we may contest the liabilities asserted under the lease.
−Removed: Xerox 2021 Annual Report 135
−Removed: obligations under these agreements and guarantees may be limited in terms of time and/or amount, and in some instances, we may have recourse against third parties for certain payments we made.
+Added: Further, our obligations under these agreements and guarantees may be limited in terms of time and/or amount, and in some instances, we may have recourse against third parties for certain payments we made.
Patent Indemnifications
14 unchanged sentences
As a consequence, we do not have any significant product warranty obligations, including any obligations under customer satisfaction programs.
−Removed: In a few circumstances, particularly in certain cash sales, we may issue a limited product warranty if negotiated by the customer.
+Added: In a few circumstances, particularly in
+Added: Xerox 2022 Annual Report 141
+Added: certain cash sales, we may issue a limited product warranty if negotiated by the customer.
We also issue warranties for certain of our entry level products, where full-service maintenance agreements are not available.
10 unchanged sentences
We believe that our capacity in the surety markets as well as under various credit arrangements (including our Credit Facility) is sufficient to allow us to respond to future requests for proposals that require such credit support.
−Removed: Xerox 2021 Annual Report 136
Note 21 - Preferred Stock
4 unchanged sentences
Each share of Series A Preferred Stock is convertible at any time, at the option of the holder, into 37.4532 shares of common stock of Xerox Holdings Corporation for a total of 6,742 thousand shares (reflecting an initial conversion price of approximately $ 26.70 per share of common stock), subject to customary anti-dilution adjustments.
+Added: At December 31, 2022, 6,742 thousand shares of Common Stock were reserved for conversion of the Series A Preferred Stock.
If the closing price of Xerox Holdings Corporation common stock exceeds $ 39.00 or 146.1 % of the initial conversion price of $ 26.70 per share of common stock for 20 out of 30 consecutive trading days, Xerox Holdings Corporation will have the right to cause any or all of the Series A Preferred Stock to be converted into shares of common stock at the then applicable conversion rate.
11 unchanged sentences
Xerox Holdings Corporation is authorized to issue 437.5 million shares of Common stock, $ 1.00 par value per share.
−Removed: At December 31, 2021, 25 million shares were reserved for issuance under our incentive compensation plans and 7 million shares were reserved for conversion of the Series A Convertible Perpetual Preferred Voting Stock.
Treasury Stock
1 unchanged sentence
Retirement of Treasury stock is recorded as a reduction of Common stock and Additional paid-in capital at the time such retirement is approved by our Board of Directors.
−Removed: In October 2021, the Xerox Holdings Corporation's Board of Directors authorized a $ 500 share repurchase program (exclusive of commissions and fees).
−Removed: This program replaced the approximate $ 450 thousand of authority remaining under Xerox Holdings Corporation's previously authorized $ 1.1 billion share repurchase program.
+Added: In October 2021, the Xerox Holdings Corporation's Board of Directors authorized a $ 500 share repurchase program (exclusive of commissions and fees), which has been fully utilized as of December 31, 2022.
The following provides cumulative information relating to Xerox Holdings Corporation's current share repurchase program from its inception in October 2021 through December 31, 2022 (shares in thousands):
3 unchanged sentences
Number of shares repurchased 24,575
−Removed: Of the $ 500 of share repurchase granted in October 2021 by Xerox Holdings Corporation's Board of Directors, approximately $ 113 of that authority remained available at December 31, 2021.
The following table reflects the changes in Common and Treasury stock shares (shares in thousands).
17 unchanged sentences
Note 23 – Stock-Based Compensation
−Removed: (shares in thousands)
+Added: (shares in thousands, unless otherwise noted)
We have a long-term incentive plan whereby eligible employees may be granted restricted stock units (RSUs), performance share units (PSUs) and stock options (SOs).
6 unchanged sentences
Stock-based compensation expense, pre-tax (1)
+Added: $ 75 $ 54 $ 42
Income tax benefit recognized in earnings 11 13 11
−Removed: In 2019, the timing of our annual grant of awards was changed from April to January to more closely align the grant date with the underlying performance period related to PSUs.
−Removed: Stock options were last awarded under the 2018 grant.
+Added: (1) 2022 includes $ 21 associated with the accelerated vesting of all outstanding equity awards, according to the terms of the award agreement, in connection with the passing of Xerox Holding's former CEO.
Restricted Stock Units
Compensation expense for RSUs is based upon the grant-date market price and is recognized on a straight-line basis over the vesting period, based on management's estimate of the number of shares expected to vest.
−Removed: Beginning with the 2018 grant, RSU's vest on a graded schedule as follows:
−Removed: 25 % after one year of service, 25 % after two years of service and 50 % after three years of service from the date of grant.
−Removed: Prior to the 2018 grant, RSUs vested on a three-year cliff basis from the date of grant.
−Removed: Beginning with the 2021 grant, RSUs vest on a graded schedule as follows:
−Removed: 33 % after one year of service, 33 % after two years of service and 34 % after three years of service from the date of grant.
+Added: RSUs vest on a graded schedule from the date of grant as follows:
+Added: Years of Service (1)
+Added: 2022 2021 2020 2019 2018 Prior to 2018
+Added: Year 1 33 % 33 % 25 % 25 % 25 % — %
+Added: Year 2 33 % 33 % 25 % 25 % 25 % — %
+Added: Year 3 34 % 34 % 50 % 50 % 50 % 100 %
+Added: 100 % 100 % 100 % 100 % 100 % 100 %
+Added: (1) RSUs vest on a graded schedule over a three-year service period from the date of grant.
Performance Share Units
−Removed: PSU awards granted in 2021, 2020 and 2019 were comprised of a performance-based component that included a Revenue and Free Cash Flow metric and a market-based component that included an Absolute Share Price metric.
−Removed: The metrics are weighted as follows:
−Removed: 25 % Revenue, 25 % Free Cash Flow and 50 % Absolute Share Price.
−Removed: Accordingly, each PSU grant was one-half performance-based (Revenue and Free Cash Flow) and one-half market-based (Absolute Share Price).
+Added: PSU awards are comprised of performance-based components (Earnings per share, Revenue and Free cash flow) as well as a market-based component (Absolute Share Price).
+Added: Accordingly, each PSU grant is one-half performance-based and one-half market-based.
+Added: The metrics and weightings are as follows:
+Added: Award Year (Metric Weighting)
+Added: Performance Metric 2022 2021 2020
+Added: Earnings per share 50 % — % — %
+Added: Revenue — % 25 % 25 %
+Added: Free cash flow — % 25 % 25 %
+Added: Absolute share price 50 % 50 % 50 %
+Added: 100 % 100 % 100 %
The measures are independent of each other and depending on the achievement of these metrics, a recipient of a PSU award is entitled to receive a number of shares equal to a percentage, ranging from 0 % to 200 % of the PSU award granted.
−Removed: PSUs have a three-year cliff vesting from the date of grant.
−Removed: In November 2020, the Xerox Holdings Corporation Board approved grants of RSUs to employees who had received grants of PSUs in 2019 and/or 2020 that included performance and market metrics that have been permanently adversely impacted by the COVID-19 pandemic.
+Added: All PSUs granted have a three-year cliff vesting from the date of grant.
+Added: In November 2020, the Xerox Holdings Corporation Board approved grants of RSUs to employees who had received grants of PSUs in 2019 and/or 2020 that included performance and market metrics that were adversely affected permanently by the impacts from the COVID-19 pandemic.
These grants of RSUs were made in December 2020.
1 unchanged sentence
These RSU grants were not intended to take the place of the Company’s 2021 regular annual equity incentive programs.
+Added: Xerox 2022 Annual Report 144
Performance-Based Component:
−Removed: PSUs vest contingent upon meeting pre-determined cumulative performance metrics.
−Removed: The fair value of our PSUs is based upon the grant-date market price.
+Added: This PSU component vests contingent upon meeting pre-determined cumulative performance metrics.
+Added: The fair value of this PSU component is based upon the grant-date market price for the underlying stock.
Compensation expense is recognized on a straight-line basis over the vesting period, based on management's estimate of the number of shares expected to vest and based on meeting the performance metrics.
5 unchanged sentences
Since the Absolute Share Price metric of the PSU award represents a market condition, a Monte Carlo simulation was used to determine the grant-date fair value.
−Removed: Xerox 2021 Annual Report 139
−Removed: The TSR metric included as the market-based component of the 2018 PSU grant was based on the percentage change in Xerox Corporation stock price plus dividends paid over the three-year measurement period.
−Removed: Payout for this portion of the PSU was to be determined based on Xerox Corporation percentage change compared to the shareholder returns of the peer group of companies approved by the compensation committee of the Board (as disclosed in the 2018 annual proxy statement).
−Removed: Since the TSR metric of the PSU award represented a market condition, a Monte Carlo simulation was used to determine the grant-date fair value.
A summary of Xerox Holdings key valuation input assumptions used in the Monte Carlo simulation relative to awards granted were as follows:
18 unchanged sentences
2020 Total Return Targets (1)
+Added: 2019 Total Return Targets (1)
200 % $ 30.00 and above
1 unchanged sentence
$ 45.00 and above
+Added: $ 40.00 and above
100 % $ 25.00 $ 30.00 $ 40.00 $ 35.00
3 unchanged sentences
Below $ 37.00
−Removed: Our 2018 TSR metric compared to the peer group TSR will determine the payout as follows:
−Removed: Payout as a Percent of Target Percentile (1)
−Removed: 200 % 80th and above
−Removed: 0 % Below 25th
+Added: Below $ 30.00
(1) For performance between the levels described above, the degree of vesting is interpolated on a linear basis.
Compensation expense for the market-based component of the PSU awards is recognized on a straight-line basis over the vesting period based on the fair value determined by the Monte Carlo simulation and, except in cases of employee forfeiture, cannot be reversed regardless of performance.
−Removed: There was no impact to compensation expense as a result of the Xerox Corporation Board’s approval to modify the 2018 TSR metric to a one-year performance period (2018) and a two-year time-based requirement (2019 and 2020).
Xerox 2022 Annual Report 145
1 unchanged sentence
The Xerox Corporation Board approved the granting of SOs as part of the 2018 plan design.
−Removed: Compensation expense associated with SOs is based upon the grant date fair value determined by utilizing the Black-Scholes (BS) option - pricing model and is recognized on a straight-line basis over the vesting period, based on management's estimate of the number of SOs expected to vest.
−Removed: The 2018 SOs have a contractual term of 10 years from the date of grant and vest as follows:
−Removed: 25 % after one year of service, 25 % after two years of service, and 50 % after three years of service from the date of grant.
−Removed: Xerox Holdings weighted average assumptions used in the BS option-pricing model relative to SO awards were as follows:
−Removed: Expected term (1)
−Removed: Expected volatility (2)
−Removed: Expected dividend yield (3)
−Removed: Risk-free interest rate (4)
−Removed: Weighted average fair value (5)
−Removed: (1) Since these SO grants were effectively part of a new program, the expected term was calculated using the "Simplified Method” under the SEC guidance based on the SOs vesting schedule and contractual term.
−Removed: We did not have sufficient historical exercise data to provide a reasonable basis to estimate an expected term.
−Removed: (2) The expected volatility was calculated based on a combination of term-matched historical volatility and implied volatility from traded options.
−Removed: (3) The dividend yield was calculated as the expected quarterly dividend divided by our three-month average stock price as of the grant date.
−Removed: (4) The risk-free interest rate was based on the zero-coupon U.S.
−Removed: Treasury yield curve with a maturity matched to the expected term of the SOs.
−Removed: (5) The weighted average of fair values used to record compensation expense as determined by the BS option-pricing model.
−Removed: Management’s estimate of the number of shares expected to vest at the time of grant reflects an estimate for forfeitures based on our historical forfeiture rate to date.
+Added: Compensation expense associated with SOs is based upon the grant-date fair value determined by utilizing the Black-Scholes option - pricing model and is recognized on a straight-line basis over the vesting period, based on management's estimate of the number of SOs expected to vest.
+Added: The compensation expense associated with our 2018 SO grants was fully recognized by April 2021 when these options fully vested.
+Added: The 2018 SOs have a contractual term of 10 years from the April 2018 date of grant.
+Added: Stock Options – CareAR Holdings, LLC
+Added: In September 2021, Xerox Holdings Corporation announced the formation of CareAR Holdings, which consolidates CareAR, Inc., DocuShare® and XMPie under a single holding company named CareAR Holdings (CareAR).
+Added: In March 2022, the CareAR Holdings, LLC Board approved the CareAR 2022 Equity Compensation Plan (the Plan) and authorized the issuance of 105 SOs to certain executives and employees of Xerox and CareAR.
+Added: Compensation expense of $ 30 associated with 90 SOs currently awarded under the Plan is based upon the grant-date fair value, as determined by utilizing a Black-Scholes option-pricing model and is expected to be recorded on a straight-line basis over 4.7 years, based on the vesting period and management’s estimate of the number of SOs expected to vest.
+Added: SOs vest on an annual, graduated schedule beginning January 2023 through January 2027 as follows:
+Added: 10 % in January 2023 and 2024, respectively, 20 % in January 2025 and 2026, respectively, and 40 % in January 2027 based upon continued service.
+Added: Options granted under the Plan are subject to terms and conditions as determined by the CareAR Board and become vested and exercisable at any time subsequent to the scheduled vesting dates and may expire 90 days or one year from employee termination, depending on cause, but in no event later than 10 years from the May 2022 grant date.
+Added: The terms of the awards also include certain provisions that allow for the immediate vesting in the event of a sale of the entity.
+Added: With respect to all stock-based compensation programs, Management’s estimate of the number of shares expected to vest at the time of grant reflects an estimate for forfeitures based on our historical forfeiture rate to date.
Should actual forfeitures differ from management’s estimate, the activity will be reflected in a subsequent period.
−Removed: In addition, RSUs, PSUs and SOs awarded to employees who are retirement-eligible at the date of grant, become retirement-eligible during the vesting period, or are terminated not-for-cause (e.g.
−Removed: as part of a restructuring initiative), vest based on service provided from the date of grant to the date of separation.
+Added: In addition, RSUs, PSUs and SOs awarded to employees who are retirement-eligible at the date of grant, become retirement-eligible during the vesting period, or are terminated not-for-cause (e.g., as part of a restructuring initiative), vest based on service provided from the date of grant to the date of separation.
Xerox 2022 Annual Report 146
1 unchanged sentence
2022 2021 2020
−Removed: Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value (1)
−Removed: Shares Weighted Average Grant Date Fair Value (1)
+Added: Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value (1)
Restricted Stock Units
1 unchanged sentence
Granted 2,444 21.75 1,513 23.37 2,028 27.85
−Removed: Vested ( 1,327 ) 26.07 ( 1,473 ) 28.85 ( 1,666 ) 29.28
+Added: ( 1,975 ) 24.56 ( 1,327 ) 26.07 ( 1,473 ) 28.85
Forfeited ( 409 ) 24.20 ( 212 ) 25.06 ( 213 ) 28.39
3 unchanged sentences
977 25.72 1,195 24.67 901 37.59
−Removed: Vested ( 672 ) 28.08 ( 993 ) 31.94 ( 633 ) 29.56
+Added: ( 644 ) 27.95 ( 672 ) 28.08 ( 993 ) 31.94
Forfeited/Expired (4)
+Added: ( 1,422 ) 20.98 ( 130 ) 26.92 ( 313 ) 26.22
Outstanding at December 31 1,729 28.38 2,818 25.47 2,425 26.67
7 unchanged sentences
(1) Weighted average exercise price for stock options.
−Removed: (2) Includes a 2018 Restricted Stock Award (RSA) grant of 351 shares with a corresponding grant date fair value of $ 28.51 , which vested in 2019.
+Added: (2) 2022 includes approximately 469 RSUs and 644 PSUs associated with the accelerated vesting of all outstanding equity awards, according to the terms of the award agreement, in connection with the passing of Xerox Holding's former CEO.
+Added: No other PSUs vested in 2022.
(3) 2021 includes 60 shares associated with the over-performance of our 2018 PSU grant.
+Added: (4) 2022 includes approximately 1,125 PSUs granted in 2019 that were adversely affected permanently by the impacts from the COVID-19 pandemic, and therefore no shares were earned.
+Added: (5) Activity excludes the CareAR SO program, for which the number of options outstanding have not changed since the May 2022 grant date.
Unrecognized compensation cost related to non-vested stock-based awards at December 31, 2022 was as follows:
2 unchanged sentences
Performance Shares 12 1.8
+Added: Stock Options (1)
+Added: (1) Reflects CareAR SOs granted in May 2022.
The aggregate intrinsic value of outstanding stock-based awards was as follows:
6 unchanged sentences
December 31, 2022 December 31, 2021 December 31, 2020
−Removed: Awards Total Intrinsic Value Cash Received Tax Benefit Total Intrinsic Value Cash Received Tax Benefit Total Intrinsic Value (1)
−Removed: Cash Received Tax Benefit
+Added: Awards Total Intrinsic Value Cash Received Tax Benefit Total Intrinsic Value Cash Received Tax Benefit Total Intrinsic Value Cash Received Tax Benefit
Restricted Stock Units $ 39 $ — $ 6 $ 30 $ — $ 5 $ 33 $ — $ 5
1 unchanged sentence
Stock Options — — — — — — — — —
−Removed: (1) RSUs include a RSA grant of 351 shares, which vested in 2019.
Xerox 2022 Annual Report 147
−Removed: Note 25 – Other Comprehensive Income (Loss)
−Removed: In 2019, as a result of the sale of our investment in Fuji Xerox, we reclassified out of Accumulated other comprehensive loss and into earnings $ 165 of accumulated translation adjustments and defined benefit plan losses related to Fuji Xerox.
−Removed: The reclassified amounts are included in the gain recognized on the Sales.
−Removed: Refer to Note 6 - Divestitures for additional information regarding these Sales and the associated gain recognized.
−Removed: Other Comprehensive Income (Loss) is comprised of the following:
+Added: Note 24 – Other Comprehensive (Loss) Income
+Added: Other Comprehensive (Loss) Income is comprised of the following:
Year Ended December 31,
1 unchanged sentence
Pre-tax Net of Tax Pre-tax Net of Tax Pre-tax Net of Tax
−Removed: Translation Adjustments (Losses) Gains
−Removed: Aggregates adjustment in period $ ( 145 ) $ ( 141 ) $ 238 $ 241 $ 53 $ 45
−Removed: Divestiture - reclassification — — — — 17 17
Net Translation Adjustments (Losses) Gains $ ( 377 ) $ ( 377 ) $ ( 145 ) $ ( 141 ) $ 238 $ 241
−Removed: Unrealized Gains (Losses)
+Added: Unrealized (Losses) Gains
Changes in fair value of cash flow hedges (losses) gains ( 35 ) ( 27 ) ( 12 ) ( 9 ) 4 3
1 unchanged sentence
35 26 7 5 1 1
+Added: Other losses ( 1 ) ( 1 ) — — — —
Net Unrealized (Losses) Gains ( 1 ) ( 2 ) ( 5 ) ( 4 ) 5 4
−Removed: Defined Benefit Plans Gains (Losses)
−Removed: Net actuarial/prior service gains (losses) 537 409 117 86 ( 275 ) ( 202 )
+Added: Defined Benefit Plans (Losses) Gains
+Added: Net actuarial/prior service (losses) gains ( 373 ) ( 284 ) 537 409 117 86
Prior service amortization/curtailment (2)
2 unchanged sentences
88 66 132 99 138 104
−Removed: Fuji Xerox changes in defined benefit plans, net (3)
−Removed: Other (losses) gains (4)
+Added: Other gains (losses) (3)
62 61 35 35 ( 63 ) ( 61 )
−Removed: Divestiture - reclassification — — — — 148 148
−Removed: Changes in Defined Benefit Plans Gains (Losses) 632 489 112 69 ( 65 ) ( 10 )
−Removed: Other Comprehensive Income (Loss) Attributable to Xerox Holdings/Xerox $ 482 $ 344 $ 355 $ 314 $ ( 2 ) $ 46
+Added: Changes in Defined Benefit Plans (Losses) Gains ( 241 ) ( 171 ) 632 489 112 69
+Added: Other Comprehensive (Loss) Income ( 619 ) ( 550 ) 482 344 355 314
+Added: Other comprehensive loss attributable to noncontrolling interests ( 1 ) ( 1 ) — — — —
+Added: Other Comprehensive (Loss) Income Attributable to Xerox Holdings/Xerox $ ( 618 ) $ ( 549 ) $ 482 $ 344 $ 355 $ 314
_____________
1 unchanged sentence
(2) Reclassified to Total Net Periodic Benefit Cost - refer to Note 18 - Employee Benefit Plans for additional information.
−Removed: (3) Represents our share of Fuji Xerox's benefit plan changes.
(3) Primarily represents currency impact on cumulative amount of benefit plan net actuarial losses and prior service credits in AOCL.
9 unchanged sentences
Note 25 – (Loss) Earnings per Share
−Removed: The following table sets forth the computation of basic and diluted earnings per share of Xerox Holdings Corporation's Common stock (shares in thousands):
+Added: The following table sets forth the computation of basic and diluted (loss) earnings per share of Xerox Holdings Corporation's Common stock (shares in thousands):
Year Ended December 31,
1 unchanged sentence
Basic (Loss) Earnings per Share:
−Removed: Net (Loss) Income from continuing operations attributable to Xerox Holdings $ ( 455 ) $ 192 $ 648
+Added: Net (Loss) Income attributable to Xerox Holdings $ ( 322 ) $ ( 455 ) $ 192
Accrued dividends on preferred stock ( 14 ) ( 14 ) ( 14 )
−Removed: Adjusted Net (Loss) income from continuing operations available to common shareholders ( 469 ) 178 634
−Removed: Income from discontinued operations attributable to Xerox Holdings, net of tax — — 705
Adjusted Net (Loss) income available to common shareholders $ ( 336 ) $ ( 469 ) $ 178
1 unchanged sentence
Basic (Loss) Earnings per Share $ ( 2.15 ) $ ( 2.56 ) $ 0.85
−Removed: Continuing operations $ ( 2.56 ) $ 0.85 $ 2.86
−Removed: Discontinued operations — — 3.17
−Removed: Basic (Loss) Earnings per Share $ ( 2.56 ) $ 0.85 $ 6.03
Diluted (Loss) Earnings per Share:
−Removed: Net (Loss) Income from continuing operations attributable to Xerox Holdings $ ( 455 ) $ 192 $ 648
+Added: Net (Loss) Income attributable to Xerox Holdings $ ( 322 ) $ ( 455 ) $ 192
Accrued dividends on preferred stock ( 14 ) ( 14 ) ( 14 )
−Removed: Adjusted Net (Loss) income from continuing operations available to common shareholders ( 469 ) 178 648
−Removed: Income from discontinued operations attributable to Xerox Holdings, net of tax — — 705
Adjusted Net (Loss) income available to common shareholders $ ( 336 ) $ ( 469 ) $ 178
6 unchanged sentences
Diluted (Loss) Earnings per Share $ ( 2.15 ) $ ( 2.56 ) $ 0.84
−Removed: Continuing operations $ ( 2.56 ) $ 0.84 $ 2.78
−Removed: Discontinued operations — — 3.02
−Removed: Diluted (Loss) Earnings per Share $ ( 2.56 ) $ 0.84 $ 5.80
The following securities were not included in the computation of diluted earnings per share as they were either contingently issuable shares or shares that if included would have been anti-dilutive (shares in thousands):
5 unchanged sentences
Xerox 2022 Annual Report 149
−Removed: Note 27 – Subsequent Events
−Removed: Secured Borrowings
−Removed: In January 2022, we entered into a secured loan agreement with financial institutions where we sold $ 789 of U.S.
−Removed: based finance receivables to an SPE.
−Removed: The purchase by the SPE was funded through a $ 668 amortizing secured loan to the SPE from the financial institutions.
−Removed: The SPE is fully consolidated in our financial statements.
−Removed: The secured loan was an amendment of the December 2020 secured borrowing, which had a remaining balance of $ 248 , and we received the incremental net cash.
−Removed: The transaction was accounted for as an extinguishment of debt and the issuance of new debt and associated collateral.
−Removed: The new loan has a variable interest rate based on the financial institutions' cost of funds plus a spread (initial rate of 1.40 %) and an expected life of approximately 2.5 years, with half of the loan projected to be repaid within the first year based on collections of the underlying portfolio of receivables.
−Removed: Acquisition of Powerland
−Removed: In February 2022, Xerox acquired Powerland, a leading IT services provider in Canada for approximately $ 60 (CAD 76 million), which includes certain holdbacks and payment of assumed tax liabilities.
−Removed: The acquisition also includes contingent consideration up to approximately $ 22 (CAD 28 million) based on future performance of the acquisition over the next two years .
−Removed: The acquisition strengthens Xerox’s IT services offerings in North America, which include cloud, cyber security, end user computing and managed services.
−Removed: We are currently assessing the purchase price allocation but expect the majority to be allocated to Intangible assets and Goodwill.
−Removed: Xerox 2021 Annual Report 145
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.