4 unchanged sentences
Opinions on the Financial Statements and Internal Control over Financial Reporting
−Removed: We have audited the accompanying consolidated balance sheets of Xerox Holdings Corporation and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of (loss) income, of comprehensive (loss) income, of shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).
+Added: We have audited the accompanying consolidated balance sheets of Xerox Holdings Corporation and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of income (loss), of comprehensive loss, of shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).
We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
23 unchanged sentences
Critical Audit Matters
−Removed: The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.
−Removed: 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.
+Added: The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.
+Added: 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Realizability of Deferred Tax Assets - U.S.
19 unchanged sentences
foreign tax credit carryforwards with a limited life.
−Removed: Interim Goodwill Impairment Assessment - Print and Other Reporting Unit
−Removed: 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.
−Removed: 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.
−Removed: If the fair value exceeds the carrying value, goodwill is not considered impaired.
−Removed: If the carrying value exceeds the fair value, goodwill is considered impaired and management would recognize an impairment loss for the excess.
−Removed: 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: In the third quarter 2022, management determined there was a triggering event requiring an interim quantitative assessment of goodwill.
−Removed: 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
−Removed: Xerox 2022 Annual Report 69
−Removed: recognized an after-tax non-cash impairment charge of $395 million ($412 million pre-tax) in the third quarter 2022.
−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, and taxes.
−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 risks unique to the subject cash flows.
−Removed: 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;
−Removed: (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;
−Removed: and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
−Removed: 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 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.
−Removed: These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the Print and Other reporting unit;
−Removed: (ii) evaluating the appropriateness of the discounted cash flow method;
−Removed: (iii) testing the completeness and accuracy of underlying data used in the discounted cash flow method;
−Removed: 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.
−Removed: 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;
−Removed: (ii) the consistency with external market and industry data;
−Removed: and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.
−Removed: 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
6 unchanged sentences
Opinions on the Financial Statements and Internal Control over Financial Reporting
−Removed: We have audited the accompanying consolidated balance sheets of Xerox Corporation and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of (loss) income, of comprehensive (loss) income, of shareholder's equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).
+Added: We have audited the accompanying consolidated balance sheets of Xerox Corporation and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of income (loss), of comprehensive loss, of shareholder’s equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).
We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
10 unchanged sentences
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
−Removed: Our audits also i ncluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
−Removed: Our audit of internal control over financial reporting included obtaining an understanding of internal control over finan ci al reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
+Added: Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
+Added: Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audits also included performing such other procedures as we considered necessary in the circumstances.
9 unchanged sentences
Critical Audit Matters
−Removed: The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.
−Removed: 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.
+Added: The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.
+Added: 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Realizability of Deferred Tax Assets - U.S.
19 unchanged sentences
foreign tax credit carryforwards with a limited life.
−Removed: Interim Goodwill Impairment Assessment - Print and Other Reporting Unit
−Removed: 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.
−Removed: 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.
−Removed: If the fair value exceeds the carrying value, goodwill is not considered impaired.
−Removed: If the carrying value exceeds the fair value, goodwill is considered impaired and management would recognize an impairment loss for the excess.
−Removed: 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: In the third quarter 2022, management determined there was a triggering event requiring an interim quantitative assessment of goodwill.
−Removed: After completing the interim impairment test, management
−Removed: Xerox 2022 Annual Report 72
−Removed: 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.
−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, and taxes.
−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 risks unique to the subject cash flows.
−Removed: 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;
−Removed: (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;
−Removed: and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
−Removed: 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 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.
−Removed: These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the Print and Other reporting unit;
−Removed: (ii) evaluating the appropriateness of the discounted cash flow method;
−Removed: (iii) testing the completeness and accuracy of underlying data used in the discounted cash flow method;
−Removed: 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.
−Removed: 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;
−Removed: (ii) the consistency with external market and industry data;
−Removed: and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.
−Removed: 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
42 unchanged sentences
Xerox Holdings Corporation
−Removed: Consolidated Statements of (Loss) Income
+Added: Consolidated Statements of Income (Loss)
Year Ended December 31,
13 unchanged sentences
Amortization of intangible assets 43 42 55
−Removed: Transaction and related costs, net — — 18
+Added: PARC donation 132 — —
Other expenses, net 75 60 ( 27 )
Total Costs and Expenses 6,914 7,432 7,510
−Removed: (Loss) Income before Income Taxes and Equity Income ( 328 ) ( 475 ) 252
−Removed: Income tax (benefit) expense ( 3 ) ( 17 ) 64
−Removed: Equity in net income of unconsolidated affiliates 3 3 4
−Removed: Net (Loss) Income ( 322 ) ( 455 ) 192
−Removed: Net Income attributable to noncontrolling interests — — —
−Removed: Net (Loss) Income Attributable to Xerox Holdings $ ( 322 ) $ ( 455 ) $ 192
−Removed: Basic (Loss) Earnings per Share $ ( 2.15 ) $ ( 2.56 ) $ 0.85
−Removed: Diluted (Loss) Earnings per Share $ ( 2.15 ) $ ( 2.56 ) $ 0.84
+Added: Loss before Income Taxes ( 28 ) ( 325 ) ( 472 )
+Added: Income tax benefit ( 29 ) ( 3 ) ( 17 )
+Added: Net Income (Loss) 1 ( 322 ) ( 455 )
+Added: Preferred stock dividends, net ( 14 ) ( 14 ) ( 14 )
+Added: Net Loss Attributable to Common Shareholders $ ( 13 ) $ ( 336 ) $ ( 469 )
+Added: Basic Loss per Share $ ( 0.09 ) $ ( 2.15 ) $ ( 2.56 )
+Added: Diluted Loss per Share $ ( 0.09 ) $ ( 2.15 ) $ ( 2.56 )
The accompanying notes are an integral part of these Consolidated Financial Statements.
1 unchanged sentence
Xerox Holdings Corporation
−Removed: Consolidated Statements of Comprehensive (Loss) Income
+Added: Consolidated Statements of Comprehensive Loss
Year Ended December 31,
(in millions) 2023 2022 2021
−Removed: Net (Loss) Income $ ( 322 ) $ ( 455 ) $ 192
−Removed: Net Income attributable to noncontrolling interests — — —
−Removed: Net (Loss) Income Attributable to Xerox Holdings ( 322 ) ( 455 ) 192
−Removed: Other Comprehensive (Loss) Income, Net (1)
+Added: Net Income (Loss) $ 1 $ ( 322 ) $ ( 455 )
+Added: Other Comprehensive Income (Loss), Net (1)
Translation adjustments, net 191 ( 376 ) ( 141 )
−Removed: Unrealized (losses) gains, net ( 2 ) ( 4 ) 4
+Added: Unrealized gains (losses), net 1 ( 2 ) ( 4 )
Changes in defined benefit plans, net ( 331 ) ( 171 ) 489
Other Comprehensive (Loss) Income, Net ( 139 ) ( 549 ) 344
−Removed: Other comprehensive loss, net attributable to noncontrolling interests ( 1 ) — —
−Removed: Other Comprehensive (Loss) Income, Net Attributable to Xerox Holdings ( 549 ) 344 314
−Removed: Comprehensive (Loss) Income, Net ( 872 ) ( 111 ) 506
−Removed: Comprehensive loss, net attributable to noncontrolling interests ( 1 ) — —
−Removed: Comprehensive (Loss) Income, Net Attributable to Xerox Holdings $ ( 871 ) $ ( 111 ) $ 506
+Added: Comprehensive Loss, Net $ ( 138 ) $ ( 871 ) $ ( 111 )
_____________
36 unchanged sentences
Additional paid-in capital 1,114 1,588
−Removed: Treasury stock, at cost — ( 177 )
Retained earnings 4,977 5,136
4 unchanged sentences
Total Liabilities and Equity $ 10,008 $ 11,543
−Removed: Shares of common stock issued 155,781 168,069
−Removed: Treasury stock — ( 8,675 )
−Removed: Shares of Common Stock Outstanding 155,781 159,394
+Added: Shares of Common Stock Issued and Outstanding 123,144 155,781
The accompanying notes are an integral part of these Consolidated Financial Statements.
5 unchanged sentences
Cash Flows from Operating Activities
−Removed: Net (Loss) Income $ ( 322 ) $ ( 455 ) $ 192
−Removed: Adjustments required to reconcile Net (loss) income to Cash flows provided by operating activities
+Added: Net Income (Loss) $ 1 $ ( 322 ) $ ( 455 )
+Added: Adjustments required to reconcile Net income (loss) to Cash flows provided by operating activities
Depreciation and amortization 251 270 327
Provisions 54 65 46
−Removed: Deferred tax (benefit) expense ( 27 ) ( 89 ) 34
+Added: Deferred tax benefit ( 68 ) ( 27 ) ( 89 )
Net gain on sales of businesses and assets ( 39 ) ( 56 ) ( 40 )
+Added: PARC donation 132 — —
Stock-based compensation 54 75 54
3 unchanged sentences
Non-service retirement-related costs 19 ( 12 ) ( 89 )
−Removed: ( 12 ) ( 89 ) ( 29 )
Contributions to retirement plans ( 102 ) ( 124 ) ( 160 )
−Removed: ( 124 ) ( 160 ) ( 164 )
(Increase) decrease in accounts receivable and billed portion of finance receivables ( 5 ) ( 48 ) 41
−Removed: (Increase) decrease in inventories ( 143 ) 88 ( 134 )
+Added: Decrease (increase) in inventories 123 ( 143 ) 88
Increase in equipment on operating leases ( 141 ) ( 112 ) ( 129 )
−Removed: (Increase) decrease in finance receivables ( 141 ) 20 183
+Added: Decrease (increase) in finance receivables 614 ( 141 ) 20
Decrease in other current and long-term assets 16 27 68
−Removed: Increase (decrease) in accounts payable 278 118 ( 123 )
−Removed: Increase (decrease) in accrued compensation (1)
−Removed: Increase (decrease) in other current and long-term liabilities 9 89 ( 165 )
+Added: (Decrease) increase in accounts payable ( 290 ) 278 118
+Added: Increase in accrued compensation 48 34 9
+Added: (Decrease) increase in other current and long-term liabilities ( 114 ) 9 89
Net change in income tax assets and liabilities ( 12 ) ( 27 ) 10
19 unchanged sentences
Cash, Cash Equivalents and Restricted Cash at End of Year $ 617 $ 1,139 $ 1,909
−Removed: _____________
−Removed: (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.
−Removed: There was no change to Net cash provided by operating activities as a result of the reclassification.
−Removed: Prior year amounts have been revised to conform to this presentation.
−Removed: 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 Shareholders' Equity
−Removed: (in millions) Common Stock Additional
+Added: (in millions) Common Stock (1)
Capital Treasury Stock Retained
4 unchanged sentences
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 (3)
3 unchanged sentences
Stock option and incentive plans, net 2 35 — — — 37 — 37
−Removed: Payments to acquire treasury stock, including fees — — ( 300 ) — — ( 300 ) — ( 300 )
+Added: Common stock repurchased — — ( 888 ) — — ( 888 ) — ( 888 )
Cancellation of treasury stock ( 32 ) ( 679 ) 711 — — — — —
+Added: Transactions with 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 ) — ( 871 )
Cash dividends declared-common (3)
3 unchanged sentences
Stock option and incentive plans, net 2 62 — — — 64 — 64
−Removed: Payments to acquire treasury stock, including fees — — ( 888 ) — — ( 888 ) — ( 888 )
+Added: Common stock repurchased — — ( 113 ) — — ( 113 ) — ( 113 )
Cancellation of treasury stock ( 14 ) ( 276 ) 290 — — — — —
−Removed: Investment from noncontrolling interests — 1 — — — 1 4 5
+Added: Transactions with noncontrolling interests — — — — — — 4 4
Distributions to noncontrolling interests — — — — — — ( 1 ) ( 1 )
Balance at December 31, 2022 $ 156 $ 1,588 $ — $ 5,136 $ ( 3,537 ) $ 3,343 $ 10 $ 3,353
−Removed: Comprehensive loss, net — — — ( 322 ) ( 549 ) ( 871 ) ( 1 ) ( 872 )
+Added: Comprehensive income (loss), net — — — 1 ( 139 ) ( 138 ) — ( 138 )
Cash dividends declared-common (3)
3 unchanged sentences
Stock option and incentive plans, net 1 45 — — — 46 — 46
−Removed: Payments to acquire treasury stock, including fees — — ( 113 ) — — ( 113 ) — ( 113 )
+Added: Common stock repurchased — — ( 553 ) — — ( 553 ) — ( 553 )
Cancellation of treasury stock ( 34 ) ( 519 ) 553 — — — — —
−Removed: Investment from noncontrolling interests — — — — — — 5 5
+Added: Transactions with noncontrolling interests — — — — — — 2 2
Distributions to noncontrolling interests — — — — — — ( 2 ) ( 2 )
1 unchanged sentence
_____________
+Added: (1) Common Stock has a par value of $ 1 per share.
(2) AOCL - Accumulated other comprehensive loss.
−Removed: (2) Cash dividends declared on common stock for 2022, 2021 and 2020 were $ 0.25 per share on a quarterly basis and $ 1.00 per share on an annual basis.
−Removed: (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.
+Added: (3) Cash dividends declared on common stock for 2023, 2022 and 2021 were $ 0.25 per share on a quarterly basis and $ 1.00 per share on an annual basis, respectively.
+Added: (4) Cash dividends declared on preferred stock for 2023, 2022 and 2021 were $ 20 per share on a quarterly basis and $ 80 per share on an annual basis, respectively.
The accompanying notes are an integral part of these Consolidated Financial Statements.
1 unchanged sentence
Xerox Corporation
−Removed: Consolidated Statements of (Loss) Income
+Added: Consolidated Statements of Income (Loss)
Year Ended December 31,
13 unchanged sentences
Amortization of intangible assets 43 42 55
−Removed: Transaction and related costs, net — — 18
+Added: PARC donation 132 — —
Other expenses, net 75 60 ( 27 )
Total Costs and Expenses 6,914 7,432 7,510
−Removed: (Loss) Income before Income Taxes and Equity Income ( 328 ) ( 475 ) 252
−Removed: Income tax (benefit) expense ( 3 ) ( 17 ) 64
−Removed: Equity in net income of unconsolidated affiliates 3 3 4
−Removed: Net (Loss) Income ( 322 ) ( 455 ) 192
−Removed: Net Income attributable to noncontrolling interests — — —
−Removed: Net (Loss) Income Attributable to Xerox $ ( 322 ) $ ( 455 ) $ 192
+Added: Loss before Income Taxes ( 28 ) ( 325 ) ( 472 )
+Added: Income tax benefit ( 29 ) ( 3 ) ( 17 )
+Added: Net Income (Loss) $ 1 $ ( 322 ) $ ( 455 )
The accompanying notes are an integral part of these Consolidated Financial Statements.
1 unchanged sentence
Xerox Corporation
−Removed: Consolidated Statements of Comprehensive (Loss) Income
+Added: Consolidated Statements of Comprehensive Loss
Year Ended December 31,
(in millions) 2023 2022 2021
−Removed: Net (Loss) Income $ ( 322 ) $ ( 455 ) $ 192
−Removed: Net Income attributable to noncontrolling interests — — —
−Removed: Net (Loss) Income Attributable to Xerox ( 322 ) ( 455 ) 192
−Removed: Other Comprehensive (Loss) Income, Net (1)
+Added: Net Income (Loss) $ 1 $ ( 322 ) $ ( 455 )
+Added: Other Comprehensive Income (Loss), Net (1)
Translation adjustments, net 191 ( 376 ) ( 141 )
−Removed: Unrealized (losses) gains, net ( 2 ) ( 4 ) 4
+Added: Unrealized gains (losses), net 1 ( 2 ) ( 4 )
Changes in defined benefit plans, net ( 331 ) ( 171 ) 489
Other Comprehensive (Loss) Income, Net ( 139 ) ( 549 ) 344
−Removed: Other comprehensive loss, net attributable to noncontrolling interests ( 1 ) — —
−Removed: Other Comprehensive (Loss) Income, Net Attributable to Xerox ( 549 ) 344 314
−Removed: Comprehensive (Loss) Income, Net ( 872 ) ( 111 ) 506
−Removed: Comprehensive loss, net attributable to noncontrolling interests ( 1 ) — —
−Removed: Comprehensive (Loss) Income, Net Attributable to Xerox $ ( 871 ) $ ( 111 ) $ 506
+Added: Comprehensive Loss, Net $ ( 138 ) $ ( 871 ) $ ( 111 )
_____________
48 unchanged sentences
Cash Flows from Operating Activities
−Removed: Net (Loss) Income $ ( 322 ) $ ( 455 ) $ 192
−Removed: Adjustments required to reconcile Net (loss) income to Cash flows provided by operating activities
+Added: Net Income (Loss) $ 1 $ ( 322 ) $ ( 455 )
+Added: Adjustments required to reconcile Net income (loss) to Cash flows provided by operating activities
Depreciation and amortization 251 270 327
Provisions 54 65 46
−Removed: Deferred tax (benefit) expense ( 27 ) ( 89 ) 34
+Added: Deferred tax benefit ( 68 ) ( 27 ) ( 89 )
Net gain on sales of businesses and assets ( 39 ) ( 56 ) ( 40 )
+Added: PARC donation 132 — —
Stock-based compensation 54 75 54
3 unchanged sentences
Non-service retirement-related costs 19 ( 12 ) ( 89 )
−Removed: ( 12 ) ( 89 ) ( 29 )
Contributions to retirement plans ( 102 ) ( 124 ) ( 160 )
−Removed: ( 124 ) ( 160 ) ( 164 )
(Increase) decrease in accounts receivable and billed portion of finance receivables ( 5 ) ( 48 ) 41
−Removed: (Increase) decrease in inventories ( 143 ) 88 ( 134 )
+Added: Decrease (increase) in inventories 123 ( 143 ) 88
Increase in equipment on operating leases ( 141 ) ( 112 ) ( 129 )
−Removed: (Increase) decrease in finance receivables ( 141 ) 20 183
+Added: Decrease (increase) in finance receivables 614 ( 141 ) 20
Decrease in other current and long-term assets 16 27 68
−Removed: Increase (decrease) in accounts payable 278 118 ( 123 )
−Removed: Increase (decrease) in accrued compensation (1)
−Removed: Increase (decrease) in other current and long-term liabilities 9 89 ( 165 )
+Added: (Decrease) increase in accounts payable ( 290 ) 278 118
+Added: Increase in accrued compensation 48 34 9
+Added: (Decrease) increase in other current and long-term liabilities ( 114 ) 9 89
Net change in income tax assets and liabilities ( 12 ) ( 27 ) 10
11 unchanged sentences
Payments on long-term debt ( 1,874 ) ( 1,723 ) ( 519 )
−Removed: Contributions from parent — — 1,494
Distributions to parent ( 722 ) ( 312 ) ( 1,120 )
5 unchanged sentences
Cash, Cash Equivalents and Restricted Cash at End of Year $ 617 $ 1,139 $ 1,909
−Removed: _____________
−Removed: (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.
−Removed: There was no change to Net cash provided by operating activities as a result of the reclassification.
−Removed: Prior year amounts have been revised to conform to this presentation.
−Removed: Refer to Note 18 - Employee Benefit Plans for additional information.
The accompanying notes are an integral part of these Consolidated Financial Statements.
8 unchanged sentences
Balance at December 31, 2020 $ 4,888 $ 5,834 $ ( 3,332 ) $ 7,390 $ 4 $ 7,394
−Removed: Comprehensive income, net — 192 314 506 — 506
−Removed: Dividends declared to parent — ( 605 ) — ( 605 ) — ( 605 )
−Removed: Capital contributions from parent (2)
−Removed: 1,494 — — 1,494 — 1,494
−Removed: Transfers from parent 128 — — 128 — 128
−Removed: Distributions to noncontrolling interests — — — — ( 3 ) ( 3 )
−Removed: Balance at December 31, 2020 $ 4,888 $ 5,834 $ ( 3,332 ) $ 7,390 $ 4 $ 7,394
Comprehensive (loss) income, net — ( 455 ) 344 ( 111 ) — ( 111 )
3 unchanged sentences
Transfers to parent ( 193 ) — — ( 193 ) — ( 193 )
−Removed: Investment from noncontrolling interests 1 — — 1 4 5
+Added: Transactions with noncontrolling interests 1 — — 1 4 5
Distributions to noncontrolling interests — — — — ( 1 ) ( 1 )
3 unchanged sentences
Transfers from parent 491 — — 491 — 491
−Removed: Investment from noncontrolling interests — — — — 5 5
+Added: Transactions with noncontrolling interests — — — — 4 4
Distributions to noncontrolling interests — — — — ( 1 ) ( 1 )
Balance at December 31, 2022 $ 3,693 $ 3,427 $ ( 3,537 ) $ 3,583 $ 10 $ 3,593
+Added: Comprehensive income (loss), net — 1 ( 139 ) ( 138 ) — ( 138 )
+Added: Dividends declared to parent — ( 469 ) — ( 469 ) — ( 469 )
+Added: Transfers to parent ( 208 ) — — ( 208 ) — ( 208 )
+Added: Transactions with noncontrolling interests — — — — 2 2
+Added: Distributions to noncontrolling interests — — — — ( 2 ) ( 2 )
+Added: Balance at December 31, 2023 $ 3,485 $ 2,959 $ ( 3,676 ) $ 2,768 $ 10 $ 2,778
_____________
(1) AOCL - Accumulated other comprehensive loss.
−Removed: (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.
−Removed: Refer to Note 15 - Debt for additional information regarding the Senior Notes offerings.
(2) Refer to Note 15 - Debt for information regarding capitalization of balance to Intercompany Loan with Xerox Holdings Corporation.
7 unchanged sentences
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.
−Removed: References herein to “we,” “us,” “our,” the “Company” refer collectively to both Xerox Holdings and Xerox unless the context suggests otherwise.
+Added: References herein to “we,” “us,” “our,” and the “Company” refer collectively to both Xerox Holdings and Xerox unless the context suggests otherwise.
References to “Xerox Holdings Corporation” refer to the stand-alone parent company and do not include its subsidiaries.
6 unchanged sentences
Currently, Xerox Holdings' primary direct operating subsidiary is Xerox and therefore Xerox represents nearly all of Xerox Holdings' operations.
−Removed: 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-sized businesses, large enterprises, governments and graphic communications providers, and for our partners who serve them.
+Added: Xerox is a global enterprise for workplace technology that integrates hardware, services and software for large to small enterprises.
+Added: As customers seek to manage information and document workflows across digital and physical platforms, we deliver secure and sustainable document management solutions.
+Added: We provide advanced document technology, services, software 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.
Xerox serves customers globally in North America, Central and South America, Brazil, Europe, Eurasia, the Middle East, Africa and India.
−Removed: 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.
+Added: Xerox Holdings' other direct subsidiary, Xerox Ventures LLC, 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.
The investments are normally equity or equity-linked and for less than 20% ownership.
1 unchanged sentence
Xerox Ventures LLC had investments of approximately $ 26 and $ 21 at December 31, 2023 and 2022, respectively.
+Added: In January 2024, Myriad Ventures Fund I LP was established, and Xerox Ventures LLC investments were transferred to this new entity, which will continue to be fully consolidated by Xerox Holdings.
Basis of Consolidation
1 unchanged sentence
Investments in business entities in which we do not have control, but we have the ability to exercise significant influence over operating and financial policies (generally 20 % to 50 % ownership) are accounted for using the equity method of accounting.
−Removed: Operating results of acquired businesses are included in the Consolidated Statements of (Loss) Income from the date of acquisition.
+Added: Operating results of acquired businesses are included in the Consolidated Statements of Income (Loss) from the date of acquisition.
We consolidate variable interest entities if we are deemed to be the primary beneficiary of the entity.
−Removed: 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 “(Loss) Income before Income Taxes and Equity Income” as “pre-tax (loss) income” throughout the Notes to the Consolidated Financial Statements.
−Removed: 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.
−Removed: As such, prior period reportable segment results and related disclosures have been conformed to reflect the Company’s current reportable segments.
−Removed: Refer to Note 4 - Segment and Geographic Reporting for additional information regarding this change.
+Added: Operating results for variable interest entities in which we are determined to be the primary beneficiary are included in the Consolidated Statements of Income (Loss) from the date such determination is made.
+Added: For convenience and ease of reference, we refer to the financial statement caption “Loss before Income Taxes” as “pre-tax loss” throughout the Notes to the Consolidated Financial Statements.
+Added: Certain reclassifications have been made to the amounts for prior years in order to conform to the current year’s presentation.
Xerox 2023 Annual Report 79
−Removed: 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.
−Removed: Impairment Evaluation - 2022
−Removed: During 2022, we had events and conditions in the first quarter and third quarter that required an interim assessment of Goodwill.
−Removed: 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).
−Removed: As a result of the new operating and reportable segments, we also reassessed our reporting units for the evaluation of Goodwill.
−Removed: Prior to this change, we determined that we had one operating/reportable segment and one reporting unit for Goodwill assessment purposes.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The Company performed those impairment tests, which did not result in the identification of an impairment loss as of January 1, 2022.
−Removed: 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.
−Removed: Additionally, higher interest rates continued to put downward pressure on the Company’s valuation.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Consistent with our policy for an annual review, we also assessed Goodwill in the fourth quarter 2022.
−Removed: 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.
−Removed: 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.
−Removed: Impairment Evaluation - 2021
−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: 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.
−Removed: 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.
−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.
−Removed: 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
−Removed: Xerox 2022 Annual Report 87
−Removed: require the exercise of judgment.
+Added: accordingly, our accounting estimates 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.
9 unchanged sentences
Accounting Standard Updates to be Adopted:
+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 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: Segment Disclosures
+Added: In November 2023, the FASB issued ASU 2023-07 , Segment Reporting (Topic 280):
+Added: Improvements to Reportable Segment Disclosures , which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses.
+Added: The update will require public entities to disclose significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within segment profit and loss.
+Added: The amendments are effective for the Company's annual periods beginning January 1, 2024, and interim periods beginning January 1, 2025, with early adoption permitted, and will be applied retrospectively to all prior periods presented in the financial statements.
+Added: We are currently evaluating the impact of the adoption of this standard to determine its impact on the Company's disclosures.
+Added: Income Tax Disclosures
+Added: In December 2023, the FASB issued ASU 2023-09 , Income Taxes (Topic 740):
+Added: Improvements to Income Tax Disclosures , which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.
+Added: The amendments are effective for the Company’s annual periods beginning January 1, 2025, with early adoption
+Added: Xerox 2023 Annual Report 80
+Added: permitted, and should be applied either prospectively or retrospectively.
+Added: We are currently evaluating the impact of the adoption of this standard to determine its impact on the Company's disclosures.
+Added: Accounting Standard Updates Recently Adopted:
In September 2022, the FASB issued ASU 2022-04 , Liabilities - Supplier Finance Programs (Subtopic 405-50):
1 unchanged sentence
The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations.
−Removed: 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 requirements to disclose the key terms of the programs and information about obligations outstanding was effective for our fiscal year beginning on January 1, 2023.
The new standard’s requirement to disclose a rollforward of obligations outstanding will be effective for our fiscal year beginning on January 1, 2024.
−Removed: 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: Refer to Note 14 - Supplementary Financial Information for the required disclosures effective January 1, 2023.
Financial Instruments
3 unchanged sentences
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 .
−Removed: This update is effective for our fiscal year beginning on January 1, 2023.
+Added: This update was effective for our fiscal year beginning on January 1, 2023.
The provisions of this amendment are to be applied on a prospective basis.
−Removed: We are currently evaluating the impact of the adoption of this standard on the Company's consolidated financial statements and related disclosures.
−Removed: 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.
−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 through December 31, 2022.
−Removed: In December 2022, the FASB issued ASU 2022-06 , Reference Rate Reform (Topic 848), Deferral of the
−Removed: Xerox 2022 Annual Report 88
−Removed: 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.
−Removed: There has been no material impact to date as a result of adopting these ASUs 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: Refer to Note 8 - Finance Receivables, Net for required disclosures regarding gross write-offs by vintage year.
Government Assistance
5 unchanged sentences
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.
−Removed: Refer to Note 14 - Supplementary Financial Information - Government Assistance - for additional information.
Business Combinations
3 unchanged sentences
We early adopted this update effective for our fiscal year beginning January 1, 2022.
+Added: The adoption of this update did not have a material impact on the Company’s consolidated financial statements and related disclosures.
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 and the adoption has not had a material impact on acquisitions made year to date.
+Added: The standard did not impact contract assets or liabilities acquired in business combinations that occurred prior to the adoption 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).
1 unchanged sentence
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.
−Removed: We adopted this update effective for our fiscal year beginning January 1, 2022.
+Added: We adopted this
+Added: Xerox 2023 Annual Report 81
+Added: update effective for our fiscal year beginning January 1, 2022.
The adoption of this update did not have a material impact on the Company’s consolidated financial statements and related disclosures.
4 unchanged sentences
The adoption did not have a material impact on our results of operations, financial position, cash flows or disclosures.
−Removed: 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) 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
−Removed: Xerox 2022 Annual Report 89
−Removed: costs and complexities of applying lease modification accounting under Topic 842 to leases impacted by the effects of the COVID-19 pandemic.
−Removed: 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.
−Removed: 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: 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.
−Removed: Financial Instruments - Credit Losses
−Removed: On January 1, 2020, we adopted ASU 2016-13 , Financial Instruments Credit Losses - Measurement of Credit Losses on Financial Instruments.
−Removed: This update was issued by the FASB in June 2016, with additional updates and amendments being issued in 2018, 2019 and 2020 and requires measurement and recognition of expected credit losses for financial assets on an expected loss model rather than an incurred loss model.
−Removed: The update impacted financial assets including net investment in leases that are not accounted for at fair value through Net Income.
−Removed: The adoption of ASU 2016-13 primarily impacted the estimation of our Allowance for doubtful accounts for Accounts Receivable and Finance Receivables.
−Removed: 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: 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.
−Removed: Intangibles - Internal-Use Software
−Removed: On January 1, 2020, we adopted ASU 2018-15 , Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.
−Removed: This update was issued by the FASB in August 2018 and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).
−Removed: The update provides criteria for determining which implementation costs to capitalize as an asset related to the service contract and which costs to expense.
−Removed: The capitalized implementation costs are required to be expensed over the term of the hosting arrangement.
−Removed: 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, 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, cash flows or related disclosures upon adoption.
+Added: In 2023 and 2022 the FASB also issued the following ASUs, which could impact the Company in the future but currently did not have, nor are expected to have, a material impact on our financial condition, results of operations, cash flows or related disclosures upon adoption.
+Added: Those updates are as follows:
+Added: • Disclosure Improvements:
+Added: ASU 2023-06 , Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.
+Added: Since the Company is already subject to SEC disclosure requirements, this update was effective upon issuance.
+Added: • Business Combinations:
+Added: ASU 2023-05 , Business Combinations - Joint Venture Formation (Topic 805-60):
+Added: Recognition and Initial Measurement.
+Added: This update is effective for our fiscal year beginning January 1, 2025.
+Added: • Liabilities:
+Added: ASU 2023-04 , Liabilities (Topic 405):
+Added: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.
+Added: The Company adopted this conforming guidance upon issuance in August 2023.
+Added: • Investments:
+Added: ASU 2023-02 , Investments - Equity Method and Joint Ventures (Topic 323):
+Added: Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force).
+Added: This update is effective for our fiscal year beginning January 1, 2024.
+Added: ASU 2023-01 , Leases (Topic 842):
+Added: Common Control Arrangements.
+Added: This update is effective for our fiscal year beginning January 1, 2024.
• Fair Value Measurement:
3 unchanged sentences
ASU 2022-01 , Derivatives and Hedging (Topic 815), Fair Value Hedging - Portfolio Layer Method.
−Removed: This update is effective for our fiscal year beginning January 1, 2023.
−Removed: • Equity Instruments:
−Removed: 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).
This update was effective for our fiscal year beginning January 1, 2023.
−Removed: ASU 2021-05 , Leases - Certain Lease Payments with Variable Lease Payments (ASC 842).
−Removed: This update was effective for our fiscal year beginning January 1, 2022.
−Removed: • Investments:
−Removed: ASU 2020-01 , Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) .
−Removed: This update was effective for our fiscal year beginning January 1, 2021.
−Removed: • Compensation - Stock Compensation and Revenue from Contracts with Customers:
−Removed: ASU 2019-08 , (Topic 718) and (Topic 606) Codification Improvements - Share-Based Consideration Payable to a Customer.
−Removed: This update was effective for our fiscal year beginning January 1, 2020.
−Removed: Xerox 2022 Annual Report 90
Summary of Accounting Policies
12 unchanged sentences
We provide maintenance agreements on our equipment that include service and supplies for which the customer may pay a base minimum plus a price-per-page charge for usage.
−Removed: In arrangements that include minimums, those minimums are normally set below the customer’s estimated page volumes and are not considered substantive.
−Removed: These agreements are sold as part of a bundled lease arrangement or through distributors and resellers.
−Removed: We normally account for these maintenance agreements as a single performance obligation for printing services being delivered in a series with delivery being measured by usage as billed to the customer.
+Added: In arrangements that include minimums, those minimums are normally set below the customer’s estimated page volumes and are not
+Added: Xerox 2023 Annual Report 82
+Added: considered substantive.
+Added: These agreements are normally sold as part of a bundled lease arrangement or through distributors and resellers.
+Added: We account for these maintenance agreements as a single performance obligation for maintenance services being delivered in a series with delivery being measured by usage as billed to the customer.
Accordingly, revenue on these types of agreements is normally recognized as billed to the customer over the term of the agreements based on page volumes.
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: Print outsourcing services:
−Removed: 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.
−Removed: Revenues on unit-price contracts are recognized at the contractual selling prices as work is completed by the customer.
−Removed: 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: Our services contracts may also include the sale or lease of equipment and software.
−Removed: In these instances, we follow the policies noted for Equipment or Software Revenues and separately report the revenue associated with these performance obligations.
−Removed: Certain document management services arrangements may also include an embedded lease of equipment.
−Removed: In these instances, the revenues associated with the lease are recognized in accordance with the requirements for lease accounting.
+Added: Service offerings:
+Added: The Company’s primary service offerings include Managed Print Services, Digital Services and IT Services.
+Added: In our services arrangements, the Company typically satisfies the performance obligations and recognizes revenue over time as the services are rendered.
+Added: We generally account for these service arrangements as single performance obligations since they primarily involve the delivery of an integrated service to the customer with services being delivered in a series.
+Added: Delivery is typically measured on an output basis such as usage and is normally consistent with the billing or invoicing to the customer.
+Added: Revenues on unit-price or time-based contracts are recognized as work is completed to the customer.
Sales to distributors and resellers:
−Removed: We utilize distributors and resellers to sell our equipment, supplies and maintenance services to end-user customers.
+Added: We utilize distributors and resellers to sell our equipment, supplies, parts, and maintenance services to end-user customers.
We refer to our distributor and reseller network as our two-tier distribution model.
4 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
−Removed: Xerox 2022 Annual Report 91
−Removed: revenue when sales occur.
+Added: We estimate the variable consideration associated with these programs and record those amounts as a reduction to revenue when sales occur.
Similarly, we account for our estimates of sales returns and other allowances when sales occur based on our historical experience.
3 unchanged sentences
Software accessories sold in connection with our Equipment sales, as well as free-standing software sales, are accounted for as separate performance obligations if determined to be material in relation to the overall arrangement.
−Removed: Revenue from software is not a significant component of our Total revenues.
Supplies revenue is recognized upon transfer of control to the customer, generally upon utilization or shipment to the customer in accordance with the sales contract terms.
3 unchanged sentences
These arrangements also typically include an incremental, variable component for page volumes in excess of the contractual page volume minimums, which are often expressed in terms of price-per-image or page.
−Removed: Revenues under these bundled lease arrangements are allocated considering the relative standalone selling prices of the lease and non-lease deliverables included in the bundled arrangement.
−Removed: Lease deliverables include the equipment and financing, while the non-lease deliverables generally consist of the services, which include supplies.
−Removed: Consistent with the guidance in ASC 842 and ASC 606, regarding the allocation of fixed and variable consideration, we only consider the fixed payments for purposes of allocation to the lease elements of the contract.
−Removed: The fixed minimum monthly payments are multiplied by the number of months in the contract term to arrive at the total fixed lease payments that the customer is obligated to make over the lease term.
−Removed: Amounts allocated to the equipment and financing elements are then subjected to the accounting estimates noted below under Leases to ensure the values reflect standalone selling prices.
−Removed: The remainder of any fixed payments, as well as the variable payments, are allocated to non-lease elements because the variable consideration for incremental page volume or usage is considered attributable to the delivery of those elements.
−Removed: The consideration for the non-lease elements is not dependent on the consideration for equipment and vice versa, and the consideration for the equipment and services is priced at the appropriate standalone values;
−Removed: therefore, the relative standalone selling price allocation method is not necessary.
−Removed: 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 or Print outsourcing services agreements.
+Added: Consistent with the guidance in ASC 842 and ASC 606, the transaction price is allocated between the lease and non-lease deliverables based on standalone selling price (SSP).
+Added: Lease deliverables include the equipment and financing, while the non-lease deliverables generally consist of the services, which normally include supplies.
+Added: With respect to the allocation of fixed and variable consideration, we only consider the fixed payments for purposes of allocation to the lease elements of the contract.
+Added: The revenue associated with the lease element is typically recognized at a point-in-time upon transfer of control as a sales-type lease, unless the lease is accounted for as an operating lease, which will normally result in recognition over the term of the lease.
+Added: 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
+Added: Xerox 2023 Annual Report 83
+Added: Accordingly, revenue from these agreements is recognized in a manner consistent with the guidance for Maintenance or Managed Print services agreements.
+Added: We establish SSP using observable inputs from standalone sales of products, as well as the prices established by management in similar transactions.
+Added: Based on historical sales practices and policies together with a periodic analysis, we have determined that there is not a material difference between standalone selling price and recorded sales price.
The two primary accounting provisions we use to classify transactions as sales-type or operating leases are:
6 unchanged sentences
We believe five years is representative of the period during which the equipment is expected to be economically usable, with normal service, for the purpose for which it is intended.
−Removed: We perform an analysis of the stand-alone selling price of equipment based on cash selling prices as well as other methodologies including a margin analysis during the applicable period.
−Removed: With respect to the analysis of cash sales, cash selling prices are compared to the range of values determined for our leases.
−Removed: 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.
−Removed: 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.
11 unchanged sentences
Shipping and Handling:
−Removed: Shipping and handling costs are accounted for as a fulfillment cost and are included in Cost of sales in the Consolidated Statements of (Loss) Income.
+Added: Shipping and handling costs are accounted for as a fulfillment cost and are included in Cost of sales in the Consolidated Statements of Income (Loss).
Refer to Note 3 - Revenue for additional information regarding revenue recognition policies with respect to contract assets and liabilities as well as contract costs.
7 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 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: Xerox 2023 Annual Report 84
+Added: 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.
6 unchanged sentences
The purpose of the SPEs is to facilitate the funding of customer loan and lease payments and associated equipment in the capital markets.
−Removed: These securitizations qualify as collateral for secured borrowings and no gains or losses are recognized at the time of
−Removed: Xerox 2022 Annual Report 93
−Removed: securitization.
+Added: These securitizations qualify as collateral for secured borrowings and no gains or losses are recognized at the time of securitization.
The receivables remain on the balance sheet and classified as Finance receivables, net.
26 unchanged sentences
Accordingly, the two primary criteria we use to classify transactions as operating leases or finance leases are:
−Removed: (i) a review of the lease term to determine if it is equal to or greater than 75% of the economic life of the asset, and (ii) a review of the present value of the minimum lease payments to determine if they are equal to or greater than 90% of the fair market value of the asset at the inception of the lease.
+Added: (i) a review of the lease term to determine if it is equal to or greater than 75% of the economic life of the asset, and (ii) a review of the
+Added: Xerox 2023 Annual Report 85
+Added: present value of the minimum lease payments to determine if they are equal to or greater than 90% of the fair market value of the asset at the inception of the lease.
Right-of-use (ROU) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.
6 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
−Removed: Xerox 2022 Annual Report 94
−Removed: 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 economic environment and over a similar term.
The rate is dependent on several factors, including the lease term and currency of the lease payments.
25 unchanged sentences
The primary drivers that generate Goodwill are the value of synergies between the acquired entities and the company and the acquired assembled workforce, neither of which qualifies as an identifiable intangible asset.
−Removed: Goodwill is not amortized, but rather is tested for impairment annually, or more frequently whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable and an impairment loss may have been incurred.
+Added: Goodwill is not amortized, but rather is
+Added: Xerox 2023 Annual Report 86
+Added: tested for impairment annually, or more frequently whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable and an impairment loss may have been incurred.
We assess 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
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.
−Removed: 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).
+Added: Consistent with the determination that we had two operating/reportable segments we determined that we had two reporting units – Print and Other, and 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
−Removed: Xerox 2022 Annual Report 95
−Removed: exceeds the carrying value, Goodwill is not considered impaired.
+Added: If the fair value 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.
11 unchanged sentences
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).
−Removed: 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.
−Removed: The recoverability test/income approach indicated that our Long-Lived assets and Other Intangible Assets to be held and used were not impaired.
Refer to Note 13 - Restructuring Programs for additional information regarding the impairment of long-lived assets in connection with our restructuring programs and initiatives.
10 unchanged sentences
Actual returns on plan assets are not immediately recognized in our income statement due to the delayed recognition requirement.
−Removed: In calculating the expected return on the plan asset component of our net periodic pension cost, we apply our estimate of the long-term rate of return on the plan assets that support our pension obligations, after deducting assets that are specifically allocated to Transitional Retirement Accounts (which are accounted for based on specific plan terms).
+Added: In calculating the expected return on the plan asset component of our net periodic pension cost, we apply our estimate of the long-term rate of return on the plan assets that support our pension obligations, after deducting assets that
+Added: Xerox 2023 Annual Report 87
+Added: are specifically allocated to Transitional Retirement Accounts (which are accounted for based on specific plan terms).
For purposes of determining the expected return on plan assets, we utilize a market-related value approach in determining the value of the pension plan assets, rather than a fair market value approach.
2 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.
−Removed: Xerox 2022 Annual Report 96
The discount rate is used to present value our future anticipated benefit obligations.
18 unchanged sentences
Government Grants/Assistance
−Removed: 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.
+Added: Government grants related to income are recognized as a reduction of related expenses in the Consolidated Statements of Income (Loss) 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.
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.
46 unchanged sentences
Contract Costs:
−Removed: 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.
−Removed: 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 .
−Removed: We pay commensurate sales commissions upon customer renewals, therefore our amortization period is aligned to our initial contract term.
−Removed: Incremental direct costs are as follows:
−Removed: Year Ended December 31,
−Removed: 2022 2021 2020
−Removed: Incremental direct costs of obtaining a contract $ 63 $ 61 $ 62
−Removed: Amortization of incremental direct costs 68 73 81
−Removed: The balance of deferred incremental direct costs net of accumulated amortization at December 31, 2022 and 2021 was $ 125 and $ 132 , respectively.
−Removed: This amount is expected to be amortized over its estimated period of benefit, which we currently estimate to be approximately four years .
−Removed: 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
+Added: We incur the following contract costs as part of our revenue arrangements:
+Added: • Incremental direct costs of obtaining a contract, which are primarily sales commissions paid to salespeople and agents in connection with the placement of equipment with associated post sale services arrangements.
+Added: These costs are deferred and amortized to Selling Expenses on a straight-line basis over the estimated contract term, which is currently estimated to be approximately four years .
+Added: We pay commensurate sales commissions upon customer renewals;
+Added: therefore, our amortization period is aligned to our initial contract term.
+Added: • Contract fulfillment costs, which are costs incurred for resources and assets that will be used to satisfy our future performance obligations included in our service arrangements.
+Added: These costs are amortized over the contractual service period of the arrangement to cost of services.
+Added: • Contract inducements, which are capitalized and amortized as a reduction of revenue over the term of the contract.
Xerox 2023 Annual Report 89
−Removed: cost of services.
−Removed: 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.
−Removed: Amounts deferred associated with contract fulfillment costs and inducements were $ 10 and $ 15 at December 31, 2022 and 2021, respectively, and related amortization was $ 5 , $ 6 and $ 4 for the three years ended December 31, 2022, 2021 and 2020, respectively.
+Added: Changes in contract costs, net are as follows:
+Added: 2023 2022 2021
+Added: Balance at January 1st, 135 147 158
+Added: Customer contract costs deferred 70 65 66
+Added: Amortization of customer contract costs ( 69 ) ( 73 ) ( 79 )
+Added: Balance at December 31st, $ 136 $ 135 $ 147
+Added: _____________
+Added: (1) Includes currency.
Equipment and software used in the fulfillment of service arrangements, and where the Company retains control, are capitalized and depreciated over the shorter of their useful life or the term of the contract if an asset is contract specific.
Note 4 – Segment and Geographic Area Reporting
−Removed: Our reportable segments are aligned with how we manage the business and view the markets we serve.
−Removed: 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.
−Removed: 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.
−Removed: As such, prior period reportable segment results and related disclosures have been conformed to reflect the Company’s current reportable segments.
+Added: Our reportable segments – Print and Other , and FITTLE – are aligned to how the Chief Operating Decision Maker (CODM), our Chief Executive Officer (CEO), allocates resources and assesses performance against the Company’s key growth strategies and are consistent with how we manage the business and view the markets we serve.
+Added: Segment Reporting Change
+Added: During the second quarter 2023, as a result of the strategic shift in the Company’s approach to funding FITTLE’s new originations through funding agreements that involve the sale of lease receivables, the measures for FITTLE’s segment revenues and profits used by our CODM were recast as follows to correspond with this change in strategy:
+Added: • The management and oversight of the equipment on operating leases portion of our financing business was transferred from the FITTLE segment to the marketing and sales groups in the Print and Other segment since the funding agreements currently exclude the sale of operating lease arrangements.
+Added: • The allocation of shared expenses as well as commissions and other payments made by the FITTLE segment to the Print and Other segment were recast to better reflect the operations of FITTLE in line with the change in strategic direction.
+Added: The following provides segment revenues and profit for 2022 and 2021, recast to conform to our new segment measurements:
+Added: Segment Revenues Segment Profit
+Added: 2022 2021 2022 2021
+Added: Print and Other $ 6,667 $ 6,548 $ 238 $ 293
+Added: FITTLE 610 695 37 82
+Added: Intersegment revenue (1)
+Added: ( 170 ) ( 205 ) — —
+Added: Total External Revenue $ 7,107 $ 7,038 $ 275 $ 375
+Added: Print and Other $ 137 $ 181 $ 20 $ 18
+Added: FITTLE ( 217 ) ( 294 ) ( 20 ) ( 18 )
+Added: Intersegment revenue (1)
+Added: Total External Revenue $ — $ — $ — $ —
+Added: Print and Other $ 6,804 $ 6,729 $ 258 $ 311
+Added: FITTLE 393 401 17 64
+Added: Intersegment revenue (1)
+Added: ( 90 ) ( 92 ) — —
+Added: Total External Revenue $ 7,107 $ 7,038 $ 275 $ 375
+Added: _____________
+Added: (1) Intersegment revenue is primarily commissions and other payments made by the FITTLE Segment to the Print and Other Segment for the lease of Xerox equipment placements.
+Added: Xerox 2023 Annual Report 90
Our Print and Other segment includes the sale of document systems, supplies and technical services and managed services.
7 unchanged sentences
Customers also include graphic communication enterprises as well as channel partners including distributors and resellers.
−Removed: 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: Segment revenues also include commissions and other payments from the FITTLE segment for the exclusive right to provide lease financing for Xerox products.
These revenues are reported as part of Intersegment Revenues, which are eliminated in consolidated revenues.
−Removed: The Financing (FITTLE) segment provides leasing solutions through either bundled or unbundled lease agreements of Xerox and non-Xerox products and IT services equipment.
−Removed: 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.
−Removed: Segment revenues primarily includes financing income on sales-type leases, operating lease income (including month-to-month rentals and extensions) and leasing fees.
+Added: The FITTLE segment provides leasing solutions and currently offers leasing for direct channel customer purchases of Xerox solutions through bundled lease agreements and lease financing to end-user customers who purchase Xerox solutions through our indirect channels.
+Added: Segment revenues primarily include financing income on sales-type leases (including month-to-month extensions) and leasing fees.
+Added: Segment revenues also include gains/losses from the sale of finance receivables including commissions, fees on the sales of underlying equipment residuals and servicing fees.
+Added: In December 2022, the Company entered into a finance receivables funding agreement with an affiliate of HPS Investment Partners (HPS) pursuant to which the Company agreed to offer for sale, and HPS agreed to purchase, certain eligible pools of finance receivables on a monthly basis.
+Added: During the second quarter 2023, the finance receivables funding agreement with HPS was amended to expand the pools of finance receivables eligible for sale and to include the sale of the underlying leased equipment to HPS.
+Added: Refer to Note 8 - Finance Receivables, Net for additional information on the sale of receivables.
+Added: In the third quarter 2023, the Company entered into an agreement with PEAC Solutions (a subsidiary of HPS) that named PEAC as the provider of certain leasing and financial services programs for Xerox and non-Xerox equipment sold through our U.S.
+Added: network of independent dealers and resellers.
+Added: In the fourth quarter 2023, our partnership with PEAC Solutions was further expanded to include the transition of some FITTLE U.S.
+Added: employees in risk, IT, and operations to PEAC Solutions.
+Added: Upon completion of this transition, PEAC Solutions will become the preferred financing partner, primary funder, and service provider for XBS leases in the U.S.
Segment Policy
5 unchanged sentences
The CODM uses these results, in part, to evaluate the performance of, and to allocate resources to each segment.
−Removed: 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: The 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.
Xerox 2023 Annual Report 91
2 unchanged sentences
2023 2022 (1)
−Removed: Print and Other Financing (FITTLE) Total Print and Other Financing (FITTLE) Total Print and Other Financing (FITTLE) Total
+Added: Print and Other FITTLE Total Print and Other FITTLE Total Print and Other FITTLE Total
External revenue $ 6,485 $ 401 $ 6,886 $ 6,714 $ 393 $ 7,107 $ 6,637 $ 401 $ 7,038
7 unchanged sentences
Interest expense — 130 130 — 108 108 — 111 111
−Removed: — 116 116 — 121 121 — 133 133
Depreciation and amortization 208 — 208 228 — 228 272 — 272
3 unchanged sentences
_____________
−Removed: (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: (1) Amounts for 2022 and 2021 have been recast to conform to the current year's reporting presentation.
+Added: See the Segment Reporting Change section above.
+Added: (2) Intersegment revenue is primarily commissions and other payments made by the FITTLE Segment to the Print and Other Segment for the lease of Xerox equipment placements.
(3) Segment margin based on External revenue only.
−Removed: (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 .
−Removed: (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: (4) Capital expenditures are allocated fully to the Print and Other segment since they are primarily managed and controlled through that segment, together, with related long-lived assets.
Selected financial information for our reportable segments was as follows:
1 unchanged sentence
2023 2022 2021
−Removed: Pre-tax (Loss) Income
+Added: Pre-tax (Loss)
Total Segment profit $ 389 $ 275 $ 375
2 unchanged sentences
Amortization of intangible assets ( 43 ) ( 42 ) ( 55 )
+Added: PARC Donation ( 132 ) — —
Accelerated share vesting — ( 21 ) —
−Removed: Transaction and related costs, net — — ( 18 )
Other expenses, net ( 75 ) ( 60 ) 27
−Removed: Total Pre-tax (loss) income $ ( 328 ) $ ( 475 ) $ 252
+Added: Total Pre-tax (loss) $ ( 28 ) $ ( 325 ) $ ( 472 )
Depreciation and Amortization
27 unchanged sentences
The components of lease income are as follows:
−Removed: Location in Statements of (Loss) Income Year Ended December 31,
+Added: Location in Statements of Income (Loss)
+Added: Year Ended December 31,
2023 2022 2021
6 unchanged sentences
Xerox 2023 Annual Report 93
−Removed: Note 6 – Acquisitions and Investments
+Added: Note 6 – Acquisitions and Divestitures
The following table summarizes the purchase price allocations for our acquisitions as of the acquisition dates:
−Removed: Year Ended December 31, 2022 Year Ended December 31, 2021 Year Ended December 31, 2020
−Removed: Weighted-Average Life Acquisitions Weighted-Average Life Acquisitions Weighted-Average Life Acquisitions
+Added: Year Ended December 31, 2022 Year Ended December 31, 2021
+Added: Weighted-Average Life Acquisitions Weighted-Average Life Acquisitions
Accounts/finance receivables $ 29 $ 5
Intangible assets:
−Removed: Customer relationships 10 years 41 9 years 27 9 years 69
−Removed: Trademarks 5 years 7 5 years 3 9 years 9
−Removed: Technology — 3 years 1 3 years 9
−Removed: Goodwill 62 25 111
+Added: Customer relationships 10 years 41 9 years 27
+Added: Trademarks 5 years 7 5 years 3
+Added: Technology — 3 years 1
Other assets 30 4
4 unchanged sentences
_____________
−Removed: (1) Includes estimated contingent consideration liabilities of approximately $ 11 as of December 31, 2022 .
+Added: (1) Goodwill from 2022 acquisitions included approximately $ 20 of goodwill that is expected to be deductible for tax purposes.
+Added: (2) Liabilities assumed in 2022 acquisitions included estimated contingent consideration liabilities of approximately $ 11 .
2023 Acquisitions
+Added: There were no material business acquisitions during 2023.
+Added: 2022 Acquisitions
During 2022, Xerox acquired two businesses that totaled $ 93 , net of cash acquired.
1 unchanged sentence
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.
−Removed: The acquisition strengthens Xerox’s IT services offerings in North America, which include cloud, cyber security, end user computing and managed services.
+Added: Approximately $ 11 was accrued as part of the purchase price reflecting the estimated fair value payout for this element.
+Added: During 2023 $ 6 of contingent consideration was paid.
+Added: The acquisition strengthened Xerox’s IT services offerings in North America, which include cloud, cybersecurity, end user computing and managed services.
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.
−Removed: The acquisition strengthens Xerox’s strategy to grow its global Digital Services presence in EMEA.
−Removed: Both of our 2022 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 acquisition dates.
−Removed: 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.
−Removed: 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.
−Removed: Any adjustments to the preliminary allocations are not expected to be material.
+Added: The acquisition strengthened Xerox’s strategy to grow its global Digital Services presence in EMEA.
The Goodwill associated with both acquisitions is included in our Print and Other segment.
4 unchanged sentences
2021 also included smaller acquisitions totaling approximately $ 3 .
−Removed: All of our 2021 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 acquisition dates.
−Removed: 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.
−Removed: 2020 Acquisitions
−Removed: Business acquisitions in 2020 totaled $ 194 , net of cash acquired, and included three acquisitions in the U.K.
−Removed: for $ 172 (GBP 133 million) - Arena Group, Altodigital Networks and ITEC Connect, as well as an acquisition in Canada for approximately $ 22 (CAD 29 million).
−Removed: These acquisitions are expected to expand our presence in the SMB market in both Western Europe and Canada.
−Removed: 2020 also included the acquisition of CareAR for $ 9 .
+Added: The Goodwill associated with these acquisitions is included in our Print and Other segment.
+Added: Our acquisitions in 2022 and 2021 resulted in 100 % ownership of the acquired companies.
+Added: The operating results of these acquisitions were not material to our financial statements and were included within our results from the respective acquisition dates.
+Added: The purchase prices were all cash, with the exception of the Powerland acquisition in 2022, which included a contingent consideration element.
Xerox 2023 Annual Report 94
−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 acquisition dates.
−Removed: 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.
−Removed: Revenue Summary
+Added: Revenue Impact
Our acquisitions contributed aggregate revenues from their respective acquisition dates as follows:
3 unchanged sentences
2022 215 163 —
+Added: 2021 42 37 19
Total Contributed Aggregate Revenue $ 257 $ 200 $ 19
−Removed: Joint Venture Formation
−Removed: In May 2021, Xerox and the Victorian Government (AU) (VicGov) partnered to launch Eloque, a venture to commercialize new technology that will remotely monitor the structural health of critical infrastructure assets, such as road and railway bridges.
−Removed: 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: The revenues and expenses of the new entity post formation were not material for the years ended December 31, 2022 and December 31, 2021.
−Removed: 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.
−Removed: As a result of this determination, we mutually agreed with our partner VicGov to shut down the Eloque joint venture.
−Removed: The impacts from this shutdown were not material.
ServiceNow Inc.
6 unchanged sentences
As a result of this contingent redemption right, we classified ServiceNow’s noncontrolling interest in CareAR Holdings LLC as temporary equity within Xerox’s Consolidated Balance Sheet.
+Added: Donation of Palo Alto Research Center (PARC)
+Added: In April 2023, Xerox completed the donation of its Palo Alto Research Center (PARC) subsidiary to Stanford Research Institute International (SRI), a nonprofit research institute.
+Added: The donation enables Xerox to focus on its core businesses and prioritize growth through its business technology solutions for customers in Print, as well as Digital Services and IT Services.
+Added: The donation also allows PARC to reach its full potential through SRI’s resources and deep-tech expertise that will enable PARC to focus exclusively on the development of pioneering innovative technologies.
+Added: The majority of patents held by PARC will be retained by Xerox with a perpetual license to use those patents being provided to SRI.
+Added: Xerox, at its option, will also continue to receive certain research services from SRI.
+Added: The donation resulted in a net charge of $ 132 in the second quarter 2023, which includes allocated Goodwill of $ 115 , the carrying value of the net assets associated with PARC being donated of $ 13 , and approximately $ 4 of other costs and expenses related to the donation.
+Added: The allocation of Goodwill was based on the relative fair value of the PARC business to the total fair value for the Print and Other Segment/Reporting Unit, which it was part of prior to the donation.
+Added: The estimated fair values of the PARC business as well as the Print and Other reporting unit are based on estimates and assumptions that are considered Level 3 inputs under the fair value hierarchy.
+Added: Xerox also recorded a net income tax benefit of $ 40 related to the donation for a net after-tax loss on the donation of $ 92 .
Xerox 2023 Annual Report 95
7 unchanged sentences
Balance at December 31, 2021 $ 58
−Removed: Charge-offs ( 18 )
−Removed: Recoveries and other (1)
+Added: Charge-offs, net ( 14 )
Balance at December 31, 2022 $ 52
−Removed: Charge-offs ( 14 )
−Removed: Recoveries and other (1)
+Added: Charge-offs, net ( 17 )
Balance at December 31, 2023 $ 64
4 unchanged sentences
Based on that assessment the allowance for doubtful accounts as a percentage of gross receivables was 7.0 % at December 31, 2023 and 5.7 % at December 31, 2022.
−Removed: The decrease in the allowance is primarily due to a reduction in estimated losses for customer accommodations and other billing adjustments.
+Added: The increase in the allowance is primarily due to an increase in aged receivables in the U.S.
Accounts Receivable Sale Arrangements
−Removed: Accounts receivable sale arrangements are utilized in the normal course of business as part of our cash and liquidity management.
−Removed: The accounts receivable sold are generally short-term trade receivables with payment due dates of less than 60 days.
We have one facility in Europe that enables us to sell accounts receivable associated with our distributor network on an ongoing basis, without recourse.
8 unchanged sentences
(1) Losses on sales were not material.
−Removed: Customers may also enter into structured-payable arrangements that require us to sell our receivables from that customer to a third-party financial institution, which then makes payments to us to settle the customer's receivable.
−Removed: In these instances, we ensure the sale of the receivables are bankruptcy-remote and the payment made to us is without recourse.
−Removed: 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.
Xerox 2023 Annual Report 96
Note 8 – Finance Receivables, Net
−Removed: Finance receivables include sales-type leases and installment loans arising from the marketing of our equipment.
+Added: Finance receivables include sales-type leases and installment loans arising from the sales of our equipment.
These receivables are typically collateralized by a security interest in the underlying equipment.
10 unchanged sentences
A summary of our gross finance receivables' future contractual maturities, including those previously billed, is as follows:
−Removed: 2023 $ 1,325 972
+Added: 12 months $ 1,075 $ 1,325
+Added: 24 months 758 967
+Added: 36 months 547 690
+Added: 48 months 343 411
+Added: 60 months 143 169
Thereafter 33 31
5 unchanged sentences
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.
−Removed: 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.
−Removed: 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.
−Removed: Our assessment also included a review of current portfolio credit metrics and the level of write-offs incurred over the past year.
−Removed: Our allowance for doubtful finance receivables is effectively determined by geography.
The risk characteristics in our finance receivable portfolio segments are generally consistent with the risk factors associated with the economies of the countries/regions included in those geographies.
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 was $ 26 for the year ended December 31, 2022.
+Added: The net bad debt provision was $ 6 for the year ended December 31, 2023.
This compares to the bad debt provision of $ 26 for the year ended December 31, 2022.
−Removed: 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.
−Removed: Xerox 2022 Annual Report 105
−Removed: 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.
−Removed: In addition, there continues to be geopolitical uncertainty in Europe from the Ukraine/Russia conflict and continued impacts from the COVID-19 recovery.
−Removed: 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: The decrease in the bad debt provision was primarily due to a credit of $( 12 ) related to a reserve release in the U.S.
+Added: as the result of a favorable reassessment of the credit exposure on a large customer receivable balance after a contract amendment, which improved our credit position.
+Added: In addition, the bad debt provision benefited from the sales of finance lease receivables and a lower balance of finance receivables in 2023 as compared to 2022.
+Added: The allowance for credit losses as a percentage of net finance receivables before allowance was 3.5 % at December 31, 2023 and 3.6 % at December 31, 2022.
+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 includes a review of current portfolio credit metrics and the level of write-offs incurred over the past year.
+Added: 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.
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.
−Removed: The allowance for doubtful accounts as well as the related investment in finance receivables were as follows:
+Added: Xerox 2023 Annual Report 97
+Added: The allowance for credit losses as well as the related investment in finance receivables were as follows:
Allowance for Credit Losses:
−Removed: United States Canada Europe (1)
+Added: United States Canada EMEA (1)
Balance at December 31, 2021 $ 77 $ 11 $ 30 $ 118
Provision 20 ( 2 ) 8 26
−Removed: Charge-offs ( 7 ) ( 3 ) ( 6 ) ( 16 )
−Removed: Recoveries and other (2)
+Added: Charge-offs, net ( 15 ) ( 3 ) ( 8 ) ( 26 )
+Added: 1 1 ( 3 ) ( 1 )
Balance at December 31, 2022 $ 83 $ 7 $ 27 $ 117
Provision ( 8 ) 1 13 6
−Removed: Charge-offs ( 15 ) ( 3 ) ( 8 ) ( 26 )
−Removed: Recoveries and other (2)
−Removed: 1 1 ( 3 ) ( 1 )
+Added: Charge-offs, net ( 17 ) ( 3 ) ( 14 ) ( 34 )
Balance at December 31, 2023 $ 58 $ 7 $ 27 $ 92
14 unchanged sentences
These customers are less susceptible to adverse effects due to shifts in economic conditions or changes in circumstance.
−Removed: The rating generally equates to a Standard & Poor's (S&P) rating of BBB- or better.
Loss rates in this category in the normal course are generally less than 1 %.
1 unchanged sentence
This rating includes accounts with average credit risk that are more susceptible to loss in the event of adverse business or economic conditions.
−Removed: This rating generally equates to a BB S&P rating.
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.
18 unchanged sentences
Total $ 260 $ 122 $ 135 $ 88 $ 32 $ 8 $ 645
+Added: Charge-offs $ 1 $ 1 $ 1 $ 1 $ 1 $ 2 $ 7
United States (Indirect):
3 unchanged sentences
Total $ 259 $ 154 $ 95 $ 39 $ 13 $ — $ 560
+Added: Charge-offs $ 4 $ 3 $ 3 $ 2 $ 2 $ 3 $ 17
Low Credit Risk $ 45 $ 24 $ 16 $ 9 $ 4 $ — $ 98
2 unchanged sentences
Total $ 114 $ 65 $ 38 $ 26 $ 11 $ 1 $ 255
+Added: Charge-offs $ — $ — $ — $ 2 $ — $ 1 $ 3
Low Credit Risk $ 251 $ 182 $ 110 $ 48 $ 19 $ 6 $ 616
2 unchanged sentences
Total $ 462 $ 346 $ 194 $ 91 $ 40 $ 9 $ 1,142
+Added: Charge-offs $ 3 $ 8 $ 4 $ 2 $ — $ — $ 17
Total Finance Receivables
3 unchanged sentences
Total $ 1,095 $ 687 $ 462 $ 244 $ 96 $ 18 $ 2,602
+Added: Total Charge-offs $ 8 $ 12 $ 8 $ 7 $ 3 $ 6 $ 44
Xerox 2023 Annual Report 99
27 unchanged sentences
(1) Includes developing market countries.
−Removed: Xerox 2022 Annual Report 108
The aging of our receivables portfolio is based upon the number of days an invoice is past due.
3 unchanged sentences
We generally continue to maintain equipment on lease and provide services to customers that have invoices for finance receivables that are 90 days or more past due and, as a result of the bundled nature of billings, we also continue to accrue interest on those receivables.
−Removed: However, interest revenue for such billings is only recognized if collectability is deemed reasonably assured.
+Added: However, interest revenue for such billings is only recognized if collectability is deemed probable.
The aging of our billed finance receivables is as follows:
10 unchanged sentences
Total $ 53 $ 12 $ 10 $ 75 $ 2,527 $ 2,602 $ 61
+Added: Xerox 2023 Annual Report 100
December 31, 2022
12 unchanged sentences
Sales of Receivables
−Removed: 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.
−Removed: Accordingly, the receivables sold were derecognized from our financial statements and the Purchaser does not have recourse back to the Company for uncollectible receivables.
−Removed: 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.
−Removed: The Receivables Funding Agreement contemplates lease receivable sales totaling approximately $ 600 during the initial term.
−Removed: 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.
−Removed: 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.
−Removed: The cash proceeds were recorded in Net cash provided by operating activities.
+Added: In December 2022, the Company entered into a finance receivables funding agreement with an affiliate of HPS Investment Partners (HPS) pursuant to which the Company agreed to offer for sale, and HPS agreed to purchase, certain eligible pools of finance receivables on a monthly basis in transactions structured as "true sales at law," and bankruptcy remote transfers and we have received an opinion to that effect from outside legal counsel.
+Added: Accordingly, the receivables sold are derecognized from our financial statements and HPS does not have recourse back to the Company for uncollectible receivables.
+Added: During the second quarter 2023, the finance receivables funding agreement with HPS was amended to expand the pools of finance receivables eligible for sale and to include the sale of the underlying leased equipment to HPS.
+Added: The commission paid by HPS was also accordingly amended to cover the value associated with the underlying equipment being sold to HPS.
+Added: The company retained a first right of refusal to repurchase the underlying equipment at the end of the lease term, to the extent offered for sale by HPS, at its then fair value.
+Added: The amended finance receivables funding agreement automatically renews each year for a one-year period, unless terminated by either the Company or HPS.
+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 finance receivables funding agreement.
+Added: Of the finance receivables sold and derecognized from our balance sheet, $ 994 and $ 60 remained uncollected as of December 31, 2023 and 2022, respectively.
+Added: Finance receivable sales activity was as follows:
+Added: Year Ended December 31,
+Added: Finance receivable sales - net proceeds (1)
+Added: Gain on sale/Commissions (2)(3)
+Added: Servicing revenue (2)
+Added: _____________
+Added: (1) Cash proceeds were reported in Net cash provided by operating activities.
+Added: (2) Recorded in Services, maintenance and rentals as Other Revenue.
+Added: Amounts include revenues associated with the sale of the underlying leased equipment.
+Added: (3) The year ended December 31, 2023 includes $ 4 of revenues associated with the sale of the underlying leased equipment and which are expected to be paid over the term of the agreements.
Secured Borrowings and Collateral
16 unchanged sentences
Estimated minimum future revenues associated with Equipment on operating leases are as follows:
−Removed: 2023 $ 185 110
+Added: 12 months $ 165 $ 185
+Added: 24 months 89 95
+Added: 36 months 52 59
+Added: 48 months 30 30
+Added: 60 months 13 13
Thereafter 2 4
12 unchanged sentences
Office furniture and equipment 3 to 15
−Removed: Finance leases 1 to 12
+Added: Finance leased assets 1 to 12
Other 4 to 20
2 unchanged sentences
Accumulated depreciation (1)
+Added: ( 1,870 ) ( 2,047 )
Land, buildings and equipment, net $ 266 $ 320
+Added: _____________
(1) Depreciation expense was $ 60 , $ 68 and $ 76 for the three years ended December 31, 2023, 2022 and 2021, respectively.
We lease buildings and equipment, substantially all of which are accounted for as operating leases.
−Removed: Finance leased assets were $ 18 and $ 9 at December 31, 2022 and 2021, respectively.
Refer to Note 11 - Lessee for additional information regarding leased assets.
2 unchanged sentences
Useful lives of our internal use software generally vary from three to seven years .
−Removed: 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 twelve years and a variety of renewal and/or termination options.
+Added: Our leases have remaining terms of up to eleven years and a variety of renewal and/or termination options.
The components of lease expense are as follows:
8 unchanged sentences
(1) Variable lease expense is related to our leased real estate for offices and warehouses and primarily includes labor and operational costs, as well as taxes and insurance.
−Removed: As of December 31, 2022, we had no additional operating leases that had not yet commenced.
−Removed: Xerox 2022 Annual Report 111
+Added: As of December 31, 2023, we had approximately $ 6 additional operating leases that had not yet commenced.
Operating lease ROU assets, net and operating lease liabilities were reported in the Consolidated Balance Sheets as follows:
3 unchanged sentences
Total Operating lease liabilities $ 182 $ 229
+Added: Xerox 2023 Annual Report 103
Supplemental information related to operating leases is as follows:
9 unchanged sentences
Maturities and additional information related to operating lease liabilities are as follows:
+Added: December 31, 2023
+Added: 12 months $ 62
Thereafter 21
5 unchanged sentences
and Europe and related infrastructure, within outsourced warehouse supply arrangements, in the U.S.
−Removed: These leases have remaining maturities up to nine years with a maximum expiration date through December 2031.
+Added: These leases have remaining maturities up to four years with a maximum expiration date through August 2027.
As of December 31, 2023 and 2022, the remaining lease obligation for all finance leases is $ 17 and $ 16 , respectively, based on discount rates of 7.28 % and 6.40 %, respectively.
The ROU asset balances associated with these finance leases at December 31, 2023 and 2022 of $ 19 and $ 18 , respectively are included in Land, buildings and equipment, net in the Consolidated Balance Sheets.
−Removed: Xerox 2022 Annual Report 112
Note 12 - Goodwill, Net and Intangible Assets, Net
10 unchanged sentences
Acquisitions 5 28 —
−Removed: Canada Acquisitions 34 16 10
+Added: Canada Acquisition — 34 16
Other — 3 ( 5 )
+Added: Dispositions (2)
Goodwill impairment — ( 412 ) ( 781 )
3 unchanged sentences
_____________
−Removed: (1) Refer to Note 6 - Acquisitions and Investments for additional information related to acquisitions.
−Removed: No Goodwill has been allocated to the Financing (FITTLE) segment for the three years ended December 31, 2022, 2021 or 2020, respectively.
−Removed: Accordingly, amounts above represent the Goodwill allocated to the Print and Other segment, as well as Goodwill on a Total Company basis.
−Removed: Refer to Note 1 - Basis of Presentation for additional information regarding the allocation of Goodwill.
+Added: (1) Refer to Note 6 - Acquisitions and Divestitures for additional information related to acquisitions.
+Added: (2) Primarily includes the write-off of $ 115 of goodwill associated with the donation of our Palo Alto Research Center (PARC) as well as other immaterial dispositions.
+Added: Refer to Note 6 - Acquisitions and Divestitures for additional information related to the PARC donation.
+Added: Xerox 2023 Annual Report 104
+Added: Total Goodwill is fully allocated to the Print and Other segment and no Goodwill has been allocated to the FITTLE segment for the three years ended December 31, 2023, 2022 or 2021, respectively.
+Added: We performed our annual Goodwill assessment in the fourth quarter of 2023 qualitatively and concluded that it is more likely-than-not that the fair value of the Print and Other reporting unit, the only reporting unit with Goodwill, is higher than its carrying amount and Goodwill was not impaired.
In the third quarter of 2022, we concluded that an interim impairment test of Goodwill was required.
2 unchanged sentences
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 for additional information related to the Goodwill impairment charges and our annual impairment assessment performed during the fourth quarter 2022.
Intangible Assets, Net
13 unchanged sentences
Total Intangible Assets $ 545 $ 368 $ 177 $ 553 $ 345 $ 208
−Removed: Amortization expense related to intangible assets was $ 42 , $ 55 and $ 56 for the three years ended December 31, 2022, 2021 and 2020, respectively.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Xerox 2022 Annual Report 113
+Added: Excluding the impact of future acquisitions, amortization expense is expected to approximate $ 39 in 2024 and $ 32 in 2025, 2026, 2027 and in 2028, respectively.
+Added: Distribution network, technology and non-compete assets are expected to be fully amortized by 2025.
Note 13 – Restructuring Programs
−Removed: We engage in restructuring actions, including Project Own It, as well as other transformation efforts in order to reduce our cost structure and realign it to the changing nature of our business.
−Removed: As part of our efforts to reduce costs, our restructuring actions may also include the off-shoring and/or outsourcing of certain operations, services and other functions, as well as reducing our real estate footprint.
−Removed: Restructuring costs include employee severance and related costs, other contractual termination costs and asset impairments that may result from employee reductions, migration of facilities from higher-cost to lower-cost countries, and the consolidation of facilities within countries.
−Removed: 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.
+Added: We engage in restructuring actions and other transformation efforts in order to reduce our cost structure and realign it to the changing nature of our business.
+Added: As part of our efforts to reduce costs, our restructuring actions may also include the offshoring and/or outsourcing of certain operations, services and other functions, as well as reducing our real estate footprint.
+Added: Restructuring and related costs, net reflect the following components for the three years ended December 31, 2023, 2022 and 2021:
+Added: Year Ended December 31,
+Added: 2023 2022 2021
+Added: Restructuring charges, net $ 114 $ 68 $ 18
+Added: Asset impairment charges, net 32 ( 6 ) 9
+Added: Related costs, net 21 3 11
+Added: Total Restructuring and related costs, net $ 167 $ 65 $ 38
+Added: Restructuring charges, net primarily includes employee severance costs and other contractual termination costs that may result from restructuring actions and initiatives.
+Added: 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 associated costs when they are both probable and reasonably estimable and is the primary accounting applied for most of our Restructuring actions.
Severance payments made under a one-time benefit arrangement are recorded upon communication to the affected employees.
−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.
+Added: In the event employees are required to perform future service beyond their minimum retention period in a one-time benefit arrangement, we record severance charges ratably over the remaining service period of those employees as restructuring related costs.
Contractual termination costs, including facility exit costs, are generally recognized when it has been determined that a liability has been incurred.
−Removed: Restructuring activities may include the disposal or abandonment of assets, including leased right-of-use assets, that require an acceleration of depreciation or an impairment charge reflecting the excess of an asset's book value over fair value or other recoveries.
−Removed: The recognition of restructuring costs requires that we make certain judgments and estimates regarding the nature, timing and amount of costs associated with planned initiatives.
+Added: Asset impairment charges, net primarily include impairments that may result from employee reductions, migration of facilities from higher-cost to lower-cost countries, and the consolidation of facilities within countries and is net of any gains we may realize on the disposal
+Added: Xerox 2023 Annual Report 105
+Added: of those assets.
+Added: Restructuring activities may also include the disposal or abandonment of assets, including leased right-of-use assets, that require an acceleration of depreciation or an impairment charge reflecting the excess of an asset's book value over fair value or other recoveries.
+Added: Restructuring related costs also include severance costs paid in connection with contractual outsourcing arrangements as well as professional support services associated with our business transformation initiatives.
+Added: The recognition of restructuring and related costs requires that we make certain judgments and estimates regarding the nature, timing and amount of costs associated with planned initiatives.
To the extent our actual results differ from our estimates and assumptions, we may be required to revise the estimated liabilities, requiring the recognition of additional restructuring costs or the reduction of liabilities already recognized.
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.
−Removed: Restructuring charges primarily relate to the Print and Other segment as amounts related to the Financing (FITTLE) segment were immaterial for all periods presented.
+Added: Restructuring Charges, Net
+Added: Restructuring charges, net primarily relate to the Print and Other segment as amounts related to the FITTLE segment were immaterial for all periods presented.
A summary of our restructuring program activity for the three years ended December 31, 2023, 2022 and 2021 is as follows:
−Removed: Severance and
−Removed: Related Costs Other Contractual
+Added: Costs Other Contractual
Termination Costs (2)
16 unchanged sentences
_____________
−Removed: (1) Represents net amount recognized within the Consolidated Statements of (Loss) Income for the years shown for restructuring.
+Added: (1) Represents net amount recognized within the Consolidated Statements of Income (Loss) for the years shown for restructuring.
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: Xerox 2022 Annual Report 114
The following table summarizes the reconciliation to the Consolidated Statements of Cash Flows:
1 unchanged sentence
2023 2022 2021
−Removed: Charges against reserve and currency $ ( 52 ) $ ( 73 ) $ ( 75 )
−Removed: Effects of foreign currency and other non-cash items — 1 ( 6 )
Restructuring Cash Payments $ ( 27 ) $ ( 52 ) $ ( 72 )
−Removed: 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: Effects of foreign currency and other non-cash items ( 1 ) — ( 1 )
+Added: Charges against reserve and currency $ ( 28 ) $ ( 52 ) $ ( 73 )
+Added: Asset Impairment Charges, Net
+Added: Charges associated with asset impairments represent the write-down of the related assets to their new cost basis.
Impairments are net of any potential sublease income or other recovery amounts.
−Removed: A summary of our restructuring-related asset impairment activity is as follows:
+Added: 2023 activity includes the impairment associated with the Company's sale of its Russian Subsidiary, which was completed in October 2023 and the impairment associated with the Company's sale of its Xerox Research Center of Canada (XRCC), the Canadian research division of Xerox, to Myant Capital Partners, which was completed in July 2023.
+Added: 2023 also includes impairments associated with strategic actions taken as a result of the Company's Project Reinvention, including the outsourcing of certain back-office functions and geographic simplification.
+Added: Xerox 2023 Annual Report 106
Year Ended December 31,
6 unchanged sentences
Adjustments/Reversals ( 4 ) ( 1 ) ( 2 )
−Removed: Net asset impairment (credit) charge $ ( 6 ) $ 9 $ —
+Added: Net asset impairment charge (credit) $ 32 $ ( 6 ) $ 9
_____________ _
1 unchanged sentence
(2) Reflect gain on the sales of exited surplus facilities and land.
+Added: Related Costs
In connection with our restructuring programs, we also incurred certain related costs as follows:
2 unchanged sentences
Retention-related severance/bonuses (1)
+Added: $ ( 2 ) $ — $ 6
Contractual severance costs — 3 1
32 unchanged sentences
Operating lease obligations 41 68
−Removed: Financing lease obligations 6 2
Interest payable 37 43
Restructuring reserves 119 39
−Removed: Restructuring related costs 12 18
−Removed: Product warranties 5 5
Dividends payable - Xerox Holdings (3)
8 unchanged sentences
Operating lease obligations 141 161
−Removed: Finance lease obligations 10 5
Environmental reserves 11 11
8 unchanged sentences
Xerox 2023 Annual Report 108
−Removed: Government Assistance
−Removed: 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.
−Removed: Estimated savings from these various government assistance programs are recorded as follows in the Consolidated Statements of (Loss) Income:
−Removed: Year Ended December 31,
−Removed: 2022 2021 2020
−Removed: Cost of sales $ — $ — $ 1
−Removed: Cost of services, maintenance and rentals — 20 73
−Removed: Research, development and engineering expenses — 1 1
−Removed: Selling, administrative and general expenses — 13 32
−Removed: Total Estimated savings $ — $ 34 $ 107
Cash, Cash Equivalents and Restricted Cash
6 unchanged sentences
Litigation deposits in Brazil 27 39
−Removed: Escrow and cash collections related to secured borrowing arrangements (1)
+Added: Escrow and cash collections related to secured borrowings and receivable sales (1)
Other restricted cash 22 1
2 unchanged sentences
__________________________
−Removed: (1) Represents collections on finance receivables pledged for secured borrowings that will be remitted to lenders in the following month.
+Added: (1) Includes collections on finance receivables pledged for secured borrowings or sold that will be remitted in the following month.
Restricted cash is reported in the Consolidated Balance Sheets as follows:
2 unchanged sentences
Total Restricted cash $ 98 $ 94
−Removed: Pension and Other Benefit Liabilities
−Removed: Pension liabilities (1)
−Removed: $ 1,097 $ 1,285
−Removed: Accrued compensation liabilities 61 66
−Removed: Deferred compensation liabilities (2)
−Removed: Pension and other benefit liabilities $ 1,175 $ 1,373
−Removed: __________________________
−Removed: (1) Refer to Note 18 - Employee Benefit Plans for additional information regarding pension liabilities.
−Removed: (2) Includes amounts measured at fair value on a recurring basis at December 31, 2022 and 2021 of $ 14 and $ 18 , respectively.
−Removed: Refer to Note 17 - Fair Value of Financial Assets and Liabilities for additional information regarding deferred compensation liabilities.
−Removed: Xerox 2022 Annual Report 117
Summarized Cash Flow Information
2 unchanged sentences
2023 2022 2021
−Removed: Provision for receivables Operating $ 36 $ 12 $ 116
−Removed: Provision for inventories Operating 29 34 31
−Removed: Provision for product warranties Operating 7 8 8
+Added: Provision for receivables (1)
+Added: Operating $ 36 $ 36 $ 12
+Added: Provision for inventory Operating 18 29 34
Depreciation of buildings and equipment Operating 60 68 76
2 unchanged sentences
Amortization of acquired intangible assets Operating 43 42 55
+Added: Amortization of patents (2)
+Added: Operating 9 10 11
Amortization of customer contract costs (3)
6 unchanged sentences
Payments to noncontrolling interests Financing ( 2 ) ( 1 ) ( 1 )
−Removed: Proceeds from noncontrolling interests Financing 6 15 —
+Added: Investment from noncontrolling interests Financing — 6 15
Repurchases related to stock-based compensation - Xerox Holdings Financing ( 8 ) ( 12 ) ( 18 )
__________________________
+Added: (1) Provision for receivables includes adjustments for customer accommodations and contract terminations of $ 8 , $( 7 ), and $ 5 for the three years ended December 31, 2023, 2022 and 2021, respectively.
+Added: (2) Amortization of patents is reported in Decrease in other current and long-term assets on the Consolidated Statements of Cash Flows.
(3) Amortization of customer contract costs is reported in Decrease in other current and long-term assets on the Consolidated Statements of Cash Flows.
1 unchanged sentence
Xerox 2023 Annual Report 109
+Added: Supplier Finance Programs
+Added: The Company has a program through a financial institution that enables vendors and suppliers, at their option, to receive early payment for their invoices.
+Added: The program operates in a similar manner to a purchasing card program, however with this program the Company directly receives invoices associated with those vendors and suppliers participating in the program.
+Added: The Company confirms and validates those invoices and the amounts due before submitting the invoices to the financial institution for early payment at a discounted amount.
+Added: The financial institution subsequently invoices the Company for the stated or full amount of the invoices paid early and we are required to make payment within 45 days of the statement date.
+Added: The overall impact of the program generally results in the Company paying its supplier and vendor invoices consistent with their original terms.
+Added: This program is generally available to all non-inventory vendors and suppliers.
+Added: Spending associated with this program during 2023 was approximately $ 125 .
+Added: All outstanding amounts related to the program are recorded within Accounts payable in our Consolidated Balance Sheets, and the associated payments are included in operating activities within our Consolidated Statements of Cash Flows.
+Added: The amounts due to vendors and suppliers participating in this program and included in Accounts payable were approximately $ 40 at both December 31, 2023 and 2022, respectively.
Note 15 – Debt
9 unchanged sentences
We defer costs associated with debt issuance over the applicable term, or to the first put date in the case of convertible debt or debt with a put feature.
−Removed: These costs are amortized as interest expense in our Consolidated Statements of (Loss) Income.
+Added: These costs are amortized as interest expense in our Consolidated Statements of Income (Loss).
+Added: Xerox 2023 Annual Report 110
Long-term debt was as follows:
6 unchanged sentences
Senior Notes due 2023 (2)
−Removed: Senior Notes due 2023 (2)
4.38 % 4.63 % $ — $ 300
Senior Notes due 2024 3.80 % 3.84 % 300 300
+Added: Term Loan B due 2029 (3)
+Added: 9.34 % 9.65 % 550 —
Senior Notes due 2035 4.80 % 4.84 % 250 250
3 unchanged sentences
United States $ 102 $ 790
−Removed: Subtotal Secured Borrowings $ 1,042 $ 561
+Added: France 182 195
+Added: Subtotal Xerox - Other Subsidiaries $ 361 $ 1,042
Principal debt balance $ 3,311 $ 3,742
3 unchanged sentences
Subtotal - Debt issuance costs $ ( 19 ) $ ( 18 )
−Removed: Unamortized premium 2 3
+Added: Unamortized (discount) premium ( 15 ) 2
current maturities ( 567 ) ( 860 )
3 unchanged sentences
(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.
−Removed: (3) Refer to the Secured Borrowings and Collateral section below for additional information.
+Added: (3) Represent secured borrowings of Xerox Corporation and its Other subsidiaries.
+Added: Refer to the Secured Borrowings and Collateral section below for additional information regarding the secured borrowings of Other subsidiaries, which are secured by finance receivables..
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.
−Removed: Xerox 2022 Annual Report 119
Xerox Holdings Corporation/Xerox Corporation Intercompany Loan
−Removed: In August 2020, Xerox Holdings Corporation issued $ 550 of 5.00 % Senior Notes due August 2025 (the 2025 Senior Notes) at par and $ 550 of 5.50 % Senior Notes due August 2028 (the 2028 Senior Notes) at par resulting in aggregate net proceeds (after fees and expenses) of approximately $ 1,089 .
−Removed: On August 24, 2020, Xerox Holdings Corporation issued an additional $ 200 of the 2025 Senior Notes at 100.75 % of par and an additional $ 200 of the 2028 Senior Notes at 102.50 % of par resulting in additional aggregate net proceeds (after premium, fees and expenses) of approximately $ 405 for total aggregate net proceeds from both issuances of approximately $ 1,494 .
−Removed: In 2020, the net debt proceeds were contributed by Xerox Holdings Corporation to Xerox Corporation and recorded as Additional paid-in capital by Xerox Corporation.
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 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.
−Removed: The amount was originally recorded as Additional paid-in capital in 2020 when the cash was contributed by Xerox Holdings Corporation.
+Added: The contribution was the result of the net debt proceeds Xerox Holdings Corporation received in connection with the issuance of the Senior Notes.
The intercompany loan was established to mirror the terms of Xerox Holdings Corporation’s 2025 and 2028 Senior Notes, including interest rates and payment dates.
1 unchanged sentence
At December 31, 2023 and 2022, the balance of the Intercompany Loan reported in Xerox Corporation’s Consolidated Balance Sheet was $ 1,497 and $ 1,496 , respectively, which is net of related debt issuance costs, and the intercompany interest payable was $ 30 and $ 30 , respectively.
−Removed: 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.
−Removed: Credit Facility
−Removed: 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.
−Removed: The new Credit Agreement provided Xerox Corporation with a $ 500 Revolving Credit Facility and has a maturity date of July 7, 2024.
−Removed: 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.
−Removed: This new facility replaced our prior $ 1.5 billion Credit Facility.
−Removed: In December 2022, Xerox Corporation amended the Revolving Credit Facility to reduce the aggregate amount of the commitment under the Credit Agreement to $ 250 .
−Removed: The reduction in borrowing capacity resulted in a debt extinguishment loss of approximately $ 1 related to the write-off of deferred debt issuance costs.
−Removed: 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.
−Removed: The new revolving Credit Agreement also includes a $ 150 letter of credit sub-facility.
−Removed: At December 31, 2022, we had no outstanding borrowings or letters of credit under the new revolving Credit Facility.
−Removed: At Xerox Corporation’s election, the borrowings under the new revolving Credit Facility in U.S.
−Removed: 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.
−Removed: 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).
−Removed: 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.
−Removed: Xerox Corporation may also borrow in currencies other than U.S.
−Removed: dollars pursuant to the credit agreement, and such borrowings will bear interest calculated under a construct similar to that described above.
−Removed: Principal outstanding would be payable in full at maturity on July 7, 2024.
−Removed: 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.
−Removed: 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 2023 Annual Report 111
−Removed: The new revolving Credit Facility requires the Company to comply with the following financial covenants measured as of the end of each fiscal quarter:
−Removed: (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.
−Removed: The required Total Net Leverage Ratio is 5.00 :1.00 at December 31, 2022;
−Removed: 4.75 :1.00 at March 31, 2023;
−Removed: 4.50 :1:00 at June 30, 2023 and 4.25 :1.00 thereafter.
−Removed: (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.
−Removed: The Interest Coverage Ratio is 2.50 :1.00 at December 31, 2022;
−Removed: and 2.75 :1.00 thereafter.
−Removed: 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.
−Removed: 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.
+Added: Revolving Credit Facility
+Added: In May 2023, Xerox Corporation, as borrower, its parent company, Xerox Holdings Corporation, and certain of its subsidiaries, as guarantors, entered into a five-year asset-based revolving credit agreement (the ABL Facility) with Citibank, N.A., as administrative and collateral agent and several participating lending banks including Citibank N.A.
+Added: The aggregate outstanding principal amount of the ABL is payable in full at maturity on May 22, 2028, and there are no scheduled principal payments prior to maturity.
+Added: We deferred approximately $ 7 of debt issuance costs in connection with the ABL Facility, which will be amortized over the five-year term.
+Added: Our previous $ 250 Revolving Credit Facility due July 2024 was terminated prior to entering into the ABL Facility and resulted in a debt extinguishment loss of approximately $ 1 related to the write-off of deferred debt issuance costs.
+Added: Under the ABL Facility, Xerox Corporation may borrow up to the lesser of (x) $ 300 and (y) a borrowing base calculated based on working capital amounts (Accounts receivable and Inventories) of the loan parties thereunder as set forth in the ABL Facility.
+Added: The ABL Facility includes an uncommitted accordion feature that allows Xerox Corporation to increase the facility by a total of up to $ 250 , subject to obtaining additional commitments from existing lenders or new lending institutions.
+Added: The ABL Facility also includes a $ 100 letter of credit subfacility.
+Added: Xerox Corporation's borrowings under the ABL Facility are supported by guarantees from Xerox Holdings Corporation and certain of Xerox Corporation's Canadian and English subsidiaries (and, within a specified period following the closing date of the TLB - see below - certain U.S., German and Belgian subsidiaries), and by security interests in substantially all of the working capital assets of Xerox Corporation, Xerox Holdings Corporation, and such Canadian and English subsidiaries (and, within a specified period following the closing date of the TLB (see below), substantially all assets of Xerox Corporation, Xerox Holdings Corporation and such U.S., Canadian and English subsidiaries (subject to certain exceptions and limitations set forth in the TLB), and all finance lease receivables of such German and Belgian subsidiaries).
+Added: At Xerox Corporation’s election, the loans under the ABL Facility will bear interest at either:
+Added: (1) a fluctuating rate per annum equal to the highest of (A) Citibank’s base rate, (B) a rate of 0.5 % in excess of the “NYFRB” rate, and (C) a rate of 1.0 % in excess of one-month Term SOFR, provided that such fluctuating rate shall not be less than 0.0 %, in each case plus an applicable margin (the loans bearing interest at such fluctuating rate, “ABR Loans”);
+Added: (2) the one-, three-, or six-month period or (as agreed to by the Agent and the Lenders) such other period, as selected by the Xerox Corporation, per annum Term SOFR (plus a 0.10 % credit spread adjustment), provided that such rate shall not be less than 0.0 %, plus an applicable margin (the loans bearing interest at such rate “Term SOFR Loans”).
+Added: The applicable margin for ABR loans ranges from 0.5 % to 1.0 % depending on the Company’s average excess availability.
+Added: The applicable margin for Term SOFR loans from 1.5 % to 2.0 % depending on the Company’s average daily excess availability.
+Added: At December 31, 2023, there were no borrowings under the ABL Facility, and no letters of credits were issued under the facility.
+Added: During 2023, maximum borrowings under the ABL Facility were $ 220 .
+Added: The ABL Facility requires the Company to comply with a fixed charge coverage ratio of 1X, as defined in the ABL Facility, measured as of the last day of each fiscal quarter during which excess availability is less than an amount equal to the greater of (A) $ 22.5 and (B) 10 % of the Line Cap (the lesser of the aggregate amount of Revolving Commitments and the then-applicable Borrowing Base).
+Added: Based on the excess availability at December 31, 2023, the fixed charge coverage ratio measurement was not applicable.
+Added: The ABL Facility also contains negative covenants governing dividends, investments, indebtedness, and other matters customary for similar facilities.
+Added: As of December 31, 2023, we were in full compliance with all covenants under the ABL Facility and no Event of Default (as such term is defined in the ABL Facility) had occurred.
+Added: If an event of default occurs under the ABL Facility, the entire principal amount outstanding, together with all accrued unpaid interest and other amounts owed in respect thereof, may be declared immediately due and payable, subject, in certain instances, to the expiration of applicable cure periods.
+Added: Term Loan B Credit Facility
+Added: In November 2023, Xerox Corporation, as borrower, and its parent company, Xerox Holdings Corporation, and certain of Xerox’s subsidiaries, as guarantors, entered into a first lien term loan Credit Agreement with Jefferies Finance LLC (Jefferies Finance), as Administrative Agent and Collateral Agent, and a syndicate of Lenders providing for a first lien senior secured term loan credit facility (the Term Loan B or “TLB”) to Xerox Corporation of $ 550 , which was fully extended as term loans to Xerox Corporation at closing.
+Added: The term loans under this facility
+Added: Xerox 2023 Annual Report 112
+Added: included an aggregate Original Issue Discount (OID) of $ 17 and debt issuance costs of $ 9 resulting in net proceeds of approximately $ 524 .
+Added: The OID and debt issuance costs were accordingly deferred and will be amortized over the term of the Loans.
+Added: The proceeds of the term loans were used to repay in full the bridge Loan Facility of $ 555 extended to Xerox under a credit agreement, dated as of September 28, 2023, entered into with Jefferies Finance as Administrative Agent, Collateral Agent and Lender.
+Added: The Loan Facility was a 5-year agreement with a final maturity date of September 28, 2028 and bore interest at an annual rate of 8.50 %.
+Added: The proceeds from that bridge loan were used to finance the repurchase of an aggregate of approximately 34 million shares of the Company’s common stock from Carl C.
+Added: Icahn and certain of his affiliates pursuant to the terms of a related purchase agreement as disclosed in Note 22 – Shareholders’ Equity.
+Added: The repayment of the Loan Facility resulted in a debt extinguishment loss of $ 7 primarily related to the write-off of deferred debt issuance costs.
+Added: Xerox’s obligations under the TLB are supported by, (i) on the closing date thereof, guarantees from the Company and certain of Xerox’s U.S., Canadian and English subsidiaries, and security interests in substantially all of the assets of Xerox, the Company, and such U.S., Canadian and English subsidiaries (subject to certain exceptions and limitations set forth in the TLB), and (ii) within a specified period following such closing date, guarantees from certain of Xerox’s German and Belgium subsidiaries, and security interests in the finance lease receivables of such German and Belgium subsidiaries.
+Added: Liens in favor of the Lenders under the TLB are subject to an intercreditor agreement entered into on the Closing Date with the Administrative Agent and Collateral Agent under Xerox’s existing ABL Facility, dated as of May 22, 2023.
+Added: At Xerox’s election, the term loans will bear interest at a per annum rate of either (1) a fluctuating rate equal to the highest of (A) a rate of 0.5 % in excess of the “NYFRB” rate, (B) the “prime rate” and (C) a rate of 1.0 % in excess of one-month Term SOFR, plus an applicable margin of 3.00 %, or (2) Term SOFR for a one-, three- or six-month interest period or (as agreed to by the Agent and the Lenders) such other period, as selected by the company (provided that such rate shall not be less than 0.50 %), plus an applicable margin of 4.00 %, for Term SOFR term loans, or 3.00 % for ABR term loans.
+Added: Based on Xerox’s current elections, the $ 550 of term loans at December 31, 2023 currently bear interest at an average of 9.34 % through January 31, 2024, at which time the interest rate will reset based on Xerox’s elections.
+Added: The term loans are repayable in full at maturity in November 2029 and amortize at a rate of 5 % per annum in 2024 and 2025, 7.5 % per annum in 2026 and 10 % per annum thereafter.
+Added: If the term loans are voluntarily prepaid in connection with a repricing transaction within six months of the closing date, a prepayment premium of 1 % will apply.
+Added: If an event of default occurs under the TLB, the entire principal amount outstanding thereunder, 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.
+Added: The TLB also contains customary excess cash flow and asset sale mandatory prepayments, reporting covenants and negative covenants governing dividends, investments, indebtedness, and other matters that are customary for similar term loan B facilities.
Secured Borrowings and Collateral
7 unchanged sentences
Conversely, the credit holders of these SPEs do not have legal recourse to the Company’s general credit.
+Added: Xerox 2023 Annual Report 113
Below are the secured assets and obligations held by subsidiaries of Xerox, which are included in our Consolidated Balance Sheets.
5 unchanged sentences
United States (4)
−Removed: December 2022 $ 370 $ — $ 247 7.43 % 2025
January 2022 209 — 77 6.82 % 2024
1 unchanged sentence
$ 298 $ 2 $ 102
−Removed: April 2022 $ 63 $ — $ 57 5.45 % 2025
−Removed: December 2022 $ 235 $ — $ 195 3.03 % 2025
+Added: Canada (4)(5)
+Added: July 2023 $ 86 $ — $ 77 6.74 % 2026
+Added: November 2023 $ 235 $ — $ 182 5.42 % 2026
Total $ 619 $ 2 $ 361
−Removed: Xerox 2022 Annual Report 121
Balance at December 31, 2022
4 unchanged sentences
United States (4)
−Removed: September 2021 $ 308 $ 8 $ 293 1.40 % 2024
December 2022 (7)
$ 370 $ — $ 247 7.43 % 2025
+Added: January 2022 528 — 407 5.83 % 2024
+Added: September 2021 180 5 136 5.65 % 2024
$ 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: ____________ _
(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, 2023 and 2022 .
−Removed: (2) Represents Principal Balance and excludes debt issuance costs of $ 5 and $ 1 as of December 31, 2022 and 2021 , respectively.
+Added: (2) Represents principal debt balance and excludes debt issuance costs of $ 1 and $ 5 as of December 31, 2023 and 2022 , respectively.
+Added: (3) Represents the pre-hedged rate - refer to Note 16 - Financial Instruments for additional information regarding hedging of these borrowings.
(4) Secured assets and obligations held by SPEs.
−Removed: (4) Represents the pre-hedged rate - refer to Note 16 - Financial Instruments for details regarding hedging of these borrowings.
+Added: (5) In July 2023, the outstanding balance from the April 2022 loan, was refinanced into a new loan, resulting in additional net proceeds of approximately $ 52 .
+Added: (6) In November 2023, the outstanding balance from the December 2022 loan, was refinanced into a new loan, resulting in additional net proceeds of approximately $ 107 .
+Added: (7) In the second quarter of 2023, we repaid the remaining balance of $ 185 early, and incurred a $ 2 loss on extinguishment.
Interest paid on our short-term and long-term debt amounted to $ 201 , $ 201 and $ 203 for the years ended December 31, 2023, 2022 and 2021, respectively.
6 unchanged sentences
_____________
−Removed: (1) Includes Equipment financing interest as well as non-financing interest expense included in Other expenses, net in the Consolidated Statements of (Loss) Income.
+Added: (1) Includes Equipment financing interest as well as non-financing interest expense included in Other expenses, net in the Consolidated Statements of Income (Loss).
(2) Interest expense of Xerox Corporation included intercompany expense associated with the Xerox Holdings Corporation/Xerox Corporation Intercompany Loan of $ 80 , $ 80 and $ 80 for the three years ended December 31, 2023, 2022 and 2021, respectively.
−Removed: (3) Includes Finance income, as well as other interest income that is included in Other expenses, net in the Consolidated Statements of (Loss) Income.
+Added: (3) Includes Finance income, as well as other interest income that is included in Other expenses, net in the Consolidated Statements of Income (Loss).
+Added: Xerox 2023 Annual Report 114
Equipment financing interest is determined based on an estimated cost of funds, applied against the estimated level of debt required to support our net finance receivables.
1 unchanged sentence
The estimated level of debt continues to be based on an assumed 7 to 1 leverage ratio of debt/equity as compared to our average finance receivable balance during the applicable period.
−Removed: Xerox 2022 Annual Report 122
Note 16 – Financial Instruments
3 unchanged sentences
We enter into limited types of derivative contracts, including interest rate swap agreements, interest rate caps, foreign currency spot, forward and swap contracts and net purchased foreign currency options to manage interest rate and foreign currency exposures.
−Removed: Our primary foreign currency market exposures include the Japanese Yen, Euro and U.K.
−Removed: Pound Sterling.
+Added: Our primary foreign currency market exposures include the Euro, U.K.
+Added: Pound Sterling, and the Japanese Yen.
The fair market values of all our derivative contracts change with fluctuations in interest rates and/or currency exchange rates and are designed so that any changes in their values are offset by changes in the values of the underlying exposures.
7 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: We had no fair value hedges for the three-year period ended December 31, 2022.
+Added: We had no fair value hedges for the three-year period ended December 31, 2023, 2022, and 2021, respectively.
Cash Flow Hedges
−Removed: 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: We use interest rate swaps and caps to manage the exposure to variability in the interest rate payments on our finance receivable secured loan borrowings.
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.
−Removed: At December 31, 2022 there were four interest rate derivatives outstanding as follows:
−Removed: Secured Borrowing Derivative Type Principal Debt (1)
+Added: At December 31, 2023 there were four interest rate derivatives outstanding on our finance receivable secured borrowings that are designated as cash flow hedges as follows:
+Added: Borrowing Derivative Type Principal Debt (1)
Notional Amount
Expected Maturity Pre-Hedged Rate Hedged Rate Net Fair Value
−Removed: United States N/A $ 407 $ — 2024 5.83 % — % $ —
−Removed: United States Cap 136 129 2024 5.65 % 0.50 % 4
−Removed: United States Cap 247 247 2025 7.43 % 4.50 % 1
+Added: (September 2021) Cap $ 25 $ 30 2024 6.76 % 0.50 % —
Canada Swap 77 77 2026 6.74 % 5.19 % ( 1 )
France Cap 182 118 2026 5.42 % 3.00 % —
+Added: France Cap — 65 2026 5.42 % 4.00 % 1
Total $ 284 $ 290 $ —
_____________
−Removed: (1) Excludes debt issuance costs of $ 5 at December 31, 2022.
−Removed: 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.
+Added: (1) Reflects principal debt and excludes debt issuance costs of $ 1 at December 31, 2023.
+Added: No material amount of ineffectiveness was recorded in the Consolidated Statements of Income (Loss) for these designated cash flow hedges and all components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
+Added: In December 2023, an interest rate Cap associated with the December 2022 U.S.
+Added: secured borrowing with a notional value of $ 173 was dedesignated as a cash flow hedge and the net fair value recorded in Accumulated Other Comprehensive Loss was reclassified to earnings.
+Added: Xerox 2023 Annual Report 115
Foreign Exchange Risk Management
1 unchanged sentence
As a part of our foreign exchange risk management strategy, we use derivative instruments, primarily forward contracts and purchased option contracts, to hedge the following foreign currency exposures, thereby reducing volatility of earnings or protecting fair values of assets and liabilities:
−Removed: • Foreign currency-denominated assets and liabilities
+Added: • Foreign currency-denominated assets and liabilities, and
• Forecasted purchases, and sales in foreign currency.
−Removed: Xerox 2022 Annual Report 123
−Removed: 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.
+Added: At December 31, 2023, we had outstanding forward exchange and purchased option contracts with terms of less than 12 months.
At December 31, 2023, approximately 94 % of these contracts mature within three months, 3 % in three to six months and 3 % in six to twelve months.
−Removed: The associated exposures being hedged at December 31, 2022 were higher by 38.5 %, as compared to December 31, 2021.
−Removed: There have not been any material changes in our hedging strategy during 2022.
+Added: During second quarter 2023, as a result of a change in the currency terms included in a significant supplier inventory contract, forecasted purchases of inventory in YEN were no longer expected.
+Added: This change resulted in decrease in our YEN/USD and YEN/EUR hedging positions in 2023.
+Added: There have not been any other material changes in our hedging strategy during 2023.
The following is a summary of the primary hedging positions and corresponding fair values as of December 31, 2023:
−Removed: Currencies Hedged (Buy/Sell) Gross
+Added: Year Ended December 31,
+Added: Currencies Hedged (Buy/Sell) Gross Notional
Value Fair Value
+Added: Gross Notional
+Added: Value Fair Value
+Added: Pound Sterling $ 385 $ 3 $ 297 $ 6
+Added: Dollar/Euro 359 ( 3 ) 127 ( 1 )
+Added: Euro/Canadian Dollar 169 — 131 —
+Added: Dollar 150 1 70 —
Japanese Yen/U.S.
Dollar 113 1 389 3
−Removed: Pound Sterling 297 6
Japanese Yen/Euro 60 — 250 ( 1 )
−Removed: Euro/Canadian Dollar 131 —
−Removed: Dollar/Euro 127 ( 1 )
Dollar/Canadian Dollar — — 53 1
1 unchanged sentence
Euro/Swedish Krona — — 45 —
+Added: Pound Sterling/Euro 36 — — —
+Added: Euro/Danish Krone 25 — — —
+Added: Canadian Dollar/Euro 24 — — —
All Other 75 — 130 —
3 unchanged sentences
Foreign Currency Cash Flow Hedges
−Removed: We designate a portion of our foreign currency derivative contracts as cash flow hedges of our foreign currency-denominated inventory purchases, sales and expenses.
−Removed: 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.
+Added: We designate a portion of our foreign currency derivative contracts as cash flow hedges of our foreign currency-denominated inventory purchases.
+Added: All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
+Added: The amount of ineffectiveness recorded in the Consolidated Statements of Income (Loss) for these designated cash flow hedges was not material for the three years ended December 31, 2023.
The net liability fair value of these contracts was $ 2 and $ 4 as of December 31, 2023 and 2022, respectively.
−Removed: Summary of Derivative Instruments Fair Value
−Removed: The following table provides a summary of the fair value amounts of our derivative instruments:
−Removed: Designation of Derivatives Balance Sheet Location 2022 2021
−Removed: Derivatives Designated as Hedging Instruments
−Removed: Foreign exchange contracts – forwards Other current assets $ 5 $ 3
−Removed: Accrued expenses and other current liabilities ( 9 ) ( 6 )
−Removed: Interest rate cap Other long-term assets 6 1
−Removed: Interest rate swap Other long-term assets 1 —
−Removed: Net Designated Derivative Asset (Liability) $ 3 $ ( 2 )
−Removed: Derivatives NOT Designated as Hedging Instruments
−Removed: Foreign exchange contracts – forwards Other current assets $ 14 $ 1
−Removed: Accrued expenses and other current liabilities ( 2 ) ( 5 )
−Removed: Net Undesignated Derivative Asset (Liability) $ 12 $ ( 4 )
−Removed: Summary of Derivatives Total Derivative Assets $ 26 $ 5
−Removed: Total Derivative Liabilities ( 11 ) ( 11 )
−Removed: Net Derivative Asset (Liability) $ 15 $ ( 6 )
Xerox 2023 Annual Report 116
14 unchanged sentences
Total $ ( 18 ) $ ( 35 ) $ ( 12 ) $ ( 18 ) $ ( 35 ) $ ( 7 )
−Removed: 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.
+Added: For the three years ended December 31, 2023, 2022 and 2021 no amount of ineffectiveness was recorded in the Consolidated Statements of Income (Loss) for these designated cash flow hedges.
All components of each derivative’s gain or (loss) were included in the assessment of hedge effectiveness.
4 unchanged sentences
They are not designated as hedges since there is a natural offset for the remeasurement of the underlying foreign currency-denominated asset or liability.
+Added: The net asset fair value of these contracts was $ 5 and $ 12 as of December 31, 2023 and 2022, respectively.
The following table provides a summary of gains (losses) on non-designated derivative instruments:
2 unchanged sentences
Foreign exchange contracts – forwards Other expense – Currency gains (losses), net $ 26 $ 17 $ ( 26 )
−Removed: For the three years ended December 31, 2022, 2021 and 2020, we recorded Currency losses, net of $ 13 , $ 7 and $ 3 , respectively.
+Added: For the three years ended December 31, 2023, 2022 and 2021, we recorded net currency losses, net of $ 28 , $ 13 and $ 7 , respectively.
Net currency gains and losses include the mark-to-market adjustments of the derivatives not designated as hedging instruments and the related cost of those derivatives, as well as the remeasurement of foreign currency-denominated assets and liabilities and are included in Other expenses, net.
4 unchanged sentences
As of December 31,
−Removed: Foreign exchange contracts - forwards $ 19 $ 4
−Removed: Interest rate cap 6 1
−Removed: Interest rate swap 1 —
+Added: Derivatives $ 11 $ 26
Deferred compensation investments in mutual funds 14 15
Total $ 25 $ 41
−Removed: Foreign exchange contracts - forwards $ 11 $ 11
+Added: Derivatives $ 8 $ 11
Deferred compensation plan liabilities 13 14
26 unchanged sentences
December 31 is the measurement date for all of our post-retirement benefit plans.
−Removed: Where legally possible, we have amended our major defined benefit pension plans to freeze current benefits and eliminate benefit accruals for future service, including our primary U.S.
−Removed: defined benefit plan for salaried employees, the Canadian Salary Pension Plan and the U.K.
−Removed: Final Salary Pension Plan.
+Added: Where legally possible, we have amended our major defined benefit pension plans to freeze current benefits and eliminate benefit accruals for future service, including our U.S.
+Added: defined benefit plans, the Canadian Salary Pension Plan and the U.K.
+Added: pension plan.
In certain Non-U.S.
plans, we are required to continue to consider salary increases and inflation in determining the benefit obligation related to prior service.
−Removed: Effective January 1, 2023, our pension plan in the Netherlands was changed to a Defined Contribution Plan for future service.
+Added: In December 2023, the Trustees for the U.K.
+Added: pension plan entered an insurance buy-in contract, in accordance with U.K.
+Added: pension regulations.
+Added: The insurance buy-in contract is a group annuity contract that is expected to provide an income stream to cover a significant majority of the cash flows arising for the plan population with future contracted payments.
+Added: However, the benefit obligation remains with the plan and the Company.
+Added: This contract is issued by a third-party insurance company with no affiliation to the Company or the plan.
+Added: The contract was funded through existing plan assets, with a portion of the premium payments for the policy being deferred until full liquidation of certain illiquid assets of the plan.
+Added: The insurance contract is valued on an insurer pricing basis, which reflects the purchase price adjusted for changes in discount rates and other actuarial assumptions, which approximates fair value.
+Added: The insurance buy-in contract is classified as a Level 3 investment in the Plan Asset tables below.
+Added: This buy-in contract was an extension of a similar contract purchased in 2022 that covered a portion of member benefit payments.
+Added: The buy-in arrangement also allows for the possible future conversion into a buy-out arrangement where the insurance company would assume full responsibility for the U.K.
+Added: pension plan pension obligations, at which time the Company would derecognize the assets and liabilities of the pension plan and realize a settlement gain or loss as a component of the net periodic pension cost.
+Added: Effective January 1, 2023, we implemented a new defined contribution plan in the Netherlands to provide future retirement benefits for eligible employees and ceased accruals in in the existing pension plan in the Netherlands.
We recorded this change as a curtailment effective December 31, 2022.
−Removed: The benefits accrued prior to 2023 under the Netherlands Pension Plan remain in a Collective Defined Contribution (CDC) plan.
−Removed: 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.
+Added: The benefits accrued prior to 2023 under the pension plan in the Netherlands 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 through 2022.
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 continues to be accounted for as a defined benefit plan.
−Removed: 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.
−Removed: Our primary domestic defined benefit pension plans provided a benefit at the greater of (i) the highest average pay and years of service formula, (ii) the benefit calculated under a formula that provides for the accumulation of salary and interest credits during an employee's work life or (iii) the individual account balance from the Company's prior defined contribution plan (Transitional Retirement Account or TRA).
−Removed: Pension plan assets consist of both defined benefit plan assets and assets legally restricted to the TRA accounts.
−Removed: 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 and expected return.
+Added: GAAP this plan doesn’t meet the definition of a defined contribution plan and therefore it continues to be accounted for as a defined benefit plan.
Xerox 2023 Annual Report 119
6 unchanged sentences
Service cost — 1 5 16 1 1
−Removed: Interest (income) cost ( 65 ) 80 123 88 8 8
+Added: Interest cost (income) 116 ( 65 ) 188 123 10 8
Plan participants' contributions — — 1 2 7 9
−Removed: Actuarial gain ( 643 ) ( 86 ) ( 1,697 ) ( 233 ) ( 59 ) ( 1 )
+Added: Actuarial loss (gain) 75 ( 643 ) 165 ( 1,697 ) ( 5 ) ( 59 )
Currency exchange rate changes — — 205 ( 534 ) 2 ( 7 )
24 unchanged sentences
(1) Includes under-funded and unfunded plans.
+Added: Pension and other benefit liabilities include the following additional accounts at December 31st:
+Added: Pension liabilities (1)
+Added: $ 1,145 $ 1,097
+Added: Accrued compensation liabilities 56 61
+Added: Deferred compensation liabilities (2)
+Added: Pension and other benefit liabilities $ 1,216 $ 1,175
+Added: __________________________
+Added: (1) Reflects pension net funded status liability.
+Added: (2) Includes amounts measured at fair value on a recurring basis at December 31, 2023 and 2022 of $ 13 and $ 14 , respectively.
+Added: Refer to Note 17 - Fair Value of Financial Assets and Liabilities for additional information regarding deferred compensation liabilities.
Benefit plans pre-tax amounts recognized in AOCL at December 31st:
13 unchanged sentences
$ 2,146 $ 1,528 $ 2,098 $ 1,518
−Removed: 44 38 181 144
Unfunded Plans:
9 unchanged sentences
$ 2,146 $ 1,528 $ 2,098 $ 1,518
−Removed: 45 38 810 751
Unfunded Plans:
25 unchanged sentences
Service cost $ — $ 1 $ 2 $ 5 $ 16 $ 20 $ 1 $ 1 $ 2
−Removed: Interest (income) cost (1)
+Added: Interest cost (income) (1)
116 ( 65 ) 80 188 123 88 10 8 8
2 unchanged sentences
Recognized net actuarial loss (gain) 16 13 17 11 23 59 ( 12 ) ( 4 ) 1
−Removed: Amortization of prior service credit — ( 1 ) ( 2 ) 1 ( 1 ) ( 1 ) ( 8 ) ( 66 ) ( 76 )
+Added: Amortization of prior service (credit) cost — — ( 1 ) 5 1 ( 1 ) ( 15 ) ( 8 ) ( 66 )
Recognized settlement loss 19 56 54 1 — 1 — — —
8 unchanged sentences
Amortization of net actuarial (loss) gain ( 35 ) ( 69 ) ( 71 ) ( 12 ) ( 23 ) ( 60 ) 12 4 ( 1 )
−Removed: Amortization of net prior service credit — 1 2 ( 1 ) 1 1 15 66 76
+Added: Amortization of net prior service credit (cost) — — 1 ( 5 ) ( 1 ) 1 15 15 66
Curtailment gain — — — — 4 4 — — —
3 unchanged sentences
_____________
−Removed: (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.
−Removed: (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.
+Added: (1) Interest cost for Pension Benefits includes interest expense on non-TRA obligations of $ 284 , $ 205 and $ 150 and interest expense/(income) directly allocated to TRA participant accounts of $ 20 , $( 147 ) and $ 18 for the years ended December 31, 2023, 2022 and 2021, respectively.
+Added: (2) Expected return on plan assets includes expected investment income on non-TRA assets of $ 300 , $ 302 and $ 307 and actual investment income/(loss) on TRA assets of $ 20 , $( 147 ) and $ 18 for the years ended December 31, 2023, 2022 and 2021, respectively.
(3) Amounts represent the pre-tax effect included in Other comprehensive income.
Refer to Note 24 - Other Comprehensive (Loss) Income for the related tax effects and the net of tax amounts.
−Removed: Xerox 2022 Annual Report 130
Plan Amendments
+Added: In April 2023 and 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 2023 and 2022 pension increase award to 6.5 % and 7.5 %, respectively.
+Added: The April 2023 plan amendment resulted in an increase of $ 36 in the projected benefit obligation (PBO) for this plan and the April 2022 plan amendment resulted in an increase of approximately $ 72 in the PBO for this plan, with both amounts inclusive of other remeasurement adjustments for changes in actuarial assumptions.
In October 2018, the High Court of Justice in the United Kingdom (the High Court) ruled that Lloyds Bank PLC was required to equalize benefits payable to men and women under its U.K.
2 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 GBP 33 million (approximately USD $ 42 ).
−Removed: This increase in the benefit obligation was recorded as a plan amendment in 2018.
−Removed: 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.
−Removed: 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.
−Removed: This latest estimate reflects a more recent analysis completed by the Plan Actuary adjusted approximately for market conditions at December 31, 2022.
−Removed: The equalization method has now been agreed between the Company and Trustee and is now in the process of being implemented.
−Removed: The method decision does not materially impact the estimated cost.
−Removed: In April 2022, our U.K.
−Removed: 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.
−Removed: Retail Price Index (RPI).
−Removed: This amendment resulted in an increase of approximately $ 73 in the projected benefit obligation (PBO) for this plan.
+Added: At December 31, 2023, the aggregate cost for this matter was estimated to be approximately GBP 17 million (approximately USD $ 22 ).
+Added: This latest estimate reflects a most recent analysis completed by the Plan Actuary adjusted for market conditions at December 31, 2023.
+Added: The equalization method was agreed between the Company and Trustee and is in the process of being implemented.
+Added: Xerox 2023 Annual Report 122
Retiree Health Plans:
5 unchanged sentences
This negative plan amendment resulted in a reduction of $ 50 in the postretirement benefit obligation.
−Removed: In October 2020, we reduced the level of Company cost sharing for retiree health care benefits provided to certain existing non-union retirees.
−Removed: This change to our U.S.
−Removed: Retiree Health Plan was effective January 1, 2021.
−Removed: This negative plan amendment resulted in a reduction in the postretirement benefit obligation of $ 11 .
−Removed: 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.
−Removed: Xerox 2022 Annual Report 131
Current Allocation
23 unchanged sentences
(2) Other NAV includes mutual funds of $ 92 (measured at NAV) which are invested approximately 70 % in fixed income securities and approximately 30 % in equity securities.
−Removed: (3) Other Level 1 includes net non-financial, Non-U.S.
−Removed: assets of $ 22 , such as due to/from broker, interest receivables and accrued expenses.
+Added: (3) At December 31, 2023, other Level 1 includes net non-financial (liabilities)/assets, such as due to/from broker, interest receivables and accrued expenses.
+Added: Plans had net liabilities of $( 18 ), while the Non-U.S.
+Added: plans had net assets of $ 24 .
Xerox 2023 Annual Report 123
20 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 (liabilities) 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 assets of $ 22 , such as due to/from broker, interest receivables and accrued expenses.
The following tables represents a rollforward of the defined benefit plans assets measured at fair value using significant unobservable inputs (Level 3 assets):
16 unchanged sentences
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.
−Removed: 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.
+Added: 2022 and 2023 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.
11 unchanged sentences
(1) Target allows for an additional allocation to synthetic equity which is offset by cash.
+Added: (2) Significant changes in asset allocation in Non-U.S.
+Added: are due to the U.K.
+Added: pension plan entering an insurance buy-in contract, which is included in Other.
We employ a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk.
23 unchanged sentences
Total Retirement Plans $ 102 $ 150
−Removed: The 2022 U.S.
−Removed: 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: Approximately $ 25 of estimated contributions are included in 2023 for our U.S.
+Added: Approximately $ 30 of the 2023 contributions for our U.S.
+Added: plans were for our tax-qualified defined benefit plans.
+Added: Approximately $ 80 of estimated contributions for 2024 are for our U.S.
tax-qualified defined benefit plans.
−Removed: 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.
−Removed: In addition, the decrease in non-U.S.
−Removed: plan contributions in 2023 is due to further contributions to our U.K.
−Removed: defined benefit pension plan not being required after October 2022 following agreement of the triennial valuation of the Plan with the Plan Trustees.
+Added: However, once the next actuarial valuations and projected results are available, actual contributions required to meet minimum funding requirements will be determined and finalized and may change from the current estimate.
Xerox 2023 Annual Report 125
40 unchanged sentences
We recorded charges related to our defined contribution plans of $ 40 in 2023, $ 37 in 2022 and $ 18 in 2021.
−Removed: During 2021 and 2020, the Company suspended its full year employer matching contribution for its U.S.
+Added: During 2021, the Company suspended its full year employer matching contribution for its U.S.
based 401(k) plan for salaried (non-union) employees.
2 unchanged sentences
Note 19 - Income and Other Taxes
−Removed: (Loss) income before income taxes and equity income (pre-tax (loss) income) was as follows:
+Added: Loss before income taxes was as follows:
Year Ended December 31,
2023 2022 2021
−Removed: Domestic (loss) income $ ( 319 ) $ ( 343 ) $ 353
−Removed: Foreign (loss) income ( 9 ) ( 132 ) ( 101 )
−Removed: (Loss) Income before Income Taxes and Equity Income $ ( 328 ) $ ( 475 ) $ 252
−Removed: The components of Income tax (benefit) expense were as follows:
+Added: Domestic loss $ ( 89 ) $ ( 319 ) $ ( 341 )
+Added: Foreign income (loss) 61 ( 6 ) ( 131 )
+Added: Loss before Income Taxes $ ( 28 ) $ ( 325 ) $ ( 472 )
+Added: The components of Income tax benefit were as follows:
Year Ended December 31,
9 unchanged sentences
Deferred ( 24 ) ( 9 ) ( 8 )
−Removed: Income Tax (Benefit) Expense $ ( 3 ) $ ( 17 ) $ 64
+Added: Income Tax Benefit $ ( 29 ) $ ( 3 ) $ ( 17 )
A reconciliation of the U.S.
14 unchanged sentences
Goodwill impairment — % ( 22.0 ) % ( 29.1 ) %
+Added: Divestitures 25.3 % — % — %
Other ( 0.9 ) % 0.9 % 0.1 %
6 unchanged sentences
On a consolidated basis, we paid a total of $ 51 , $ 50 and $ 61 in income taxes to federal, foreign and state jurisdictions during the three years ended December 31, 2023, 2022 and 2021, respectively.
−Removed: Total income tax expense (benefit) was allocated to the following items:
+Added: Total income tax expense was allocated to the following items:
Year Ended December 31,
2023 2022 2021
−Removed: Pre-tax (loss) income $ ( 3 ) $ ( 17 ) $ 64
+Added: Pre-tax loss $ ( 29 ) $ ( 3 ) $ ( 17 )
Common shareholders' equity:
38 unchanged sentences
At December 31, 2023 we have not provided deferred taxes on our undistributed pre-1987 E&P of approximately $ 310 , as such undistributed earnings have been determined to be indefinitely reinvested and we currently do not plan to initiate any action that would precipitate a deferred tax impact.
−Removed: The decrease from the amount at December 31, 2021 of $ 330 is due to foreign currency translation adjustments.
Additionally, we have also not provided deferred taxes on the outside basis differences in our investments in foreign subsidiaries that are unrelated to undistributed earnings.
10 unchanged sentences
Deferred and share-based compensation 40 26
−Removed: Depreciation 2 31
+Added: Pension 147 97
Operating lease liabilities 43 49
21 unchanged sentences
The deferred tax assets requiring significant judgment are U.S.
−Removed: foreign tax credit carryforwards with a limited life.
−Removed: 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.
+Added: tax credit carryforwards with a limited life.
+Added: The net change in the total valuation allowance for the years ended December 31, 2023, 2022 and 2021 was an increase of $ 9 , an increase of $ 9 and a decrease of $ 39 , 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.
5 unchanged sentences
Note 20 – Contingencies and Litigation
−Removed: As more fully discussed below, we are involved in a variety of claims, lawsuits, investigations and proceedings concerning:
+Added: We are involved in a variety of claims, lawsuits, investigations and proceedings concerning:
securities law;
38 unchanged sentences
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) 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: On December 13, 2019, alleged shareholder Miami Firefighters’ Relief & Pension Fund (Miami Firefighters) filed a 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).
Xerox Holdings was named as a nominal defendant in the case but no monetary damages are sought against it.
−Removed: The complaint includes four causes of action:
+Added: Miami Firefighters alleges:
breach of fiduciary duty of loyalty against the Icahn defendants;
2 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, among other things, a judgment of breach of fiduciary duties against the Icahn defendants and the Directors, and;
−Removed: disgorgement to Xerox Holdings of profits Icahn Capital and High River earned from trading in HP stock.
−Removed: The Court subsequently granted plaintiff’s unopposed motion to consolidate a similar action filed on December 26, 2019 by alleged shareholder Steven J.
−Removed: Reynolds against the same parties in the same court, and designating Miami Firefighters’ counsel as lead counsel in the consolidated action.
−Removed: Defendants moved to dismiss in August 2020, and the Court granted defendants’ motions and dismissed the action in its entirety.
−Removed: 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.
−Removed: The claims asserted against the Directors remain dismissed.
−Removed: 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.
−Removed: 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.
−Removed: The Icahn Defendants subsequently filed a motion for summary judgment seeking dismissal of all claims against them.
+Added: Miami Firefighters seeks 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.
+Added: This action was consolidated with a similar action brought by Steven J.
+Added: Reynolds against the same parties in the same court.
+Added: Miami Firefighters’ counsel has been designated as lead counsel in the consolidated action.
+Added: Claims asserted against the Directors were later dismissed.
+Added: In December 2021, the Xerox Holdings Board approved the formation of a Special Litigation Committee (SLC) to investigate and evaluate Miami Firefighters' claims and determine the course of action that would be in the best interests of the Company and its shareholders.
+Added: The SLC concluded that the claims were without merit and pursuing them would not be in the best interest of Xerox or its shareholders.
+Added: The SLC's request that those claims be dismissed is pending before a New York state appellate court.
Xerox Holdings Corporation v.
Factory Mutual Insurance Company and Related Actions:
−Removed: 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, 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: On March 10, 2021, Xerox Holdings Corporation (Xerox Holdings) filed a complaint for breach of contract and declaratory judgment against Factory Mutual Insurance Company (FM) in Rhode Island Superior Court, Providence County seeking insurance coverage for business interruption losses resulting from the coronavirus/COVID-19 pandemic.
+Added: Xerox Holdings alleges that FM 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;
that Xerox Holdings’ worldwide actual and projected losses through the end of 2020 totaled in excess of $ 300 ;
−Removed: and that defendant improperly denied and rejected coverage following Xerox Holdings' claim for coverage.
−Removed: 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: and that FM incorrectly denied coverage for those losses.
+Added: Xerox Holdings seeks full coverage of costs and losses under FM’s policy.
Subsidiaries of Xerox Holdings filed similar complaints and related requests for arbitration in Toronto, London, and Amsterdam for Canadian, UK and European losses.
1 unchanged sentence
proceedings pending the outcome of the U.S.
−Removed: 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.
+Added: litigation is in abeyance as the Rhode Island Supreme Court prepares to hear another COVID-19 insurance coverage case against a FM affiliate with overlapping legal 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
−Removed: Xerox 2022 Annual Report 140
−Removed: 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 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.
2 unchanged sentences
Contingent obligations related to indemnifications arising from our divestitures and contingent consideration provided for by our acquisitions are not expected to be material to our financial position, results of operations or cash flows.
+Added: Xerox 2023 Annual Report 131
Other Agreements:
18 unchanged sentences
Finally, in connection with Xerox Holdings Corporation's and/or Xerox Corporation's acquisition of businesses, we may become contractually obligated to indemnify certain former and current directors, officers and employees of those businesses in accordance with pre-acquisition by-laws and/or indemnification agreements and/or applicable state law.
−Removed: Product Warranty Liabilities
−Removed: In connection with our normal sales of equipment, including those under sales-type leases, we generally do not issue product warranties.
−Removed: Our arrangements typically involve a separate full-service maintenance agreement with the customer.
−Removed: The agreements generally extend over a period equivalent to the lease term or the expected useful life of the equipment under a cash sale.
−Removed: The service agreements involve the payment of fees in return for our performance of repairs and maintenance.
−Removed: 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
−Removed: Xerox 2022 Annual Report 141
−Removed: certain cash sales, we may issue a limited product warranty if negotiated by the customer.
−Removed: We also issue warranties for certain of our entry level products, where full-service maintenance agreements are not available.
−Removed: In these instances, we record warranty obligations at the time of the sale.
−Removed: Aggregate product warranty liability expenses for the three years ended December 31, 2022, 2021 and 2020 were $ 7 , $ 8 and $ 8 , respectively.
−Removed: Total product warranty liabilities as of December 31, 2022 and 2021 were $ 6 and $ 6 , respectively.
We have issued or provided approximately $ 241 of guarantees as of December 31, 2023 in the form of letters of credit or surety bonds issued to i) support certain insurance programs;
6 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.
+Added: Xerox 2023 Annual Report 132
Note 21 - Preferred Stock
18 unchanged sentences
Xerox Holdings Corporation is authorized to issue 437.5 million shares of Common stock, $ 1.00 par value per share.
+Added: At December 31, 2023, 14 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), which has been fully utilized as of December 31, 2022.
−Removed: 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):
−Removed: Authorized share repurchase program $ 500
−Removed: Share repurchase cost $ 500
−Removed: Share repurchase fees $ 1
−Removed: Number of shares repurchased 24,575
+Added: Icahn Share Repurchase
+Added: On September 28, 2023, Xerox Holdings Corporation entered into a share purchase agreement (the Purchase Agreement) with Carl C.
+Added: Icahn and certain of his affiliates (Icahn Parties) pursuant to which the Company agreed to purchase an aggregate of approximately 34 million shares of the Company’s Common Stock, at a price of $ 15.84 per share, the closing price on September 27, 2023, the last full trading day prior to the execution of the Purchase Agreement, for an aggregate purchase price of approximately $ 542 .
+Added: The purchase was completed and settled on September 28, 2023 and was funded by a $ 555 Credit Agreement with Jefferies Finance LLC (Jefferies Finance), as the Administrative Agent, Collateral Agent and Lender.
+Added: This loan was subsequently repaid in November 2023 with the proceeds from a Term Loan B Credit Facility (Refer to Note 15 – Debt for additional information regarding the Term Loan B Credit Facility).
+Added: Aggregate fees associated with the share repurchase were approximately $ 11 and include the 1% excise tax on net share repurchases as required by the Inflation Reduction Act of 2022.
+Added: The costs incurred are included as part of the cost of Treasury Stock.
The following table reflects the changes in Common and Treasury stock shares (shares in thousands).
31 unchanged sentences
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: RSUs vest on a graded schedule from the date of grant as follows:
−Removed: Years of Service (1)
−Removed: 2022 2021 2020 2019 2018 Prior to 2018
−Removed: Year 1 33 % 33 % 25 % 25 % 25 % — %
−Removed: Year 2 33 % 33 % 25 % 25 % 25 % — %
−Removed: Year 3 34 % 34 % 50 % 50 % 50 % 100 %
−Removed: 100 % 100 % 100 % 100 % 100 % 100 %
−Removed: (1) RSUs vest on a graded schedule over a three-year service period from the date of grant.
+Added: RSUs granted in 2021 through 2023 vest on a graded schedule as follows:
+Added: 33 % after one year of service, 33 % after two years of service, and 34 % after three years of service from the date of grant.
Performance Share Units
−Removed: 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).
−Removed: Accordingly, each PSU grant is one-half performance-based and one-half market-based.
+Added: PSU awards are comprised of performance-based components (Earnings per share, Revenue and Free cash flow) as well as market-based components (Relative Total Shareholder Return (RTSR) and Absolute Share Price).
+Added: PSUs granted in 2023 are entirely market-based.
+Added: PSUs granted in 2022 and 2021 are one-half performance-based and one-half market-based.
The metrics and weightings are as follows:
4 unchanged sentences
Free cash flow — % — % 25 %
+Added: Relative total shareholder return 100 % — % — %
Absolute share price — % 50 % 50 %
2 unchanged sentences
All PSUs granted 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 were adversely affected permanently by the impacts from the COVID-19 pandemic.
−Removed: These grants of RSUs were made in December 2020.
−Removed: The grant-date value of the new RSUs for each recipient was approximately 50 % of the grant-date value of the recipient’s 2020 and/or 2019 PSUs.
−Removed: These RSU grants were not intended to take the place of the Company’s 2021 regular annual equity incentive programs.
−Removed: Xerox 2022 Annual Report 144
Performance-Based Component:
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Market-Based Component:
−Removed: The Absolute Share Price metric, included as the market-based component of the 2022, 2021 and 2020 PSU grant, is based on Xerox Holdings Corporation's average closing price for the last 20 trading days of the three-year performance period, inclusive of dividends during that period.
−Removed: Payout for this portion of the PSU will be determined based on total return targets.
−Removed: 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.
+Added: The RTSR metric, included as part of the 2023 PSU, is based on Xerox Holdings Corporation's stock price appreciation, inclusive of dividends paid, measured over three equally weighted performance periods (2023, 2023-2024, and 2023-2025).
+Added: RTSR will be determined by ranking Xerox Holdings Corporation and the companies within two distinct market indices, as approved by the Compensation Committee of the Board, from highest to lowest according to their respective TSRs, for each of the three performance periods.
+Added: Payout for this portion of the PSU will be determined based on the weighted average of Xerox Holdings Corporation's payout for each of the three performance periods.
+Added: The Absolute Share Price metric, included as the
+Added: Xerox 2023 Annual Report 135
+Added: market-based component of the 2022 and 2021 PSU grant, is based on Xerox Holdings Corporation's average closing price for the last 20 trading days of the three-year performance period, inclusive of dividends during that period.
+Added: Payout for these portions of the PSU metrics will be determined based on total return targets.
+Added: Since these metrics represent market conditions, Monte Carlo simulations were used to determine their respective grant-date fair values.
A summary of Xerox Holdings key valuation input assumptions used in the Monte Carlo simulation relative to awards granted were as follows:
−Removed: 2022 Award 2021 Award 2020 Award 2019 Award
−Removed: Term 3 years 3 years 3 years 3 years
+Added: 2023 Award 2022 Award 2021 Award
+Added: Term 3 years 3 years 3 years
Risk-free interest rate (1)
3.80 % 1.09 % 0.20 %
−Removed: Dividend yield (2)
−Removed: 4.87 % 4.66 % 2.80 % 3.97 %
Volatility (2)
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Treasury yield curve on the valuation date, with a maturity matched to the performance period.
−Removed: (2) The dividend yield was calculated as the expected quarterly dividend divided by our three-month average stock price as of the valuation date, annualized and continuously compounded.
(2) Volatility is derived from historical stock prices as well as implied volatility when appropriate and available.
(3) The weighted average of fair values used to record compensation expense as determined by the Monte Carlo simulation.
−Removed: Our Absolute Share Price metric is compared against total return targets to determine the payout as follows:
−Removed: Payout as a Percent of Target 2022 Total Return Targets (1)
−Removed: 2021 Total Return Targets (1)
+Added: Our RTSR and Absolute Share Price metrics are compared against total return targets to determine the payout as follows:
+Added: Payout as a Percent of Target 2023 Percentile Ranking Return Targets (1)
2022 Total Return Targets (1)
2021 Total Return Targets (1)
−Removed: 200 % $ 30.00 and above
−Removed: $ 33.00 and above
+Added: 200 % 75th and above
$ 30.00 and above
$ 33.00 and above
−Removed: 100 % $ 25.00 $ 30.00 $ 40.00 $ 35.00
−Removed: 50 % $ 20.00 $ 27.00 $ 37.00 $ 30.00
−Removed: 0 % Below $ 20.00
−Removed: Below $ 27.00
+Added: 100 % 50th $ 25.00 $ 30.00
+Added: 50 % 25th $ 20.00 $ 27.00
+Added: 0 % Below 25th
Below $ 20.00
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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: Xerox 2022 Annual Report 145
−Removed: Stock Options
−Removed: 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 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 compensation expense associated with our 2018 SO grants was fully recognized by April 2021 when these options fully vested.
−Removed: The 2018 SOs have a contractual term of 10 years from the April 2018 date of grant.
−Removed: Stock Options – CareAR Holdings, LLC
−Removed: 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).
−Removed: 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.
−Removed: 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.
−Removed: SOs vest on an annual, graduated schedule beginning January 2023 through January 2027 as follows:
−Removed: 10 % in January 2023 and 2024, respectively, 20 % in January 2025 and 2026, respectively, and 40 % in January 2027 based upon continued service.
−Removed: 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.
−Removed: The terms of the awards also include certain provisions that allow for the immediate vesting in the event of a sale of the entity.
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.
7 unchanged sentences
Outstanding at January 1 3,221 $ 23.16 3,161 $ 25.26 3,187 $ 26.48
−Removed: Granted 2,444 21.75 1,513 23.37 2,028 27.85
3,382 16.56 2,444 21.75 1,513 23.37
+Added: ( 1,593 ) 23.73 ( 1,975 ) 24.56 ( 1,327 ) 26.07
Forfeited ( 338 ) 19.27 ( 409 ) 24.20 ( 212 ) 25.06
7 unchanged sentences
Outstanding at December 31 2,039 24.18 1,729 28.38 2,818 25.47
−Removed: Stock Options (5)
−Removed: Outstanding at January 1 612 $ 27.77 799 $ 27.81 861 $ 27.83
−Removed: Granted — — — — — —
−Removed: Forfeited/Expired ( 116 ) 27.95 ( 187 ) 27.97 ( 60 ) 27.98
−Removed: Exercised — — — — ( 2 ) 27.98
−Removed: Outstanding at December 31 496 27.72 612 27.77 799 27.81
−Removed: Exercisable at December 31 496 27.72 612 27.77 470 27.84
−Removed: (1) Weighted average exercise price for stock options.
+Added: (1) 2023 includes approximately 445 RSUs associated with a special retention award.
(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.
2 unchanged sentences
(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.
−Removed: (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, 2023 was as follows:
8 unchanged sentences
Performance Shares 37
−Removed: Stock Options (1)
−Removed: (1) Strike price greater than Xerox Holdings Corporation Stock price at December 31, 2022, therefore, intrinsic value is considered to be $ 0 .
The intrinsic value and actual tax benefit realized for all vested and exercised stock-based awards was as follows:
December 31, 2023 December 31, 2022 December 31, 2021
−Removed: Awards Total Intrinsic Value Cash Received Tax Benefit Total Intrinsic Value Cash Received Tax Benefit Total Intrinsic Value Cash Received Tax Benefit
+Added: Awards Total Intrinsic Value Tax Benefit Total Intrinsic Value Tax Benefit Total Intrinsic Value Tax Benefit
Restricted Stock Units $ 25 $ 5 $ 39 $ 6 $ 30 $ 5
Performance Share Units — — 10 — 17 2
−Removed: Stock Options — — — — — — — — —
Xerox 2023 Annual Report 137
4 unchanged sentences
Pre-tax Net of Tax Pre-tax Net of Tax Pre-tax Net of Tax
−Removed: Net Translation Adjustments (Losses) Gains $ ( 377 ) $ ( 377 ) $ ( 145 ) $ ( 141 ) $ 238 $ 241
+Added: Net Translation Adjustments Gains (Losses) $ 191 $ 191 $ ( 376 ) $ ( 376 ) $ ( 145 ) $ ( 141 )
Unrealized (Losses) Gains
−Removed: Changes in fair value of cash flow hedges (losses) gains ( 35 ) ( 27 ) ( 12 ) ( 9 ) 4 3
+Added: Changes in fair value of cash flow hedges losses ( 18 ) ( 16 ) ( 35 ) ( 27 ) ( 12 ) ( 9 )
Changes in cash flow hedges reclassed to earnings (1)
1 unchanged sentence
Other losses — — ( 1 ) ( 1 ) — —
−Removed: Net Unrealized (Losses) Gains ( 1 ) ( 2 ) ( 5 ) ( 4 ) 5 4
+Added: Net Unrealized Gains (Losses) — 1 ( 1 ) ( 2 ) ( 5 ) ( 4 )
Defined Benefit Plans (Losses) Gains
4 unchanged sentences
35 26 88 66 132 99
−Removed: Other gains (losses) (3)
+Added: Other (losses) gains (3)
( 49 ) ( 49 ) 62 61 35 35
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Other Comprehensive (Loss) Income $ ( 233 ) $ ( 139 ) $ ( 618 ) $ ( 549 ) $ 482 $ 344
−Removed: Other comprehensive loss attributable to noncontrolling interests ( 1 ) ( 1 ) — — — —
−Removed: Other Comprehensive (Loss) Income Attributable to Xerox Holdings/Xerox $ ( 618 ) $ ( 549 ) $ 482 $ 344 $ 355 $ 314
_____________
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Cumulative translation adjustments $ ( 2,046 ) $ ( 2,237 ) $ ( 1,861 )
−Removed: Other unrealized (losses) gains, net ( 4 ) ( 2 ) 2
+Added: Other unrealized losses, net ( 3 ) ( 4 ) ( 2 )
Benefit plans net actuarial losses and prior service credits ( 1,627 ) ( 1,296 ) ( 1,125 )
−Removed: Total Accumulated Other Comprehensive Loss Attributable to Xerox Holdings/Xerox $ ( 3,537 ) $ ( 2,988 ) $ ( 3,332 )
+Added: Total Accumulated Other Comprehensive Loss $ ( 3,676 ) $ ( 3,537 ) $ ( 2,988 )
We utilize the aggregate portfolio approach for releasing disproportionate income tax effects from AOCL.
Xerox 2023 Annual Report 138
−Removed: Note 25 – (Loss) Earnings per Share
−Removed: 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):
+Added: Note 25 – Loss per Share
+Added: The following table sets forth the computation of basic and diluted loss per share of Xerox Holdings Corporation's Common stock (shares in thousands):
Year Ended December 31,
2023 2022 2021
−Removed: Basic (Loss) Earnings per Share:
−Removed: Net (Loss) Income attributable to Xerox Holdings $ ( 322 ) $ ( 455 ) $ 192
+Added: Basic Loss per Share:
+Added: Net Income (Loss) $ 1 $ ( 322 ) $ ( 455 )
Accrued dividends on preferred stock ( 14 ) ( 14 ) ( 14 )
−Removed: Adjusted Net (Loss) income available to common shareholders $ ( 336 ) $ ( 469 ) $ 178
+Added: Adjusted Net Loss attributable to common shareholders $ ( 13 ) $ ( 336 ) $ ( 469 )
Weighted average common shares outstanding 149,116 156,006 183,168
−Removed: Basic (Loss) Earnings per Share $ ( 2.15 ) $ ( 2.56 ) $ 0.85
−Removed: Diluted (Loss) Earnings per Share:
−Removed: Net (Loss) Income attributable to Xerox Holdings $ ( 322 ) $ ( 455 ) $ 192
+Added: Basic Loss per Share $ ( 0.09 ) $ ( 2.15 ) $ ( 2.56 )
+Added: Diluted Loss per Share:
+Added: Net Income (Loss) $ 1 $ ( 322 ) $ ( 455 )
Accrued dividends on preferred stock ( 14 ) ( 14 ) ( 14 )
−Removed: Adjusted Net (Loss) income available to common shareholders $ ( 336 ) $ ( 469 ) $ 178
+Added: Adjusted Net Loss attributable to common shareholders $ ( 13 ) $ ( 336 ) $ ( 469 )
Weighted average common shares outstanding 149,116 156,006 183,168
4 unchanged sentences
Adjusted Weighted average common shares outstanding 149,116 156,006 183,168
−Removed: Diluted (Loss) Earnings per Share $ ( 2.15 ) $ ( 2.56 ) $ 0.84
+Added: Diluted Loss per Share $ ( 0.09 ) $ ( 2.15 ) $ ( 2.56 )
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):
7 unchanged sentences
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.