Xerox Holdings Corp 10-K

Item 8. Financial Statements and Supplementary Data Xerox 2023 Annual Report 62 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Xerox Holdings Corporation Opinions on the Financial Statements and Internal Control over Financial Reporting 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). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. 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. 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. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Xerox 2023 Annual Report 63 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters 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. 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. Foreign Tax Credit Carryforwards As described in Note 19 to the consolidated financial statements, the Company has recorded $892 million of deferred tax assets, net of a valuation allowance of $375 million, as of December 31, 2023, which includes U.S. foreign tax credit carryforwards with a limited life. Management records the estimated future tax effects of temporary differences between the tax bases of assets and amounts reported, as well as net operating loss and tax credit carryforwards. Deferred tax assets are assessed for realizability and, where applicable, a valuation allowance is recorded to reduce the total deferred tax asset to an amount that will, more-likely-than-not, be realized in the future. Management applied judgment in assessing the realizability of these deferred tax assets and the need for any valuation allowances, in particular the realizability of U.S. foreign tax credit carryforwards with a limited life. In determining the amount of deferred tax assets that are more-likely-than-not to be realized, management considered historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. The principal considerations for our determination that performing procedures relating to the realizability of deferred tax assets related to the U.S. foreign tax credit carryforwards is a critical audit matter are (i) the significant judgment by management in assessing the realizability of deferred tax assets related to the Company’s U.S. foreign tax credit carryforwards with a limited life; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating management’s significant assumptions related to projected future taxable income; (iii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the realizability of deferred tax assets, including controls over projected future taxable income. These procedures also included, among others, evaluating management’s assessment of the realizability of deferred tax assets related to the Company’s U.S. foreign tax credit carryforwards with a limited life, including evaluating the reasonableness of the assumptions related to projected future taxable income. Evaluating management’s assumptions related to projected future taxable income involved evaluating whether the assumptions were reasonable by considering historical profitability as well as other audit evidence related to management’s forecasts. Professionals with specialized skill and knowledge were used to assist in the evaluation of management’s application of income tax law in determining projected future taxable income and the assessment of the realizability of deferred tax assets related to the Company’s U.S. foreign tax credit carryforwards with a limited life. /s/ PricewaterhouseCoopers LLP Stamford, Connecticut February 23, 2024 We have served as the Company’s or its predecessor's auditor since 2001. Xerox 2023 Annual Report 64 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholder of Xerox Corporation Opinions on the Financial Statements and Internal Control over Financial Reporting 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). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. 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. 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. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Xerox 2023 Annual Report 65 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters 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. 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. Foreign Tax Credit Carryforwards As described in Note 19 to the consolidated financial statements, the Company has recorded $892 million of deferred tax assets, net of a valuation allowance of $375 million, as of December 31, 2023, which includes U.S. foreign tax credit carryforwards with a limited life. Management records the estimated future tax effects of temporary differences between the tax bases of assets and amounts reported, as well as net operating loss and tax credit carryforwards. Deferred tax assets are assessed for realizability and, where applicable, a valuation allowance is recorded to reduce the total deferred tax asset to an amount that will, more-likely-than-not, be realized in the future. Management applied judgment in assessing the realizability of these deferred tax assets and the need for any valuation allowances, in particular the realizability of U.S. foreign tax credit carryforwards with a limited life. In determining the amount of deferred tax assets that are more-likely-than-not to be realized, management considered historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. The principal considerations for our determination that performing procedures relating to the realizability of deferred tax assets related to the U.S. foreign tax credit carryforwards is a critical audit matter are (i) the significant judgment by management in assessing the realizability of deferred tax assets related to the Company’s U.S. foreign tax credit carryforwards with a limited life; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating management’s significant assumptions related to projected future taxable income; (iii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the realizability of deferred tax assets, including controls over projected future taxable income. These procedures also included, among others, evaluating management’s assessment of the realizability of deferred tax assets related to the Company’s U.S. foreign tax credit carryforwards with a limited life, including evaluating the reasonableness of the assumptions related to projected future taxable income. Evaluating management’s assumptions related to projected future taxable income involved evaluating whether the assumptions were reasonable by considering historical profitability as well as other audit evidence related to management’s forecasts. Professionals with specialized skill and knowledge were used to assist in the evaluation of management’s application of income tax law in determining projected future taxable income and the assessment of the realizability of deferred tax assets related to the Company’s U.S. foreign tax credit carryforwards with a limited life. /s/ PricewaterhouseCoopers LLP Stamford, Connecticut February 23, 2024 We have served as the Company’s auditor since 2001. Xerox 2023 Annual Report 66 Table of Contents Xerox Holdings Corporation Reports of Management Management's Responsibility for Financial Statements The management of Xerox Holdings Corporation is responsible for the integrity and objectivity of all information presented in this annual report. The Consolidated Financial Statements were prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on management's best estimates and judgments. Management believes the Consolidated Financial Statements fairly reflect the form and substance of transactions and that the financial statements fairly represent Xerox Holdings Corporation's financial position and results of operations. The Audit Committee of the Xerox Holdings Corporation Board of Directors, which is composed solely of independent directors, meets regularly with the independent auditors, PricewaterhouseCoopers LLP, the internal auditors and representatives of management to review accounting, financial reporting, internal control and audit matters, as well as the nature and extent of the audit effort. The Audit Committee is responsible for the engagement of the independent auditors. The independent auditors and internal auditors have free access to the Audit Committee. Management's Report on Internal Control Over Financial Reporting The management of Xerox Holdings Corporation is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the rules promulgated under the Securities Exchange Act of 1934. Under the supervision and with the participation of our management, including our principal executive, financial and accounting officers, we have conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in “Internal Control - Integrated Framework (2013) ” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the above evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2023. The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included herein. /s/ S TEVEN J. B ANDROWCZAK /s/ X AVIER H EISS /s/ M IRLANDA G ECAJ Chief Executive Officer Chief Financial Officer Chief Accounting Officer Xerox 2023 Annual Report 67 Table of Contents Xerox Corporation Reports of Management Management's Responsibility for Financial Statements The management of Xerox Corporation is responsible for the integrity and objectivity of all information presented in this annual report. The Consolidated Financial Statements were prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on management's best estimates and judgments. Management believes the Consolidated Financial Statements fairly reflect the form and substance of transactions and that the financial statements fairly represent Xerox Corporation's financial position and results of operations. The Audit Committee of the Xerox Holdings Corporation Board of Directors, which is composed solely of independent directors, meets regularly with the independent auditors, PricewaterhouseCoopers LLP, the internal auditors and representatives of management to review accounting, financial reporting, internal control and audit matters, as well as the nature and extent of the audit effort. The Audit Committee is responsible for the engagement of the independent auditors. The independent auditors and internal auditors have free access to the Audit Committee. Management's Report on Internal Control Over Financial Reporting The management of Xerox Corporation is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the rules promulgated under the Securities Exchange Act of 1934. Under the supervision and with the participation of our management, including our principal executive, financial and accounting officers, we have conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in “Internal Control - Integrated Framework (2013) ” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the above evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2023. The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included herein. /s/ S TEVEN J. B ANDROWCZAK /s/ X AVIER H EISS /s/ M IRLANDA G ECAJ Chief Executive Officer Chief Financial Officer Chief Accounting Officer Xerox 2023 Annual Report 68 Table of Contents Xerox Holdings Corporation Consolidated Statements of Income (Loss) Year Ended December 31, (in millions, except per-share data) 2023 2022 2021 Revenues Sales $ 2,720 $ 2,800 $ 2,582 Services, maintenance and rentals 3,975 4,100 4,235 Financing 191 207 221 Total Revenues 6,886 7,107 7,038 Costs and Expenses Cost of sales 1,778 2,002 1,862 Cost of services, maintenance and rentals 2,664 2,679 2,662 Cost of financing 130 108 111 Research, development and engineering expenses 229 304 310 Selling, administrative and general expenses 1,696 1,760 1,718 Goodwill impairment — 412 781 Restructuring and related costs, net 167 65 38 Amortization of intangible assets 43 42 55 PARC donation 132 — — Other expenses, net 75 60 ( 27 ) Total Costs and Expenses 6,914 7,432 7,510 Loss before Income Taxes ( 28 ) ( 325 ) ( 472 ) Income tax benefit ( 29 ) ( 3 ) ( 17 ) Net Income (Loss) 1 ( 322 ) ( 455 ) Less: Preferred stock dividends, net ( 14 ) ( 14 ) ( 14 ) Net Loss Attributable to Common Shareholders $ ( 13 ) $ ( 336 ) $ ( 469 ) Basic Loss per Share $ ( 0.09 ) $ ( 2.15 ) $ ( 2.56 ) Diluted Loss per Share $ ( 0.09 ) $ ( 2.15 ) $ ( 2.56 ) The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2023 Annual Report 69 Table of Contents Xerox Holdings Corporation Consolidated Statements of Comprehensive Loss Year Ended December 31, (in millions) 2023 2022 2021 Net Income (Loss) $ 1 $ ( 322 ) $ ( 455 ) Other Comprehensive Income (Loss), Net (1) Translation adjustments, net 191 ( 376 ) ( 141 ) Unrealized gains (losses), net 1 ( 2 ) ( 4 ) Changes in defined benefit plans, net ( 331 ) ( 171 ) 489 Other Comprehensive (Loss) Income, Net ( 139 ) ( 549 ) 344 Comprehensive Loss, Net $ ( 138 ) $ ( 871 ) $ ( 111 ) _____________ (1) Refer to Note 24 - Other Comprehensive (Loss) Income for gross components of Other Comprehensive (Loss) Income, reclassification adjustments out of Accumulated Other Comprehensive Loss and related tax effects. . The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2023 Annual Report 70 Table of Contents Xerox Holdings Corporation Consolidated Balance Sheets December 31, (in millions, except share data in thousands) 2023 2022 Assets Cash and cash equivalents $ 519 $ 1,045 Accounts receivable (net of allowance of $ 64 and $ 52 , respectively) 850 857 Billed portion of finance receivables (net of allowance of $ 4 and $ 4 , respectively) 71 93 Finance receivables, net 842 1,061 Inventories 661 797 Other current assets 234 254 Total current assets 3,177 4,107 Finance receivables due after one year (net of allowance of $ 88 and $ 113 , respectively) 1,597 1,948 Equipment on operating leases, net 265 235 Land, buildings and equipment, net 266 320 Intangible assets, net 177 208 Goodwill, net 2,747 2,820 Deferred tax assets 745 582 Other long-term assets 1,034 1,323 Total Assets $ 10,008 $ 11,543 Liabilities and Equity Short-term debt and current portion of long-term debt $ 567 $ 860 Accounts payable 1,044 1,331 Accrued compensation and benefits costs 306 258 Accrued expenses and other current liabilities 862 881 Total current liabilities 2,779 3,330 Long-term debt 2,710 2,866 Pension and other benefit liabilities 1,216 1,175 Post-retirement medical benefits 171 184 Other long-term liabilities 360 411 Total Liabilities 7,236 7,966 Commitments and Contingencies (See Note 20) Noncontrolling Interests (See Note 6) 10 10 Convertible Preferred Stock 214 214 Common stock 123 156 Additional paid-in capital 1,114 1,588 Retained earnings 4,977 5,136 Accumulated other comprehensive loss ( 3,676 ) ( 3,537 ) Xerox Holdings shareholders’ equity 2,538 3,343 Noncontrolling interests 10 10 Total Equity 2,548 3,353 Total Liabilities and Equity $ 10,008 $ 11,543 Shares of Common Stock Issued and Outstanding 123,144 155,781 The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2023 Annual Report 71 Table of Contents Xerox Holdings Corporation Consolidated Statements of Cash Flows Year Ended December 31, (in millions) 2023 2022 2021 Cash Flows from Operating Activities Net Income (Loss) $ 1 $ ( 322 ) $ ( 455 ) Adjustments required to reconcile Net income (loss) to Cash flows provided by operating activities Depreciation and amortization 251 270 327 Provisions 54 65 46 Deferred tax benefit ( 68 ) ( 27 ) ( 89 ) Net gain on sales of businesses and assets ( 39 ) ( 56 ) ( 40 ) PARC donation 132 — — Stock-based compensation 54 75 54 Goodwill impairment — 412 781 Restructuring and asset impairment charges 146 62 27 Payments for restructurings ( 27 ) ( 52 ) ( 72 ) Non-service retirement-related costs 19 ( 12 ) ( 89 ) Contributions to retirement plans ( 102 ) ( 124 ) ( 160 ) (Increase) decrease in accounts receivable and billed portion of finance receivables ( 5 ) ( 48 ) 41 Decrease (increase) in inventories 123 ( 143 ) 88 Increase in equipment on operating leases ( 141 ) ( 112 ) ( 129 ) Decrease (increase) in finance receivables 614 ( 141 ) 20 Decrease in other current and long-term assets 16 27 68 (Decrease) increase in accounts payable ( 290 ) 278 118 Increase in accrued compensation 48 34 9 (Decrease) increase in other current and long-term liabilities ( 114 ) 9 89 Net change in income tax assets and liabilities ( 12 ) ( 27 ) 10 Net change in derivative assets and liabilities 13 ( 22 ) 2 Other operating, net 13 13 ( 17 ) Net cash provided by operating activities 686 159 629 Cash Flows from Investing Activities Cost of additions to land, buildings, equipment and software ( 37 ) ( 57 ) ( 68 ) Proceeds from sales of businesses and assets 43 87 44 Acquisitions, net of cash acquired ( 7 ) ( 93 ) ( 53 ) Other investing, net ( 4 ) ( 15 ) ( 8 ) Net cash used in investing activities ( 5 ) ( 78 ) ( 85 ) Cash Flows from Financing Activities Proceeds from issuance of long-term debt 1,396 1,194 311 Payments on long-term debt ( 1,874 ) ( 1,723 ) ( 519 ) Dividends ( 165 ) ( 174 ) ( 206 ) Payments to acquire treasury stock, including fees ( 544 ) ( 113 ) ( 888 ) Other financing, net ( 15 ) ( 6 ) ( 8 ) Net cash used in financing activities ( 1,202 ) ( 822 ) ( 1,310 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 1 ) ( 29 ) ( 16 ) Decrease in cash, cash equivalents and restricted cash ( 522 ) ( 770 ) ( 782 ) Cash, cash equivalents and restricted cash at beginning of year 1,139 1,909 2,691 Cash, Cash Equivalents and Restricted Cash at End of Year $ 617 $ 1,139 $ 1,909 The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2023 Annual Report 72 Table of Contents Xerox Holdings Corporation Consolidated Statements of Shareholders' Equity (in millions) Common Stock (1) Additional Paid-in Capital Treasury Stock Retained Earnings AOCL (2) Xerox Holdings Shareholders’ Equity Non- controlling Interests Total Equity Balance at December 31, 2020 $ 198 $ 2,445 $ — $ 6,281 $ ( 3,332 ) $ 5,592 $ 4 $ 5,596 Comprehensive (loss) income, net — — — ( 455 ) 344 ( 111 ) — ( 111 ) Cash dividends declared-common (3) — — — ( 181 ) — ( 181 ) — ( 181 ) Cash dividends declared-preferred (4) — — — ( 14 ) — ( 14 ) — ( 14 ) Stock option and incentive plans, net 2 35 — — — 37 — 37 Common stock repurchased — — ( 888 ) — — ( 888 ) — ( 888 ) Cancellation of treasury stock ( 32 ) ( 679 ) 711 — — — — — 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 Comprehensive loss, net — — — ( 322 ) ( 549 ) ( 871 ) — ( 871 ) Cash dividends declared-common (3) — — — ( 159 ) — ( 159 ) — ( 159 ) Cash dividends declared-preferred (4) — — — ( 14 ) — ( 14 ) — ( 14 ) Stock option and incentive plans, net 2 62 — — — 64 — 64 Common stock repurchased — — ( 113 ) — — ( 113 ) — ( 113 ) Cancellation of treasury stock ( 14 ) ( 276 ) 290 — — — — — 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 Comprehensive income (loss), net — — — 1 ( 139 ) ( 138 ) — ( 138 ) Cash dividends declared-common (3) — — — ( 146 ) — ( 146 ) — ( 146 ) Cash dividends declared-preferred (4) — — — ( 14 ) — ( 14 ) — ( 14 ) Stock option and incentive plans, net 1 45 — — — 46 — 46 Common stock repurchased — — ( 553 ) — — ( 553 ) — ( 553 ) Cancellation of treasury stock ( 34 ) ( 519 ) 553 — — — — — Transactions with noncontrolling interests — — — — — — 2 2 Distributions to noncontrolling interests — — — — — — ( 2 ) ( 2 ) Balance at December 31, 2023 $ 123 $ 1,114 $ — $ 4,977 $ ( 3,676 ) $ 2,538 $ 10 $ 2,548 _____________ (1) Common Stock has a par value of $ 1 per share. (2) AOCL - Accumulated other comprehensive loss. (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. (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. Xerox 2023 Annual Report 73 Table of Contents Xerox Corporation Consolidated Statements of Income (Loss) Year Ended December 31, (in millions) 2023 2022 2021 Revenues Sales $ 2,720 $ 2,800 $ 2,582 Services, maintenance and rentals 3,975 4,100 4,235 Financing 191 207 221 Total Revenues 6,886 7,107 7,038 Costs and Expenses Cost of sales 1,778 2,002 1,862 Cost of services, maintenance and rentals 2,664 2,679 2,662 Cost of financing 130 108 111 Research, development and engineering expenses 229 304 310 Selling, administrative and general expenses 1,696 1,760 1,718 Goodwill impairment — 412 781 Restructuring and related costs, net 167 65 38 Amortization of intangible assets 43 42 55 PARC donation 132 — — Other expenses, net 75 60 ( 27 ) Total Costs and Expenses 6,914 7,432 7,510 Loss before Income Taxes ( 28 ) ( 325 ) ( 472 ) Income tax benefit ( 29 ) ( 3 ) ( 17 ) Net Income (Loss) $ 1 $ ( 322 ) $ ( 455 ) The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2023 Annual Report 74 Table of Contents Xerox Corporation Consolidated Statements of Comprehensive Loss Year Ended December 31, (in millions) 2023 2022 2021 Net Income (Loss) $ 1 $ ( 322 ) $ ( 455 ) Other Comprehensive Income (Loss), Net (1) Translation adjustments, net 191 ( 376 ) ( 141 ) Unrealized gains (losses), net 1 ( 2 ) ( 4 ) Changes in defined benefit plans, net ( 331 ) ( 171 ) 489 Other Comprehensive (Loss) Income, Net ( 139 ) ( 549 ) 344 Comprehensive Loss, Net $ ( 138 ) $ ( 871 ) $ ( 111 ) _____________ (1) Refer to Note 24 - Other Comprehensive (Loss) Income for gross components of Other Comprehensive (Loss) Income, reclassification adjustments out of Accumulated Other Comprehensive Loss and related tax effects. The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2023 Annual Report 75 Table of Contents Xerox Corporation Consolidated Balance Sheets December 31, (in millions) 2023 2022 Assets Cash and cash equivalents $ 519 $ 1,045 Accounts receivable (net of allowance of $ 64 and $ 52 , respectively) 850 857 Billed portion of finance receivables (net of allowance of $ 4 and $ 4 , respectively) 71 93 Finance receivables, net 842 1,061 Inventories 661 797 Other current assets 234 254 Total current assets 3,177 4,107 Finance receivables due after one year (net of allowance of $ 88 and $ 113 , respectively) 1,597 1,948 Equipment on operating leases, net 265 235 Land, buildings and equipment, net 266 320 Intangible assets, net 177 208 Goodwill, net 2,747 2,820 Deferred tax assets 745 582 Other long-term assets 1,008 1,302 Total Assets $ 9,982 $ 11,522 Liabilities and Equity Short-term debt and current portion of long-term debt $ 567 $ 860 Accounts payable 1,044 1,331 Accrued compensation and benefits costs 306 258 Accrued expenses and other current liabilities 820 834 Total current liabilities 2,737 3,283 Long-term debt 1,213 1,370 Related party debt 1,497 1,496 Pension and other benefit liabilities 1,216 1,175 Post-retirement medical benefits 171 184 Other long-term liabilities 360 411 Total Liabilities 7,194 7,919 Commitments and Contingencies (See Note 20) Noncontrolling Interests (See Note 6) 10 10 Additional paid-in capital 3,485 3,693 Retained earnings 2,959 3,427 Accumulated other comprehensive loss ( 3,676 ) ( 3,537 ) Xerox shareholder's equity 2,768 3,583 Noncontrolling interests 10 10 Total Equity 2,778 3,593 Total Liabilities and Equity $ 9,982 $ 11,522 The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2023 Annual Report 76 Table of Contents Xerox Corporation Consolidated Statements of Cash Flows Year Ended December 31, (in millions) 2023 2022 2021 Cash Flows from Operating Activities Net Income (Loss) $ 1 $ ( 322 ) $ ( 455 ) Adjustments required to reconcile Net income (loss) to Cash flows provided by operating activities Depreciation and amortization 251 270 327 Provisions 54 65 46 Deferred tax benefit ( 68 ) ( 27 ) ( 89 ) Net gain on sales of businesses and assets ( 39 ) ( 56 ) ( 40 ) PARC donation 132 — — Stock-based compensation 54 75 54 Goodwill impairment — 412 781 Restructuring and asset impairment charges 146 62 27 Payments for restructurings ( 27 ) ( 52 ) ( 72 ) Non-service retirement-related costs 19 ( 12 ) ( 89 ) Contributions to retirement plans ( 102 ) ( 124 ) ( 160 ) (Increase) decrease in accounts receivable and billed portion of finance receivables ( 5 ) ( 48 ) 41 Decrease (increase) in inventories 123 ( 143 ) 88 Increase in equipment on operating leases ( 141 ) ( 112 ) ( 129 ) Decrease (increase) in finance receivables 614 ( 141 ) 20 Decrease in other current and long-term assets 16 27 68 (Decrease) increase in accounts payable ( 290 ) 278 118 Increase in accrued compensation 48 34 9 (Decrease) increase in other current and long-term liabilities ( 114 ) 9 89 Net change in income tax assets and liabilities ( 12 ) ( 27 ) 10 Net change in derivative assets and liabilities 13 ( 22 ) 2 Other operating, net 13 13 ( 17 ) Net cash provided by operating activities 686 159 629 Cash Flows from Investing Activities Cost of additions to land, buildings, equipment and software ( 37 ) ( 57 ) ( 68 ) Proceeds from sales of businesses and assets 43 87 44 Acquisitions, net of cash acquired ( 7 ) ( 93 ) ( 53 ) Other investing, net 1 ( 2 ) — Net cash used in investing activities — ( 65 ) ( 77 ) Cash Flows from Financing Activities Proceeds from issuance of long-term debt 1,396 1,194 311 Payments on long-term debt ( 1,874 ) ( 1,723 ) ( 519 ) Distributions to parent ( 722 ) ( 312 ) ( 1,120 ) Other financing, net ( 7 ) 6 10 Net cash used in financing activities ( 1,207 ) ( 835 ) ( 1,318 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 1 ) ( 29 ) ( 16 ) Decrease in cash, cash equivalents and restricted cash ( 522 ) ( 770 ) ( 782 ) Cash, cash equivalents and restricted cash at beginning of year 1,139 1,909 2,691 Cash, Cash Equivalents and Restricted Cash at End of Year $ 617 $ 1,139 $ 1,909 The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2023 Annual Report 77 Table of Contents Xerox Corporation Consolidated Statements of Shareholder's Equity (in millions) Additional Paid-in Capital Retained Earnings AOCL (1) Xerox Shareholder's Equity Non- controlling Interests Total Equity Balance at December 31, 2020 $ 4,888 $ 5,834 $ ( 3,332 ) $ 7,390 $ 4 $ 7,394 Comprehensive (loss) income, net — ( 455 ) 344 ( 111 ) — ( 111 ) Dividends declared to parent — ( 903 ) — ( 903 ) — ( 903 ) Intercompany loan capitalization (2) ( 1,494 ) — — ( 1,494 ) — ( 1,494 ) Transfers to parent ( 193 ) — — ( 193 ) — ( 193 ) Transactions with noncontrolling interests 1 — — 1 4 5 Distributions to noncontrolling interests — — — — ( 1 ) ( 1 ) Balance at December 31, 2021 $ 3,202 $ 4,476 $ ( 2,988 ) $ 4,690 $ 7 $ 4,697 Comprehensive loss, net — ( 322 ) ( 549 ) ( 871 ) — ( 871 ) Dividends declared to parent — ( 727 ) — ( 727 ) — ( 727 ) Transfers from parent 491 — — 491 — 491 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 Comprehensive income (loss), net — 1 ( 139 ) ( 138 ) — ( 138 ) Dividends declared to parent — ( 469 ) — ( 469 ) — ( 469 ) Transfers to parent ( 208 ) — — ( 208 ) — ( 208 ) Transactions with noncontrolling interests — — — — 2 2 Distributions to noncontrolling interests — — — — ( 2 ) ( 2 ) Balance at December 31, 2023 $ 3,485 $ 2,959 $ ( 3,676 ) $ 2,768 $ 10 $ 2,778 _____________ (1) AOCL - Accumulated other comprehensive loss. (2) Refer to Note 15 - Debt for information regarding capitalization of balance to Intercompany Loan with Xerox Holdings Corporation. The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2023 Annual Report 78 Table of Contents Xerox Holdings Corporation Xerox Corporation Notes to Consolidated Financial Statements (in millions, except per-share data and where otherwise noted) Note 1 – Basis of Presentation References to “Xerox Holdings” refer to Xerox Holdings Corporation and its consolidated subsidiaries while references to “Xerox” refer to Xerox Corporation and its consolidated subsidiaries. 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. References to “Xerox Corporation” refer to the stand-alone company and do not include its subsidiaries. The accompanying Consolidated Financial Statements and footnotes represent the respective consolidated results and financial results of Xerox Holdings and Xerox and all respective companies that each registrant directly or indirectly controls, either through majority ownership or otherwise. This is a combined report of Xerox Holdings and Xerox, which includes separate Consolidated Financial Statements for each registrant. The accompanying Consolidated Financial Statements of both Xerox Holdings and Xerox have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Notes to the Consolidated Financial Statements reflect the activity for both Xerox Holdings and Xerox for all periods presented, unless otherwise noted. Description of Business Currently, Xerox Holdings' primary direct operating subsidiary is Xerox and therefore Xerox represents nearly all of Xerox Holdings' operations. Xerox is a global enterprise for workplace technology that integrates hardware, services and software for large to small enterprises. As customers seek to manage information and document workflows across digital and physical platforms, we deliver secure and sustainable document management solutions. 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. 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. Since the investments normally do not have readily determinable fair values, they are accounted for under the measurement alternative per ASC Topic 321-10-35-2. Xerox Ventures LLC had investments of approximately $ 26 and $ 21 at December 31, 2023 and 2022, respectively. 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 All significant intercompany accounts and transactions have been eliminated. 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. 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. 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. 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. 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 Table of Contents Use of Estimates The preparation of our Consolidated Financial Statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Future events and their effects cannot be predicted with certainty; 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. Our estimates are based on management's best available information including current events, historical experience, actions that the company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. As a result, actual results may be different from these estimates. In the ordinary course of accounting for the items discussed above, we make changes in estimates as appropriate and as we become aware of new or revised circumstances surrounding those estimates. Such changes and refinements in estimation methodologies are reflected in reported results of operations in the period in which the changes are made and, if material, their effects are disclosed in the Notes to the Consolidated Financial Statements and in Management's Discussion and Analysis of Financial Condition and Results of Operations. Note 2 – Recent Accounting Pronouncements and Summary of Significant Accounting Policies New Accounting Standards and Accounting Changes Xerox Holdings and Xerox consider the applicability and impact of all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB). The ASUs listed below apply to both registrants. Except for the Accounting Standard Updates (ASUs) discussed below, the new ASUs issued by the FASB during the last two years did not have any significant impact on the Company. Accounting Standard Updates to be Adopted: Reference Rate Reform 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. 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. In January 2021, the FASB issued ASU 2021-01 , Reference Rate Reform (Topic 848), Scope, which provided clarification to ASU 2020-04. These ASUs were effective commencing with our quarter ended March 31, 2020 through December 31, 2022. 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. There has been no material impact to date as a result of adopting these ASUs on reference rate reform. 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. Segment Disclosures In November 2023, the FASB issued ASU 2023-07 , Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. 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. 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. We are currently evaluating the impact of the adoption of this standard to determine its impact on the Company's disclosures. Income Tax Disclosures In December 2023, the FASB issued ASU 2023-09 , Income Taxes (Topic 740): 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. The amendments are effective for the Company’s annual periods beginning January 1, 2025, with early adoption Xerox 2023 Annual Report 80 Table of Contents permitted, and should be applied either prospectively or retrospectively. We are currently evaluating the impact of the adoption of this standard to determine its impact on the Company's disclosures. Accounting Standard Updates Recently Adopted: Liabilities In September 2022, the FASB issued ASU 2022-04 , Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations that requires entities that use supplier finance programs in connection with the purchase of goods and services to disclose the key terms of the programs and information about obligations outstanding at the end of the reporting period, including a rollforward of those obligations. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. 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. Refer to Note 14 - Supplementary Financial Information for the required disclosures effective January 1, 2023. Financial Instruments In March 2022, the FASB issued ASU 2022-02 , Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures - Gross Write-offs. The amendments in this update eliminate the accounting guidance for Troubled Debt Restructurings (TDRs) by creditors while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors made to borrowers experiencing financial difficulty. The amendments also require disclosure of current-period gross write-offs by year of origination for financing receivables. 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 . 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. Refer to Note 8 - Finance Receivables, Net for required disclosures regarding gross write-offs by vintage year. Government Assistance In November 2021, the FASB issued ASU 2021-10 , Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance. The update increases the transparency surrounding government assistance by requiring disclosure of 1) the types of assistance received, 2) an entity’s accounting for the assistance, and 3) the effect of the assistance on the entity’s financial statements. We adopted this update effective for our fiscal year beginning January 1, 2022. The impact of adoption was not material to our Consolidated Financial Statements. Impacts on future periods will depend on the amounts of government assistance received. 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. Business Combinations In October 2021, the FASB issued ASU 2021-08 , Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers . The new guidance requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC Topic 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts. This approach differs from the current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. We early adopted this 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. The impact of adopting the new standard will depend on the magnitude of future acquisitions. The standard did not impact contract assets or liabilities acquired in business combinations that occurred prior to the adoption date. Debt 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). This update simplified the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock. This update also amended the guidance for the derivatives scope exception for contracts in an entity's own equity to reduce form-over-substance-based accounting conclusions and required the application of the if-converted method for calculating diluted earnings per share. We adopted this Xerox 2023 Annual Report 81 Table of Contents 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. Income Taxes In December 2019, the FASB issued ASU 2019-12 , Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which was intended to simplify various aspects related to accounting for income taxes . ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. We adopted this update effective for our fiscal year beginning January 1, 2021. The adoption did not have a material impact on our results of operations, financial position, cash flows or disclosures. Other Updates 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. Those updates are as follows: • Disclosure Improvements: ASU 2023-06 , Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. Since the Company is already subject to SEC disclosure requirements, this update was effective upon issuance. • Business Combinations: ASU 2023-05 , Business Combinations - Joint Venture Formation (Topic 805-60): Recognition and Initial Measurement. This update is effective for our fiscal year beginning January 1, 2025. • Liabilities: ASU 2023-04 , Liabilities (Topic 405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 121. The Company adopted this conforming guidance upon issuance in August 2023. • Investments: ASU 2023-02 , Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force). This update is effective for our fiscal year beginning January 1, 2024. • Leases: ASU 2023-01 , Leases (Topic 842): Common Control Arrangements. This update is effective for our fiscal year beginning January 1, 2024. • Fair Value Measurement: ASU 2022-03 , Fair Value Measurement (Topic 820), Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This update is effective for our fiscal year beginning January 1, 2024. • Derivatives and Hedging: ASU 2022-01 , Derivatives and Hedging (Topic 815), Fair Value Hedging - Portfolio Layer Method. This update was effective for our fiscal year beginning January 1, 2023. Summary of Accounting Policies Revenue Recognition We generate revenue through the sale of equipment and supplies and by providing maintenance and printing services. Revenue is measured based on the consideration specified in a contract with a customer and is recognized when we satisfy a performance obligation by transferring control of a product to a customer or in the period the customer benefits from the service. With the exception of our sales-type lease arrangements, our invoices to the customer, which normally have short-term payment terms, are typically aligned to the transfer of goods or as services are rendered to our customers and therefore in most cases, we recognize revenue based on our right to invoice customers. As a result of the application of this practical expedient for the substantial portion of our revenue, the disclosure of the value of unsatisfied performance obligations for our services is not required. Significant judgments primarily include the identification of performance obligations in our Document management services arrangements as well as the pattern of delivery for those services. More specifically, revenue related to our products and services is generally recognized as follows: Equipment: Revenues from the sale of equipment directly to end-user customers, including those from sales-type leases (see below), are recognized when obligations under the terms of a contract with our customer are satisfied and control has been transferred to the customer. For equipment placements that require us to install the product at the customer location, revenue is normally recognized when the equipment has been delivered and installed at the customer location. Sales of customer installable products are recognized upon shipment or receipt by the customer according to the customer's shipping terms. Revenue from the equipment performance obligation also includes certain analyst training services performed in connection with the installation or delivery of the equipment . Maintenance services: 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. In arrangements that include minimums, those minimums are normally set below the customer’s estimated page volumes and are not Xerox 2023 Annual Report 82 Table of Contents considered substantive. These agreements are normally sold as part of a bundled lease arrangement or through distributors and resellers. 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. Service offerings: The Company’s primary service offerings include Managed Print Services, Digital Services and IT Services. In our services arrangements, the Company typically satisfies the performance obligations and recognizes revenue over time as the services are rendered. 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. Delivery is typically measured on an output basis such as usage and is normally consistent with the billing or invoicing to the customer. Revenues on unit-price or time-based contracts are recognized as work is completed to the customer. Sales to distributors and resellers: 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. Revenues on sales to distributors and resellers are generally recognized when products are shipped to such distributors and resellers. However, revenue is only recognized when the distributor or reseller has economic substance apart from the Company such that collectability is probable and we have no further obligations related to bringing about the resale, delivery or installation of the product that would impact transfer of control. Revenues associated with maintenance agreements sold through distributors and resellers to end-user customers are recognized in a consistent manner for maintenance services. Revenue that may be subject to a reversal of revenue due to contractual terms or uncertainties is not recorded as revenue until the contractual provisions lapse or the uncertainties are resolved. Distributors and resellers participate in various rebate, price-protection, cooperative marketing and other programs. 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. In certain instances, we may provide lease financing to end-user customers who purchased equipment we sold to distributors or resellers. We are not obligated to provide financing and we compete with other third-party leasing companies with respect to the lease financing provided to these end-user customers. Software: Most of our equipment has both software and non-software components that function together to deliver the equipment's essential functionality and therefore they are accounted for together as part of Equipment sales revenues. 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. Supplies: 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. Financing: Finance income attributable to sales-type leases, direct financing leases and installment loans is recognized on the accrual basis using the effective interest method. Bundled Lease Arrangements: A portion of our direct sales of equipment to end-user customers are made through bundled lease arrangements which typically include equipment, services (maintenance and managed services) and financing components, where the customer pays a single negotiated fixed minimum monthly payment for all elements over the contractual lease term. 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. 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). Lease deliverables include the equipment and financing, while the non-lease deliverables generally consist of the services, which normally include supplies. 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. 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. 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 Xerox 2023 Annual Report 83 Table of Contents customer. Accordingly, revenue from these agreements is recognized in a manner consistent with the guidance for Maintenance or Managed Print services agreements. We establish SSP using observable inputs from standalone sales of products, as well as the prices established by management in similar transactions. 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. Leases: The two primary accounting provisions we use to classify transactions as sales-type or operating leases are: (i) a review of the lease term to determine if it is for the major part of the economic life of the underlying equipment (defined as greater than 75%); and (ii) a review of the present value of the lease payments to determine if they are equal to or greater than substantially all of the fair market value of the equipment at the inception of the lease (defined as greater than 90%). Equipment placements included in arrangements meeting these conditions are accounted for as sales-type leases and revenue is recognized in a manner consistent with Equipment sales. Equipment placements included in arrangements that do not meet these conditions are accounted for as operating leases and revenue is recognized over the term of the lease. We consider the economic life of most of our products to be five years , since this represents the most frequent contractual lease term for our principal products and only a small percentage of our leases are for original terms longer than five years . There is no significant after-market for our used equipment. 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. 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. We reassess our pricing interest rates quarterly based on changes in the local prevailing rates in the marketplace. The pricing interest rates generally equal the implicit rates within the leases, as corroborated by our comparisons of cash to lease selling prices and other analyses as noted above. Additional Lease Payments: Certain leases may require the customer to pay property taxes and insurance on the equipment. In these instances, the amounts for property taxes and insurance that we invoice to customers and pay to third parties are considered variable payments and are recorded as other revenues and other cost of revenues, respectively. Amounts related to property taxes and insurance are not material. We exclude from variable payments all lessor costs that are explicitly required to be paid directly by a lessee on behalf of the lessor to a third party. Other Revenue Recognition Policies Revenue-based Taxes: Revenue-based taxes assessed by governmental authorities that are both imposed on and concurrent with specific revenue-producing transactions, and that are collected by the Company from a customer, are excluded from revenue. The primary revenue-based taxes are sales tax and value-added tax (VAT). Shipping and Handling: 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. Other Significant Accounting Policies Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand, including money market funds, and investments with original maturities of three months or less. Allowance for Doubtful Accounts and Credit Losses The allowance for doubtful accounts and provision for credit losses represents an estimate of the losses expected to be incurred from the Company's trade and finance receivable portfolio. The measurement and recognition of expected credit losses is based on an expected loss model and incorporates an assessment of past collection experience as well as consideration of current and future economic conditions and changes in our customer collection trends. The allowance of finance receivables is determined on a collective basis by year of origination through the application of projected loss rates to our different portfolios by country, which represent our portfolio segments. This is the level at which we develop and document our methodology to determine the allowance for credit losses. These Xerox 2023 Annual Report 84 Table of Contents 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. We consider all available information in our quarterly assessments of the adequacy of the allowance for doubtful accounts. We believe our estimates, including any qualitative adjustments, are reasonable and have considered all reasonably available information about past events, current conditions, and reasonable and supportable forecasts of future events and economic conditions. The identification of account-specific exposure is not a significant factor in establishing the allowance for doubtful finance receivables. Receivable Sales and Securitization The Company securitizes certain finance lease receivables by transferring them to Special Purpose Entities (SPEs) that meet the definition of a Variable Interest Entity (VIE) and are consolidated into our financial statements. These SPEs are bankruptcy-remote legal entities with separate assets and liabilities. The purpose of the SPEs is to facilitate the funding of customer loan and lease payments and associated equipment in the capital markets. 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. The Company continues recognize finance income over the lives of these receivables. We also transfer certain portions of our finance receivable portfolios to third parties and account for those transfers of financial assets as sales when we have surrendered control over the related assets. Whether control has been relinquished requires, among other things, an evaluation of relevant legal considerations and an assessment of the nature and extent of the Company’s continuing involvement with the assets transferred. Gains and losses stemming from transfers reported as sales are normally included in revenue in the accompanying statements of income. Gains or losses on the sale of finance receivables depend, in part, on both (a) the cash proceeds and (b) the net non-cash proceeds received or paid. Assets obtained and liabilities incurred in connection with transfers reported as sales are initially recognized in the balance sheet at fair value. Refer to Note 8 – Finance Receivables, Net for additional information on our finance receivable sales. Inventories Inventories are carried at the lower of average cost or net realizable value. Inventories also include equipment that is returned at the end of the lease term. Returned equipment is recorded at the lower of remaining net book value or salvage value, which is normally not significant. We regularly review inventory quantities and record a provision for excess and/or obsolete inventory based primarily on our estimated forecast of product demand, production requirements and servicing commitments. Several factors may influence the realizability of our inventories, including our decision to exit a product line, technological changes and new product development. The provision for excess and/or obsolete raw materials and equipment inventories is based primarily on near-term forecasts of product demand and include consideration of new product introductions, as well as changes in remanufacturing strategies. The provision for excess and/or obsolete service parts inventory is based primarily on projected servicing requirements over the life of the related equipment populations. Refer to Note 9 - Inventories and Equipment on Operating Leases, Net for further discussion. Land, Buildings and Equipment on Operating Leases Land, buildings and equipment are recorded at cost. Buildings and equipment are depreciated over their estimated useful lives. Leasehold improvements are depreciated over the shorter of the lease term or the estimated useful life. Equipment on operating leases is depreciated to estimated salvage value over the lease term. Depreciation is computed using the straight-line method. Significant improvements are capitalized, and maintenance and repairs are expensed. Refer to Note 9 - Inventories and Equipment on Operating Leases, Net and Note 10 - Land, Buildings, Equipment and Software, Net for further discussion. Leased Assets We determine at inception whether an arrangement is a lease. Our leases do not include assets of a specialized nature, or the transfer of ownership at the end of the lease, and the exercise of end-of-lease purchase options, which are primarily in our equipment leases, is not reasonably assured at lease inception. Accordingly, the two primary criteria we use to classify transactions as operating leases or finance leases are: (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 Xerox 2023 Annual Report 85 Table of Contents 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. We also assess arrangements for goods or services to determine if the arrangement contains a lease at its inception. This assessment first considers whether there is an implicitly or explicitly identified asset in the arrangement and then whether there is a right to control the use of the asset. If there is an embedded lease within a contract, the Company determines the classification of the lease at the lease inception date consistent with standalone leases of assets. Operating leases are included in Other long-term assets, Accrued expenses and other current liabilities, and Other long-term liabilities in our Consolidated Balance Sheets. Finance leases are included in Land, buildings and equipment, net, Accrued expenses and other current liabilities, and Other long-term liabilities in our Consolidated Balance Sheets. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. 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. 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. Lease terms used to calculate the present value of lease payments generally do not include any options to extend, renew, or terminate the lease, as we do not have reasonable certainty at lease inception that these options will be exercised. We generally consider the economic life of our operating lease ROU assets to be comparable to the useful life of similar owned assets. We have elected the short-term lease exception, therefore operating lease ROU assets and liabilities do not include leases with a lease term of twelve months or less. Our leases generally do not provide a residual guarantee. The operating lease ROU asset also excludes lease incentives. Lease expense is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components. These components are accounted for separately for vehicle and equipment leases. We account for the lease and non-lease components as a single lease component for real estate leases of offices and warehouses. We review the potential impairment of our ROU assets consistent with the approach applied for our other long-lived assets. We review the recoverability of our long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. We have elected to include the carrying amount of operating lease liabilities in any tested asset group and include the associated operating lease payments in the undiscounted future pre-tax cash flows. Software - Internal Use and Product We capitalize direct costs associated with developing, purchasing or otherwise acquiring software for internal use and amortize these costs on a straight-line basis over the expected useful life of the software, beginning when the software is implemented (Internal Use Software). Costs incurred for upgrades and enhancements that will not result in additional functionality are expensed as incurred. Amounts expended for Internal Use Software are included in Cash Flows from Investing activities. We also capitalize certain costs related to the development of software solutions to be sold to our customers upon reaching technological feasibility (Product Software). These costs are amortized on a straight-line basis over the estimated economic life of the software. Amounts expended for Product Software are included in Cash Flows from Operations. We perform periodic reviews to ensure that unamortized Product Software costs remain recoverable from estimated future operating profits (net realizable value or NRV). Costs to support or service licensed software are charged to Costs of services as incurred. Refer to Note 10 - Land, Buildings, Equipment and Software, Net for further information. Goodwill and Other Intangible Assets Goodwill represents the excess of the purchase price over the fair value of acquired net assets in a business combination, including the amount assigned to identifiable intangible assets. 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. Goodwill is not amortized, but rather is Xerox 2023 Annual Report 86 Table of Contents 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. Impairment testing for Goodwill is done at the reporting unit level. 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. 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. The qualitative impairment test assesses several factors to determine whether it is more-likely-than-not that the fair value of the entity is less than its carrying amount. If we conclude it is more-likely-than-not that the fair value of the entity is less than its carrying amount, a quantitative fair value test is performed. In certain circumstances, we may also bypass the qualitative test and proceed directly to a quantitative impairment test. In a quantitative impairment test, we assess Goodwill by comparing the carrying amount of the entity to its fair value. Fair value of the entity is determined by using a weighted combination of an income approach and a market approach. 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. Other intangible assets primarily consist of assets obtained in connection with business acquisitions, including installed customer base and distribution network relationships, existing technology, trademarks and non-compete agreements. We apply an impairment evaluation whenever events or changes in business circumstances indicate that the carrying value of our intangible assets may not be recoverable. Other intangible assets are amortized on a straight-line basis over their estimated economic lives. We believe that the straight-line method of amortization reflects an appropriate allocation of the cost of the intangible assets to earnings in proportion to the amount of economic benefits obtained annually by the Company. Refer to Note 12 - Goodwill, Net and Intangible Assets, Net for further information. Impairment of Long-Lived Assets We review the recoverability of our long-lived assets, including buildings, equipment, right-of-use leased assets, internal use software and other intangible assets, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. Our primary measure of fair value is based on discounted cash flows. Long-lived assets to be disposed of by sale are reported at the lower of carrying amount or fair value less costs to sell. 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). Refer to Note 13 - Restructuring Programs for additional information regarding the impairment of long-lived assets in connection with our restructuring programs and initiatives. Pension and Post-Retirement Benefit Obligations We sponsor various forms of defined benefit pension plans in several countries covering employees who meet eligibility requirements. Retiree health benefit plans cover a portion of our U.S. and Canadian employees for retiree medical costs. We employ a delayed recognition feature in measuring the costs of pension and post-retirement benefit plans. This requires changes in the benefit obligations and changes in the value of assets set aside to meet those obligations to be recognized not as they occur, but systematically and gradually over subsequent periods. All changes are ultimately recognized as components of net periodic benefit cost, except to the extent they may be offset by subsequent changes. At any point, changes that have been identified and quantified but not recognized as components of net periodic benefit cost are recognized in Accumulated other comprehensive loss, net of tax. Several statistical and other factors that attempt to anticipate future events are used in calculating the expense, liability and asset values related to our pension and retiree health benefit plans. These factors include assumptions we make about the applicable discount rate, expected return on plan assets, cash balance interest-crediting rate, rate of increase in healthcare costs, the rate of future compensation increases and mortality. Actual returns on plan assets are not immediately recognized in our income statement due to the delayed recognition requirement. 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 Xerox 2023 Annual Report 87 Table of Contents 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. The primary difference between the two methods relates to systematic recognition of changes in fair value over time (generally two years ) versus immediate recognition of changes in fair value. Our expected rate of return on plan assets is applied to the market-related asset value to determine the amount of the expected return on plan assets to be used in the determination of the net periodic pension cost. The market-related value approach reduces the volatility in net periodic pension cost that would result from using the fair market value approach. The discount rate is used to present value our future anticipated benefit obligations. The discount rate reflects the current rate at which benefit liabilities could be effectively settled considering the timing of expected payments for plan participants. In estimating our discount rate, we consider rates of return on high-quality fixed-income investments adjusted to eliminate the effects of call provisions, as well as the expected timing of pension and other benefit payments. Each year, the difference between the actual return on plan assets and the expected return on plan assets, as well as increases or decreases in the benefit obligation as a result of changes in the discount rate and other actuarial assumptions, are added to or subtracted from any cumulative actuarial gain or loss from prior years. This amount is the net actuarial gain or loss recognized in Accumulated other comprehensive loss. We amortize net actuarial gains and losses as a component of net pension cost for a year if, as of the beginning of the year, that net gain or loss (excluding asset gains or losses that have not been recognized in market-related value) exceeds 10% of the greater of the projected benefit obligation or the market-related value of plan assets (the corridor method). This determination is made on a plan-by-plan basis. If amortization is required for a particular plan, we amortize the applicable net gain or loss in excess of the 10% threshold on a straight-line basis in net periodic pension cost over the remaining service period of the employees participating in that pension plan. In plans where substantially all participants are inactive, the amortization period for the excess is the average remaining life expectancy of the plan participants. Our primary domestic plans allow participants the option of settling their vested benefits through the receipt of a lump-sum payment. The participant ' s vested benefit is considered fully settled upon payment of the lump sum. We have elected to apply settlement accounting and therefore we recognize the losses associated with settlements in this plan immediately upon the settlement of the vested benefits. Settlement accounting requires us to recognize a pro rata portion of the aggregate unamortized net actuarial losses upon settlement. The pro rata factor is computed as the percentage reduction in the projected benefit obligation due to the settlement of the participant ' s vested benefit. Refer to Note 18 - Employee Benefit Plans for further information regarding our Pension and Post-Retirement Benefit Obligations . Research, Development and Engineering (RD&E) Research, development and engineering costs are expensed as incurred. Sustaining engineering costs are incurred with respect to on-going product improvements or environmental compliance after initial product launch. Sustaining engineering costs were $ 55 , $ 58 and $ 59 in for the years ended December 31, 2023, 2022 and 2021, respectively. Government Grants/Assistance 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. Foreign Currency Translation and Remeasurement The functional currency for most of our foreign operations is the local currency. Net assets are translated at current rates of exchange and income, expense and cash flow items are translated at average exchange rates for the applicable period. The translation adjustments are recorded in Accumulated other comprehensive loss. The U.S. Dollar is used as the functional currency for certain foreign subsidiaries that conduct their business in U.S. Dollars as well as foreign subsidiaries operating in highly inflationary economies. For these subsidiaries, non-monetary foreign currency assets and liabilities are translated using historical rates, while monetary assets and liabilities are translated at current rates, with the U.S. dollar effects of rate changes recorded in Currency (gains) and losses within Other expenses, net together with other foreign currency remeasurements. Xerox 2023 Annual Report 88 Table of Contents Note 3 – Revenue Revenues disaggregated by primary geographic markets, major product lines, and sales channels are as follows: Year Ended December 31, 2023 2022 2021 Primary geographical markets (1) United States $ 3,826 $ 4,014 $ 3,982 Europe 1,951 1,935 2,023 Canada 554 545 398 Other 555 613 635 Total Revenues $ 6,886 $ 7,107 $ 7,038 Major product and services lines Equipment $ 1,655 $ 1,624 $ 1,581 Supplies, paper and other sales 1,065 1,176 1,001 Maintenance agreements (2) 1,631 1,730 1,787 Service arrangements (3) 1,984 1,953 1,991 Rental and other 360 417 457 Financing 191 207 221 Total Revenues $ 6,886 $ 7,107 $ 7,038 Sales channels: Direct equipment lease (4) $ 920 $ 708 $ 664 Distributors & resellers (5) 1,044 1,222 1,130 Customer direct 756 870 788 Total Sales $ 2,720 $ 2,800 $ 2,582 _____________ (1) Geographic area data is based upon the location of the subsidiary reporting the revenue. (2) Includes revenues from maintenance agreements on sold equipment as well as revenues associated with service agreements sold through our channel partners. (3) Primarily includes revenues from our Print outsourcing arrangements including revenues from embedded operating leases in those arrangements, which were not significant. (4) Primarily reflects sales through bundled lease arrangements. (5) Primarily reflects sales through our two-tier distribution channels. Contract assets and liabilities: We normally do not have contract assets, which are primarily unbilled accounts receivable that are conditional on something other than the passage of time. Our contract liabilities, which represent billings in excess of revenue recognized, are primarily related to advanced billings for maintenance and other services to be performed and were approximately $ 132 and $ 131 at December 31, 2023 and 2022, respectively. The majority of the balance at December 31, 2023 will be amortized to revenue over approximately the next 30 months. Contract Costs: We incur the following contract costs as part of our revenue arrangements: • 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. 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 . We pay commensurate sales commissions upon customer renewals; therefore, our amortization period is aligned to our initial contract term. • 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. These costs are amortized over the contractual service period of the arrangement to cost of services. • Contract inducements, which are capitalized and amortized as a reduction of revenue over the term of the contract. Xerox 2023 Annual Report 89 Table of Contents Changes in contract costs, net are as follows: 2023 2022 2021 Balance at January 1st, 135 147 158 Customer contract costs deferred 70 65 66 Amortization of customer contract costs ( 69 ) ( 73 ) ( 79 ) Other (1) — ( 4 ) 2 Balance at December 31st, $ 136 $ 135 $ 147 _____________ (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 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. Segment Reporting Change 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: • 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. • 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. The following provides segment revenues and profit for 2022 and 2021, recast to conform to our new segment measurements: Segment Revenues Segment Profit 2022 2021 2022 2021 As Reported: Print and Other $ 6,667 $ 6,548 $ 238 $ 293 FITTLE 610 695 37 82 Intersegment revenue (1) ( 170 ) ( 205 ) — — Total External Revenue $ 7,107 $ 7,038 $ 275 $ 375 Change: Print and Other $ 137 $ 181 $ 20 $ 18 FITTLE ( 217 ) ( 294 ) ( 20 ) ( 18 ) Intersegment revenue (1) 80 113 — — Total External Revenue $ — $ — $ — $ — Recast: Print and Other $ 6,804 $ 6,729 $ 258 $ 311 FITTLE 393 401 17 64 Intersegment revenue (1) ( 90 ) ( 92 ) — — Total External Revenue $ 7,107 $ 7,038 $ 275 $ 375 _____________ (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. Xerox 2023 Annual Report 90 Table of Contents Our Print and Other segment includes the sale of document systems, supplies and technical services and managed services. The segment also includes the delivery of managed services that involve a continuum of solutions and services that help our customers optimize their print and communications infrastructure, apply automation and simplification to maximize productivity, and ensure the highest levels of security. This segment also includes IT services and software. Our product groupings range from: • “Entry” , which include A4 devices and desktop printers and multifunction devices that primarily serve small and medium workgroups/work teams. • “Mid-Range” , which include A3 devices that generally serve large workgroup/work teams environments as well as products in the Light Production product groups serving centralized print centers, print for pay and lower volume production print establishments. • “High-End” , which include production printing and publishing systems that generally serve the graphic communications marketplace and print centers in large enterprises. Customers range from small and mid-sized businesses to large enterprises. Customers also include graphic communication enterprises as well as channel partners including distributors and resellers. 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. 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. Segment revenues primarily include financing income on sales-type leases (including month-to-month extensions) and leasing fees. 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. 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. 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. Refer to Note 8 - Finance Receivables, Net for additional information on the sale of receivables. 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. network of independent dealers and resellers. In the fourth quarter 2023, our partnership with PEAC Solutions was further expanded to include the transition of some FITTLE U.S. employees in risk, IT, and operations to PEAC Solutions. 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 We derive the results of our business segments directly from our internal management reporting system. The accounting policies that the Company uses to derive its segment results are substantially the same as those used by the Company in preparing its consolidated financial statements. The segment results include a significant level of management estimates regarding the allocation of revenues such as finance income in bundled lease arrangements and other leasing revenues and operating lease revenues embedded in our managed services contracts as well as the allocation of expenses for shared selling and administrative services. Accordingly, the financial results for the segments may not be indicative of the results the businesses would have as on a standalone basis or what might be presented for the businesses in stand-alone financial statements. The CODM measures the performance of each segment based on several metrics, including segment revenues and profit. The CODM uses these results, in part, to evaluate the performance of, and to allocate resources to each segment. 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 Table of Contents Selected financial information for our reportable segments was as follows: Year Ended December 31, 2023 2022 (1) 2021 (1) 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 Intersegment revenue (2) 86 — 86 90 — 90 92 — 92 Total Segment revenue $ 6,571 $ 401 $ 6,972 $ 6,804 $ 393 $ 7,197 $ 6,729 $ 401 $ 7,130 Segment profit $ 360 $ 29 $ 389 $ 258 $ 17 $ 275 $ 311 $ 64 $ 375 Segment margin (3) 5.6 % 7.2 % 5.6 % 3.8 % 4.3 % 3.9 % 4.7 % 16.0 % 5.3 % Interest income $ — $ 191 $ 191 $ — $ 207 $ 207 $ — $ 221 $ 221 Interest expense — 130 130 — 108 108 — 111 111 Depreciation and amortization 208 — 208 228 — 228 272 — 272 Capital expenditures (4) 37 — 37 57 — 57 68 — 68 Total Assets 7,301 2,707 10,008 8,230 3,313 11,543 9,949 3,274 13,223 _____________ (1) Amounts for 2022 and 2021 have been recast to conform to the current year's reporting presentation. See the Segment Reporting Change section above. (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. (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: Year Ended December 31, 2023 2022 2021 Pre-tax (Loss) Total Segment profit $ 389 $ 275 $ 375 Goodwill impairment — ( 412 ) ( 781 ) Restructuring and related costs, net ( 167 ) ( 65 ) ( 38 ) Amortization of intangible assets ( 43 ) ( 42 ) ( 55 ) PARC Donation ( 132 ) — — Accelerated share vesting — ( 21 ) — Other expenses, net ( 75 ) ( 60 ) 27 Total Pre-tax (loss) $ ( 28 ) $ ( 325 ) $ ( 472 ) Depreciation and Amortization Total reported segments $ 208 $ 228 $ 272 Amortization of intangible assets 43 42 55 Total Depreciation and amortization $ 251 $ 270 $ 327 Interest Expense Total reported segments $ 130 $ 108 $ 111 Corporate 68 91 96 Total Interest expense $ 198 $ 199 $ 207 Interest Income Total reported segments $ 191 $ 207 $ 221 Corporate 16 11 4 Total Interest income $ 207 $ 218 $ 225 Xerox 2023 Annual Report 92 Table of Contents Geographic Area Data Geographic area data is based upon the location of the subsidiary reporting the revenue or long-lived assets and is as follows: Revenues Long-Lived Assets (1) Year Ended December 31, As of December 31, 2023 2022 2021 2023 2022 United States $ 3,826 $ 4,014 $ 3,982 $ 467 $ 537 Europe 1,951 1,935 2,023 241 249 Canada 554 545 398 42 54 Other areas 555 613 635 21 25 Total $ 6,886 $ 7,107 $ 7,038 $ 771 $ 865 _____________ (1) Long-lived assets are comprised of (i) Land, buildings and equipment, net, (ii) Equipment on operating leases, net, (iii) Leased right-of-use (ROU) assets, net, (iv) Internal use software, net, and v) Capitalized product software, net. Note 5 – Lessor Revenue from sales-type leases is presented on a gross basis when the Company enters into a lease to realize value from a product that it would otherwise sell in its ordinary course of business, whereas in transactions where the Company enters into a lease for the purpose of generating revenue by providing financing, the profit or loss, if any, is presented on a net basis. In addition, we have elected to account for sales tax and other similar taxes collected from a lessee as lessee costs and therefore we exclude these costs from contract consideration and variable consideration and present revenue net of these costs. The components of lease income are as follows: Location in Statements of Income (Loss) Year Ended December 31, 2023 2022 2021 Revenue from sales type leases Sales $ 920 $ 708 $ 664 Interest income on lease receivables Financing 191 207 221 Lease income - operating leases Services, maintenance and rentals 161 170 246 Variable lease income Services, maintenance and rentals 62 63 62 Total Lease income $ 1,334 $ 1,148 $ 1,193 Profit at lease commencement on sales type leases was estimated to be approximately $ 332 , $ 229 and $ 221 for the three years ended December 31, 2023, 2022 and 2021, respectively. Xerox 2023 Annual Report 93 Table of Contents Note 6 – Acquisitions and Divestitures Acquisitions The following table summarizes the purchase price allocations for our acquisitions as of the acquisition dates: Year Ended December 31, 2022 Year Ended December 31, 2021 Weighted-Average Life Acquisitions Weighted-Average Life Acquisitions Accounts/finance receivables $ 29 $ 5 Intangible assets: Customer relationships 10 years 41 9 years 27 Trademarks 5 years 7 5 years 3 Technology — 3 years 1 Goodwill (1) 62 25 Other assets 30 4 Total Assets acquired 169 65 Liabilities assumed (2) ( 76 ) ( 12 ) Total Cash Purchase Price $ 93 $ 53 _____________ (1) Goodwill from 2022 acquisitions included approximately $ 20 of goodwill that is expected to be deductible for tax purposes. (2) Liabilities assumed in 2022 acquisitions included estimated contingent consideration liabilities of approximately $ 11 . 2023 Acquisitions There were no material business acquisitions during 2023. 2022 Acquisitions During 2022, Xerox acquired two businesses that totaled $ 93 , net of cash acquired. In February 2022, Xerox acquired Powerland, a leading IT services provider in Canada, for approximately $ 52 (CAD 66 million), net of cash. 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. Approximately $ 11 was accrued as part of the purchase price reflecting the estimated fair value payout for this element. During 2023 $ 6 of contingent consideration was paid. 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. 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. 2021 Acquisitions In 2021, Xerox continued its strategy of focusing on further penetrating the small-to-medium sized business (SMB) market through acquisitions of local area resellers and partners, including multi-brand dealers as well as companies with an adjacent or sole IT services business. During 2021, we acquired businesses associated with this initiative that totaled $ 50 , net of cash acquired, which included an office equipment dealer in Canada for approximately $ 31 , as well as two acquisitions in the U.S. for approximately $ 19 . 2021 also included smaller acquisitions totaling approximately $ 3 . The Goodwill associated with these acquisitions is included in our Print and Other segment. Summary Our acquisitions in 2022 and 2021 resulted in 100 % ownership of the acquired companies. The operating results of these acquisitions were not material to our financial statements and were included within our results from the respective acquisition dates. 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 Table of Contents Revenue Impact Our acquisitions contributed aggregate revenues from their respective acquisition dates as follows: Year Ended December 31, Acquisition Year 2023 2022 2021 2023 $ — $ — $ — 2022 215 163 — 2021 42 37 19 Total Contributed Aggregate Revenue $ 257 $ 200 $ 19 Investments ServiceNow Inc. Investment in CareAR In August 2021, in connection with Xerox Holdings Corporation's formation of the CareAR software business, ServiceNow, Inc. acquired a noncontrolling interest in CareAR Holdings LLC for $ 10 . CareAR Holdings LLC is a direct operating subsidiary of Xerox Corporation and includes Xerox’s XMPie, Inc., DocuShare LLC and CareAR, Inc. business units. ServiceNow’s investment includes a fair value redemption right, which is contingent on the non-occurrence of a future liquidity event (e.g., sale, public offering, spin-off, etc.) within 6 years of the closing of the investment. 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. Divestitures Donation of Palo Alto Research Center (PARC) 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. 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. 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. The majority of patents held by PARC will be retained by Xerox with a perpetual license to use those patents being provided to SRI. Xerox, at its option, will also continue to receive certain research services from SRI. 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. 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. 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. 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 Table of Contents Note 7 – Accounts Receivable, Net Accounts receivable, net were as follows: December 31, 2023 2022 Invoiced $ 710 $ 698 Accrued (1) 204 211 Allowance for doubtful accounts ( 64 ) ( 52 ) Accounts receivable, net $ 850 $ 857 ____________ (1) Accrued receivables includes amounts to be invoiced in the subsequent quarter for current services provided. The allowance for doubtful accounts was as follows: Balance at December 31, 2021 $ 58 Provision 17 Charge-offs, net ( 14 ) Other (1) ( 9 ) Balance at December 31, 2022 $ 52 Provision 22 Charge-offs, net ( 17 ) Other (1) 7 Balance at December 31, 2023 $ 64 _____________ (1) Includes the impacts of foreign currency translation and adjustments to reserves necessary to reflect events of non-payment such as customer accommodations and contract terminations. We perform ongoing credit evaluations of our customers and adjust credit limits based upon customer payment history and current creditworthiness. The allowance for uncollectible accounts receivable is determined based on an assessment of past collection experience as well as consideration of current and future economic conditions and changes in our customer collection trends. 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. The increase in the allowance is primarily due to an increase in aged receivables in the U.S. Accounts Receivable Sale Arrangements We have one facility in Europe that enables us to sell accounts receivable associated with our distributor network on an ongoing basis, without recourse. Under this arrangement, we sell our entire interest in the related accounts receivable for cash and no portion of the payment is held back or deferred by the purchaser. Of the accounts receivable sold and derecognized from our balance sheet, $ 99 and $ 159 remained uncollected as of December 31, 2023 and 2022, respectively. Accounts receivable sales activity was as follows: Year Ended December 31, 2023 2022 2021 Accounts receivable sales (1) $ 399 $ 593 $ 478 _____________ (1) Losses on sales were not material. Xerox 2023 Annual Report 96 Table of Contents Note 8 – Finance Receivables, Net 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. Finance receivables, net were as follows: December 31, 2023 2022 Gross receivables $ 2,899 $ 3,593 Unearned income ( 297 ) ( 374 ) Subtotal 2,602 3,219 Residual values — — Allowance for doubtful accounts ( 92 ) ( 117 ) Finance Receivables, Net 2,510 3,102 Less: Billed portion of finance receivables, net 71 93 Less: Current portion of finance receivables not billed, net 842 1,061 Finance Receivables Due After One Year, Net $ 1,597 $ 1,948 A summary of our gross finance receivables' future contractual maturities, including those previously billed, is as follows: December 31, 2023 2022 12 months $ 1,075 $ 1,325 24 months 758 967 36 months 547 690 48 months 343 411 60 months 143 169 Thereafter 33 31 Total $ 2,899 $ 3,593 Finance Receivables - Allowance for Credit Losses and Credit Quality Our finance receivable portfolios are primarily in the U.S., Canada and EMEA. We generally establish customer credit limits and estimate the allowance for credit losses on a country or geographic basis. Customer credit limits are based upon an initial evaluation of the customer's credit quality, and we adjust that limit accordingly based upon ongoing credit assessments of the customer, including payment history and changes in credit quality. 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. 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. 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. The decrease in the bad debt provision was primarily due to a credit of $( 12 ) related to a reserve release in the U.S. 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. 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. 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. 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. Our assessment also includes a review of current portfolio credit metrics and the level of write-offs incurred over the past year. 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. Xerox 2023 Annual Report 97 Table of Contents The allowance for credit losses as well as the related investment in finance receivables were as follows: Allowance for Credit Losses: United States Canada EMEA (1) Total Balance at December 31, 2021 $ 77 $ 11 $ 30 $ 118 Provision 20 ( 2 ) 8 26 Charge-offs, net ( 15 ) ( 3 ) ( 8 ) ( 26 ) Other (2) 1 1 ( 3 ) ( 1 ) Balance at December 31, 2022 $ 83 $ 7 $ 27 $ 117 Provision ( 8 ) 1 13 6 Charge-offs, net ( 17 ) ( 3 ) ( 14 ) ( 34 ) Other (2) — 2 1 3 Balance at December 31, 2023 $ 58 $ 7 $ 27 $ 92 Finance Receivables Collectively Evaluated for Impairment: December 31, 2022 (3) $ 1,948 $ 228 $ 1,043 $ 3,219 December 31, 2023 (3) $ 1,205 $ 255 $ 1,142 $ 2,602 _____________ (1) Includes developing market countries. (2) Includes the impacts of foreign currency translation and adjustments to reserves necessary to reflect events of non-payment such as customer accommodations and contract terminations. (3) Total Finance receivables exclude the allowance for credit losses of $ 92 and $ 117 at December 31, 2023 and 2022, respectively. In the U.S., customers are further evaluated by class based on the type of lease origination. The primary categories are direct, which primarily includes leases originated directly with end-user customers through bundled lease arrangements, and indirect, which primarily includes leases originated through our XBS sales channel and lease financing to end-user customers who purchased equipment we sold to distributors or resellers. We evaluate our customers based on the following credit quality indicators: • Low Credit Risk: This rating includes accounts with excellent to good business credit, asset quality and capacity to meet financial obligations. These customers are less susceptible to adverse effects due to shifts in economic conditions or changes in circumstance. Loss rates in this category in the normal course are generally less than 1 %. • Average Credit Risk: This rating includes accounts with average credit risk that are more susceptible to loss in the event of adverse business or economic conditions. 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. In addition, the higher loss rates are largely offset by the higher rates of return we obtain with such leases. Loss rates in this category in the normal course are generally in the range of 2 % to 5 %. • High Credit Risk: This rating includes accounts that have marginal credit risk such that the customer’s ability to make repayment is impaired or may likely become impaired. We use numerous strategies to mitigate risk including higher rates of interest, prepayments, personal guarantees, etc. Accounts in this category include customers who were downgraded during the term of the lease from low and average credit risk evaluation when the lease was originated. Accordingly, there is a distinct possibility for a loss of principal and interest or customer default. The loss rates in this category in the normal course are generally in the range of 7 % to 10 %. Credit quality indicators are updated at least annually, or more frequently to the extent required by economic conditions, and the credit quality of any given customer can change during the life of the portfolio. Xerox 2023 Annual Report 98 Table of Contents Details about our finance receivables portfolio based on geography, origination year and credit quality indicators are as follows: December 31, 2023 2023 2022 2021 2020 2019 Prior Total Finance Receivables United States (Direct): Low Credit Risk $ 122 $ 51 $ 61 $ 43 $ 17 $ 3 $ 297 Average Credit Risk 104 35 49 23 9 2 222 High Credit Risk 34 36 25 22 6 3 126 Total $ 260 $ 122 $ 135 $ 88 $ 32 $ 8 $ 645 Charge-offs $ 1 $ 1 $ 1 $ 1 $ 1 $ 2 $ 7 United States (Indirect): Low Credit Risk $ 136 $ 77 $ 48 $ 22 $ 6 $ — $ 289 Average Credit Risk 111 69 41 15 6 — 242 High Credit Risk 12 8 6 2 1 — 29 Total $ 259 $ 154 $ 95 $ 39 $ 13 $ — $ 560 Charge-offs $ 4 $ 3 $ 3 $ 2 $ 2 $ 3 $ 17 Canada Low Credit Risk $ 45 $ 24 $ 16 $ 9 $ 4 $ — $ 98 Average Credit Risk 63 36 18 12 6 — 135 High Credit Risk 6 5 4 5 1 1 22 Total $ 114 $ 65 $ 38 $ 26 $ 11 $ 1 $ 255 Charge-offs $ — $ — $ — $ 2 $ — $ 1 $ 3 EMEA (1) Low Credit Risk $ 251 $ 182 $ 110 $ 48 $ 19 $ 6 $ 616 Average Credit Risk 192 148 73 36 17 3 469 High Credit Risk 19 16 11 7 4 — 57 Total $ 462 $ 346 $ 194 $ 91 $ 40 $ 9 $ 1,142 Charge-offs $ 3 $ 8 $ 4 $ 2 $ — $ — $ 17 Total Finance Receivables Low Credit Risk $ 554 $ 334 $ 235 $ 122 $ 46 $ 9 $ 1,300 Average Credit Risk 470 288 181 86 38 5 1,068 High Credit Risk 71 65 46 36 12 4 234 Total $ 1,095 $ 687 $ 462 $ 244 $ 96 $ 18 $ 2,602 Total Charge-offs $ 8 $ 12 $ 8 $ 7 $ 3 $ 6 $ 44 Xerox 2023 Annual Report 99 Table of Contents December 31, 2022 2022 2021 2020 2019 2018 Prior Total Finance Receivables United States (Direct): Low Credit Risk $ 173 $ 104 $ 80 $ 53 $ 23 $ 2 $ 435 Average Credit Risk 83 36 26 28 7 2 182 High Credit Risk 71 70 49 18 6 2 216 Total $ 327 $ 210 $ 155 $ 99 $ 36 $ 6 $ 833 United States (Indirect): Low Credit Risk $ 249 $ 165 $ 91 $ 49 $ 12 $ 1 $ 567 Average Credit Risk 210 156 73 40 11 — 490 High Credit Risk 22 20 9 5 2 — 58 Total $ 481 $ 341 $ 173 $ 94 $ 25 $ 1 $ 1,115 Canada Low Credit Risk $ 31 $ 22 $ 17 $ 12 $ 5 $ — $ 87 Average Credit Risk 46 25 22 16 5 — 114 High Credit Risk 6 6 8 4 2 1 27 Total $ 83 $ 53 $ 47 $ 32 $ 12 $ 1 $ 228 EMEA (1) Low Credit Risk $ 269 $ 167 $ 90 $ 59 $ 24 $ 5 $ 614 Average Credit Risk 152 105 63 43 15 3 381 High Credit Risk 17 13 9 7 2 — 48 Total $ 438 $ 285 $ 162 $ 109 $ 41 $ 8 $ 1,043 Total Finance Receivables Low Credit Risk $ 722 $ 458 $ 278 $ 173 $ 64 $ 8 $ 1,703 Average Credit Risk 491 322 184 127 38 5 1,167 High Credit Risk 116 109 75 34 12 3 349 Total $ 1,329 $ 889 $ 537 $ 334 $ 114 $ 16 $ 3,219 _____________ (1) Includes developing market countries. The aging of our receivables portfolio is based upon the number of days an invoice is past due. Receivables that are more than 90 days past due are considered delinquent. Receivable losses are charged against the allowance when management believes the uncollectibility of the receivable is confirmed and is generally based on individual credit evaluations, results of collection efforts and specific circumstances of the customer. Subsequent recoveries, if any, are credited to the allowance. 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. However, interest revenue for such billings is only recognized if collectability is deemed probable. The aging of our billed finance receivables is as follows: December 31, 2023 Current 31-90 Days Past Due >90 Days Past Due Total Billed Unbilled Total Finance Receivables >90 Days and Accruing Direct $ 24 $ 6 $ 5 $ 35 $ 610 $ 645 $ 41 Indirect 16 3 3 22 538 560 — Total United States 40 9 8 57 1,148 1,205 41 Canada 6 1 1 8 247 255 10 EMEA (1) 7 2 1 10 1,132 1,142 10 Total $ 53 $ 12 $ 10 $ 75 $ 2,527 $ 2,602 $ 61 Xerox 2023 Annual Report 100 Table of Contents December 31, 2022 Current 31-90 Days Past Due >90 Days Past Due Total Billed Unbilled Total Finance Receivables >90 Days and Accruing Direct $ 30 $ 6 $ 6 $ 42 $ 791 $ 833 $ 47 Indirect 27 6 4 37 1,078 1,115 — Total United States 57 12 10 79 1,869 1,948 47 Canada 5 1 — 6 222 228 6 EMEA (1) 9 2 1 12 1,031 1,043 12 Total $ 71 $ 15 $ 11 $ 97 $ 3,122 $ 3,219 $ 65 _____________ (1) Includes developing market countries. Sales of Receivables 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. Accordingly, the receivables sold are derecognized from our financial statements and HPS does not have recourse back to the Company for uncollectible receivables. 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. The commission paid by HPS was also accordingly amended to cover the value associated with the underlying equipment being sold to HPS. 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. The amended finance receivables funding agreement automatically renews each year for a one-year period, unless terminated by either the Company or HPS. 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. Of the finance receivables sold and derecognized from our balance sheet, $ 994 and $ 60 remained uncollected as of December 31, 2023 and 2022, respectively. Finance receivable sales activity was as follows: Year Ended December 31, 2023 2022 Finance receivable sales - net proceeds (1) $ 1,102 $ 60 Gain on sale/Commissions (2)(3) 25 2 Servicing revenue (2) $ 9 $ — _____________ (1) Cash proceeds were reported in Net cash provided by operating activities. (2) Recorded in Services, maintenance and rentals as Other Revenue. Amounts include revenues associated with the sale of the underlying leased equipment. (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 In 2022 and 2021 we sold certain finance receivables to consolidated special purpose entities included in our Consolidated Balance Sheet as collateral for secured loans. Refer to Note 15 - Debt, for additional information related to these arrangements. Xerox 2023 Annual Report 101 Table of Contents Note 9 – Inventories and Equipment on Operating Leases, Net The following is a summary of Inventories by major category: December 31, 2023 2022 Finished goods $ 528 $ 640 Work-in-process 47 45 Raw materials 86 112 Total Inventories $ 661 $ 797 The transfer of equipment from our inventories to equipment subject to an operating lease is presented in our Consolidated Statements of Cash Flows in the operating activities section. Equipment on operating lease and similar arrangements consists of our equipment rented to customers and depreciated to estimated salvage value at the end of the lease term. Equipment on operating leases and the related accumulated depreciation were as follows: December 31, 2023 2022 Equipment on operating leases $ 1,074 $ 1,163 Accumulated depreciation ( 809 ) ( 928 ) Equipment on operating leases, net $ 265 $ 235 Depreciable lives generally vary from four to five years consistent with our planned and historical usage of the equipment subject to operating leases. Estimated minimum future revenues associated with Equipment on operating leases are as follows: December 31, 2023 2022 12 months $ 165 $ 185 24 months 89 95 36 months 52 59 48 months 30 30 60 months 13 13 Thereafter 2 4 Total $ 351 $ 386 Total contingent rentals on operating leases, consisting principally of usage charges in excess of minimum contracted amounts, for the years ended December 31, 2023, 2022 and 2021 amounted to $ 62 , $ 63 and $ 62 , respectively. Secured Borrowings and Collateral In 2021, we sold the rights to payments under operating leases to a consolidated special purpose entity included in our Consolidated Balance Sheet as collateral for a secured loan. Refer to Note 15 - Debt, for additional information related to this arrangement. Xerox 2023 Annual Report 102 Table of Contents Note 10 - Land, Buildings, Equipment and Software, Net Land, buildings and equipment, net were as follows: December 31, Estimated Useful Lives (Years) 2023 2022 Land $ 8 $ 8 Building and building equipment 25 to 50 678 708 Leasehold improvements 1 to 12 78 112 Plant machinery 5 to 12 855 1,000 Office furniture and equipment 3 to 15 436 460 Finance leased assets 1 to 12 33 26 Other 4 to 20 37 38 Construction in progress 11 15 Subtotal 2,136 2,367 Accumulated depreciation (1) ( 1,870 ) ( 2,047 ) Land, buildings and equipment, net $ 266 $ 320 _____________ (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. Refer to Note 11 - Lessee for additional information regarding leased assets. Internal Use Software As of December 31, 2023 and 2022, capitalized costs related to internal use software, net of accumulated amortization, were $ 68 and $ 95 , respectively. Useful lives of our internal use software generally vary from three to seven years . Note 11 – Lessee Operating Leases We have operating leases for real estate and vehicles in our domestic and international operations, and for certain equipment in our domestic operations. Additionally, we have identified embedded operating leases within certain supply chain contracts for warehouses, primarily within our domestic operations. 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: Year Ended December 31, 2023 2022 2021 Operating lease expense $ 83 $ 97 $ 104 Short-term lease expense 16 17 20 Variable lease expense (1) 53 49 48 Sublease income ( 1 ) ( 5 ) ( 4 ) Total Lease expense $ 151 $ 158 $ 168 _____________ (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. 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: December 31, 2023 2022 Other long-term assets $ 172 $ 215 Accrued expenses and other current liabilities $ 41 $ 68 Other long-term liabilities 141 161 Total Operating lease liabilities $ 182 $ 229 Xerox 2023 Annual Report 103 Table of Contents Supplemental information related to operating leases is as follows: Year Ended December 31, 2023 2022 2021 Cash paid for amounts included in the measurement of lease liabilities - Operating cash flows $ 91 $ 101 $ 109 Right-of-use assets obtained in exchange for new lease liabilities (1) $ 23 $ 45 $ 41 Weighted-average remaining lease term 4 years 4 years 5 years Weighted-average discount rate 6.07 % 5.19 % 4.67 % _____________ (1) Includes the impact of new leases as well as remeasurements and modifications to existing leases. Maturities and additional information related to operating lease liabilities are as follows: December 31, 2023 12 months $ 62 24 months 47 36 months 39 48 months 22 60 months 17 Thereafter 21 Total Lease payments 208 Less: Imputed interest 26 Total Operating lease liabilities $ 182 Finance Leases Xerox has finance leases for equipment in the U.S. and Europe and related infrastructure, within outsourced warehouse supply arrangements, in the U.S. 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. Note 12 - Goodwill, Net and Intangible Assets, Net Goodwill, Net The following table presents the changes in the carrying amount of Goodwill, net: 2023 2022 2021 Goodwill $ 4,013 $ 4,068 $ 4,071 Accumulated impairment losses ( 1,193 ) ( 781 ) — Goodwill, net at January 1 $ 2,820 $ 3,287 $ 4,071 Goodwill Activity: Foreign currency translation 47 ( 120 ) ( 23 ) Acquisitions (1) : U.S. Acquisitions — — 9 U.K. Acquisitions 5 28 — Canada Acquisition — 34 16 Other — 3 ( 5 ) Dispositions (2) ( 125 ) — — Goodwill impairment — ( 412 ) ( 781 ) Goodwill $ 3,940 $ 4,013 $ 4,068 Accumulated impairment losses ( 1,193 ) ( 1,193 ) ( 781 ) Goodwill, net at December 31 $ 2,747 $ 2,820 $ 3,287 _____________ (1) Refer to Note 6 - Acquisitions and Divestitures for additional information related to acquisitions. (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. Refer to Note 6 - Acquisitions and Divestitures for additional information related to the PARC donation. Xerox 2023 Annual Report 104 Table of Contents 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. 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. Based on that test, we determined that the estimated fair value of the Print and Other reporting unit (the only reporting unit with Goodwill) had declined below its carrying value and, as a result, we recognized an after-tax non-cash impairment charge of $ 395 ($ 412 pre-tax) related to our Goodwill for the year ended December 31, 2022. In the fourth quarter of 2021, after completing our annual impairment test, we concluded that the estimated fair value of the Company had declined below its carrying value. As a result, we recognized an after-tax non-cash impairment charge of $ 750 ($ 781 pre-tax) related to our Goodwill for the year ended December 31, 2021. Intangible Assets, Net Intangible assets, net were $ 177 at December 31, 2023, all of which relate to our Print and Other segment. Intangible assets were comprised of the following: December 31, 2023 December 31, 2022 Weighted Average Amortization Gross Carrying Amount Accumulated Amortization Net Amount Gross Carrying Amount Accumulated Amortization Net Amount Customer relationships 10 years $ 200 $ 92 $ 108 $ 214 $ 85 $ 129 Distribution network 25 years 123 118 5 123 113 10 Trademarks 18 years 209 147 62 201 135 66 Technology and non-compete 3 years 13 11 2 15 12 3 Total Intangible Assets $ 545 $ 368 $ 177 $ 553 $ 345 $ 208 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. Distribution network, technology and non-compete assets are expected to be fully amortized by 2025. Note 13 – Restructuring Programs 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. 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. Restructuring and related costs, net reflect the following components for the three years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 2022 2021 Restructuring charges, net $ 114 $ 68 $ 18 Asset impairment charges, net 32 ( 6 ) 9 Related costs, net 21 3 11 Total Restructuring and related costs, net $ 167 $ 65 $ 38 Restructuring charges, net primarily includes employee severance costs and other contractual termination costs that may result from restructuring actions and initiatives. 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. 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. 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 Xerox 2023 Annual Report 105 Table of Contents of those assets. 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. 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. 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. Restructuring Charges, Net 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: Severance Costs Other Contractual Termination Costs (2) Total Balance at December 31, 2020 $ 78 $ 4 $ 82 Restructuring provision 30 3 33 Reversals of prior charges ( 13 ) ( 2 ) ( 15 ) Net Current Period Charges (1) 17 1 18 Charges against reserve and currency ( 70 ) ( 3 ) ( 73 ) Balance at December 31, 2021 $ 25 $ 2 $ 27 Restructuring provision 74 3 77 Reversals of prior charges ( 8 ) ( 1 ) ( 9 ) Net Current Period Charges (1) 66 2 68 Charges against reserve and currency ( 52 ) — ( 52 ) Balance at December 31, 2022 $ 39 $ 4 $ 43 Restructuring provision 125 — 125 Reversals of prior charges ( 11 ) — ( 11 ) Net Current Period Charges (1) 114 — 114 Charges against reserve and currency ( 24 ) ( 4 ) ( 28 ) Balance at December 31, 2023 $ 129 $ — $ 129 _____________ (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. The following table summarizes the reconciliation to the Consolidated Statements of Cash Flows: Year Ended December 31, 2023 2022 2021 Restructuring Cash Payments $ ( 27 ) $ ( 52 ) $ ( 72 ) Effects of foreign currency and other non-cash items ( 1 ) — ( 1 ) Charges against reserve and currency $ ( 28 ) $ ( 52 ) $ ( 73 ) Asset Impairment Charges, Net 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. 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. 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. Xerox 2023 Annual Report 106 Table of Contents Year Ended December 31, 2023 2022 2021 Lease right of use assets (1) $ — $ 2 $ 3 Owned assets (1) 36 15 12 Asset impairments 36 17 15 Gain on sales of owned assets (2) — ( 22 ) ( 4 ) Adjustments/Reversals ( 4 ) ( 1 ) ( 2 ) Net asset impairment charge (credit) $ 32 $ ( 6 ) $ 9 _____________ _ (1) Primarily related to the exit and abandonment of leased and owned facilities, net of any potential sublease income and recoveries. (2) Reflect gain on the sales of exited surplus facilities and land. Related Costs In connection with our restructuring programs, we also incurred certain related costs as follows: Year Ended December 31, 2023 2022 2021 Retention-related severance/bonuses (1) $ ( 2 ) $ — $ 6 Contractual severance costs — 3 1 Consulting and other costs (2) 23 — 4 Total $ 21 $ 3 $ 11 _____________ (1) Includes retention related severance and bonuses for employees expected to continue working beyond their minimum retention period before termination. (2) Represents professional support services associated with our business transformation initiatives. For the years ended December 31, 2023, 2022 and 2021, cash payments for restructuring related costs were approximately $ 26 , $ 9 and $ 13 , respectively, while the reserve was $ 8 and $ 12 at December 31, 2023 and 2022, respectively. The balance at December 31, 2023 is expected to be paid over the next twelve months. Xerox 2023 Annual Report 107 Table of Contents Note 14 - Supplementary Financial Information The components of Other assets and liabilities are as follows: December 31, 2023 2022 Other Current Assets Income taxes receivable $ 13 $ 27 Royalties, license fees and software maintenance 19 23 Restricted cash 70 55 Prepaid expenses 29 32 Advances and deposits 33 29 Other 70 88 Total Other Current Assets $ 234 $ 254 Other Long-term Assets Income taxes receivable $ 22 $ 1 Prepaid pension costs 423 667 Internal use software, net 68 95 Restricted cash 28 39 Customer contract costs, net 136 135 Operating lease right-of-use assets 172 215 Deferred compensation plan investments 14 15 Investments in affiliates, at equity (1) 40 38 Investments at cost - Xerox Holdings 26 21 Other 105 97 Total Other Long-term Assets (2) $ 1,034 $ 1,323 Accrued Expenses and Other Current Liabilities Income taxes payable $ 39 $ 16 Other taxes payable 60 60 Operating lease obligations 41 68 Interest payable 37 43 Restructuring reserves 119 39 Dividends payable - Xerox Holdings (3) 42 47 Distributor and reseller rebates/commissions 120 145 Unearned income and other revenue deferrals 147 154 Administration and overhead 61 72 Other 196 237 Total Accrued Expenses and Other Current Liabilities (4) $ 862 $ 881 Other Long-term Liabilities Deferred taxes $ 95 $ 95 Income taxes payable 14 41 Operating lease obligations 141 161 Environmental reserves 11 11 Restructuring reserves 10 4 Other 89 99 Total Other Long-term Liabilities $ 360 $ 411 _____________ (1) Investments in affiliates, at equity largely consists of several minor investments in entities in the Middle East region. Xerox's ownership interest in investments in corporate joint ventures and other companies is generally between 20% and 50%. (2) Xerox's balances of $ 1,008 and $ 1,302 at December 31, 2023 and 2022, respectively, excludes Investments at cost. (3) Represents dividends payable by Xerox Holdings Corporation on Common and Preferred Stock. (4) Xerox's balances of $ 820 and $ 834 at December 31, 2023 and 2022, respectively, excludes dividends payable of $ 42 and $ 47 , respectively. Xerox 2023 Annual Report 108 Table of Contents Cash, Cash Equivalents and Restricted Cash Restricted cash primarily relates to escrow cash deposits made in Brazil associated with ongoing litigation as well as cash collections on finance receivables that were pledged for secured borrowings. As more fully discussed in Note 20 - Contingencies and Litigation, various litigation matters in Brazil require us to make cash deposits to escrow as a condition of continuing the litigation. Restricted cash amounts are classified in our Consolidated Balance Sheets based on when the cash will be contractually or judicially released. Cash, cash equivalents and restricted cash amounts are as follows: December 31, 2023 2022 Cash and cash equivalents $ 519 $ 1,045 Restricted cash Litigation deposits in Brazil 27 39 Escrow and cash collections related to secured borrowings and receivable sales (1) 49 54 Other restricted cash 22 1 Total Restricted cash 98 94 Cash, cash equivalents and restricted cash $ 617 $ 1,139 __________________________ (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: December 31, 2023 2022 Other current assets $ 70 $ 55 Other long-term assets 28 39 Total Restricted cash $ 98 $ 94 Summarized Cash Flow Information Summarized cash flow information is as follows: Source/(Use) Location in Statement of Cash Flows Year Ended December 31, 2023 2022 2021 Provision for receivables (1) Operating $ 36 $ 36 $ 12 Provision for inventory Operating 18 29 34 Depreciation of buildings and equipment Operating 60 68 76 Depreciation and obsolescence of equipment on operating leases Operating 111 115 155 Amortization of internal use software Operating 37 45 41 Amortization of acquired intangible assets Operating 43 42 55 Amortization of patents (2) Operating 9 10 11 Amortization of customer contract costs (3) Operating 69 73 79 Cost of additions to land, buildings and equipment Investing ( 29 ) ( 36 ) ( 29 ) Cost of additions to internal use software Investing ( 8 ) ( 21 ) ( 39 ) Payments to acquire noncontrolling interests - Xerox Holdings Investing ( 5 ) ( 13 ) ( 8 ) Common stock dividends - Xerox Holdings Financing ( 151 ) ( 160 ) ( 192 ) Preferred stock dividends - Xerox Holdings Financing ( 14 ) ( 14 ) ( 14 ) Payments to noncontrolling interests Financing ( 2 ) ( 1 ) ( 1 ) Investment from noncontrolling interests Financing — 6 15 Repurchases related to stock-based compensation - Xerox Holdings Financing ( 8 ) ( 12 ) ( 18 ) __________________________ (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. (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. Refer to Note 3 - Revenue - Contract Costs for additional information. Xerox 2023 Annual Report 109 Table of Contents Supplier Finance Programs The Company has a program through a financial institution that enables vendors and suppliers, at their option, to receive early payment for their invoices. 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. 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. 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. The overall impact of the program generally results in the Company paying its supplier and vendor invoices consistent with their original terms. This program is generally available to all non-inventory vendors and suppliers. Spending associated with this program during 2023 was approximately $ 125 . 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. 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 Short-term borrowings were as follows: December 31, 2023 2022 Short-term debt and current portion of long-term debt Xerox Holdings Corporation $ — $ — Xerox Corporation 323 300 Xerox - Other Subsidiaries (1) 244 560 Total $ 567 $ 860 _____________ (1) Represents subsidiaries of Xerox Corporation. We classify our debt based on the contractual maturity dates of the underlying debt instruments or as of the earliest put date available to the debt holders. 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. These costs are amortized as interest expense in our Consolidated Statements of Income (Loss). Xerox 2023 Annual Report 110 Table of Contents Long-term debt was as follows: December 31, Stated Rate Weighted Average Interest Rates at December 31, 2023 (1) 2023 2022 Xerox Holdings Corporation Senior Notes due 2025 5.00 % 4.95 % $ 750 $ 750 Senior Notes due 2028 5.50 % 5.40 % 750 750 Subtotal - Xerox Holdings Corporation $ 1,500 $ 1,500 Xerox Corporation Senior Notes due 2023 (2) 4.38 % 4.63 % $ — $ 300 Senior Notes due 2024 3.80 % 3.84 % 300 300 Term Loan B due 2029 (3) 9.34 % 9.65 % 550 — Senior Notes due 2035 4.80 % 4.84 % 250 250 Senior Notes due 2039 6.75 % 6.78 % 350 350 Subtotal - Xerox Corporation $ 1,450 $ 1,200 Xerox - Other Subsidiaries (3) United States $ 102 $ 790 Canada 77 57 France 182 195 Subtotal Xerox - Other Subsidiaries $ 361 $ 1,042 Principal debt balance $ 3,311 $ 3,742 Xerox Holdings Corporation - Debt issuance costs ( 6 ) ( 9 ) Xerox Corporation - Debt issuance costs ( 12 ) ( 4 ) Xerox - Other subsidiaries - Debt issuance costs ( 1 ) ( 5 ) Subtotal - Debt issuance costs $ ( 19 ) $ ( 18 ) Unamortized (discount) premium ( 15 ) 2 Less: current maturities ( 567 ) ( 860 ) Total Long-term Debt $ 2,710 $ 2,866 _____________ (1) Represents the weighted average effective interest rate, which includes the effect of discounts and premiums on issued debt. (2) As a result of the downgrade of our debt ratings in February 2022, the coupon rate of 4.375 % increased by 0.25 % to 4.625 % effective March 15, 2022. (3) Represent secured borrowings of Xerox Corporation and its Other subsidiaries. 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: 2024 (1) 2025 2026 2027 2028 Thereafter Total Xerox Holdings Corporation $ — $ 750 $ — $ — $ 750 $ — $ 1,500 Xerox Corporation 328 27 41 55 55 944 1,450 Xerox - Other Subsidiaries (2) 244 102 15 — — — 361 Total $ 572 $ 879 $ 56 $ 55 $ 805 $ 944 $ 3,311 _____________ (1) Current portion of long-term debt maturities for 2024 are $ 113 , $ 378 , $ 41 and $ 40 for the first, second, third and fourth quarters, respectively. (2) Represents subsidiaries of Xerox Corporation. Xerox Holdings Corporation/Xerox Corporation Intercompany Loan 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. 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. The intercompany interest expense also includes a ratable amount to reimburse Xerox Holdings Corporation for its debt issuance costs and premium. 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. Xerox 2023 Annual Report 111 Table of Contents Revolving Credit Facility 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. 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. We deferred approximately $ 7 of debt issuance costs in connection with the ABL Facility, which will be amortized over the five-year term. 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. 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. 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. The ABL Facility also includes a $ 100 letter of credit subfacility. 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). At Xerox Corporation’s election, the loans under the ABL Facility will bear interest at either: (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”); or (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”). The applicable margin for ABR loans ranges from 0.5 % to 1.0 % depending on the Company’s average excess availability. The applicable margin for Term SOFR loans from 1.5 % to 2.0 % depending on the Company’s average daily excess availability. At December 31, 2023, there were no borrowings under the ABL Facility, and no letters of credits were issued under the facility. During 2023, maximum borrowings under the ABL Facility were $ 220 . 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). Based on the excess availability at December 31, 2023, the fixed charge coverage ratio measurement was not applicable. The ABL Facility also contains negative covenants governing dividends, investments, indebtedness, and other matters customary for similar facilities. 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. 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. Term Loan B Credit Facility 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. The term loans under this facility Xerox 2023 Annual Report 112 Table of Contents included an aggregate Original Issue Discount (OID) of $ 17 and debt issuance costs of $ 9 resulting in net proceeds of approximately $ 524 . The OID and debt issuance costs were accordingly deferred and will be amortized over the term of the Loans. 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. 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 %. 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. Icahn and certain of his affiliates pursuant to the terms of a related purchase agreement as disclosed in Note 22 – Shareholders’ Equity. 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. 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. 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. 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. 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. 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. 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. 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. 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 Over the past three years, we have entered into secured loan agreements with various financial institutions where we sold finance receivables and rights to payments under our equipment on operating leases. In certain transactions, the sales were made to special purpose entities (SPEs), owned and controlled by Xerox, where the SPEs funded the purchase through amortizing secured loans from the financial institutions. The loans have variable interest rates and expected lives of approximately 2.5 years, with half projected to be repaid within the first year based on collections of the underlying portfolio of receivables. For certain loans, we entered into interest rate hedge agreements to either fix or cap the interest rate over the life of the loan. The sales of the receivables to the SPEs were structured as "true sales at law," and we have received opinions to that effect from outside legal counsel. However, the transactions were accounted for as secured borrowings as we fully consolidate the SPEs in our financial statements. As a result, the assets of the SPEs are not available to satisfy any of our other obligations. Conversely, the credit holders of these SPEs do not have legal recourse to the Company’s general credit. Xerox 2023 Annual Report 113 Table of Contents Below are the secured assets and obligations held by subsidiaries of Xerox, which are included in our Consolidated Balance Sheets. Balance at December 31, 2023 Finance Receivables, Net (1) Equipment on Operating Leases, Net Secured Debt (2) Interest Rate (3) Expected Maturity United States (4) January 2022 209 — 77 6.82 % 2024 September 2021 89 2 25 6.76 % 2024 Total U.S. $ 298 $ 2 $ 102 Canada (4)(5) July 2023 $ 86 $ — $ 77 6.74 % 2026 France (6) November 2023 $ 235 $ — $ 182 5.42 % 2026 Total $ 619 $ 2 $ 361 Balance at December 31, 2022 Finance Receivables, Net (1) Equipment on Operating Leases, Net Secured Debt (2) Interest Rate (3) Expected Maturity United States (4) December 2022 (7) $ 370 $ — $ 247 7.43 % 2025 January 2022 528 — 407 5.83 % 2024 September 2021 180 5 136 5.65 % 2024 Total U.S. $ 1,078 $ 5 $ 790 Canada (4) April 2022 $ 63 $ — $ 57 5.45 % 2025 France December 2022 $ 235 $ — $ 195 3.03 % 2025 Total $ 1,376 $ 5 $ 1,042 ____________ _ (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 . (2) Represents principal debt balance and excludes debt issuance costs of $ 1 and $ 5 as of December 31, 2023 and 2022 , respectively. (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. (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 . (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 . (7) In the second quarter of 2023, we repaid the remaining balance of $ 185 early, and incurred a $ 2 loss on extinguishment. Interest 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. Interest expense and interest income was as follows: Year Ended December 31, 2023 2022 2021 Interest expense (1) (2) $ 198 $ 199 $ 207 Interest income (3) 207 218 225 _____________ (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. (3) Includes Finance income, as well as other interest income that is included in Other expenses, net in the Consolidated Statements of Income (Loss). Xerox 2023 Annual Report 114 Table of Contents 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. The estimated cost of funds is based on the interest cost associated with actual borrowings determined to be in support of the leasing business. 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. Note 16 – Financial Instruments We are exposed to market risk from changes in foreign currency exchange rates and interest rates, which could affect operating results, financial position and cash flows. We manage our exposure to these market risks through our regular operating and financing activities and, when appropriate, through the use of derivative financial instruments. These derivative financial instruments are utilized to hedge economic exposures, as well as to reduce earnings and cash flow volatility resulting from shifts in market rates. 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. Our primary foreign currency market exposures include the Euro, U.K. 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. Derivative financial instruments are held solely as risk management tools and not for trading or speculative purposes. The related cash flow impacts of all of our derivative activities are reflected as cash flows from operating activities. We do not believe there is significant risk of loss in the event of non-performance by the counterparties associated with our derivative instruments because these transactions are executed with a diversified group of major financial institutions. Further, our policy is to deal only with counterparties having a minimum investment grade or better credit rating. Credit risk is managed through the continuous monitoring of exposures to such counterparties. Interest Rate Risk Management We use interest rate swap and interest rate cap agreements to manage our interest rate exposure and to achieve a desired proportion of variable and fixed rate debt. These derivatives may be designated as fair value hedges or cash flow hedges depending on the nature of the risk being hedged. We had no fair value hedges for the three-year period ended December 31, 2023, 2022, and 2021, respectively. Cash Flow Hedges 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. 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: Borrowing Derivative Type Principal Debt (1) Notional Amount Expected Maturity Pre-Hedged Rate Hedged Rate Net Fair Value U.S. (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 % — France Cap — 65 2026 5.42 % 4.00 % 1 Total $ 284 $ 290 $ — _____________ (1) Reflects principal debt and excludes debt issuance costs of $ 1 at December 31, 2023. 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. In December 2023, an interest rate Cap associated with the December 2022 U.S. 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. Xerox 2023 Annual Report 115 Table of Contents Foreign Exchange Risk Management We are a global company, and we are exposed to foreign currency exchange rate fluctuations in the normal course of our business. 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: • Foreign currency-denominated assets and liabilities, and • Forecasted purchases, and sales in foreign currency. 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. 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. This change resulted in decrease in our YEN/USD and YEN/EUR hedging positions in 2023. 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: Year Ended December 31, 2023 2022 Currencies Hedged (Buy/Sell) Gross Notional Value Fair Value Asset (1) Gross Notional Value Fair Value Asset (1) Euro/U.K. Pound Sterling $ 385 $ 3 $ 297 $ 6 U.S. Dollar/Euro 359 ( 3 ) 127 ( 1 ) Euro/Canadian Dollar 169 — 131 — Euro/U.S. Dollar 150 1 70 — Japanese Yen/U.S. Dollar 113 1 389 3 Japanese Yen/Euro 60 — 250 ( 1 ) U.S. Dollar/Canadian Dollar — — 53 1 Swedish Krona/Euro — — 49 — Euro/Swedish Krona — — 45 — U.K. Pound Sterling/Euro 36 — — — Euro/Danish Krone 25 — — — Canadian Dollar/Euro 24 — — — All Other 75 — 130 — Total Foreign exchange hedging $ 1,396 $ 2 $ 1,541 $ 8 _____________ (1) Represents the net receivable (payable) amount included in the Consolidated Balance Sheet at December 31, 2023. Foreign Currency Cash Flow Hedges We designate a portion of our foreign currency derivative contracts as cash flow hedges of our foreign currency-denominated inventory purchases. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness. 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. Xerox 2023 Annual Report 116 Table of Contents Summary of Derivative Instruments Gains (Losses) Derivative gains and (losses) affect the income statement based on whether such derivatives are designated as hedges of underlying exposures. The following is a summary of derivative gains and (losses). Designated Derivative Instruments Gains (Losses) The following table provide a summary of gains (losses) on derivative instruments: Derivative (Loss) Gain Recognized in OCI (Effective Portion) (Loss) Gain Reclassified from AOCI to Income (Effective Portion) Derivatives in Cash Flow Hedging Relationships Year Ended December 31, Location of Derivative (Loss) Gain Reclassified from AOCI into Income (Effective Portion) Year Ended December 31, 2023 2022 2021 2023 2022 2021 Foreign exchange contracts – forwards/options $ ( 17 ) $ ( 41 ) $ ( 12 ) Cost of sales $ ( 22 ) $ ( 36 ) $ ( 7 ) Interest rate contracts ( 1 ) 6 — Interest expense 4 1 — Total $ ( 18 ) $ ( 35 ) $ ( 12 ) $ ( 18 ) $ ( 35 ) $ ( 7 ) 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. At December 31, 2023, a net after-tax loss of $ 3 was recorded in Accumulated other comprehensive loss associated with our cash flow hedging activity. The entire balance is expected to be reclassified into Net income within the next 12 months, providing an offsetting economic impact against the underlying anticipated transactions. Non-Designated Derivative Instruments Gains (Losses) Non-designated derivative instruments are primarily instruments used to hedge foreign currency-denominated assets and liabilities. They are not designated as hedges since there is a natural offset for the remeasurement of the underlying foreign currency-denominated asset or liability. 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: Year Ended December 31, Derivatives NOT Designated as Hedging Instruments Location of Derivative Gain (Loss) 2023 2022 2021 Foreign exchange contracts – forwards Other expense – Currency gains (losses), net $ 26 $ 17 $ ( 26 ) 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. Xerox 2023 Annual Report 117 Table of Contents Note 17 – Fair Value of Financial Assets and Liabilities The following table represents assets and liabilities' fair value measured on a recurring basis. The basis for the measurement at fair value in all cases is Level 2 – Significant Other Observable Inputs. As of December 31, 2023 2022 Assets Derivatives $ 11 $ 26 Deferred compensation investments in mutual funds 14 15 Total $ 25 $ 41 Liabilities Derivatives $ 8 $ 11 Deferred compensation plan liabilities 13 14 Total $ 21 $ 25 We utilize the income approach to measure the fair value for our derivative assets and liabilities. The income approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange rates and forward prices, and therefore are classified as Level 2. Fair value for our deferred compensation plan investments in mutual funds is based on quoted market prices for those funds. Fair value for deferred compensation plan liabilities is based on the fair value of investments corresponding to employees’ investment selections. Summary of Other Financial Assets and Liabilities The estimated fair values of our other financial assets and liabilities were as follows: December 31, 2023 December 31, 2022 Carrying Amount Fair Value Carrying Amount Fair Value Cash and cash equivalents $ 519 $ 519 $ 1,045 $ 1,045 Accounts receivable, net 850 850 857 857 Short-term debt and current portion of long-term debt 567 567 860 861 Long-term debt Xerox Holdings Corporation $ 1,497 $ 1,410 $ 1,496 $ 1,294 Xerox Corporation 1,096 1,023 894 726 Xerox - Other Subsidiaries (1) 117 117 476 478 Total Long-term debt $ 2,710 $ 2,550 $ 2,866 $ 2,498 _____________ (1) Represents subsidiaries of Xerox Corporation. The fair value amounts for Cash and cash equivalents and Accounts receivable, net, approximate carrying amounts due to the short maturities of these instruments. The fair value of Short-term debt, including the current portion of long-term debt, and Long-term debt was estimated based on the current rates offered to us for debt of similar maturities (Level 2). The difference between the fair value and the carrying value represents the theoretical net premium or discount we would pay or receive to retire all debt at such date. Xerox 2023 Annual Report 118 Table of Contents Note 18 – Employee Benefit Plans We sponsor numerous defined benefit and defined contribution pension and other post-retirement benefit plans, primarily retiree health care, in our domestic and international operations. December 31 is the measurement date for all of our post-retirement benefit plans. 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. defined benefit plans, the Canadian Salary Pension Plan and the U.K. 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. In December 2023, the Trustees for the U.K. pension plan entered an insurance buy-in contract, in accordance with U.K. pension regulations. 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. However, the benefit obligation remains with the plan and the Company. This contract is issued by a third-party insurance company with no affiliation to the Company or the plan. 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. 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. The insurance buy-in contract is classified as a Level 3 investment in the Plan Asset tables below. This buy-in contract was an extension of a similar contract purchased in 2022 that covered a portion of member benefit payments. 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. 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. 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. The benefits accrued prior to 2023 under the pension plan in the Netherlands remain in a Collective Defined Contribution (CDC) plan. 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. 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 Table of Contents Pension Benefits U.S. Plans Non-U.S. Plans Retiree Health 2023 2022 2023 2022 2023 2022 Change in Benefit Obligation: Benefit obligation, January 1 $ 2,345 $ 3,372 $ 4,240 $ 6,543 $ 209 $ 303 Service cost — 1 5 16 1 1 Interest cost (income) 116 ( 65 ) 188 123 10 8 Plan participants' contributions — — 1 2 7 9 Actuarial loss (gain) 75 ( 643 ) 165 ( 1,697 ) ( 5 ) ( 59 ) Currency exchange rate changes — — 205 ( 534 ) 2 ( 7 ) Plan amendment — — 36 72 ( 3 ) ( 26 ) Plan curtailments — — — ( 20 ) — — Benefits paid/settlements ( 147 ) ( 320 ) ( 273 ) ( 265 ) ( 28 ) ( 27 ) Other — — — — — 7 Benefit Obligation, December 31 $ 2,389 $ 2,345 $ 4,567 $ 4,240 $ 193 $ 209 Change in Plan Assets: Fair value of plan assets, January 1 $ 1,518 $ 2,544 $ 4,594 $ 7,252 $ — $ — Actual return on plan assets 104 ( 730 ) 89 ( 1,865 ) — — Employer contributions 53 24 28 81 21 19 Plan participants' contributions — — 1 2 7 8 Currency exchange rate changes — — 223 ( 609 ) — — Benefits paid/settlements ( 147 ) ( 320 ) ( 273 ) ( 265 ) ( 28 ) ( 27 ) Other — — — ( 2 ) — — Fair Value of Plan Assets, December 31 $ 1,528 $ 1,518 $ 4,662 $ 4,594 $ — $ — Net Funded Status at December 31 (1) $ ( 861 ) $ ( 827 ) $ 95 $ 354 $ ( 193 ) $ ( 209 ) Amounts Recognized in the Consolidated Balance Sheets: Other long-term assets $ — $ — $ 423 $ 667 $ — $ — Accrued compensation and benefit costs ( 24 ) ( 24 ) ( 20 ) ( 19 ) ( 22 ) ( 25 ) Pension and other benefit liabilities ( 837 ) ( 803 ) ( 308 ) ( 294 ) — — Post-retirement medical benefits — — — — ( 171 ) ( 184 ) Net Amounts Recognized $ ( 861 ) $ ( 827 ) $ 95 $ 354 $ ( 193 ) $ ( 209 ) Accumulated Benefit Obligation $ 2,389 $ 2,345 $ 4,526 $ 4,194 _____________ (1) Includes under-funded and unfunded plans. Pension and other benefit liabilities include the following additional accounts at December 31st: December 31, 2023 2022 Pension liabilities (1) $ 1,145 $ 1,097 Accrued compensation liabilities 56 61 Deferred compensation liabilities (2) 15 17 Pension and other benefit liabilities $ 1,216 $ 1,175 __________________________ (1) Reflects pension net funded status liability. (2) Includes amounts measured at fair value on a recurring basis at December 31, 2023 and 2022 of $ 13 and $ 14 , respectively. 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: Pension Benefits U.S. Plans Non-U.S. Plans Retiree Health 2023 2022 2023 2022 2023 2022 Net actuarial loss (gain) $ 731 $ 692 $ 1,551 $ 1,202 $ ( 73 ) $ ( 79 ) Prior service cost (credit) — — 134 99 ( 82 ) ( 94 ) Total loss (gain) - Pre-tax $ 731 $ 692 $ 1,685 $ 1,301 $ ( 155 ) $ ( 173 ) Xerox 2023 Annual Report 120 Table of Contents Aggregate information for pension plans with an accumulated benefit obligation in excess of plan assets is presented below. Information for Retiree Health plans with an accumulated post-retirement benefit obligation in excess of plan assets has been disclosed in the preceding table on Benefit obligations and Net funded status as all Retiree Health plans are unfunded. December 31, 2023 December 31, 2022 Accumulated Benefit Obligation Fair Value of Plan Assets Accumulated Benefit Obligation Fair Value of Plan Assets Underfunded Plans: U.S. $ 2,146 $ 1,528 $ 2,098 $ 1,518 Non-U.S. 46 40 44 38 Unfunded Plans: U.S. $ 243 $ — $ 247 $ — Non-U.S. 317 — 304 — Total Underfunded and Unfunded Plans: U.S. $ 2,389 $ 1,528 $ 2,345 $ 1,518 Non-U.S. 363 40 348 38 Total $ 2,752 $ 1,568 $ 2,693 $ 1,556 Aggregate information for pension plans with a projected benefit obligation in excess of plan assets is presented below: December 31, 2023 December 31, 2022 Projected Benefit Obligation Fair Value of Plan Assets Projected Benefit Obligation Fair Value of Plan Assets Underfunded Plans: U.S. $ 2,146 $ 1,528 $ 2,098 $ 1,518 Non-U.S. 47 40 45 38 Unfunded Plans: U.S. $ 243 $ — $ 247 $ — Non-U.S. 322 — 308 — Total Underfunded and Unfunded Plans: U.S. $ 2,389 $ 1,528 $ 2,345 $ 1,518 Non-U.S. 369 40 353 38 Total $ 2,758 $ 1,568 $ 2,698 $ 1,556 Pension plan assets and benefit obligations by country were as follows: December 31, 2023 December 31, 2022 Fair Value of Pension Plan Assets Projected Benefit Obligation Net Funded Status Fair Value of Pension Plan Assets Projected Benefit Obligation Net Funded Status U.S. funded $ 1,528 $ 2,146 $ ( 618 ) $ 1,518 $ 2,098 $ ( 580 ) U.S. unfunded — 243 ( 243 ) — 247 ( 247 ) Total U.S. 1,528 2,389 ( 861 ) 1,518 2,345 ( 827 ) U.K. 2,892 2,655 237 2,903 2,439 464 Netherlands 839 769 70 793 729 64 Canada 586 562 24 553 532 21 Germany — 248 ( 248 ) — 237 ( 237 ) Other 345 333 12 345 303 42 Total $ 6,190 $ 6,956 $ ( 766 ) $ 6,112 $ 6,585 $ ( 473 ) Xerox 2023 Annual Report 121 Table of Contents The components of Net periodic benefit cost and other changes in plan assets and benefit obligations were as follows: Year Ended December 31, Pension Benefits U.S. Plans Non-U.S. Plans Retiree Health 2023 2022 2021 2023 2022 2021 2023 2022 2021 Components of Net Periodic Benefit Costs: Service cost $ — $ 1 $ 2 $ 5 $ 16 $ 20 $ 1 $ 1 $ 2 Interest cost (income) (1) 116 ( 65 ) 80 188 123 88 10 8 8 Expected return on plan assets (2) ( 103 ) 71 ( 117 ) ( 217 ) ( 226 ) ( 208 ) — — — Recognized net actuarial loss (gain) 16 13 17 11 23 59 ( 12 ) ( 4 ) 1 Amortization of prior service (credit) cost — — ( 1 ) 5 1 ( 1 ) ( 15 ) ( 8 ) ( 66 ) Recognized settlement loss 19 56 54 1 — 1 — — — Recognized curtailment gain — — — — ( 4 ) ( 4 ) — — — Defined Benefit Plans 48 76 35 ( 7 ) ( 67 ) ( 45 ) ( 16 ) ( 3 ) ( 55 ) Defined contribution plans 19 20 — 21 17 18 n/a n/a n/a Net Periodic Benefit Cost (Credit) $ 67 $ 96 $ 35 $ 14 $ ( 50 ) $ ( 27 ) $ ( 16 ) $ ( 3 ) $ ( 55 ) Other changes in plan assets and benefit obligations recognized in Other Comprehensive (Loss) Income: Net actuarial loss (gain) $ 74 $ 16 $ ( 57 ) $ 298 $ 368 $ ( 425 ) $ ( 5 ) $ ( 57 ) $ ( 1 ) Prior service cost (credit) — — — 36 72 ( 4 ) ( 3 ) ( 26 ) ( 50 ) Amortization of net actuarial (loss) gain ( 35 ) ( 69 ) ( 71 ) ( 12 ) ( 23 ) ( 60 ) 12 4 ( 1 ) Amortization of net prior service credit (cost) — — 1 ( 5 ) ( 1 ) 1 15 15 66 Curtailment gain — — — — 4 4 — — — Total Recognized in Other Comprehensive (Loss) Income (3) $ 39 $ ( 53 ) $ ( 127 ) $ 317 $ 420 $ ( 484 ) $ 19 $ ( 64 ) $ 14 Total Recognized in Net Periodic Benefit Cost (Credit) and Other Comprehensive (Loss) Income $ 106 $ 43 $ ( 92 ) $ 331 $ 370 $ ( 511 ) $ 3 $ ( 67 ) $ ( 41 ) _____________ (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. (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. Plan Amendments Pension: In April 2023 and 2022, our U.K. 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. 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. defined benefit pension plans by amending those plans to increase the pension benefits payable to participants that accrued such benefits during the period from 1990 to 1997. The inequalities arose from statutory differences in the retirement ages and rates of accrual of benefits for men and women related to Guaranteed Minimum Pension (GMP) benefits that are included in U.K. defined benefit pension plans. At December 31, 2023, the aggregate cost for this matter was estimated to be approximately GBP 17 million (approximately USD $ 22 ). This latest estimate reflects a most recent analysis completed by the Plan Actuary adjusted for market conditions at December 31, 2023. The equalization method was agreed between the Company and Trustee and is in the process of being implemented. Xerox 2023 Annual Report 122 Table of Contents Retiree Health Plans: During 2022, we amended our U.S. Retiree Health Plan to reduce benefits and eliminate coverage for existing union retirees and for certain union employees as a result of contract negotiations. These negative plan amendments resulted in a reduction of approximately $ 30 in the Company's postretirement benefit obligation. In December 2021, we amended our U.S. Retiree Health Plan to reduce certain benefits for existing union retirees through the reduction or elimination of coverage or cost-sharing subsidies for retiree health care and life insurance costs. This negative plan amendment resulted in a reduction of $ 50 in the postretirement benefit obligation. Plan Assets Current Allocation As of the 2023 and 2022 measurement dates, the global pension plan assets were $ 6,190 and $ 6,112 , respectively. These assets were invested among several asset classes. The following tables present the defined benefit plans assets measured at fair value and the basis for that measurement. December 31, 2023 U.S. Plans Non-U.S. Plans Asset Class Level 1 Level 2 Level 3 Assets measured at NAV (1) Total Level 1 Level 2 Level 3 Assets measured at NAV (1) Total Cash and cash equivalents $ 1 $ — $ — $ — $ 1 $ 452 $ — $ — $ — $ 452 Equity Securities: U.S. 48 — — — 48 13 20 — — 33 International 87 — — 127 214 315 — — 27 342 Fixed Income Securities: U.S. treasury securities — 74 — — 74 — 2 — — 2 Debt security issued by government agency — 134 — — 134 — 546 — — 546 Corporate bonds — 660 — — 660 — 197 — — 197 Derivatives — 57 — — 57 — 90 — — 90 Real estate — — 47 12 59 — — 106 70 176 Private equity/venture capital — — — 157 157 — — 4 311 315 Guaranteed insurance contracts — — — — — — — 2,481 — 2,481 Other (2)(3) ( 18 ) — — 142 124 24 4 — — 28 Total Fair Value of Plan Assets $ 118 $ 925 $ 47 $ 438 $ 1,528 $ 804 $ 859 $ 2,591 $ 408 $ 4,662 _____________ (1) Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. (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. (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. The U.S. Plans had net liabilities of $( 18 ), while the Non-U.S. plans had net assets of $ 24 . Xerox 2023 Annual Report 123 Table of Contents December 31, 2022 U.S. Plans Non-U.S. Plans Asset Class Level 1 Level 2 Level 3 Assets measured at NAV (1) Total Level 1 Level 2 Level 3 Assets measured at NAV (1) Total Cash and cash equivalents $ 3 $ — $ — $ — $ 3 $ 532 $ — $ — $ — $ 532 Equity Securities: U.S. 44 — — — 44 75 27 — — 102 International 89 — — 128 217 358 2 — 30 390 Fixed Income Securities: U.S. treasury securities — 73 — — 73 — 72 — — 72 Debt security issued by government agency — 151 — — 151 — 1,326 — — 1,326 Corporate bonds — 644 — — 644 — 263 — — 263 Derivatives — ( 8 ) — — ( 8 ) — 79 — — 79 Real estate — — 57 13 70 — — 144 71 215 Private equity/venture capital — — — 202 202 — — 4 1,089 1,093 Guaranteed insurance contracts — — — — — — — 483 — 483 Other (2)(3) — — — 122 122 22 17 — — 39 Total Fair Value of Plan Assets $ 136 $ 860 $ 57 $ 465 $ 1,518 $ 987 $ 1,786 $ 631 $ 1,190 $ 4,594 _____________ (1) Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. (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. (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): U.S. Non-U.S. Real Estate Real Estate Private Equity/Venture Capital Guaranteed Insurance Contracts Total Balance at December 31, 2021 $ 51 $ 164 $ 4 $ 75 $ 243 Purchases — — — 569 569 Sales ( 2 ) ( 19 ) — ( 5 ) ( 24 ) Unrealized gains (losses) 8 ( 10 ) 1 ( 133 ) ( 142 ) Currency translation — 9 ( 1 ) ( 23 ) ( 15 ) Balance at December 31, 2022 $ 57 $ 144 $ 4 $ 483 $ 631 Purchases — — — 1,951 1,951 Sales ( 13 ) ( 16 ) — ( 3 ) ( 19 ) Unrealized gains (losses) 3 ( 31 ) — ( 9 ) ( 40 ) Currency translation — 9 — 59 68 Balance at December 31, 2023 $ 47 $ 106 $ 4 $ 2,481 $ 2,591 Level 3 Valuation Method Our primary Level 3 assets are Real Estate, Private Equity/Venture Capital investments, and Guaranteed Insurance Contracts. The fair value of our real estate investment funds is based on the Net Asset Value (NAV) of our ownership interest in the funds. NAV information is received from the investment advisers and is primarily derived from third-party real estate appraisals for the properties owned. 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. 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. Xerox 2023 Annual Report 124 Table of Contents Investment Strategy The target asset allocations for our worldwide defined benefit pension plans were: 2023 2022 U.S. Non-U.S. (2) U.S. Non-U.S. Equity investments (1) 24 % 8 % 24 % 11 % Fixed income investments 60 % 16 % 60 % 36 % Real estate 6 % 4 % 6 % 5 % Private equity/venture capital 8 % 8 % 8 % 25 % Other 2 % 64 % 2 % 23 % Total Investment Strategy 100 % 100 % 100 % 100 % _____________ (1) Target allows for an additional allocation to synthetic equity which is offset by cash. (2) Significant changes in asset allocation in Non-U.S. are due to the U.K. 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. The intent of this strategy is to minimize plan expenses by exceeding the interest growth in long-term plan liabilities. Risk tolerance is established through careful consideration of plan liabilities, plan funded status and corporate financial condition. This consideration involves the use of long-term measures that address both return and risk. The investment portfolio contains a diversified blend of equity and fixed income investments. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks, as well as growth, value and small and large capitalizations. Other assets such as real estate, private equity, and hedge funds are used to improve portfolio diversification. Derivatives may be used to hedge market exposure in an efficient, timely and cost-effective manner; however, derivatives may not be used to speculate or leverage the portfolio beyond the market value of the underlying investments. Investment risks and returns are measured and monitored on an ongoing basis through annual liability measurements and quarterly investment portfolio reviews. Expected Long-term Rate of Return We employ a “building block” approach in determining the long-term rate of return for plan assets. Historical markets are studied and long-term relationships between equities and fixed income are assessed. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. The long-term portfolio return is established giving consideration to investment diversification and rebalancing. Peer data and historical returns are reviewed periodically to assess reasonableness and appropriateness. Contributions Disclosure The following table summarizes cash contributions to our defined benefit pension plans and retiree health benefit plans. Year Ended December 31, 2023 Estimated 2024 U.S. Plans $ 53 $ 100 Non-U.S. Plans 28 30 Total Pension Plans $ 81 $ 130 Retiree Health 21 20 Total Retirement Plans $ 102 $ 150 Approximately $ 30 of the 2023 contributions for our U.S. plans were for our tax-qualified defined benefit plans. Approximately $ 80 of estimated contributions for 2024 are for our U.S. tax-qualified defined benefit plans. 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 Table of Contents Estimated Future Benefit Payments The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid during the following years: Pension Benefits U.S. Non-U.S. Total Retiree Health 2024 $ 266 $ 279 $ 545 $ 20 2025 235 285 520 20 2026 228 293 521 18 2027 224 298 522 17 2028 213 306 519 16 Years 2029-2033 904 1,629 2,533 63 Assumptions Weighted-average assumptions used to determine benefit obligations at the plan measurement dates: Pension Benefits 2023 2022 2021 U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Discount rate 4.9 % 4.1 % 5.1 % 4.5 % 2.7 % 1.8 % Rate of compensation increase — % 2.7 % — % 2.9 % 0.1 % 2.8 % Interest crediting rate 4.5 % 2.5 % 4.5 % 2.1 % 2.8 % 1.5 % Retiree Health 2023 2022 2021 Discount rate 4.7 % 5.0 % 2.7 % Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31: Pension Benefits 2024 2023 2022 2021 U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Discount rate 4.9 % 4.1 % 5.1 % 4.5 % 2.7 % 1.8 % 2.2 % 1.3 % Expected return on plan assets 8.1 % 4.3 % 8.1 % 4.3 % 5.9 % 3.2 % 5.9 % 3.1 % Rate of compensation increase — % 2.7 % — % 2.9 % 0.1 % 2.8 % 0.1 % 2.6 % Interest crediting rate 4.5 % 2.5 % 4.5 % 2.1 % 2.5 % 1.5 % 2.8 % 1.5 % Retiree Health 2024 2023 2022 2021 Discount rate 4.7 % 5.0 % 2.7 % 2.2 % _____________ Note: Expected return on plan assets is not applicable to retiree health benefits as these plans are not funded. Rate of compensation increase is not applicable to retiree health benefits as compensation levels do not impact earned benefits. Assumed health care cost trend rates were as follows: December 31, 2023 2022 Health care cost trend rate assumed for next year 6.3 % 5.1 % Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) 4.2 % 4.3 % Year that the rate reaches the ultimate trend rate 2028 2026 Defined Contribution Plans We have post-retirement savings and investment plans in several countries, including the U.S., the U.K. and Canada. In many instances, employees who participated in the defined benefit pension plans that have been amended to freeze future service accruals were transitioned to an enhanced defined contribution plan. In these plans, employees are allowed to contribute a portion of their salaries and bonuses to the plans, and we match a portion of the employee contributions. We recorded charges related to our defined contribution plans of $ 40 in 2023, $ 37 in 2022 and $ 18 in 2021. During 2021, the Company suspended its full year employer matching contribution for its U.S. based 401(k) plan for salaried (non-union) employees. The employer matching contribution was reinstated for 2022 and was made in the first quarter of 2023. Xerox 2023 Annual Report 126 Table of Contents Note 19 - Income and Other Taxes Loss before income taxes was as follows: Year Ended December 31, 2023 2022 2021 Domestic loss $ ( 89 ) $ ( 319 ) $ ( 341 ) Foreign income (loss) 61 ( 6 ) ( 131 ) Loss before Income Taxes $ ( 28 ) $ ( 325 ) $ ( 472 ) The components of Income tax benefit were as follows: Year Ended December 31, 2023 2022 2021 Federal Income Taxes Current $ 21 $ ( 5 ) $ 33 Deferred ( 65 ) ( 16 ) ( 61 ) Foreign Income Taxes Current 18 23 29 Deferred 21 ( 2 ) ( 20 ) State Income Taxes Current — 6 10 Deferred ( 24 ) ( 9 ) ( 8 ) Income Tax Benefit $ ( 29 ) $ ( 3 ) $ ( 17 ) A reconciliation of the U.S. federal statutory income tax rate to the consolidated effective income tax rate was as follows: Year Ended December 31, 2023 2022 2021 U.S. federal statutory income tax rate 21.0 % 21.0 % 21.0 % Nondeductible expenses ( 32.2 ) % ( 3.6 ) % ( 1.9 ) % Effect of tax law changes — % 0.1 % 3.1 % Change in valuation allowance for deferred tax assets 15.6 % ( 2.2 ) % 2.0 % State taxes, net of federal benefit ( 21.9 ) % 0.3 % ( 0.6 ) % Audit and other tax return adjustments 83.0 % ( 1.6 ) % 5.6 % Tax-exempt income, credits and incentives 59.0 % 8.7 % 4.5 % Foreign rate differential adjusted for U.S. taxation of foreign profits (1) ( 32.3 ) % ( 0.1 ) % ( 0.9 ) % Stock-based compensation ( 13.0 ) % ( 0.6 ) % ( 0.2 ) % Goodwill impairment — % ( 22.0 ) % ( 29.1 ) % Divestitures 25.3 % — % — % Other ( 0.9 ) % 0.9 % 0.1 % Effective Income Tax Rate 103.6 % 0.9 % 3.6 % _____________ (1) The “U.S. taxation of foreign profits” represents the U.S. tax, net of foreign tax credits, associated with actual and deemed repatriations of earnings from our non-U.S. subsidiaries. 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. Total income tax expense was allocated to the following items: Year Ended December 31, 2023 2022 2021 Pre-tax loss $ ( 29 ) $ ( 3 ) $ ( 17 ) Common shareholders' equity: Changes in defined benefit plans 93 70 143 Cash flow hedges 1 ( 1 ) ( 1 ) Translation adjustments — — ( 4 ) Total Income Tax Expense $ 65 $ 66 $ 121 Xerox 2023 Annual Report 127 Table of Contents Unrecognized Tax Benefits and Audit Resolutions We recognize tax liabilities when, despite our belief that our tax return positions are supportable, we believe that certain positions may not be fully sustained upon review by tax authorities. Each period, we assess uncertain tax positions for recognition, measurement and effective settlement. Benefits from uncertain tax positions are measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement - the more-likely-than-not recognition threshold. Where we have determined that our tax return filing position does not satisfy the more likely than not recognition threshold, we have recorded no tax benefits. These assessments require the use of considerable estimates and judgments and can increase or decrease our effective tax rate, as well as impact our operating results. A difference in the ultimate resolution of uncertain tax positions from what is currently estimated could have a material impact on our results of operations and financial condition. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a variety of jurisdictions. We are also subject to ongoing tax examinations in numerous jurisdictions due to the extensive geographical scope of our operations. As a result, we have received, and may in the future receive, proposed tax adjustments and tax assessments in multiple jurisdictions. We regularly assess the likelihood of the outcomes resulting from these ongoing tax examinations as part of our continuing assessment of uncertain tax positions to determine our provision for income taxes. The specific timing of when the resolution of each tax position will be reached is uncertain. As of December 31, 2023, we do not believe that there are any positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: 2023 2022 2021 Balance at January 1 $ 110 $ 107 $ 115 Additions related to current year 1 3 7 Additions related to prior years positions 57 4 — Reductions related to prior years positions ( 14 ) — ( 14 ) Settlements with taxing authorities (1) ( 13 ) — 7 Reductions related to lapse of statute of limitations ( 2 ) ( 3 ) ( 7 ) Currency 1 ( 1 ) ( 1 ) Balance at December 31 $ 140 $ 110 $ 107 _____________ (1) The majority of settlements did not result in the utilization of cash. Included in the balances at December 31, 2023, 2022 and 2021 are $( 31 ), $ 1 and $ 1 , respectively, of tax positions that are highly certain of realizability but for which there is uncertainty about the timing or that they may be reduced through an indirect benefit from other taxing jurisdictions. Because of the impact of deferred tax accounting, other than for the possible incurrence of interest and penalties, the disallowance of these positions would not affect the annual effective tax rate. Within income tax expense, we recognize interest and penalties accrued on unrecognized tax benefits, as well as interest received from favorable settlements. We had $( 2 ), $( 1 ) and $ 1 accrued for the payment of interest and penalties associated with unrecognized tax benefits at December 31, 2023, 2022 and 2021, respectively. In the U.S., we are no longer subject to U.S. federal income tax examinations for years before 2020. With respect to our major foreign jurisdictions, we are no longer subject to tax examinations by tax authorities for years before 2017. Deferred Income Taxes 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. 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. These basis differences are also indefinitely reinvested. A determination of the unrecognized deferred taxes related to these components is not practicable. Xerox 2023 Annual Report 128 Table of Contents The tax effects of temporary differences that give rise to significant portions of the deferred taxes were as follows: December 31, 2023 2021 Deferred Tax Assets Research and development $ 225 $ 204 Post-retirement medical benefits 50 54 Net operating losses 384 380 Operating reserves, accruals and deferrals 215 173 Tax credit carryforwards 106 122 Deferred and share-based compensation 40 26 Pension 147 97 Operating lease liabilities 43 49 Other 57 33 Subtotal 1,267 1,138 Valuation allowance ( 375 ) ( 366 ) Total $ 892 $ 772 Deferred Tax Liabilities Finance lease and installment sales $ 36 $ 72 Intangibles and goodwill 116 115 Unremitted earnings of foreign subsidiaries 25 26 Operating lease ROU assets 41 46 Other 24 26 Total $ 242 $ 285 Total Deferred Taxes, Net $ 650 $ 487 Reconciliation to the Consolidated Balance Sheets Deferred tax assets $ 745 $ 582 Deferred tax liabilities (1) ( 95 ) ( 95 ) Total Deferred Taxes, Net $ 650 $ 487 _____________ (1) Represents the deferred tax liabilities recorded in Other long-term liabilities - refer to Note 14 - Supplementary Financial Information. We record the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and the amounts reported, as well as net operating loss and tax credit carryforwards. Deferred tax assets are assessed for realizability and, where applicable, a valuation allowance is recorded to reduce the total deferred tax asset to an amount that will, more-likely-than-not, be realized in the future. We apply judgment in assessing the realizability of these deferred tax assets and the need for any valuation allowances. In determining the amount of deferred tax assets that are more-likely-than-not to be realized, we considered historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. The deferred tax assets requiring significant judgment are U.S. tax credit carryforwards with a limited life. 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. Although realization is not assured, we have concluded that it is more-likely-than-not that the deferred tax assets, for which a valuation allowance was determined to be unnecessary, will be realized in the ordinary course of operations based on the available positive and negative evidence, including scheduling of deferred tax liabilities and projected income from operating activities. The amount of the net deferred tax assets considered realizable, however, could change in the near term if future income or income tax rates are higher or lower than currently estimated, or if there are differences in the timing or amount of future reversals of existing taxable or deductible temporary differences. At December 31, 2023, we had tax credit carryforwards of $ 106 available to offset future income taxes, of which $ 3 are available to carryforward indefinitely while the majority of the remaining $ 103 will expire 2024 through 2026 if not utilized. We also had net operating loss carryforwards for income tax purposes of $ 392 that will expire 2023 through 2043, if not utilized, and $ 1.7 billion available to offset future taxable income indefinitely. Xerox 2023 Annual Report 129 Table of Contents Note 20 – Contingencies and Litigation We are involved in a variety of claims, lawsuits, investigations and proceedings concerning: securities law; governmental entity contracting, servicing and procurement law; intellectual property law; environmental law; employment law; the Employee Retirement Income Security Act (ERISA); and other laws and regulations. We determine whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. We assess our potential liability by analyzing our litigation and regulatory matters using available information. We develop our views on estimated losses in consultation with outside counsel handling our defense in these matters, which involves an analysis of potential results, assuming a combination of litigation and settlement strategies. Should developments in any of these matters cause a change in our determination as to an unfavorable outcome and result in the need to recognize a material accrual, or should any of these matters result in a final adverse judgment or be settled for significant amounts, they could have a material adverse effect on our results of operations, cash flows and financial position in the period or periods in which such change in determination, judgment or settlement occurs. Additionally, guarantees, indemnifications and claims may arise during the ordinary course of business from relationships with suppliers, customers and nonconsolidated affiliates, as well as through divestitures and sales of businesses, when the Company undertakes an obligation to guarantee the performance of others if specified triggering events occur. Nonperformance under a contract could trigger an obligation of the Company. These potential claims include actions based upon alleged exposures to products, real estate, intellectual property such as patents, environmental matters, and other indemnifications. The ultimate effect on future financial results is not subject to reasonable estimation because considerable uncertainty exists as to the final outcome of these claims. However, while the ultimate liabilities resulting from such claims may be significant to results of operations in the period recognized, management does not anticipate they will have a material adverse effect on the Company's consolidated financial position or liquidity. As of December 31, 2023, we have accrued our estimate of liability incurred under our indemnification arrangements and guarantees. Brazil Contingencies Our Brazilian operations have received or been the subject of numerous governmental assessments related to indirect and other taxes. These tax matters principally relate to claims for taxes on the internal transfer of inventory, municipal service taxes on rentals and gross revenue taxes. We are disputing these tax matters and intend to vigorously defend our positions. Based on the opinion of legal counsel and current reserves for those matters deemed probable of loss, we do not believe that the ultimate resolution of these matters will materially impact our results of operations, financial position or cash flows. Below is a summary of our Brazilian tax contingencies: December 31, 2023 December 31, 2022 Tax contingency - unreserved $ 375 $ 340 Escrow cash deposits 24 36 Surety bonds 104 80 Letters of credit 22 63 Liens on Brazilian assets — — The increase in the unreserved portion of the tax contingency, inclusive of any related interest, was primarily related to currency and interest. With respect to the unreserved tax contingency, the majority has been assessed by management as being remote as to the likelihood of ultimately resulting in a loss to the Company. In connection with the above proceedings, customary local regulations may require us to make escrow cash deposits or post other security of up to half of the total amount in dispute, as well as additional surety bonds and letters of credit, which include associated indexation. Generally, any escrowed amounts would be refundable and any liens on assets would be removed to the extent the matters are resolved in our favor. We are also involved in certain disputes with contract and former employees. Exposures related to labor matters are not material to the financial statements as of December 31, 2023 and 2022. We routinely assess all these matters as to probability of ultimately incurring a liability against our Brazilian operations and record our best estimate of the ultimate loss in situations where we assess the likelihood of an ultimate loss as probable. Xerox 2023 Annual Report 130 Table of Contents Litigation Matters Miami Firefighters’ Relief & Pension Fund v. Icahn, et al.: 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. Miami Firefighters alleges: breach of fiduciary duty of loyalty against the Icahn defendants; breach of contract against the Icahn defendants (for purchasing HP stock in violation of Icahn’s confidentiality agreement with Xerox Holdings); unjust enrichment against the Icahn defendants; 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). 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. This action was consolidated with a similar action brought by Steven J. Reynolds against the same parties in the same court. Miami Firefighters’ counsel has been designated as lead counsel in the consolidated action. Claims asserted against the Directors were later dismissed. 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. The SLC concluded that the claims were without merit and pursuing them would not be in the best interest of Xerox or its shareholders. 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: 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. 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 ; and that FM incorrectly denied coverage for those losses. 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. The parties have agreed to stay all non-U.S. proceedings pending the outcome of the U.S. litigation. The U.S. 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 Indemnifications Provided as Part of Contracts and Agreements Acquisitions/Divestitures: We have indemnified, subject to certain deductibles and limits, the purchasers of businesses or divested assets for the occurrence of specified events under certain of our divestiture agreements. In addition, we customarily agree to hold the other party harmless against losses arising from a breach of representations and covenants, including such matters as adequate title to assets sold, intellectual property rights, specified environmental matters and certain income taxes arising prior to the date of acquisition. Where appropriate, an obligation for such indemnifications is recorded as a liability at the time of the acquisition or divestiture. 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. Additionally, under certain of our acquisition agreements, we have provided for additional consideration to be paid to the sellers if established financial targets are achieved post-closing. We have recognized liabilities for these contingent obligations based on an estimate of the fair value of these contingencies at the time of acquisition. 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. Xerox 2023 Annual Report 131 Table of Contents Other Agreements: We are also party to the following types of agreements pursuant to which we may be obligated to indemnify the other party with respect to certain matters: • Guarantees on behalf of our subsidiaries with respect to real estate leases. These lease guarantees may remain in effect subsequent to the sale of the subsidiary. • Agreements to indemnify various service providers, trustees and bank agents from any third-party claims related to their performance on our behalf, with the exception of claims that result from a third-party's own willful misconduct or gross negligence. • Guarantees of our performance in certain sales and services contracts to our customers and indirectly the performance of third parties with whom we have subcontracted for their services. This includes indemnifications to customers for losses that may be sustained as a result of the use of our equipment at a customer's location. In each of these circumstances, our payment is conditioned on the other party making a claim pursuant to the procedures specified in the particular contract and such procedures also typically allow us to challenge the other party's claims. In the case of lease guarantees, we may contest the liabilities asserted under the lease. Further, our obligations under these agreements and guarantees may be limited in terms of time and/or amount, and in some instances, we may have recourse against third parties for certain payments we made. Patent Indemnifications In most sales transactions to resellers of our products, we indemnify against possible claims of patent infringement caused by our products or solutions. In addition, we indemnify certain software providers against claims that may arise as a result of our use or our subsidiaries', customers' or resellers' use of their software in our products and solutions. These indemnities usually do not include limits on the claims, provided the claim is made pursuant to the procedures required in the sales contract. Indemnification of Officers and Directors The corporate by-laws of Xerox Holdings Corporation and Xerox Corporation require that, except to the extent expressly prohibited by law, we must indemnify Xerox Holdings Corporation's and Xerox Corporation's officers and directors, respectively, against judgments, fines, penalties and amounts paid in settlement, including legal fees and all appeals, incurred in connection with civil or criminal action or proceedings, as it relates to their services to Xerox Holdings Corporation and/or Xerox Corporation and their subsidiaries. Although the by-laws provide no limit on the amount of indemnification, Xerox Holdings Corporation or Xerox Corporation may have recourse against our insurance carriers for certain payments made by Xerox Holdings Corporation or Xerox Corporation. However, certain indemnification payments (such as those related to "clawback" provisions in certain compensation arrangements) may not be covered under Xerox Holdings Corporation's and Xerox Corporation's directors' and officers' insurance coverage. Xerox Holdings Corporation and Xerox Corporation also indemnify certain fiduciaries of our employee benefit plans for liabilities incurred in their service as fiduciary whether or not they are officers of Xerox Holdings Corporation or Xerox Corporation. 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. Guarantees 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; ii) support our obligations related to the Brazil tax and labor contingencies (see Brazil Contingencies ); iii) support our obligations related to our U.K. pension plans; and iv) support certain contracts, primarily with public sector customers, which require us to provide a surety bond as a guarantee of our performance of contractual obligations. In general, we would only be liable for the amount of these guarantees in the event we, or one of our direct or indirect subsidiaries whose obligations we have guaranteed, defaulted in performing our obligations under each contract; the probability of which we believe is remote. 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. Xerox 2023 Annual Report 132 Table of Contents Note 21 - Preferred Stock Series A Convertible Perpetual Voting Preferred Stock As of December 31, 2023, Xerox Holdings Corporation had one class of preferred stock outstanding. Xerox Holdings Corporation has issued 180,000 shares of Series A Preferred Stock that have an aggregate liquidation value of $ 180 and a carrying value of $ 214 . The Series A Preferred Stock pays quarterly cash dividends at a rate of 8 % per year ($ 14 per year), on a cumulative basis. Each share of Series A Preferred Stock is convertible at any time, at the option of the holder, into 37.4532 shares of common stock of Xerox Holdings Corporation for a total of 6,742 thousand shares (reflecting an initial conversion price of approximately $ 26.70 per share of common stock), subject to customary anti-dilution adjustments. At December 31, 2023, 6,742 thousand shares of Common Stock were reserved for conversion of the Series A Preferred Stock. If the closing price of Xerox Holdings Corporation common stock exceeds $ 39.00 or 146.1 % of the initial conversion price of $ 26.70 per share of common stock for 20 out of 30 consecutive trading days, Xerox Holdings Corporation will have the right to cause any or all of the Series A Preferred Stock to be converted into shares of common stock at the then applicable conversion rate. The Series A Preferred Stock is also convertible, at the option of the holder, upon a change in control, at the applicable conversion rate plus an additional number of shares determined by reference to the price paid for our common stock upon such change in control. In addition, upon the occurrence of certain fundamental change events, including a change in control or the delisting of Xerox Holdings Corporation's common stock, the holder of the Series A Preferred Stock has the right to require Xerox Holdings Corporation to redeem any or all of the preferred stock in cash at a redemption price per share equal to the liquidation preference and any accrued and unpaid dividends up to, but not including, the redemption date. The Series A Preferred Stock is classified as temporary equity (i.e., apart from permanent equity) as a result of the contingent redemption feature. Series A Preferred Stock Voting Rights The Xerox Holdings Corporation Series A Preferred Stock votes together with the Xerox Holdings Corporation common stock, as a single class, on all matters submitted to the shareholders of Xerox Holdings Corporation, but the Xerox Holdings Corporation Series A Voting Preferred Stock is only entitled to one vote for every ten shares of Xerox Holdings Corporation common stock into which the Xerox Holdings Corporation Series A Preferred Stock is convertible ( 674,157 votes at December 31, 2023). Xerox 2023 Annual Report 133 Table of Contents Note 22 – Shareholders’ Equity Xerox Holdings Preferred Stock Xerox Holdings Corporation is authorized to issue approximately 22 million shares of cumulative Preferred stock, $ 1.00 par value per share. Refer to Note 21 - Preferred Stock for additional information. Common Stock Xerox Holdings Corporation is authorized to issue 437.5 million shares of Common stock, $ 1.00 par value per share. 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 Xerox Holdings Corporation accounts for the repurchased Common stock under the cost method and includes such Treasury stock as a component of our Common shareholders' equity. 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. Icahn Share Repurchase On September 28, 2023, Xerox Holdings Corporation entered into a share purchase agreement (the Purchase Agreement) with Carl C. 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 . 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. 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). 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. 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). The Treasury stock repurchases in the table below include the repurchases under both the prior Xerox Corporation authorized share repurchase program and the current Xerox Holdings Corporation authorized share repurchase program. Common Stock Shares Treasury Stock Shares Balance at December 31, 2020 198,386 — Stock based compensation plans, net 1,206 — Acquisition of Treasury stock — 40,198 Cancellation of Treasury stock ( 31,523 ) ( 31,523 ) Balance at December 31, 2021 168,069 8,675 Stock based compensation plans, net 1,561 — Acquisition of Treasury stock — 5,174 Cancellation of Treasury stock ( 13,849 ) ( 13,849 ) Balance at December 31, 2022 155,781 — Stock based compensation plans, net 1,608 — Acquisition of Treasury stock — 34,245 Cancellation of Treasury stock ( 34,245 ) ( 34,245 ) Balance at December 31, 2023 123,144 — Xerox At December 31, 2023, Xerox Corporation has 1,000 authorized shares of Common stock, $ 1.00 par value per share, of which 100 shares are issued and outstanding and held by Xerox Holdings Corporation. Xerox 2023 Annual Report 134 Table of Contents Note 23 – Stock-Based Compensation (shares in thousands, unless otherwise noted) We have a long-term incentive plan whereby eligible employees may be granted restricted stock units (RSUs), performance share units (PSUs) and stock options (SOs). We grant stock-based compensation awards in order to continue to attract and retain qualified employees and to better align employees' interests with those of our shareholders. Each of these awards is subject to settlement with newly issued shares of Xerox Holdings Corporation's common stock. At December 31, 2023 and 2022, 6 million and 9 million shares, respectively, were available for grant of awards. Stock-based compensation expense was as follows: Year Ended December 31, 2023 2022 2021 Stock-based compensation expense, pre-tax (1) $ 54 $ 75 $ 54 Income tax benefit recognized in earnings 10 11 13 ____________ (1) 2022 includes $ 21 associated with the accelerated vesting of all outstanding equity awards, according to the terms of the award agreement, in connection with the passing of Xerox Holding's former CEO. Restricted Stock Units Compensation expense for RSUs is based upon the grant-date market price and is recognized on a straight-line basis over the vesting period, based on management's estimate of the number of shares expected to vest. RSUs granted in 2021 through 2023 vest on a graded schedule as follows: 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 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). PSUs granted in 2023 are entirely market-based. PSUs granted in 2022 and 2021 are one-half performance-based and one-half market-based. The metrics and weightings are as follows: Award Year (Metric Weighting) Performance Metric 2023 2022 2021 Earnings per share — % 50 % — % Revenue — % — % 25 % Free cash flow — % — % 25 % Relative total shareholder return 100 % — % — % Absolute share price — % 50 % 50 % 100 % 100 % 100 % The measures are independent of each other and depending on the achievement of these metrics, a recipient of a PSU award is entitled to receive a number of shares equal to a percentage, ranging from 0 % to 200 % of the PSU award granted. All PSUs granted have a three-year cliff vesting from the date of grant. Performance-Based Component: This PSU component vests contingent upon meeting pre-determined cumulative performance metrics. The fair value of this PSU component is based upon the grant-date market price for the underlying stock. Compensation expense is recognized on a straight-line basis over the vesting period, based on management's estimate of the number of shares expected to vest and based on meeting the performance metrics. If the cumulative three-year actual results exceed the stated targets, all plan participants have the potential to earn additional shares of common stock up to a maximum over-achievement of 100 % of the original grant. If the stated targets are not met, any recognized compensation cost would be reversed. Market-Based Component: 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). 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. 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. The Absolute Share Price metric, included as the Xerox 2023 Annual Report 135 Table of Contents 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. Payout for these portions of the PSU metrics will be determined based on total return targets. 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: 2023 Award 2022 Award 2021 Award Term 3 years 3 years 3 years Risk-free interest rate (1) 3.80 % 1.09 % 0.20 % Volatility (2) 52.21 % 42.07 % 44.76 % Weighted average fair value (3) $ 23.00 $ 27.89 $ 25.80 ____________ (1) The risk-free interest rate was based on the zero-coupon U.S. Treasury yield curve on the valuation date, with a maturity matched to the performance period. (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. Our RTSR and Absolute Share Price metrics are compared against total return targets to determine the payout as follows: Payout as a Percent of Target 2023 Percentile Ranking Return Targets (1) 2022 Total Return Targets (1) 2021 Total Return Targets (1) 200 % 75th and above $ 30.00 and above $ 33.00 and above 100 % 50th $ 25.00 $ 30.00 50 % 25th $ 20.00 $ 27.00 0 % Below 25th Below $ 20.00 Below $ 27.00 ____________ (1) For performance between the levels described above, the degree of vesting is interpolated on a linear basis. Compensation expense for the market-based component of the PSU awards is recognized on a straight-line basis over the vesting period based on the fair value determined by the Monte Carlo simulation and, except in cases of employee forfeiture, cannot be reversed regardless of performance. Note: With respect to all stock-based compensation programs, Management’s estimate of the number of shares expected to vest at the time of grant reflects an estimate for forfeitures based on our historical forfeiture rate to date. Should actual forfeitures differ from management’s estimate, the activity will be reflected in a subsequent period. In addition, RSUs, PSUs and SOs awarded to employees who are retirement-eligible at the date of grant, become retirement-eligible during the vesting period, or are terminated not-for-cause (e.g., as part of a restructuring initiative), vest based on service provided from the date of grant to the date of separation. Xerox 2023 Annual Report 136 Table of Contents Summary of Stock-based Compensation Activity 2023 2022 2021 Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value Restricted Stock Units Outstanding at January 1 3,221 $ 23.16 3,161 $ 25.26 3,187 $ 26.48 Granted (1) 3,382 16.56 2,444 21.75 1,513 23.37 Vested (2) ( 1,593 ) 23.73 ( 1,975 ) 24.56 ( 1,327 ) 26.07 Forfeited ( 338 ) 19.27 ( 409 ) 24.20 ( 212 ) 25.06 Outstanding at December 31 4,672 18.46 3,221 23.16 3,161 25.26 Performance Shares Outstanding at January 1 1,729 $ 28.38 2,818 $ 25.47 2,425 $ 26.67 Granted (3) 940 22.97 977 25.72 1,195 24.67 Vested (2) — — ( 644 ) 27.95 ( 672 ) 28.08 Forfeited/Expired (4) ( 630 ) 33.86 ( 1,422 ) 20.98 ( 130 ) 26.92 Outstanding at December 31 2,039 24.18 1,729 28.38 2,818 25.47 ____________ (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. No other PSUs vested in 2022. (3) 2021 includes 60 shares associated with the over-performance of our 2018 PSU grant. (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. Unrecognized compensation cost related to non-vested stock-based awards at December 31, 2023 was as follows: Awards Unrecognized Compensation Remaining Weighted-Average Vesting Period (Years) Restricted Stock Units $ 46 1.7 Performance Shares 17 1.8 Stock Options (1) 8 3.0 Total $ 71 ____________ (1) Reflects CareAR SOs granted in May 2022. The aggregate intrinsic value of outstanding stock-based awards was as follows: Awards December 31, 2023 Restricted Stock Units $ 86 Performance Shares 37 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 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 Xerox 2023 Annual Report 137 Table of Contents Note 24 – Other Comprehensive (Loss) Income Other Comprehensive (Loss) Income is comprised of the following: Year Ended December 31, 2023 2022 2021 Pre-tax Net of Tax Pre-tax Net of Tax Pre-tax Net of Tax Net Translation Adjustments Gains (Losses) $ 191 $ 191 $ ( 376 ) $ ( 376 ) $ ( 145 ) $ ( 141 ) Unrealized (Losses) Gains Changes in fair value of cash flow hedges losses ( 18 ) ( 16 ) ( 35 ) ( 27 ) ( 12 ) ( 9 ) Changes in cash flow hedges reclassed to earnings (1) 18 17 35 26 7 5 Other losses — — ( 1 ) ( 1 ) — — Net Unrealized Gains (Losses) — 1 ( 1 ) ( 2 ) ( 5 ) ( 4 ) Defined Benefit Plans (Losses) Gains Net actuarial/prior service (losses) gains ( 400 ) ( 300 ) ( 373 ) ( 284 ) 537 409 Prior service amortization/curtailment (2) ( 10 ) ( 8 ) ( 18 ) ( 14 ) ( 72 ) ( 54 ) Actuarial loss amortization/settlement (2) 35 26 88 66 132 99 Other (losses) gains (3) ( 49 ) ( 49 ) 62 61 35 35 Changes in Defined Benefit Plans (Losses) Gains ( 424 ) ( 331 ) ( 241 ) ( 171 ) 632 489 Other Comprehensive (Loss) Income $ ( 233 ) $ ( 139 ) $ ( 618 ) $ ( 549 ) $ 482 $ 344 _____________ (1) Reclassified to Cost of sales - refer to Note 16 - Financial Instruments for additional information regarding our cash flow hedges. (2) Reclassified to Total Net Periodic Benefit Cost - refer to Note 18 - Employee Benefit Plans for additional information. (3) Primarily represents currency impact on cumulative amount of benefit plan net actuarial losses and prior service credits in AOCL. Accumulated Other Comprehensive Loss (AOCL) AOCL is comprised of the following: December 31, 2023 2022 2021 Cumulative translation adjustments $ ( 2,046 ) $ ( 2,237 ) $ ( 1,861 ) Other unrealized losses, net ( 3 ) ( 4 ) ( 2 ) Benefit plans net actuarial losses and prior service credits ( 1,627 ) ( 1,296 ) ( 1,125 ) 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 Table of Contents Note 25 – Loss per Share 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 Basic Loss per Share: Net Income (Loss) $ 1 $ ( 322 ) $ ( 455 ) Accrued dividends on preferred stock ( 14 ) ( 14 ) ( 14 ) Adjusted Net Loss attributable to common shareholders $ ( 13 ) $ ( 336 ) $ ( 469 ) Weighted average common shares outstanding 149,116 156,006 183,168 Basic Loss per Share $ ( 0.09 ) $ ( 2.15 ) $ ( 2.56 ) Diluted Loss per Share: Net Income (Loss) $ 1 $ ( 322 ) $ ( 455 ) Accrued dividends on preferred stock ( 14 ) ( 14 ) ( 14 ) Adjusted Net Loss attributable to common shareholders $ ( 13 ) $ ( 336 ) $ ( 469 ) Weighted average common shares outstanding 149,116 156,006 183,168 Common shares issuable with respect to: Stock options — — — Restricted stock and performance shares — — — Convertible preferred stock — — — Adjusted Weighted average common shares outstanding 149,116 156,006 183,168 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): Stock options 231 586 612 Restricted stock and performance shares 6,711 4,950 5,979 Convertible preferred stock 6,742 6,742 6,742 Total Anti-Dilutive Securities 13,684 12,278 13,333 Dividends per Common Share $ 1.00 $ 1.00 $ 1.00 Xerox 2023 Annual Report 139 Table of Contents Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None.