Xerox Holdings Corporation
201 Merritt 7
Norwalk, CT 06851-1056
United States
www.xerox.com
© 2021 Xerox Holdings Corporation.
All rights reserved.
Xerox® is a trademark of Xerox
Corporation in the United States
and/or other countries. BR32844
2020 Annual
Report
Making Every Day Work Better
1034419_Xerox_Annual_Report_2020_Covers.indd 1-3
3/23/21 11:46 AM
Table of Contents
Letter to the Shareholders
Board of Directors
Officers
2020 Form 10-K Insert
FYI
I
IV
IV
V
VI
FYI
Shareholder Information
For investor information, including comprehensive earnings
releases: https://www.news.xerox.com/investors
For shareholder services, call 800.828.6396 (TDD: 800.368.0328)
or 781.575.3222; or write to Computershare Trust Company, N.A.,
PO BOX 505000, Louisville, KY 40233; or via online access at
www.computershare.com.
Electronic Delivery Enrollment: Xerox offers shareholders
A D D I T I O N A L I N F O R M AT I O N
the convenience of electronic delivery, including immediate
receipt of the Proxy Statement and Annual Report and online
proxy voting.
Registered Shareholders, visit: www.computershare.com/
investor. You are a registered shareholder if you have your stock
certificate in your possession or if the shares are being held
by our transfer agent, Computershare.
Beneficial Shareholders, visit: http://enroll.icsdelivery.com/
xrx. You are a beneficial shareholder if you maintain your
position in Xerox within a brokerage account.
Investor Relations Contact: investorrelations@xerox.com
Independent Auditors
PricewaterhouseCoopers LLP
300 Atlantic Street
Stamford, CT 06901
203.539.3000
2020 Corporate Social Responsibility Report:
www.xerox.com/en-us/about/corporate-social-responsibility
Global Diversity and Inclusion Programs and EE0-1 Reports:
www.xerox.com/diversity
Minority and Women-Owned Business Suppliers:
www.xerox.com/supplierdiversity
Ethics Helpline:
• Online submission tool: www.xeroxethicshelpline.com
• Phone numbers: U.S. and Canada: 866.XRX.0001;
International numbers located at: www.xerox.com/ethics
Environment, Health, Safety and Sustainability:
www.xerox.com/environment
Governance:
www.xerox.com/governance
1034419_Xerox_Annual_Report_2020_Covers.indd 4-6
VI
3/23/21 11:46 AM
Fellow Shareholder,
This past year demonstrated the importance of turning setbacks
into opportunities. Despite the impact of the pandemic, we
looked beyond our existing portfolio of offerings to identify new
ways to help our clients, employees, partners and communities.
For instance, our experts quickly developed methods to
manufacture hand sanitizer and single-use, low-cost ventilators
to support frontline workers and those fighting the COVID-19
virus. And we launched new tools and technologies to ensure
our employees and clients maintained a safe and secure
environment given the overnight shift to remote work.
I couldn’t be prouder of the team.
The strategic initiatives we set in 2018 guided us through
2020 and continue to keep us focused on creating value for
all stakeholders. By optimizing our operations for simplicity
and investing in our innovation engine, we are positioned to
increase revenue and cash flow and generate greater returns.
The progress we’ve made across our strategic initiatives also
gives us the confidence to stand up three separate
businesses—Software, Xerox Financial Services (XFS) and
PARC Innovation. By operating separately, they will have
greater flexibility and focus in responding to the demands
of the market, growing their business and increasing profit.
In turn, we expect these businesses and the investments
we’ve made will help return Xerox to growth starting in 2021.
In software, we expanded our portfolio with the
acquisition of CareAR, an enterprise augmented reality
business, in late 2020. This market is expected to grow
six-fold to $60 billion by 2023. We plan to sell CareAR’s
proprietary technology together with our robotics, artificial
intelligence, analytics and cloud-based content
management system, DocuShare, to reinvent the service
experience. We are already using this technology within
parts of our print business and deploying it as a service
to our first customer.
I
XFS is another area in which we plan to leverage our strong
foothold in print to grow. We are transforming XFS into a global
payments business that provides white-label financing for
third-party office equipment, software and IT services.
Building on decades of experience, XFS will bring fintech-like
speed, simplicity and automation to the process. Having
recently signed our first original equipment manufacturer
partner, there’s more potential to expand this business
beyond our traditional customer base.
The trust we’ve earned with our customers has allowed us to
expand our relationships, providing IT services and integrated
workflow solutions in addition to print. With greater coverage
in the U.S., the U.K. and Canada, many small and medium-sized
business customers have turned to us to provide managed IT
services and information security management while shifting
to a hybrid work environment. Enterprise customers seek our
integrated workflow solutions to speed their digital
transformation.
In print, we are identifying new ways to grow our business.
We plan to increase cooperative competition with other print
companies where and when it makes sense. There’s a collective
opportunity to drive efficiencies in service, supply chain
logistics and manufacturing as well as financing. The other
component of our strategy includes building on our leadership
positions to gain market share in higher value growth areas
such as embellishments and inkjet. In 2020, we maintained
the top spot in total equipment sales revenue in the Americas
and in production in both the Americas and EMEA.
In our continuous pursuit of innovation, we have made strong
progress in additive manufacturing, industrial Internet of
things (IoT) and cleantech. Through the Company’s recently
created $250 million corporate venture capital fund, we
will enhance our innovation ecosystem, accelerating the
development of these technologies by investing in start-ups
and early- and mid-stage growth companies aligned with these
areas as well as targeted adjacencies. We expect to deploy
funds over the next five years, which is dependent on the
identification of investment targets.
II
These technologies address major secular challenges
such as climate change, aging infrastructure, supply chain
risk and logistics. For instance, 3D printing is poised to
transform the $5 trillion manufacturing industry and
improve global supply chains, decreasing complexities,
reducing costs and improving time-to-market. Our
technology has the potential to disrupt how manufacturers
create, prototype and produce complex, high-value metal
parts. In 2020, we reached a milestone with the launch
of the Xerox ElemX 3D liquid-metal printer that uses
off-the-shelf wire that’s safer, more cost effective and
faster than metal powders. Powder-based 3D printers are
the technology predominately used today. In late 2020,
we embarked on a strategic product development
collaboration with the U.S. Naval Postgraduate School
to help push the adoption of 3D printing throughout the
Navy and gain actionable data to deliver increased supply
chain flexibility and continuously improve ElemX for future
customers.
Events in 2020 highlighted the need to strengthen our
commitments to diversity, inclusion and belonging (DIB) as
well as sustainability. We created a new DIB roadmap and
identified tangible steps we can take to foster a more diverse
and inclusive business and world. Our roadmap includes
partnering with organizations such as A Better Chance, a
non-profit dedicated to increasing education, access and
opportunity for young people of color, and accelerating the
careers of high-potential employees who come from a diversity
of backgrounds, among other things. This past year, we
increased the percentage of underrepresented professionals
across Xerox, but we know we must continue to focus on
mirroring the markets we serve.
Recognizing there’s more opportunity for us to reduce our
carbon footprint, we have committed to achieving carbon
neutrality no later than 2040 and reducing greenhouse gas
emissions by at least 60% by 2030. This is on top of the
cleantech innovations we are incubating now that have
potential to help reduce emissions globally.
Today, we are more innovative and resilient than a year ago,
and we have the technology and expertise to solve customer
needs now and into the future. This will not only return Xerox
to growth and create value for shareholders, but it will help
make every day work better for our customers, communities
and employees.
We look forward to sharing more on this journey and thank you
for being an integral part of it.
Regards,
Keith Cozza
Chairman of the Board
John Visentin
Vice Chairman and CEO
III
B O A R D O F D I R E C T O R S
Keith Cozza, Chairman
President and Chief
Executive Officer,
Icahn Enterprises LP
Giovanni (John) Visentin
Vice Chairman and
Chief Executive Officer,
Xerox Holdings Corporation
Jonathan Christodoro
Partner, Patriot Global
Management LP
Joseph J. Echevarria
Former Chief Executive
Officer, Deloitte LLP
Nicholas Graziano
Managing Member,
Venetus Partners LP
Cheryl Gordon Krongard
Private Investor and Former
Chief Executive Officer,
Rothschild Asset
Management
A. Scott Letier
Managing Director,
Deason Capital
Services, LLC
O F F I C E R S
John Visentin
Vice Chairman and Chief
Executive Officer
Xavier Heiss
Executive Vice President
and Chief Financial Officer
Steven J. Bandrowczak
President and Chief
Operations Officer
Michael Feldman
Executive Vice President
and President, Americas
Operations and Global
Document Services
Jacques-Edouard Gueden
Executive Vice President
and President, EMEA
Operations
IV
Mary L. McHugh
Executive Vice President
and Chief Delivery and
Supply Chain Officer
Suzan Morno-Wade
Executive Vice President
and Chief Human Resources
Officer
Louis J. Pastor
Executive Vice President
and Chief Corporate
Development Officer &
Chief Legal Officer
Nicole Torraco
Senior Vice President, Xerox
Financial Services
Robert Birkenholz
Vice President and Treasurer
Joseph H. Mancini, Jr.
Vice President and Chief
Accounting Officer
Douglas H. Marshall
Secretary
Joanne Collins Smee
Executive Vice President
and Chief Commercial,
SMB and Channels Officer
Tracey Koziol
Senior Vice President,
Global Offerings
Naresh K. Shanker
Senior Vice President and
Chief Technology Officer
Anne Marie Squeo
Senior Vice President and
Chief Communications
and Brand Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________
FORM 10-K
_________________________________________________
(Mark One)
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended: December 31, 2020
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from: ______ to: _______
_________________________________________________
XEROX HOLDINGS CORPORATION
XEROX CORPORATION
(Exact Name of Registrant as specified in its charter)
_________________________________________________
New York
New York
(State or other jurisdiction of
incorporation or organization)
001-39013
001-04471
(Commission File Number)
83-3933743
16-0468020
(IRS Employer Identification No.)
P.O. Box 4505, 201 Merritt 7
Norwalk, Connecticut 06851-1056
(Address of principal executive offices and Zip Code)
203-849-5216
(Registrant's telephone number, including area code)
Common Stock, $1 par value
Title of each class
Securities registered pursuant to Section 12(b) of the Act:
XRX
Trading Symbol
New York Stock Exchange
Name of each exchange on which registered
Securities registered pursuant to Section 12(g) of the Act:
None
____________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act.
Xerox Holdings Corporation Yes ☒ No ☐
Xerox Corporation Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of
the Act.
Xerox Holdings Corporation Yes ☐ No ☒
Xerox Corporation Yes ☐ No ☒
Indicate by chec(cid:65) mar(cid:65) whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been sub(cid:64)ect to such filing requirements for the past
90 days.
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:52)es ☒ No ☐
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:52)es ☒ No ☐
Indicate by chec(cid:65) mar(cid:65) whether the registrant has submitted electronically every Interactive Data File required
to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit such files).
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:52)es ☒ No ☐
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:52)es ☒ No ☐
Indicate by chec(cid:65) mar(cid:65) whether the registrant is a large accelerated filer, an accelerated filer, a non-
accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of (cid:86)large
accelerated filer,(cid:87) (cid:86)accelerated filer,(cid:87) (cid:86)smaller reporting company(cid:87) and (cid:2)emerging growth company(cid:2) in Rule 12b-2 of
the Exchange Act.
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
☒
☐
☐
☐
☐
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☒
☐
☐
If an emerging growth company, indicate by chec(cid:65) mar(cid:65) if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act.
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) ☐
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) ☐
Indicate by chec(cid:65) mar(cid:65) whether the registrant has filed a report on and attestation to its management(cid:85)s
assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-
Oxley Act (15 U.S.C. (cid:22)262(b)) by the registered public accounting firm that prepared or issued its audit report.
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) ☒
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) ☒
Indicate by chec(cid:65) mar(cid:65) whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:52)es ☐ No ☒
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:52)es ☐ No ☒
The aggregate mar(cid:65)et value of the voting stoc(cid:65) of the registrant held by non-affiliates as of (cid:37)une 30, 2020 was
(cid:3)3,256,9(cid:22)(cid:22),944.
Indicate the number of shares outstanding of each of the registrant's classes of common stoc(cid:65), as of the latest
practicable date:
(cid:25)(cid:60)(cid:49)(cid:67)(cid:67)
(cid:37)(cid:69)(cid:68)(cid:67)(cid:68)(cid:49)(cid:62)(cid:52)(cid:57)(cid:62)(cid:55) (cid:49)(cid:68) (cid:32)(cid:49)(cid:62)(cid:69)(cid:49)(cid:66)(cid:73) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:14)(cid:13)
Xerox Holdings Corporation
Common Stoc(cid:65), (cid:3)1 par value
198,652,606
(cid:26)(cid:37)(cid:25)(cid:43)(cid:35)(cid:27)(cid:36)(cid:42)(cid:41) (cid:31)(cid:36)(cid:25)(cid:37)(cid:40)(cid:38)(cid:37)(cid:40)(cid:23)(cid:42)(cid:27)(cid:26) (cid:24)(cid:47) (cid:40)(cid:27)(cid:28)(cid:27)(cid:40)(cid:27)(cid:36)(cid:25)(cid:27)
(cid:43)ortions of the following document are incorporated herein by reference:
(cid:26)(cid:63)(cid:51)(cid:69)(cid:61)(cid:53)(cid:62)(cid:68)
Xerox Holdings Corporation Notice of 2021 Annual (cid:40)eeting of
Shareholders and (cid:43)roxy Statement (to be filed no later than 120 days after
the close of the fiscal year covered by this report on Form 10-K)
(cid:38)(cid:49)(cid:66)(cid:68) (cid:63)(cid:54) (cid:28)(cid:63)(cid:66)(cid:61) (cid:13)(cid:12)(cid:9)(cid:33) (cid:57)(cid:62) (cid:71)(cid:56)(cid:57)(cid:51)(cid:56) (cid:31)(cid:62)(cid:51)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:53)(cid:52)
III
Cautionary Statement Regarding Forward-Looking Statements
This document, and other written or oral statements made from time to time by management contain “forward-
looking statements” as defined in the Private Securities Litigation Reform Act of 1995. The words “anticipate”,
“believe”, “estimate”, “expect”, “intend”, “will”, “should”, “targeting”, “projecting”, “driving” and similar expressions, as
they relate to us, our performance and/or our technology, are intended to identify forward-looking statements. These
statements reflect management’s current beliefs, assumptions and expectations and are subject to a number of
factors that may cause actual results to differ materially. Such factors include but are not limited to: the effects of the
COVID-19 pandemic on our and our customers' businesses and the duration and extent to which this will impact our
future results of operations and overall financial performance; our ability to address our business challenges in order
to reverse revenue declines, reduce costs and increase productivity so that we can invest in and grow our business;
our ability to attract and retain key personnel; changes in economic and political conditions, trade protection
measures, licensing requirements and tax laws in the United States and in the foreign countries in which we do
business; the imposition of new or incremental trade protection measures such as tariffs and import or export
restrictions; changes in foreign currency exchange rates; our ability to successfully develop new products,
technologies and service offerings and to protect our intellectual property rights; the risk that multi-year contracts
with governmental entities could be terminated prior to the end of the contract term and that civil or criminal
penalties and administrative sanctions could be imposed on us if we fail to comply with the terms of such contracts
and applicable law; the risk that partners, subcontractors and software vendors will not perform in a timely, quality
manner; actions of competitors and our ability to promptly and effectively react to changing technologies and
customer expectations; our ability to obtain adequate pricing for our products and services and to maintain and
improve cost efficiency of operations, including savings from restructuring actions; the risk that confidential and/or
individually identifiable information of ours, our customers, clients and employees could be inadvertently disclosed
or disclosed as a result of a breach of our security systems due to cyber attacks or other intentional acts; reliance
on third parties, including subcontractors, for manufacturing of products and provision of services; the exit of the
United Kingdom from the European Union; our ability to manage changes in the printing environment and expand
equipment placements; interest rates, cost of borrowing and access to credit markets; funding requirements
associated with our employee pension and retiree health benefit plans; the risk that our operations and products
may not comply with applicable worldwide regulatory requirements, particularly environmental regulations and
directives and anti-corruption laws; the outcome of litigation and regulatory proceedings to which we may be a party;
any impacts resulting from the restructuring of our relationship with Fujifilm Holdings Corporation; and the shared
services arrangements entered into by us as part of Project Own It. Additional risks that may affect Xerox’s
operations and other factors that are set forth in the “Risk Factors” section, the “Legal Proceedings” section, the
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other
sections of this combined Annual Report on Form 10-K, as well as in Xerox Corporation’s and Xerox Holdings
Corporation’s Quarterly Reports on Form 10-Q and Xerox Holdings Corporation’s and Xerox Corporation’s Current
Reports on Form 8-K filed with the Securities and Exchange Commission. These forward-looking statements speak
only as of the date of this document or as of the date to which they refer, and Xerox assumes no obligation to
update any forward-looking statements as a result of new information or future events or developments, except as
required by law.
Throughout this combined Annual Report on Form 10-K ("combined Form 10-K"), 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,” 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 subsidiaries.
Xerox Holdings' Corporation primary direct operating subsidiary is Xerox and therefore Xerox reflects nearly all of
Xerox Holdings' operations.
(This page intentionally left blank.)
Xerox Holdings Corporation
Xerox Corporation
Form 10-K
December 31, 2020
Table of Contents
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management's Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships, Related Transactions and Director Independence . . . . . . . . . .
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part IV
Item 15.
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16.
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures Xerox Holdings Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures Xerox Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schedule II Xerox Holdings Corporation Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . .
Schedule II Xerox Corporation Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . .
Index of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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(cid:38)(cid:49)(cid:66)(cid:68) (cid:31)
(cid:31)(cid:68)(cid:53)(cid:61) (cid:13)(cid:10) (cid:24)(cid:69)(cid:67)(cid:57)(cid:62)(cid:53)(cid:67)(cid:67)
Xerox is a wor(cid:65)place technology company, building and integrating software and hardware for enterprises large and
small. As customers see(cid:65) to manage information across digital and physical platforms, we deliver a seamless,
secure and sustainable experience. (cid:50)hether inventing the copier, the Ethernet, the laser printer or more, Xerox has
long defined the modern wor(cid:65) experience and continues to do so with investments in artificial intelligence (AI),
sensors and services for Internet of Things (IoT), digital pac(cid:65)aging, 3D printing and Clean Technologies (clean tech).
(cid:34)eographically, our footprint spans approximately 160 countries and allows us to deliver our technology and
solutions to customers of all si(cid:80)es, regardless of complexity or number of customer locations.
(cid:40)(cid:53)(cid:51)(cid:53)(cid:62)(cid:68) (cid:25)(cid:56)(cid:49)(cid:62)(cid:55)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:26)(cid:53)(cid:70)(cid:53)(cid:60)(cid:63)(cid:64)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)
In (cid:37)anuary 2021, we announced our intention to stand up our Software, Financing and Innovation organi(cid:80)ations as
separate and distinct businesses by 2022.
The Software business will include a growing portfolio comprised of: DocuShare(cid:82), a cloud-based content
management system(cid:26) FreeFlow(cid:82), automation software for production print(cid:26) X(cid:40)(cid:43)ie, a multi-channel mar(cid:65)eting
software company(cid:26) and CareAR, an enterprise augmented reality business Xerox acquired in late 2020.
Xerox Financial Services (XFS) will become a global payment solutions business, offering leasing for Xerox and
third-party technology and office equipment. This will expand the Company(cid:85)s customer base, create cross-selling
opportunities and provide more leasing options for small and medium-si(cid:80)ed businesses (S(cid:40)Bs).
The Innovation business will include the scientists and engineers located in (cid:43)alo Alto, Calif.(cid:26) (cid:50)ebster, N.(cid:52).(cid:26) Cary,
N.C., and Toronto and will be named (cid:43)ARC Innovation. This team will be focused on incubating, producti(cid:80)ing and
commerciali(cid:80)ing disruptive technology aligned with our innovation focus areas such as 3D (cid:43)rinting and Digital
(cid:40)anufacturing, Sensors and Services for the IoT, AI and clean tech.
(cid:41)(cid:68)(cid:66)(cid:49)(cid:68)(cid:53)(cid:55)(cid:73)
The Company(cid:85)s four strategic initiatives, summari(cid:80)ed below, remain at the core of how we operate and deliver results
for all sta(cid:65)eholders.
1. Optimi(cid:80)e Operations for Simplicity
(cid:77)
(cid:77)
(cid:77)
Continuously improve our operating model for greater efficiency
Invest further in robotic process automation, augmented reality and analytics to drive efficiencies
Reduce complexity and simplify billing and offerings
2. Drive Revenue
(This page intentionally left blank.)
Scale IT Services in the S(cid:40)B
(cid:77)
(cid:77) (cid:34)row XFS as a global payment solutions business
(cid:77)
Expand software offerings in enterprise content management and customer experience
3. Re-energi(cid:80)e the Innovation Engine
(cid:77)
(cid:77)
(cid:77)
Deliver revenue growth from 3D and IoT
Launch a (cid:3)250 million corporate venture capital fund
Embed (cid:43)ARC(cid:85)s AI technology into new and existing software offerings
4. Focus on cash flow and increasing capital returns
(cid:77) (cid:40)aximi(cid:80)e annual free cash flow1 generation
Deploy excess capital for strategic (cid:40)(cid:5)A
(cid:77)
(cid:77) Opportunistic share repurchases
_____________
(1) (cid:30)ree cash flow is defined as Operating cash flow from continuing operations less capital expenditures.
As a result of the CO(cid:49)ID-19 pandemic, the wor(cid:65)place has been transformed into a more flexible, hybrid environment.
In response, we have further expanded our innovation investments in order to bolster and diversify our portfolio of
offerings. Xerox continues to position itself for the future through investments in our core print business including
Digital Services such as Digital (cid:40)ail, Capture (cid:5) Content and Digital Hub (cid:5) Cloud (cid:43)rint, which enable wor(cid:65) to flow
seamlessly between the office and home. Additionally, the hybrid wor(cid:65) environment has increased S(cid:40)B needs for IT
Services, an area in which we achieved organic growth in 2020, and which is an important focus area for our
business.
Xerox 2020 Annual Report 1
Xerox 2020 Annual Report 1
(cid:37)(cid:64)(cid:68)(cid:57)(cid:61)(cid:57)(cid:74)(cid:53) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67) (cid:54)(cid:63)(cid:66) (cid:41)(cid:57)(cid:61)(cid:64)(cid:60)(cid:57)(cid:51)(cid:57)(cid:68)(cid:73)
(cid:43)ro(cid:64)ect Own It is Xerox(cid:85)s enterprise-wide initiative to simplify operations, drive continuous improvement and free up
capital to reinvest in the business. Through this initiative, we have delivered approximately (cid:3)1.4 billion of gross
savings during the 30 month-period ending December 31, 2020. In 2020, we generated (cid:3)450 million in gross cost
savings and, consistent with our expectations, we plan to deliver (cid:3)3(cid:22)5 million of gross cost savings in 2021. Savings
generated by (cid:43)ro(cid:64)ect Own It will enable us to invest in our operations, targeted ad(cid:64)acencies and innovation focus
areas and ultimately help improve our long-term revenue tra(cid:64)ectory.
(cid:26)(cid:66)(cid:57)(cid:70)(cid:53) (cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)
Our roadmap, summari(cid:80)ed below, focuses on growing revenue by increasing Xerox(cid:85)s leadership position in the print
mar(cid:65)et while expanding into targeted ad(cid:64)acent and new mar(cid:65)ets:
(cid:77) (cid:29)(cid:49)(cid:57)(cid:62) (cid:67)(cid:56)(cid:49)(cid:66)(cid:53) (cid:57)(cid:62) (cid:64)(cid:66)(cid:57)(cid:62)(cid:68)(cid:10) Building on our leadership positions in print is central to gaining mar(cid:65)et share. In the
wor(cid:65)place, we are continuing to differentiate Xerox multifunction printers with apps and integrated wor(cid:65)flow
solutions that speed digital transformation and support wor(cid:65)ers in and out of the office. In production,
investments are targeted to push Xerox into growth areas such as embellishments and in(cid:65)(cid:64)et and support
customer growth goals.
(cid:27)(cid:72)(cid:64)(cid:49)(cid:62)(cid:52) (cid:67)(cid:53)(cid:66)(cid:70)(cid:57)(cid:51)(cid:53)(cid:67)(cid:10) (cid:40)anaged and digital services leverage the full Xerox portfolio to offer hori(cid:80)ontal and vertical
offerings that grow wallet share and expand the Company's customer base. Expanding XFS(cid:85)s offerings to include
leasing for both Xerox and third-party technology and office equipment will provide another avenue for new
customers and account growth.
(cid:77)
(cid:77)
(cid:77) (cid:29)(cid:66)(cid:63)(cid:71) (cid:67)(cid:63)(cid:54)(cid:68)(cid:71)(cid:49)(cid:66)(cid:53)(cid:10) Another growth driver is developing SaaS, cloud-based software for enterprise content
management that supports a hybrid wor(cid:65) environment and aids customers(cid:85) digital transformation. (cid:50)e believe the
recent acquisition of CareAR will help speed the execution of this approach.
(cid:42)(cid:49)(cid:66)(cid:55)(cid:53)(cid:68) (cid:51)(cid:66)(cid:57)(cid:68)(cid:57)(cid:51)(cid:49)(cid:60) (cid:41)(cid:35)(cid:24) (cid:61)(cid:49)(cid:66)(cid:59)(cid:53)(cid:68)(cid:10) Ongoing investments in indirect mar(cid:65)et channels, Xerox Business Solutions (XBS)
and similar European sales channels position Xerox to grow in the S(cid:40)B mar(cid:65)et, which accounts for the ma(cid:64)ority
of our business. (cid:50)e are expanding our IT Services business geographically and with enhanced capabilities to
support growth in this mar(cid:65)et.
(cid:27)(cid:62)(cid:56)(cid:49)(cid:62)(cid:51)(cid:53) (cid:68)(cid:56)(cid:53) (cid:52)(cid:57)(cid:55)(cid:57)(cid:68)(cid:49)(cid:60) (cid:53)(cid:72)(cid:64)(cid:53)(cid:66)(cid:57)(cid:53)(cid:62)(cid:51)(cid:53)(cid:10) Ongoing investments in automation, analytics and digital support tools will
elevate the customer experience while increasing productivity. E-commerce enhancements focus on driving
sales of select hardware and supplies, with an emphasis on the S(cid:40)B and low-end production mar(cid:65)ets.
(cid:26)(cid:66)(cid:57)(cid:70)(cid:53) (cid:57)(cid:62)(cid:62)(cid:63)(cid:70)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:49)(cid:62)(cid:52) (cid:62)(cid:53)(cid:71) (cid:55)(cid:66)(cid:63)(cid:71)(cid:68)(cid:56) (cid:50)(cid:69)(cid:67)(cid:57)(cid:62)(cid:53)(cid:67)(cid:67)(cid:53)(cid:67)(cid:10) Investments and an increased focus on incubating,
producti(cid:80)ing and commerciali(cid:80)ing disruptive technologies is essential for future growth. The Company continues
to ma(cid:65)e progress across its five innovation focus areas: AI, IoT sensors and services, digital pac(cid:65)aging, 3D
printing and clean tech.
(cid:77)
(cid:77)
(cid:40)(cid:53)(cid:9)(cid:53)(cid:62)(cid:53)(cid:66)(cid:55)(cid:57)(cid:74)(cid:53) (cid:68)(cid:56)(cid:53) (cid:31)(cid:62)(cid:62)(cid:63)(cid:70)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:27)(cid:62)(cid:55)(cid:57)(cid:62)(cid:53)
(cid:50)e are delivering on our commitment to re-energi(cid:80)e Xerox(cid:85)s innovation engine, by starting to moneti(cid:80)e offerings in
3D print and IoT sensors. In December, we reached an important milestone with the first installation of our Xerox
ElemX 3D liquid metal printer at the Naval (cid:43)ostgraduate School in (cid:40)onterey, Calif. In industrial IoT sensors and
services, monitoring critical infrastructure such as bridges and tunnels is a growing mar(cid:65)et opportunity that requires
deep domain expertise and go-to-mar(cid:65)et partnerships with government agencies responsible for maintenance.
Having successfully piloted this technology with (cid:49)icTrac(cid:65), a state-owned enterprise that owns all railway and tram
lines in (cid:49)ictoria, Australia, Xerox is planning broad commerciali(cid:80)ation of this offering.
To further moneti(cid:80)e our innovation and develop disruptive offerings, (cid:43)ARC-developed technologies in AI, augmented
reality and virtual reality will be integrated into CareAR(cid:85)s product roadmaps and other parts of our portfolio.
Xerox also plans to establish a (cid:3)250 million corporate venture capital fund to invest in startups and early and mid-
stage growth companies aligned with the Company(cid:85)s innovation focus areas and targeted ad(cid:64)acencies. The
corporate venture capital fund will further enhance the Company(cid:85)s existing innovation ecosystem and drive growth
through investment, commercial partnerships and co-development of new technologies. Although highly dependent
on the identification of investment targets, we expect to deploy funds over the next five years.
Refer to the Research, Development and Engineering Expenses (RD(cid:5)E) section in Item (cid:22) of this combined Form 10-
K as well as Note 1 - Basis of (cid:43)resentation and Summary of Significant Accounting (cid:43)olicies in the Consolidated
Financial Statements for additional information regarding RD(cid:5)E spending.
2
Xerox 2020 Annual Report 2
(cid:28)(cid:63)(cid:51)(cid:69)(cid:67) (cid:63)(cid:62) (cid:25)(cid:49)(cid:67)(cid:56) (cid:28)(cid:60)(cid:63)(cid:71) (cid:49)(cid:62)(cid:52) (cid:31)(cid:62)(cid:51)(cid:66)(cid:53)(cid:49)(cid:67)(cid:57)(cid:62)(cid:55) (cid:25)(cid:49)(cid:64)(cid:57)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:68)(cid:69)(cid:66)(cid:62)(cid:67)
Our business is based on a model where a large portion of revenues are generated by multi-year contractual
arrangements, with approximately 80 percent coming from post-sale revenue, our most profitable revenue stream.
Additionally, there is low annual capital expenditures (less than 2 percent of revenues) required to support our
current business model. These factors contribute to our ability to generate strong cash flow.
(cid:50)e will deploy our cash flow to drive shareholder returns through:
(cid:77) A commitment to return at least 50 percent of our free cash flow (Operating cash flows from continuing
operations less capital expenditures) to shareholders through a combination of dividends and share repurchases(cid:26)
and
(cid:77) Selective pursuit of acquisitions in targeted growth areas.
(cid:23)(cid:51)(cid:65)(cid:69)(cid:57)(cid:67)(cid:57)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Our strong balance sheet and cash flow generation allow us to pursue (cid:40)(cid:5)A opportunities to support our growth
expectations. (cid:50)e maintain a broad (cid:40)(cid:5)A pipeline that includes targets within the print industry and ad(cid:64)acent mar(cid:65)ets.
In 2020, Xerox completed three acquisitions of local area resellers and partners (including multi-brand dealers) in the
U.K., as well as one such acquisition in Canada. These acquisitions support our strategy to expand Xerox's presence
in the S(cid:40)B mar(cid:65)et internationally. In addition, in 2020 we acquired CareAR, a business that uses augmented reality
to provide enhanced remote assistance technology for enterprises that can moderni(cid:80)e field service, customer
support and other IT Services. This acquisition supports our growth strategy by enhancing our portfolio of software
solutions. Further details about our acquisitions can be found in Note 5 - Acquisitions, in the Consolidated Financial
Statements.
(cid:41)(cid:53)(cid:55)(cid:61)(cid:53)(cid:62)(cid:68) (cid:31)(cid:62)(cid:54)(cid:63)(cid:66)(cid:61)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
Our business is organi(cid:80)ed to ensure we focus on efficiently managing operations while serving our customers and
mar(cid:65)ets in which we operate. (cid:50)e maintain a geographic focus and are primarily organi(cid:80)ed from a sales perspective
on the basis of (cid:86)go-to-mar(cid:65)et(cid:87) sales channels. These sales channels are structured to serve a range of customers for
our products and services. As a result of this structure, we recogni(cid:80)e that we have one operating and reportable
segment - the design, development and sale of printing technology and related solutions.
As part of our strategy, we integrate our capabilities across technology, software and services which offer our
customers the broadest solutions-enabled portfolio in the industry to address their needs of wor(cid:65)flow simplification,
security and productivity across their digital and physical document processes.
(cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)(cid:67)
(cid:50)e have a broad and diverse base of customers by both geography and industry, ranging from S(cid:40)Bs to printing
production companies, governmental entities, educational institutions and Fortune 1000 corporations. Our business
does not depend upon a single customer, or a few customers, the loss of which would have a material adverse effect
on our business. Our business spans
three primary offering areas: (cid:45)(cid:63)(cid:66)(cid:59)(cid:64)(cid:60)(cid:49)(cid:51)(cid:53) (cid:41)(cid:63)(cid:60)(cid:69)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)(cid:8) (cid:29)(cid:66)(cid:49)(cid:64)(cid:56)(cid:57)(cid:51)
(cid:25)(cid:63)(cid:61)(cid:61)(cid:69)(cid:62)(cid:57)(cid:51)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67) (cid:49)(cid:62)(cid:52) (cid:38)(cid:66)(cid:63)(cid:52)(cid:69)(cid:51)(cid:68)(cid:57)(cid:63)(cid:62) (cid:41)(cid:63)(cid:60)(cid:69)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67) and (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:41)(cid:53)(cid:66)(cid:70)(cid:57)(cid:51)(cid:53)(cid:67).
(cid:45)(cid:63)(cid:66)(cid:59)(cid:64)(cid:60)(cid:49)(cid:51)(cid:53) (cid:41)(cid:63)(cid:60)(cid:69)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67) is made up of two strategic product groups, (cid:27)(cid:62)(cid:68)(cid:66)(cid:73) and (cid:35)(cid:57)(cid:52)(cid:9)(cid:40)(cid:49)(cid:62)(cid:55)(cid:53), which share common
technology, manufacturing and product platforms. (cid:50)or(cid:65)place Solutions revenues include the sale of products and
supplies, as well as the associated technical service and financing of those products.
(cid:77)
(cid:27)(cid:62)(cid:68)(cid:66)(cid:73) comprises des(cid:65)top monochrome and color printers and multifunction printers ((cid:40)F(cid:43)s) ranging from small
personal devices to office wor(cid:65)group printers and (cid:40)F(cid:43)s.
(cid:77) (cid:35)(cid:57)(cid:52)(cid:9)(cid:40)(cid:49)(cid:62)(cid:55)(cid:53) are larger devices that have more features and can handle higher print volumes and larger paper
si(cid:80)es than entry devices. (cid:50)e are a leader in this area of the mar(cid:65)et and offer a wide range of (cid:40)F(cid:43)s, digital
printing presses and light production devices, as well as solutions that deliver flexibility and advanced features. In
the last 18 months Xerox has also introduced brea(cid:65)through embellishment capabilities for this product group,
including the Adaptive C(cid:40)(cid:52)K(cid:10), an add-on (cid:65)it that enables existing mid-range light production devices (and low-
end production systems) to use metallic and specialty colors.
(cid:29)(cid:66)(cid:49)(cid:64)(cid:56)(cid:57)(cid:51) (cid:25)(cid:63)(cid:61)(cid:61)(cid:69)(cid:62)(cid:57)(cid:51)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67) (cid:49)(cid:62)(cid:52) (cid:38)(cid:66)(cid:63)(cid:52)(cid:69)(cid:51)(cid:68)(cid:57)(cid:63)(cid:62) (cid:41)(cid:63)(cid:60)(cid:69)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67) (cid:6)(cid:30)(cid:57)(cid:55)(cid:56)(cid:9)(cid:27)(cid:62)(cid:52)(cid:7) are designed for customers in the graphic
communications, in-plant and production print environments with high-volume printing requirements. Our broad
portfolio of presses and solutions provides full-color, on-demand printing of a wide range of applications. Our
xerographic presses provide high-speed, high-volume cut-sheet printing, ideal for publishing, transactional printing,
including variable data for personali(cid:80)ed content and one-to-one mar(cid:65)eting, to the highest quality of color and
Xerox 2020 Annual Report 3
Xerox 2020 Annual Report 3
embellishment requirements. Our in(cid:65)(cid:64)et presses offer a broad range of roll fed, continuous-feed printing technologies,
including waterless in(cid:65)(cid:64)et and aqueous in(cid:65)(cid:64)et for vivid color, and toner-based flash fusing for blac(cid:65) and white. Our
portfolio spans a variety of print speeds, image quality, feeding, finishing and media options. (cid:50)e are a worldwide
leader in the cut-sheet color and monochrome production industry. (cid:34)raphic Communications and (cid:43)roduction
Solutions revenues include the sale of products, software and supplies, as well as the associated technical service
and financing of those products.
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:41)(cid:53)(cid:66)(cid:70)(cid:57)(cid:51)(cid:53)(cid:67) includes a continuum of solutions and services that helps our customers optimi(cid:80)e their print and
communications infrastructure, apply automation and simplification to maximi(cid:80)e productivity, and ensure the highest
levels of security. Xerox has the capability to support integration and document security on a global scale, which are
critical factors for large enterprises. Our primary offerings in this area are Intelligent (cid:50)or(cid:65)place Services (I(cid:50)S) and a
range of Digital Services that leverage our software capabilities in (cid:50)or(cid:65)flow Automation, (cid:43)ersonali(cid:80)ation and
Communication Software, Content (cid:40)anagement Solutions, and Digiti(cid:80)ation Services. In addition, during 2020,
business closures that resulted from the CO(cid:49)ID-19 pandemic shifted our customers(cid:85) focus toward secure, efficient
and flexible solutions to operate in a hybrid wor(cid:65) environment. As a result, we enhanced our focus on the
development and promotion of Intelligent (cid:50)or(cid:65)place Services and Digital Services offerings to help our customers
accelerate their digital transformation.
(cid:77)
(cid:77)
(cid:31)(cid:62)(cid:68)(cid:53)(cid:60)(cid:60)(cid:57)(cid:55)(cid:53)(cid:62)(cid:68) (cid:45)(cid:63)(cid:66)(cid:59)(cid:64)(cid:60)(cid:49)(cid:51)(cid:53) (cid:41)(cid:53)(cid:66)(cid:70)(cid:57)(cid:51)(cid:53)(cid:67) (cid:6)(cid:31)(cid:45)(cid:41)(cid:7)(cid:8) which transcends the traditional (cid:40)(cid:43)S offering, utili(cid:80)es our portfolio of
security, analytics, cloud, digiti(cid:80)ation and ConnectKey(cid:82) technologies to help companies optimi(cid:80)e their print
infrastructure, secure their print environment and automate related business processes. (cid:50)e provide the most
comprehensive portfolio of (cid:40)(cid:43)S services in the industry and are recogni(cid:80)ed as an industry leader by ma(cid:64)or
analyst firms including IDC and (cid:44)uocirca. Our I(cid:50)S offering targets clients ranging from global enterprises to
governmental entities and to small and medium-si(cid:80)ed businesses, including those served via our channel
partners. This portfolio also includes: (cid:31)(cid:62)(cid:68)(cid:53)(cid:60)(cid:60)(cid:57)(cid:55)(cid:53)(cid:62)(cid:68) (cid:45)(cid:63)(cid:66)(cid:59)(cid:64)(cid:60)(cid:49)(cid:51)(cid:53) (cid:41)(cid:53)(cid:66)(cid:70)(cid:57)(cid:51)(cid:53)(cid:67) (cid:54)(cid:63)(cid:66) (cid:40)(cid:53)(cid:61)(cid:63)(cid:68)(cid:53) (cid:45)(cid:63)(cid:66)(cid:59)(cid:53)(cid:66)(cid:67), where we provide
customers with cost effective and secure printing devices along with apps and software tools that enable wor(cid:65)
from anywhere with the productivity demanded of the wor(cid:65)place(cid:26) (cid:44)(cid:57)(cid:66)(cid:68)(cid:69)(cid:49)(cid:60) (cid:38)(cid:66)(cid:57)(cid:62)(cid:68) (cid:35)(cid:49)(cid:62)(cid:49)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68) (cid:41)(cid:53)(cid:66)(cid:70)(cid:57)(cid:51)(cid:53)(cid:67), where
we provide clients with cloud server-enabled fleet management, security and automation software, and remote
customer support to administer networ(cid:65)s from anywhere(cid:26) and (cid:30)(cid:63)(cid:61)(cid:53) (cid:45)(cid:63)(cid:66)(cid:59)(cid:53)(cid:66) (cid:38)(cid:66)(cid:57)(cid:62)(cid:68) (cid:42)(cid:66)(cid:49)(cid:51)(cid:59)(cid:53)(cid:66), which strengthens
enterprise security and cost controls by using wor(cid:65)flows to route data to company-supplied or personal printers
based on data classification.
(cid:26)(cid:57)(cid:55)(cid:57)(cid:68)(cid:49)(cid:60) (cid:41)(cid:53)(cid:66)(cid:70)(cid:57)(cid:51)(cid:53)(cid:67) enables the integration of Xerox technology, software and services to securely design and
manage the digiti(cid:80)ation and wor(cid:65)flow of our clients(cid:85) content and personali(cid:80)ation and customi(cid:80)ation of targeted
communications. (cid:50)e utili(cid:80)e our domain expertise and technology to enable efficient and compliant business
processing and communications in the demanding regulatory environments and mar(cid:65)ets such as healthcare or
public sector. These solutions include (for example): (cid:25)(cid:49)(cid:64)(cid:68)(cid:69)(cid:66)(cid:53) (cid:49)(cid:62)(cid:52) (cid:25)(cid:63)(cid:62)(cid:68)(cid:53)(cid:62)(cid:68) offerings such as (cid:26)(cid:57)(cid:55)(cid:57)(cid:68)(cid:49)(cid:60) (cid:35)(cid:49)(cid:57)(cid:60)(cid:66)(cid:63)(cid:63)(cid:61),
where we use scanning and capture technology combined with AI to extract printed and digital information into
usable data that is routed into business wor(cid:65)flows (such as accounts payable) or into archives, integrating with
cloud-based content management systems such as our DocuShare software(cid:26) and (cid:26)(cid:57)(cid:55)(cid:57)(cid:68)(cid:49)(cid:60) (cid:30)(cid:69)(cid:50) (cid:49)(cid:62)(cid:52) (cid:25)(cid:60)(cid:63)(cid:69)(cid:52) (cid:38)(cid:66)(cid:57)(cid:62)(cid:68)
services, a one-stop shop where customers can submit print (cid:64)obs from anywhere and leverage our wor(cid:65)flows
and on and off-site printing networ(cid:65)s to meet their printing or mar(cid:65)eting collateral lifecycle management,
integrally, safely and with enhanced productivity from scale.
In addition to our three primary offering areas described above, a smaller portion of our revenues comes from non-
core streams including paper sales in our developing mar(cid:65)et countries, wide-format systems, licensing revenue, as
well as from (cid:41)(cid:63)(cid:54)(cid:68)(cid:71)(cid:49)(cid:66)(cid:53) and (cid:31)(cid:42) (cid:41)(cid:53)(cid:66)(cid:70)(cid:57)(cid:51)(cid:53)(cid:67), which are two areas of our business in which we have enhanced our focus
and investments. In software, we are focused on (cid:38)(cid:53)(cid:66)(cid:67)(cid:63)(cid:62)(cid:49)(cid:60)(cid:57)(cid:74)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:49)(cid:62)(cid:52) (cid:25)(cid:63)(cid:61)(cid:61)(cid:69)(cid:62)(cid:57)(cid:51)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67) (cid:41)(cid:63)(cid:54)(cid:68)(cid:71)(cid:49)(cid:66)(cid:53) and (cid:25)(cid:63)(cid:62)(cid:68)(cid:53)(cid:62)(cid:68)
(cid:35)(cid:49)(cid:62)(cid:49)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68), with our X(cid:40)(cid:43)ie, DocuShare and FreeFlow solutions. (cid:46)(cid:35)(cid:38)(cid:57)(cid:53) is a robust personali(cid:80)ation and
communication software that can support the needs of omni-channel communications customers, from onboarding to
retention. (cid:26)(cid:63)(cid:51)(cid:69)(cid:41)(cid:56)(cid:49)(cid:66)(cid:53) is a content management platform that provides a better way to capture, store and share
paper and digital content, either on-premise or in the cloud while automating time-consuming, document-heavy
processes li(cid:65)e accounts payable, HR onboarding, contract management and mortgage processing. In addition, we
operate a networ(cid:65) of centers that digiti(cid:80)e and automate paper and wor(cid:65)flows, enabling our customers to operate
cost-effectively in a fully-digiti(cid:80)ed environment with speed, quality and 24x(cid:22) availability. (cid:28)(cid:66)(cid:53)(cid:53)(cid:28)(cid:60)(cid:63)(cid:71) is a portfolio of
software offerings that brings intelligent wor(cid:65)flow automation and integration to the processing of print (cid:64)obs, from file
preparation to final production, helping customers of all si(cid:80)es address a wide range of business opportunities
including automation, personali(cid:80)ation and even electronic publishing. In addition, in 2020 we added augmented
reality to our software capabilities, with the acquisition of (cid:25)(cid:49)(cid:66)(cid:53)(cid:23)(cid:40), an enterprise augmented reality business that
offers live virtual assistance technology focused on moderni(cid:80)ing field service, customer support and other IT
Services. In (cid:31)(cid:42) (cid:41)(cid:53)(cid:66)(cid:70)(cid:57)(cid:51)(cid:53)(cid:67), we are focused on providing our S(cid:40)B customers with cost efficient and secure solutions to
4
Xerox 2020 Annual Report 4
manage their IT needs including (cid:43)C and networ(cid:65) infrastructure, communications technology, and networ(cid:65)
administration.
Refer to the (cid:31)(cid:61)(cid:64)(cid:49)(cid:51)(cid:68) (cid:63)(cid:54) (cid:25)(cid:37)(cid:44)(cid:31)(cid:26)(cid:9)(cid:13)(cid:21) (cid:63)(cid:62) (cid:37)(cid:69)(cid:66) (cid:24)(cid:69)(cid:67)(cid:57)(cid:62)(cid:53)(cid:67)(cid:67) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67) section of the (cid:40)anagement(cid:85)s Discussion and
Analysis included in Item (cid:22), as well as the (cid:40)(cid:57)(cid:67)(cid:59) (cid:28)(cid:49)(cid:51)(cid:68)(cid:63)(cid:66)(cid:67) included in Item 1A of this combined Form 10-K, for
additional information
(cid:29)(cid:53)(cid:63)(cid:55)(cid:66)(cid:49)(cid:64)(cid:56)(cid:57)(cid:51) (cid:31)(cid:62)(cid:54)(cid:63)(cid:66)(cid:61)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
Overall, approximately 40(cid:4) of our revenue is generated by customers outside the U.S. Additional details can be
found in Note 3 - Segment and (cid:34)eographic Area Reporting in the Consolidated Financial Statements.
(cid:38)(cid:49)(cid:68)(cid:53)(cid:62)(cid:68)(cid:67)(cid:8) (cid:42)(cid:66)(cid:49)(cid:52)(cid:53)(cid:61)(cid:49)(cid:66)(cid:59)(cid:67) (cid:49)(cid:62)(cid:52) (cid:34)(cid:57)(cid:51)(cid:53)(cid:62)(cid:67)(cid:53)(cid:67)
In 2020, Xerox and its subsidiaries were awarded 323 U.S. utility and design patents, and, including our research
partner Fu(cid:64)i Xerox, we were awarded 831 U.S. utility and design patents during the period. Fu(cid:64)i Xerox continues to be
a research partner subsequent to the sale of our remaining investment in Fu(cid:64)i Xerox in 2019 due to their significance
to us as a product supplier. Our patent portfolio evolves as new patents are awarded to us and as older patents
expire. As of December 31, 2020, Xerox held approximately 8,58(cid:22) U.S. utility and design patents. These patents
expire at various dates up to 20 years or more from their original filing dates. (cid:50)hile we believe that our portfolio of
patents and applications has value, in general no single patent is essential to our business. In addition, any of our
proprietary rights could be challenged, invalidated or circumvented, or may not provide significant competitive
advantages.
In 2020, we were party to multiple patent-licensing agreements and, in the ma(cid:64)ority of them, we licensed or assigned
our patents to others in return for revenue and(cid:14)or access to their patents or to further our business goals. (cid:40)ost patent
licenses expire concurrently with the expiration of the last patent identified in the license. (cid:50)e were also party to a
number of cross-licensing agreements with companies that also hold substantial patent portfolios. These agreements
vary in sub(cid:64)ect matter, scope, compensation, significance and duration.
In the U.S., we own about 188 U.S. trademar(cid:65)s, either registered or applied for. These trademar(cid:65)s have a perpetual
life, sub(cid:64)ect to renewal every 10 years. (cid:50)e vigorously enforce and protect our trademar(cid:65)s.
(cid:30)(cid:69)(cid:61)(cid:49)(cid:62) (cid:25)(cid:49)(cid:64)(cid:57)(cid:68)(cid:49)(cid:60)
(cid:37)(cid:69)(cid:66) (cid:27)(cid:61)(cid:64)(cid:60)(cid:63)(cid:73)(cid:53)(cid:53)(cid:67)
As of December 31, 2020 we had approximately 24,(cid:22)00 employees(cid:26) a reduction of approximately 2,300 (8.5(cid:4))
employees since December 31, 2019. The reduction is a result of net attrition (attrition net of gross hires), of which a
large portion is not expected to be bac(cid:65) filled, as well as the impact from organi(cid:80)ational changes. Approximately
12,800 employees were located in the U.S. and approximately 11,900 employees were located outside the U.S. (cid:50)e
had approximately 11,500 employees or almost half of our employees engaged in providing services to customers
(direct service and managed services) and approximately 3,300 engaged in direct sales.
Approximately 20(cid:4) of our employees are represented by unions or similar organi(cid:80)ations, such as wor(cid:65)er(cid:85)s councils,
and are covered by collective bargaining agreements with approximately 90(cid:4) located outside the U.S. As of
December 31, 2020, approximately 25(cid:4) of our employees were women and 30(cid:4) of our U.S. employees self-
identified as diverse.
(cid:27)(cid:61)(cid:64)(cid:60)(cid:63)(cid:73)(cid:53)(cid:53) (cid:41)(cid:49)(cid:54)(cid:53)(cid:68)(cid:73)
The Company(cid:85)s number one priority is the health and safety of the Xerox community. At the onset of the pandemic,
we quic(cid:65)ly mobili(cid:80)ed to activate our business continuity and pandemic preparedness plans, which included setting up
a CO(cid:49)ID-19 Response Team of cross functional, global senior leaders, establishing a 24-hour command center to
conduct ris(cid:65) assessments and develop mitigation plans, and creating a multi-channel, communication strategy to
(cid:65)eep all of our (cid:65)ey sta(cid:65)eholders informed.
The Response Team acted swiftly to monitor and implement CO(cid:49)ID-19 guidance from the U.S. Centers for Disease
Control and (cid:43)revention (CDC), the (cid:50)orld Health Organi(cid:80)ation ((cid:50)HO), and federal, state, local and international
governments, as applicable. The efforts of the Response Team were critical, since many of our employees and
operations are considered (cid:86)essential(cid:87) with a large portion of employees continuing to wor(cid:65) at our facilities or on site
with those clients also considered essential.
Xerox 2020 Annual Report 5
Xerox 2020 Annual Report 5
(cid:50)e created an extensive set of health and safety protocols that every Xerox facility and operation across the world
implemented. These protocols include, but are not limited to:
(cid:77)
Completing a daily health chec(cid:65) to confirm that employees meet health requirements for entering a Xerox or
customer wor(cid:65)place(cid:26)
(cid:77)
(cid:77)
(cid:77)
(cid:77)
Creating mandatory CO(cid:49)ID-19 safety training for all employees before they engage in any Xerox wor(cid:65) outside
their home(cid:26)
Implementing specific ris(cid:65)-based safety requirements to address various wor(cid:65)place scenarios and role-specific
protocols to guide employees on how the safety process and (cid:43)ersonal (cid:43)rotective Equipment ((cid:43)(cid:43)E) guidelines
apply to their roles(cid:26)
Requiring face coverings at all times, except when an employee is isolated for long periods of time, and always
maintaining social distancing of at least 6 feet (2 meters). Xerox updated its wor(cid:65)place layouts throughout the
world, as needed, to support this protocol(cid:26) and
Ensuring all facilities are regularly cleaned and saniti(cid:80)ed and have sufficient ventilation.
Adhering to these protocols ensured that our essential employees could continue to wor(cid:65) and support our customers,
including hospitals, governments and educational institutions. Additionally, the Company(cid:85)s cautious, methodical and
phased approach allowed us to safely return approximately 50(cid:4) of our active employees to their wor(cid:65)places by (cid:37)uly
2020. Although developments in the later part of 2020 have required us to return to more remote wor(cid:65) as a result of
the ongoing pandemic, we believe the actions put in place through 2020 have positioned the Company well to return
more employees to the wor(cid:65)place once it is safe to do so.
(cid:37)(cid:64)(cid:68)(cid:57)(cid:61)(cid:57)(cid:74)(cid:53) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Under (cid:43)ro(cid:64)ect Own It, we have ta(cid:65)en steps to ensure we have the right talent in place to support the evolving needs
of our business. Steps ta(cid:65)en include, but are not limited to:
(cid:77)
Realigning the wor(cid:65)force in support of the Company(cid:85)s strategy(cid:26)
Right-si(cid:80)ing parts of the business based on shifting customer needs(cid:26) and
(cid:77)
(cid:77) Optimi(cid:80)ing shared services.
In addition, we also utili(cid:80)ed government programs to furlough employees to protect both Xerox and their financial
wellness.
(cid:26)(cid:57)(cid:70)(cid:53)(cid:66)(cid:67)(cid:57)(cid:68)(cid:73)(cid:8) (cid:31)(cid:62)(cid:51)(cid:60)(cid:69)(cid:67)(cid:57)(cid:63)(cid:62) (cid:49)(cid:62)(cid:52) (cid:24)(cid:53)(cid:60)(cid:63)(cid:62)(cid:55)(cid:57)(cid:62)(cid:55)
Diversity, inclusion and belonging (DIB) is an essential part of our culture and value system. For over half a century,
Xerox has always strived to be a leader in this space and continues to be at the forefront of driving change within our
Company and our communities. In 2020, we reaffirmed our commitment to DIB by developing a new roadmap to
identify areas where we can have a bigger impact on employees and society. To support this, our roadmap focuses
on:
(cid:26)(cid:57)(cid:70)(cid:53)(cid:66)(cid:67)(cid:53) (cid:38)(cid:57)(cid:64)(cid:53)(cid:60)(cid:57)(cid:62)(cid:53): Building a diverse pipeline and accelerating the careers of underrepresented talent within the
organi(cid:80)ation.
(cid:38)(cid:49)(cid:66)(cid:68)(cid:62)(cid:53)(cid:66)(cid:67)(cid:56)(cid:57)(cid:64): Building relationships with external organi(cid:80)ations to ensure that our incoming talent better reflects
the mar(cid:65)ets and communities we serve. For example, we are wor(cid:65)ing with AI vendors to increase the pool of
women and diverse candidates for our (cid:64)ob openings using their unique artificial intelligence algorithms.
(cid:25)(cid:69)(cid:60)(cid:68)(cid:69)(cid:66)(cid:53) (cid:25)(cid:56)(cid:49)(cid:62)(cid:55)(cid:53): Reinforcing a Company-wide culture of belonging. In 2020, we held our first-ever global DIB
virtual conference, hosted by our Employee Resources (cid:34)roups (ER(cid:34)s), which was open to all Xerox employees.
The conference was an important milestone in our ongoing commitment to cultivating global and diverse teams
across the Company.
(cid:25)(cid:63)(cid:61)(cid:61)(cid:69)(cid:62)(cid:57)(cid:68)(cid:73) (cid:37)(cid:69)(cid:68)(cid:66)(cid:53)(cid:49)(cid:51)(cid:56): Extending our reach into the communities that we serve. For example, in the U.S., we
are partnering with A Better Chance (ABC) and the Thurgood (cid:40)arshall College Fund Leadership Institute to help
underrepresented and financially challenged youth pave a better career future. In the U.K., we also support
Blueprint for All to further their wor(cid:65) and honor their mission of wor(cid:65)ing with young people and local communities
to create an inclusive society for all.
(cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:73): (cid:40)easuring our progress and continue to be transparent by utili(cid:80)ing our Corporate Social
Responsibility Report to inform the public about our strategy and progress. (cid:50)e are confident that over time, our
efforts will yield sustainable progress in this critical business challenge.
(cid:77)
(cid:77)
(cid:77)
(cid:77)
(cid:77)
6
Xerox 2020 Annual Report 6
(cid:42)(cid:49)(cid:60)(cid:53)(cid:62)(cid:68) (cid:35)(cid:49)(cid:62)(cid:49)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68) (cid:49)(cid:62)(cid:52) (cid:45)(cid:63)(cid:66)(cid:59)(cid:54)(cid:63)(cid:66)(cid:51)(cid:53) (cid:26)(cid:53)(cid:70)(cid:53)(cid:60)(cid:63)(cid:64)(cid:61)(cid:53)(cid:62)(cid:68)
Talent management and wor(cid:65)force development are critical for the future of Xerox and fueling business growth and
innovation. (cid:50)e use high-impact practices and technology to drive global wor(cid:65)force capability and integrate learning
with wor(cid:65). Our organi(cid:80)ation and talent planning processes include reviews with business leaders to build our talent
pipeline. (cid:40)ore broadly, Human Resources (HR) provides a forum for management to review the future needs of the
organi(cid:80)ation, noting strengths, gaps and strategies to build strong teams for the next chapter at Xerox. The Company
is also committed to accelerating the careers of high-potential, diverse employees and women along with identifying
more diverse candidates for open roles. Our leaders embrace and support the (cid:50)ilson Rule, named after (cid:37)oseph
(cid:50)ilson, a former CEO of the Company, which requires that one out of every three final candidates for professional
roles be diverse. Finally, we provide diversity training sessions to managers to reinforce the importance of a diverse
wor(cid:65)force.
(cid:29)(cid:60)(cid:63)(cid:50)(cid:49)(cid:60) (cid:34)(cid:53)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55) (cid:31)(cid:62)(cid:62)(cid:63)(cid:70)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
The CO(cid:49)ID-19 pandemic has accelerated the way HR leaders and organi(cid:80)ations must prepare for and anticipate the
needs of the business, not (cid:64)ust today, but in the near future. In 2020, results from our Future of (cid:50)or(cid:65) survey found
that respondents plan to change their wor(cid:65) from home policy to some extent to support a hybrid wor(cid:65)force that
includes both remote and onsite employees. Recogni(cid:80)ing the new s(cid:65)ills required to support remote wor(cid:65)ers and
develop talent that you are not going to see in person is critically important.
Our Learning and Development (L(cid:5)D) function has been using different forms of digital technology to train and res(cid:65)ill
employees such as salespeople who are no longer able to be out in the field due to the CO(cid:49)ID-19 pandemic. At the
onset of the CO(cid:49)ID-19 pandemic, our L(cid:5)D function pivoted to a digital learning approach to train and res(cid:65)ill
employees across the globe. Our employees have access to a global learning platform that includes hundreds of
targeted online courses, virtual classroom events, simulations, (cid:64)ob aids, and other learning and development
resources. Learning topics include critical (cid:64)ob-specific information and technical ups(cid:65)illing, management development
and professional effectiveness, productivity tools for pro(cid:64)ect management, client service, negotiations, technology
solutions, ethics, diversity and inclusion, and information security.
As our business evolves, we will continue to leverage technology and identify new s(cid:65)ills or capabilities required to
ensure we remain competitive in the global mar(cid:65)et.
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:71)(cid:49)(cid:66)(cid:52)(cid:67)
Our success depends on attracting, retaining, and motivating a highly productive, global wor(cid:65)force. To achieve this,
we ta(cid:65)e pride in offering our employees a comprehensive Total Rewards program that includes various
compensation, benefits, and wor(cid:65)-life programs. Our programs are designed to achieve the following ob(cid:64)ectives:
(cid:77)
(cid:77)
(cid:77)
(cid:26)(cid:66)(cid:57)(cid:70)(cid:53) (cid:67)(cid:56)(cid:49)(cid:66)(cid:53)(cid:56)(cid:63)(cid:60)(cid:52)(cid:53)(cid:66) (cid:70)(cid:49)(cid:60)(cid:69)(cid:53): support our business strategy and culture.
(cid:23)(cid:60)(cid:57)(cid:55)(cid:62) (cid:71)(cid:57)(cid:68)(cid:56) (cid:64)(cid:53)(cid:66)(cid:54)(cid:63)(cid:66)(cid:61)(cid:49)(cid:62)(cid:51)(cid:53): incentivi(cid:80)e the right behaviors (cid:83) when the Company wins our employees win.
(cid:41)(cid:69)(cid:64)(cid:64)(cid:63)(cid:66)(cid:68) (cid:63)(cid:69)(cid:66) (cid:68)(cid:49)(cid:60)(cid:53)(cid:62)(cid:68) (cid:67)(cid:68)(cid:66)(cid:49)(cid:68)(cid:53)(cid:55)(cid:73): attract, retain and motivate a productive wor(cid:65)force.
As with most global companies, our compensation and benefits vary based on employee eligibility, and local
practices and regulations. (cid:50)e benchmar(cid:65) our programs to ensure we remain competitive with our peers and the
mar(cid:65)ets we serve, and to maintain alignment with our short-term and long-term business goals.
Our compensation offerings include base pay and short-term and long-term incentive programs. Our short-term
programs include: a (cid:40)anagement Incentive (cid:43)lan ((cid:40)I(cid:43)), designed to drive Xerox(cid:85)s pay for performance culture and
incentivi(cid:80)e our leaders to help Xerox achieve sustainable growth(cid:26) sales compensation programs to tightly align our
sales force with business goals(cid:26) and a (cid:43)rofit Share (cid:43)lan ((cid:43)S(cid:43)), designed to give a broad population of our
employees an opportunity to share in the organi(cid:80)ation(cid:85)s success. A Long-Term Incentive (LTI) equity-based program
is used to reinforce alignment of our leaders and (cid:65)ey talent with shareholders.
Our benefit offerings provide our employees with choice and flexibility in order to help them reach their health and
financial goals. Our offerings include the following core programs: health care, wellness, retirement, paid time off, life
and disability, and voluntary benefits.
(cid:27)(cid:62)(cid:70)(cid:57)(cid:66)(cid:63)(cid:62)(cid:61)(cid:53)(cid:62)(cid:68)(cid:49)(cid:60) (cid:41)(cid:63)(cid:51)(cid:57)(cid:49)(cid:60) (cid:29)(cid:63)(cid:70)(cid:53)(cid:66)(cid:62)(cid:49)(cid:62)(cid:51)(cid:53) (cid:6)(cid:27)(cid:41)(cid:29)(cid:7)
At our core is a deep and long-lasting commitment to ES(cid:34), a pledge to inspire and support our people, conduct
business ethically across the value chain and preserve our planet. This commitment stems from the corporate values
established over sixty years ago which include: succeeding through satisfied customers(cid:26) delivering quality and
excellence in all we do(cid:26) requiring a premium return on assets(cid:26) using technology to develop mar(cid:65)et leaders(cid:26) valuing
and empowering our employees(cid:26) and behaving responsibly as a corporate citi(cid:80)en.
Xerox 2020 Annual Report 7
Xerox 2020 Annual Report (cid:22)
(cid:50)e continue this legacy by turning investments in innovation into products and services that help our customers be
more productive, profitable and sustainable. Driving efficiency in our business operations, smart investments in
technologies that afford our customers added agility-personali(cid:80)ation, automation and better wor(cid:65)flow as part of our
customer-centric approach, will underpin our corporate social responsibility efforts. (cid:50)e do this in our own operations,
as well as in wor(cid:65)places, communities and cities around the world. (cid:50)e recogni(cid:80)e the world(cid:85)s challenges such as
climate change and human rights and understand the role we play.
(cid:50)e are focused on how we can simplify wor(cid:65), deliver more personali(cid:80)ed experiences and improve productivity
through new technologies. (cid:50)e strive to connect the physical and digital worlds without adversely affecting the
environment, human health and safety.
Our pledge to inspire and support our people, conduct business ethically and protect our planet remains at the core
of everything we do. At Xerox, we believe in continuously improving, and we apply this mentality to ensuring we are
always finding ways to improve the sustainability of our operations.
The (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:14)(cid:12)(cid:14)(cid:12) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:53) (cid:41)(cid:63)(cid:51)(cid:57)(cid:49)(cid:60) (cid:40)(cid:53)(cid:67)(cid:64)(cid:63)(cid:62)(cid:67)(cid:57)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:73) (cid:6)(cid:25)(cid:41)(cid:40)(cid:7) (cid:40)(cid:53)(cid:64)(cid:63)(cid:66)(cid:68) (available at www.xerox.com. The content of our
website is not incorporated by reference in this combined Form 10-K unless expressly noted.) describes our
management approach related to ES(cid:34). Xerox(cid:85)s CSR report highlights include:
(cid:27)(cid:62)(cid:70)(cid:57)(cid:66)(cid:63)(cid:62)(cid:61)(cid:53)(cid:62)(cid:68)
•
98(cid:4) of supplies and consumables returned by customers at end-of-life were diverted from entering landfills.
Instead, we remanufactured, reused, recycled, or provided the waste to suppliers who converted it into an energy
source.
(cid:77) Over 1 billion pages offset through the (cid:43)rintReleaf program.
(cid:77)
100(cid:4) of newly-launched, eligible Xerox products satisfied the Electronic (cid:43)roduct Environmental Assessment
Tool (E(cid:43)EAT(cid:82)) and E(cid:43)A ENER(cid:34)(cid:52) STAR(cid:82) eco-labels.
35(cid:4) reduction in (cid:34)reenhouse gas emissions ((cid:34)H(cid:34)) from our operations using a 2016 baseline(cid:26) moving us
closer to our goal of 60(cid:4) (cid:34)H(cid:34) reduction by 2030.
(cid:77)
(cid:41)(cid:63)(cid:51)(cid:57)(cid:49)(cid:60)
• (cid:50)orldwide employee matching gift program for any qualified non-profit.
• (cid:50)orldwide Total Recordable In(cid:64)uries (TRI) rate of our employees in the U.S. decreased by 2.5(cid:4).
•
•
Day Away Rate decreased by 23.2(cid:4)
Supplier spend with suppliers representing small Tier I, minority, woman or veteran-owned businesses accounted
for 13(cid:4) of our total spend.
Details on our diversity and inclusion programs including our global affinity groups.
•
(cid:29)(cid:63)(cid:70)(cid:53)(cid:66)(cid:62)(cid:49)(cid:62)(cid:51)(cid:53)
•
•
•
•
All Xerox ES(cid:34) (cid:43)riorities 3rd party validated by Business for Social Responsibility (BSR).
100(cid:4) of production suppliers required to adhere to Responsible Business Alliance (RBA) Code of Conduct.
Board oversight of corporate social responsibility.
Disclosure of all political activities and trade association memberships.
(cid:35)(cid:49)(cid:68)(cid:53)(cid:66)(cid:57)(cid:49)(cid:60) (cid:29)(cid:63)(cid:70)(cid:53)(cid:66)(cid:62)(cid:61)(cid:53)(cid:62)(cid:68) (cid:40)(cid:53)(cid:55)(cid:69)(cid:60)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Our business activities are worldwide and are sub(cid:64)ect to various federal, state, local, and foreign laws and our
products and services are governed by a number of rules and regulations. Currently costs incurred to comply with
these governmental regulations are presently not material to our capital expenditures, results of operations and
competitive position. Although there is no assurance that existing or future government laws and regulations
applicable to our operations, services or products will not have a material adverse effect on our capital expenditures,
results of operations and competitive position, we do not currently anticipate material expenditures for government
regulations. However, as a result of increased government focus in the U.S. and globally, we believe that
environmental and global trade regulations could potentially materially impact our business in the future.
For a discussion of the ris(cid:65)s associated with government regulations that may materially impact us, please see Ris(cid:65)
Factors in Item 1A.
8
Xerox 2020 Annual Report 8
(cid:35)(cid:49)(cid:66)(cid:59)(cid:53)(cid:68)(cid:57)(cid:62)(cid:55) (cid:49)(cid:62)(cid:52) (cid:26)(cid:57)(cid:67)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:50)e go to mar(cid:65)et with a services-led approach and sell our products and services directly to customers through our
direct sales force and through independent agents, dealers, value-added resellers, systems integrators and the (cid:50)eb.
In addition, we continue to focus on broadening our distribution and offerings to S(cid:40)Bs primarily through XBS, our
wholly-owned U.S. subsidiary comprised of regional core companies which provide office technology and services,
including IT Services, to S(cid:40)B customers in the U.S., and through the acquisition of resellers and multi-brand dealers
of document technology and IT Services in the U.S. and internationally.
(cid:50)e are structured to serve our customers globally into two primary go-to-mar(cid:65)et units: the Americas, comprised of
the U.S. and Canada along with (cid:40)exico, Central and South America(cid:26) and E(cid:40)EA, which includes Europe, the (cid:40)iddle
East, Africa and India. (cid:50)e have also implemented a common global delivery model that aims to provide a consistent
customer experience worldwide. (cid:50)e believe that these changes create a leaner and more effective go-to-mar(cid:65)et
model that will streamline our supply chain and provide our customers with best-in-class services.
In (cid:37)anuary 2020, Fu(cid:64)i Xerox notified Xerox of its intention to terminate the Technology Agreement (TA) on the
agreement(cid:85)s expiration date of (cid:40)arch 31, 2021. The series of transactions entered into between Xerox and
FU(cid:37)IFIL(cid:40) Holdings Corporation (FH) in November 2019, as disclosed in Note 6 - Divestitures in the Consolidated
Financial Statements, included an amendment to the TA that would allow Fu(cid:64)i Xerox continued use of the Xerox
brand trademar(cid:65) for two years after the date of termination of the TA as it transitions to a new brand in exchange for
an upfront prepaid fixed royalty of (cid:3)100 million. At this time, we expect Fu(cid:64)i Xerox to continue to use the Xerox brand
trademar(cid:65) over the next two years subsequent to termination of the TA and, therefore, to ma(cid:65)e the upfront payment
due under the amended agreement. Accordingly, we expect any potential entry by Xerox into the Fu(cid:64)i Xerox territory
under the Xerox brand to be deferred to at least April 1, 2023.
Upon termination of the TA, Xerox is free to use both Xerox and Fu(cid:64)i Xerox xerographic I(cid:43) as well as non-xerographic
I(cid:43) contained in xerographic products worldwide, including in the FX territory. Fu(cid:64)i Xerox on the other hand, can enter
mar(cid:65)ets outside its territory with xerographic products, however it has no rights to the use of any Xerox I(cid:43) outside of
the Fu(cid:64)i Xerox territory. The expiration of the TA does not affect our product sourcing arrangements with FX which
are governed by separate, commercial agreements which continue under their existing terms.
(cid:25)(cid:63)(cid:61)(cid:64)(cid:53)(cid:68)(cid:57)(cid:68)(cid:57)(cid:63)(cid:62)
Although we encounter competition in all areas of our business, we are the leader - or among the leaders - in our
core mid-range and high-end product groups. (cid:50)e compete on the basis of technology, performance, price, quality,
reliability, brand reputation, distribution, and customer service and support.
Our larger competitors include Canon, H(cid:43) Inc., Konica (cid:40)inolta and Ricoh. Our brand recognition, reputation for
document management expertise, innovative technology and service delivery excellence are our competitive
advantages. These advantages, combined with our breadth of product offerings, global distribution channels and
customer relationships, position us as a strong competitor going forward.
(cid:25)(cid:69)(cid:67)(cid:68)(cid:63)(cid:61)(cid:53)(cid:66) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:62)(cid:55)
(cid:50)e finance a large portion of our direct channel customer purchases of Xerox equipment through bundled lease
agreements. (cid:50)e also provide lease financing to end-user customers who purchase Xerox equipment through our
indirect channels. (cid:50)e compete with other third-party leasing companies with respect to the lease financing provided
to these end-user customers. In both instances, financing facilitates customer acquisition of Xerox technology and
enhances our value proposition, while providing Xerox a reasonable return on our investment in this business.
Because our lease contracts allow customers to pay for equipment over time rather than upfront upon installation, we
maintain a certain level of debt to support our investment in these lease contracts. (cid:50)e fund our customer financing
activity through a combination of cash generated from operations, cash on hand and proceeds from capital mar(cid:65)et
offerings and securiti(cid:80)ations. At December 31, 2020, we had approximately (cid:3)3.2 billion of finance receivables and
(cid:3)296 million of Equipment on operating leases, net, or Total Finance assets of approximately (cid:3)3.5 billion. (cid:50)e
maintain an assumed (cid:22):1 leverage ratio of debt to equity as compared to our Finance assets, which results in
approximately (cid:3)3.0 billion of our (cid:3)4.4 billion of debt being allocated to our financing business.
Refer to (cid:2)Debt and Customer Financing Activities(cid:2) in the (cid:25)(cid:49)(cid:64)(cid:57)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:67)(cid:63)(cid:69)(cid:66)(cid:51)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:34)(cid:57)(cid:65)(cid:69)(cid:57)(cid:52)(cid:57)(cid:68)(cid:73) section of (cid:40)anagement's
Discussion and Analysis, included in Item (cid:22) of this combined Form 10-K, for additional information.
In (cid:37)anuary 2021, we announced plans to expand our financing business to become a global payment solutions
business, offering lease financing for Xerox and third-party technology and office equipment. This will expand the
Company(cid:85)s customer base, create cross-selling opportunities and provide more leasing options for small and
medium si(cid:80)ed businesses.
Xerox 2020 Annual Report 9
Xerox 2020 Annual Report 9
(cid:35)(cid:49)(cid:62)(cid:69)(cid:54)(cid:49)(cid:51)(cid:68)(cid:69)(cid:66)(cid:57)(cid:62)(cid:55) (cid:49)(cid:62)(cid:52) (cid:41)(cid:69)(cid:64)(cid:64)(cid:60)(cid:73)
Our manufacturing and distribution facilities are located around the world. Our largest manufacturing site is in
(cid:50)ebster, N.(cid:52)., where we produce the Xerox i(cid:34)en, Nuvera, and Baltoro production printing presses and new 3D
printers as well as (cid:65)ey components and consumables for our products, such as toner. (cid:50)e have manufacturing
operations for materials and components in Dundal(cid:65), Ireland(cid:26) (cid:50)ilsonville, OR(cid:26) (cid:49)enray, Netherlands(cid:26) Ontario, Canada(cid:26)
and O(cid:65)lahoma City, OK. (cid:50)e conduct sustainable manufacturing in all of these facilities. In addition, we wor(cid:65) with
various manufacturing and distribution partners. This diversification of suppliers brings flexibility and cost efficiency to
our manufacturing and supply chain, a critical component in our strategic initiative to optimi(cid:80)e operations for
simplicity. Fu(cid:64)i Xerox is our largest partner with whom we maintain product sourcing agreements for specific products
across our entry, mid-range and high-end portfolios. (cid:50)e also acquire products from various third parties to increase
the breadth of our product portfolio and meet channel requirements. In addition, we outsource certain speciali(cid:80)ed
manufacturing activities to partners, such as Flex Ltd. and (cid:37)abil Inc., which are global contract manufacturers with
whom we have long-standing relationships.
Our supply chain operations utili(cid:80)e a networ(cid:65) of world-class logistics partners who offer warehousing and
transportation services. Reverse Logistics is an integral part of our sustainability mission, and we perform these
operations at our facility in Cincinnati, OH, and with a networ(cid:65) of various partners worldwide.
Refer to (cid:2)Contractual Cash Obligations and Other Commercial Commitments and Contingencies(cid:2) in the (cid:25)(cid:49)(cid:64)(cid:57)(cid:68)(cid:49)(cid:60)
(cid:40)(cid:53)(cid:67)(cid:63)(cid:69)(cid:66)(cid:51)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:34)(cid:57)(cid:65)(cid:69)(cid:57)(cid:52)(cid:57)(cid:68)(cid:73) section of (cid:40)anagement's Discussion and Analysis, included in Item (cid:22) of this combined
Form 10-K, as well as Note 12 - Investments in Affiliates, at Equity in the Consolidated Financial Statements for
additional information regarding our relationship with Fu(cid:64)i Xerox.
(cid:31)(cid:62)(cid:68)(cid:53)(cid:66)(cid:62)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:49)(cid:60) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
The financial measures, by geographical area for 2020, 2019 and 2018, are included in Note 3 - Segment and
(cid:34)eographic Area Reporting in the Consolidated Financial Statements for additional information. See also the ris(cid:65)
factor entitled (cid:86)Our business, results of operations and financial condition may be negatively impacted by conditions
abroad, including local economic and political environments, fluctuating foreign currencies and shifting regulatory
schemes(cid:87) in (cid:43)art I, Item 1A - Ris(cid:65) Factors of this combined report on Form 10-K.
(cid:41)(cid:53)(cid:49)(cid:67)(cid:63)(cid:62)(cid:49)(cid:60)(cid:57)(cid:68)(cid:73)
Our revenues may be affected by such factors as the introduction of new products, the length of sales cycles and the
seasonality of technology purchases and printing volume. These factors have historically resulted in lower revenues,
operating profits and operating cash flows in the first and third quarters. However, the CO(cid:49)ID-19 pandemic and
related business closures, impacted demand behaviors during 2020, and can potentially continue to have an impact
on the seasonal fluctuations of our customers(cid:85) purchasing patterns in 2021. For discussion regarding the impact of
the CO(cid:49)ID-19 pandemic on our business and financial results, see (cid:86)(cid:40)anagement(cid:85)s Discussion and Analysis(cid:87)
included in Item (cid:22) of this combined Form 10-K, as well as in (cid:43)art I, Item 1A - Ris(cid:65) Factors of this combined report on
Form 10-K.
(cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:31)(cid:62)(cid:54)(cid:63)(cid:66)(cid:61)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
Xerox Holdings is a New (cid:52)or(cid:65) corporation, organi(cid:80)ed in 2019 and our principal executive offices are located at 201
(cid:40)erritt (cid:22), (cid:43).O. Box 4505, Norwal(cid:65), Connecticut 06851-1056. Our telephone number is 203-849-5216.
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
Xerox is a New (cid:52)or(cid:65) corporation, organi(cid:80)ed in 1906 and our principal executive offices are located at 201 (cid:40)erritt (cid:22),
(cid:43).O. Box 4505, Norwal(cid:65), Connecticut 06851-1056. Our telephone number is 203-849-5216.
(cid:50)ithin the Investor Relations section of Xerox Holdings' website, you will find our combined Annual Reports on Form
10-K, (cid:44)uarterly Reports on Form 10-(cid:44), Current Reports on Form 8-K and any amendments to these reports. (cid:50)e
ma(cid:65)e these documents available timely after we have filed them with, or furnished them to, the U.S. Securities and
Exchange Commission (the SEC). The SEC's Internet address is www.sec.gov.
Our Internet address is (cid:71)(cid:71)(cid:71)(cid:10)(cid:72)(cid:53)(cid:66)(cid:63)(cid:72)(cid:10)(cid:51)(cid:63)(cid:61)(cid:5) The content of our website is not incorporated by reference in this
combined Form 10-K unless expressly noted.
10
Xerox 2020 Annual Report 10
(cid:31)(cid:68)(cid:53)(cid:61) (cid:13)(cid:23)(cid:10) (cid:40)(cid:57)(cid:67)(cid:59) (cid:28)(cid:49)(cid:51)(cid:68)(cid:63)(cid:66)(cid:67)
(cid:49)ou should carefully consider the following ris(cid:61) factors as well as the other information included, and ris(cid:61)s
described, in other sections of this combined (cid:30)orm 1(cid:13)-(cid:35), including under the headings (cid:80)(cid:27)autionary (cid:43)tatement
Regarding (cid:30)orward-(cid:36)oo(cid:61)ing (cid:43)tatements(cid:81), (cid:80)(cid:36)egal (cid:40)roceedings(cid:81), (cid:80)(cid:43)elected (cid:30)inancial Data(cid:81), and (cid:80)(cid:37)anagement(cid:79)s
Discussion and (cid:25)nalysis of (cid:30)inancial (cid:27)ondition and Results of Operations(cid:81) and in our (cid:27)onsolidated (cid:30)inancial
(cid:43)tatements and the related notes thereto.
(cid:25)ny of the following ris(cid:61)s could materially and adversely affect our business, financial condition, or results of
operations. The selected ris(cid:61)s described below, however, are not the only ris(cid:61)s facing us. (cid:25)dditional ris(cid:61)s and
uncertainties not currently (cid:61)nown to us or those we currently view to be immaterial may also materially and
adversely affect our business, financial condition, or results of operations.
(cid:41)(cid:69)(cid:61)(cid:61)(cid:49)(cid:66)(cid:73) (cid:63)(cid:54) (cid:40)(cid:57)(cid:67)(cid:59) (cid:28)(cid:49)(cid:51)(cid:68)(cid:63)(cid:66)(cid:67)
These statements reflect management(cid:85)s current beliefs, assumptions and expectations and are sub(cid:64)ect to a number
of factors that may cause actual results to differ materially. Such factors include but are not limited to:
(cid:77)
The effects of the CO(cid:49)ID-19 pandemic on our and our customers' businesses and the duration and extent
to which this will impact our future results of operations and overall financial performance(cid:26)
(cid:77) Our ability to address our business challenges in order to reverse revenue declines, reduce costs and
increase productivity so that we can invest in and grow our business(cid:26)
(cid:77) Our ability to attract and retain (cid:65)ey personnel(cid:26)
(cid:77)
(cid:77)
Changes in economic and political conditions, trade protection measures, licensing requirements and tax
laws in the United States and in the foreign countries in which we do business(cid:26)
The imposition of new or incremental trade protection measures such as tariffs and import or export
restrictions(cid:26) changes in foreign currency exchange rates(cid:26)
(cid:77) Our ability to successfully develop new products, technologies and service offerings and to protect our
intellectual property rights(cid:26)
(cid:77)
(cid:77)
(cid:77)
The ris(cid:65) that multi-year contracts with governmental entities could be terminated prior to the end of the
contract term and that civil or criminal penalties and administrative sanctions could be imposed on us if we
fail to comply with the terms of such contracts and applicable law(cid:26)
The ris(cid:65) that partners, subcontractors and software vendors will not perform in a timely, quality manner(cid:26)
Actions of competitors and our ability to promptly and effectively react to changing technologies and
customer expectations(cid:26)
(cid:77) Our ability to obtain adequate pricing for our products and services and to maintain and improve cost
efficiency of operations, including savings from restructuring actions(cid:26)
(cid:77)
(cid:77)
(cid:77)
The ris(cid:65) that confidential and(cid:14)or individually identifiable information of ours, our customers, clients and
employees could be inadvertently disclosed or disclosed as a result of a breach of our security systems due
to cyber attac(cid:65)s or other intentional acts(cid:26)
Reliance on third parties, including subcontractors, for manufacturing of products and provision of services(cid:26)
The exit of the United Kingdom from the European Union(cid:26)
(cid:77) Our ability to manage changes in the printing environment li(cid:65)e the decline in the volume of printed pages
and extension of equipment placements(cid:26)
Interest rates, cost of borrowing and access to credit mar(cid:65)ets(cid:26)
Funding requirements associated with our employee pension and retiree health benefit plans(cid:26)
The ris(cid:65) that our operations and products may not comply with applicable worldwide regulatory
requirements, particularly environmental regulations and directives and anti-corruption laws(cid:26)
The outcome of litigation and regulatory proceedings to which we may be a party(cid:26)
Any impacts resulting from the restructuring of our relationship with Fu(cid:64)ifilm Holdings Corporation(cid:26) and
The shared services arrangements entered into by us as part of (cid:43)ro(cid:64)ect Own It.
(cid:77)
(cid:77)
(cid:77)
(cid:77)
(cid:77)
(cid:77)
Xerox 2020 Annual Report 11
Xerox 2020 Annual Report 11
(cid:14)o(cid:45)pan(cid:57)(cid:5)(cid:28)pecific (cid:27)is(cid:43) Factors
(cid:29)(cid:40)e effects of t(cid:40)e (cid:14)O(cid:31)(cid:20)D(cid:5)(cid:8)(cid:10) pan(cid:36)e(cid:45)ic (cid:40)ave (cid:45)ateriall(cid:57) affecte(cid:36) (cid:40)o(cid:55) (cid:55)e an(cid:36) our custo(cid:45)ers are operating
our (cid:34)usinesses(cid:4) an(cid:36) t(cid:40)e (cid:36)uration an(cid:36) extent to (cid:55)(cid:40)ic(cid:40) t(cid:40)is (cid:55)ill i(cid:45)pact our future results of operations an(cid:36)
overall financial perfor(cid:45)ance re(cid:45)ain uncertain(cid:6)
In (cid:40)arch 2020, the (cid:50)orld Health Organi(cid:80)ation declared the outbrea(cid:65) of CO(cid:49)ID-19 a pandemic, which continues to
spread throughout the U.S. and the world and has resulted in authorities implementing numerous measures to
contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business
limitations and shutdowns.
The CO(cid:49)ID-19 pandemic has negatively impacted the global economy, disrupted customer spending and global
supply chains, and created significant volatility and disruption of financial mar(cid:65)ets. The extent of the impact of the
CO(cid:49)ID-19 pandemic on our business and financial performance, including our ability to execute our near-term and
long-term business strategies and initiatives within the expected time frames, will depend on future developments,
including the duration and severity of the pandemic and the extent and effectiveness of containment actions, and
the availability of therapeutics and vaccines, which are uncertain and cannot be predicted.
Our operations are being negatively affected by a range of external factors related to the CO(cid:49)ID-19 pandemic that
are not within our control. For example, most countries, states, counties and cities have imposed and continue to
impose a wide range of restrictions on our employees(cid:85), partners(cid:85) and customers(cid:85) physical movement to limit the
spread of CO(cid:49)ID-19 including travel bans and restrictions, quarantines, shelter-in-place orders, and business
limitations and shutdowns. Such restrictions limit our ability, as well as that of our channel partners, to sell, install
and service our equipment for our customers, negatively impacting our operations and financial performance.
Further, many businesses are requiring their office employees to wor(cid:65) from home for extended periods of time,
which is negatively impacting both sales and use of Xerox products, supplies and services. The longer this persists,
the greater effect it will have on our business.
(cid:20)f (cid:55)e are unsuccessful at a(cid:36)(cid:36)ressing our (cid:34)usiness c(cid:40)allenges(cid:4) our (cid:34)usiness an(cid:36) results of operations (cid:45)a(cid:57)
(cid:34)e a(cid:36)versel(cid:57) affecte(cid:36) an(cid:36) our a(cid:34)ilit(cid:57) to invest in an(cid:36) gro(cid:55) our (cid:34)usiness coul(cid:36) (cid:34)e li(cid:45)ite(cid:36)(cid:6)
(cid:50)e are in the process of addressing many challenges facing our business, including the CO(cid:49)ID-19 pandemic. One
set of challenges relates to dynamic and accelerating mar(cid:65)et trends, such as the declines in installations and
printed pages, fewer devices per location and an increase in electronic documentation. A second set of challenges
relates to changes in the competitive landscape. Our primary competitors are exerting increased competitive
pressure in targeted areas and are entering new mar(cid:65)ets(cid:26) our emerging competitors are introducing new
technologies and business models. These mar(cid:65)et and competitive trends ma(cid:65)e it difficult to reverse the current
declines in revenue over the past several years. A third set of challenges relates to our continued efforts to reduce
costs and increase productivity in light of declining revenues. In addition, we are vulnerable to increased ris(cid:65)s
associated with our efforts to address these challenges given the mar(cid:65)ets in which we compete, as well as, the
broad range of geographic regions in which we and our customers and partners operate, including the impact of the
CO(cid:49)ID-19 pandemic to those mar(cid:65)ets and regions that is expected to continue in future periods. If we do not
succeed in these efforts, or if these efforts are more costly or time-consuming than expected, our business and
results of operations may be adversely affected, which could limit our ability to invest in and grow our business.
(cid:32)e (cid:45)a(cid:57) (cid:34)e una(cid:34)le to attract an(cid:36) retain (cid:43)e(cid:57) personnel (cid:55)(cid:40)ile our (cid:34)usiness (cid:45)o(cid:36)el un(cid:36)ergoes significant
c(cid:40)anges(cid:6)
Xerox is undergoing significant changes in our business model and, accordingly, current and prospective employees
may experience uncertainty about their future. Our success is dependent, among other things, on our ability to
attract, develop and retain highly qualified senior management and other (cid:65)ey employees. Competition for (cid:65)ey
personnel is intense, and our ability to attract and retain (cid:65)ey personnel is dependent on a number of factors,
including prevailing mar(cid:65)et conditions and compensation pac(cid:65)ages offered by companies competing for the same
talent. Our ability to do so also depends on how well we maintain a strong corporate culture that is attractive to
employees. Hiring and training of new employees may be adversely impacted by global economic uncertainty and
office closures caused by CO(cid:49)ID-19. The departure of existing (cid:65)ey employees or the failure of potential (cid:65)ey
employees to accept employment with Xerox, despite our recruiting efforts, could have a material adverse impact on
our business, financial condition and operating results.
12
Xerox 2020 Annual Report 12
Our (cid:34)usiness(cid:4) results of operations an(cid:36) financial con(cid:36)ition (cid:45)a(cid:57) (cid:34)e negativel(cid:57) i(cid:45)pacte(cid:36) (cid:34)(cid:57) con(cid:36)itions
a(cid:34)roa(cid:36)(cid:4) inclu(cid:36)ing local econo(cid:45)ic an(cid:36) political environ(cid:45)ents(cid:4) fluctuating foreign currencies an(cid:36) s(cid:40)ifting
regulator(cid:57) sc(cid:40)e(cid:45)es(cid:6)
A significant portion of our revenue is generated from operations, and we manufacture or acquire many of our
products and(cid:14)or their components, outside the United States. The CO(cid:49)ID-19 pandemic has negatively impacted the
global economy, disrupted customer spending and global supply chains, and created significant volatility in foreign
currency exchange rates. Our future revenues, costs and results of operations could be significantly affected by
changes in foreign currency exchange rates - particularly the (cid:37)apanese yen, the euro and the British pound - as well
as by a number of other factors, including changes in local economic and political conditions, trade protection
measures, licensing requirements, local tax regulations and other related legal matters. (cid:50)e use currency derivative
contracts to hedge foreign currency denominated assets, liabilities and anticipated transactions. This practice is
intended to mitigate or reduce volatility in the results of our foreign operations, but does not completely eliminate it.
(cid:50)e do not hedge the translation effect of international revenues and expenses that are denominated in currencies
other than the U.S. dollar. If our future revenues, costs and results of operations are significantly affected by
economic or political conditions abroad and we are unable to effectively hedge these ris(cid:65)s, they could materially
adversely affect our results of operations and financial condition.
(cid:29)ariffs or ot(cid:40)er restrictions on foreign i(cid:45)ports coul(cid:36) negativel(cid:57) i(cid:45)pact our financial perfor(cid:45)ance(cid:6)
Our business, results of operations and financial condition may be negatively impacted by a potential increase in the
cost of our products as a result of new or incremental trade protection measures such as, increased import tariffs,
import or export restrictions, including those restrictions put in place as a result of the CO(cid:49)ID-19 pandemic, and
requirements and the revocation or material modification of trade agreements. Changes in U.S. and international
trade policy and resultant retaliatory countermeasures, including imposition of increased tariffs, quotas or duties by
affected countries, and trading partners are difficult to predict and may adversely affect our business. The U.S.
government has and could in the future impose trade barriers including tariffs, quotas, duties or other restrictions on
foreign imports. The implementation of a border tax, tariff or higher customs duties on our products manufactured
abroad or components that we import into the U.S., or any potential corresponding actions by other countries in
which we do business, could negatively impact our financial performance.
(cid:32)e operate glo(cid:34)all(cid:57) an(cid:36) c(cid:40)anges in tax la(cid:55)s coul(cid:36) a(cid:36)versel(cid:57) affect our results(cid:6)
(cid:50)e operate in the U.S. and globally and changes in tax laws could adversely affect our results. (cid:50)e monitor U.S.
and non-U.S. related tax law changes, which may adversely impact our overall tax costs. From time to time,
proposals have been made and(cid:14)or legislation has been introduced to change tax rates as well as related tax laws,
regulations or interpretations thereof by various (cid:64)urisdictions or limit tax treaty benefits that if enacted or
implemented could materially increase our tax costs and(cid:14)or our effective tax rate and could have a material adverse
impact on our financial condition and results of operations. The international tax environment continues to change
as a result of both coordinated actions by governments and unilateral measures designed by individual countries,
both intended to tac(cid:65)le concerns over base erosion and profit shifting and perceived international tax avoidance
techniques. The Organi(cid:80)ation for Economic Cooperation and Development (OECD) is issuing guidelines that are
different, in some respects, than long-standing international tax principles. As countries unilaterally amend their tax
laws to adopt certain parts of the OECD guidelines, this may increase tax uncertainty and may adversely impact our
income taxes. Local country, state, provincial or municipal taxation may also be sub(cid:64)ect to review and potential
override by regional, federal, national or similar forms of government. In addition, we are sub(cid:64)ect to the continuous
examination of our income tax returns by the United States Internal Revenue Service and other tax authorities
around the world. (cid:50)e regularly assesses the li(cid:65)elihood of adverse outcomes resulting from these examinations to
determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from
these examinations will not have an adverse effect on our provision for income taxes and cash tax liability.
(cid:20)f (cid:55)e fail to successfull(cid:57) (cid:36)evelop ne(cid:55) pro(cid:36)ucts(cid:4) tec(cid:40)nologies an(cid:36) service offerings an(cid:36) protect our
intellectual propert(cid:57) rig(cid:40)ts(cid:4) (cid:55)e (cid:45)a(cid:57) (cid:34)e una(cid:34)le to retain current custo(cid:45)ers an(cid:36) gain ne(cid:55) custo(cid:45)ers an(cid:36) our
revenues (cid:55)oul(cid:36) (cid:36)ecline(cid:6)
The process of developing new products and solutions is inherently complex and uncertain. It requires accurate
anticipation of customers' changing needs and emerging technological trends. (cid:50)e must wor(cid:65) with our supply
partners and commit resources before (cid:65)nowing whether these initiatives will result in products that are commercially
successful and generate the revenues required to provide desired returns. In developing these new technologies
and products, we rely upon patent, copyright, trademar(cid:65) and trade secret laws in the United States and similar laws
in other countries, and agreements with our employees, customers, suppliers and other parties, to establish and
Xerox 2020 Annual Report 13
Xerox 2020 Annual Report 13
maintain our intellectual property rights in technology and products used in our operations. It is possible that our
intellectual property rights could be challenged, invalidated or circumvented, allowing others to use our intellectual
property to our competitive detriment. Also, the laws of certain countries may not protect our proprietary rights to the
same extent as the laws of the United States and we may be unable to protect our proprietary technology
adequately against unauthori(cid:80)ed third-party copying or use, which could adversely affect our competitive position. In
addition, some of our products rely on technologies developed by third parties. (cid:50)e may not be able to obtain or to
continue to obtain licenses and technologies from these third parties at all or on reasonable terms, or such third
parties may demand cross-licenses to our intellectual property. If we fail to accurately anticipate and meet our
customers' needs through the development of new products, technologies and service offerings or if we fail to
adequately protect our intellectual property rights, we could lose mar(cid:65)et share and customers to our competitors
and that could materially adversely affect our results of operations and financial condition.
In addition, our strategy requires us to expand into ad(cid:64)acent mar(cid:65)ets with new products, services and technology
such as Digital (cid:43)ac(cid:65)aging and (cid:43)rint, AI (cid:50)or(cid:65)flow Assistants for Knowledge (cid:50)or(cid:65)ers, 3D (cid:43)rinting (cid:14) Digital
(cid:40)anufacturing, IT Services and software. Our ability to develop or acquire new products, services and technologies
for these ad(cid:64)acent mar(cid:65)ets requires the investment of significant resources, which may not lead to the development
of new technologies, products or services on a timely basis. (cid:50)e must also attract, develop and retain individuals
with the requisite technical expertise and understanding of customers' needs to develop new technologies and
introduce new products, particularly as we increase investment in these areas of the business. Similar to above if
we fail to accurately anticipate and meet our customers' needs in these ad(cid:64)acent mar(cid:65)ets through the development
of new products, technologies and service offerings or if we fail to adequately protect our intellectual property rights,
we could lose mar(cid:65)et share and customers to our competitors and that could materially adversely affect our results
of operations and financial condition.
Our govern(cid:45)ent contracts are su(cid:34)(cid:42)ect to ter(cid:45)ination rig(cid:40)ts(cid:4) au(cid:36)its an(cid:36) investigations(cid:4) (cid:55)(cid:40)ic(cid:40)(cid:4) if exercise(cid:36)(cid:4)
coul(cid:36) negativel(cid:57) i(cid:45)pact our reputation an(cid:36) re(cid:36)uce our a(cid:34)ilit(cid:57) to co(cid:45)pete for ne(cid:55) contracts(cid:6)
A significant portion of our revenues is derived from contracts with U.S. federal, state and local governments and
their agencies, as well as international governments and their agencies. (cid:34)overnment entities typically finance
pro(cid:64)ects through appropriated funds. (cid:50)hile these pro(cid:64)ects are often planned and executed as multi-year pro(cid:64)ects,
government entities usually reserve the right to change the scope of or terminate these pro(cid:64)ects for lac(cid:65) of approved
funding and(cid:14)or at their convenience. Changes in government or political developments, including budget deficits,
shortfalls or uncertainties, government spending reductions (e.g., Congressional sequestration of funds under the
Budget Control Act of 2011) or other debt or funding constraints, could result in lower governmental sales and in our
pro(cid:64)ects being reduced in price or scope or terminated altogether, which also could limit our recovery of incurred
costs, reimbursable expenses and profits on wor(cid:65) completed prior to the termination.
Additionally, government agencies routinely audit government contracts. If the government finds that we
inappropriately charged costs to a contract, the costs will be non-reimbursable or, to the extent reimbursed,
refunded to the government. If the government discovers improper or illegal activities or contractual non-compliance
in the course of audits or investigations, we may be sub(cid:64)ect to various civil and criminal penalties and administrative
sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspensions or
debarment from doing business with the government. Any resulting penalties or sanctions could have a material
adverse effect on our business, financial condition, results of operations and cash flows. Further, the negative
publicity that arises from findings in such audits or, investigations could have an adverse effect on our reputation
and reduce our ability to compete for new contracts and could also have a material adverse effect on our business,
financial condition, results of operations and cash flow.
(cid:32)e face significant co(cid:45)petition an(cid:36) our failure to co(cid:45)pete successfull(cid:57) coul(cid:36) a(cid:36)versel(cid:57) affect our results
of operations an(cid:36) financial con(cid:36)ition(cid:6)
(cid:50)e operate in an environment of significant competition, driven by rapid technological developments, changes in
industry standards, and demands of customers to become more efficient. Our competitors include large
international companies some of which have significant financial resources and compete with us globally to provide
document processing products and services in each of the mar(cid:65)ets we serve. (cid:50)e compete primarily on the basis of
technology, performance, price, quality, reliability, brand, distribution and customer service and support. Our future
success is largely dependent upon our ability to compete in the mar(cid:65)ets we currently serve, to promptly and
effectively react to changing technologies and customer expectations and to expand into additional mar(cid:65)et
segments. To remain competitive, we must develop services, applications and new products(cid:26) periodically enhance
our existing offerings(cid:26) remain cost efficient(cid:26) and attract and retain (cid:65)ey personnel and management. Our ability to
remain competitive through development of new products and services and attracting and retaining (cid:65)ey personnel
14
Xerox 2020 Annual Report 14
may be adversely impacted by the global economic uncertainty caused by the CO(cid:49)ID-19 pandemic. If we are
unable to compete successfully, we could lose mar(cid:65)et share and important customers to our competitors and such
loss could materially adversely affect our results of operations and financial condition.
Our profita(cid:34)ilit(cid:57) is (cid:36)epen(cid:36)ent upon our a(cid:34)ilit(cid:57) to o(cid:34)tain a(cid:36)e(cid:49)uate pricing for our pro(cid:36)ucts an(cid:36) services an(cid:36)
to i(cid:45)prove our cost structure(cid:6)
Our success depends on our ability to obtain adequate pricing for our products and services that will provide a
reasonable return to our shareholders. Depending on competitive mar(cid:65)et factors, including the negative impacts
from the CO(cid:49)ID-19 pandemic, future prices we obtain for our products and services may decline from current
levels. In addition, pricing actions to offset the effect of currency devaluations may not prove sufficient to offset
further devaluations or may not hold in the face of customer resistance and(cid:14)or competition. If we are unable to
obtain adequate pricing for our products and services, it could materially adversely affect our results of operations
and financial condition.
(cid:50)e continually review our operations with a view towards reducing our cost structure, including reducing our
employee base, exiting certain businesses, improving process and system efficiencies and outsourcing some
internal functions. (cid:43)ersonal protective measures, such as quarantines, restricted access to wor(cid:65)places, product
pac(cid:65)aging requirements, and similar requirements put in place by countries, states municipalities and businesses in
response to the CO(cid:49)ID-19 pandemic may change the way we interact with our customers and increase our costs of
doing business. If we are unable to continue to maintain our cost base at or below the current level and maintain
process and systems changes resulting from prior cost reduction actions, it could materially adversely affect our
results of operations and financial condition.
Our ability to sustain and improve profit margins is dependent on a number of factors, including our ability to
continue to improve the cost efficiency of our operations through such programs as (cid:43)ro(cid:64)ect Own It, the level of
pricing pressures on our products and services, the proportion of high-end as opposed to low-end equipment sales
(product mix), the trend in our post-sale revenue growth and our ability to successfully complete information
technology initiatives. If any of these factors adversely materiali(cid:80)e or if we are unable to achieve and maintain
productivity improvements through design efficiency, supplier and manufacturing cost improvements and information
technology initiatives, our ability to offset labor cost inflation, potential materials cost increases and competitive price
pressures would be impaired, all of which could materially adversely affect our results of operations and financial
condition.
(cid:32)e (cid:45)a(cid:57) not ac(cid:40)ieve so(cid:45)e or all of t(cid:40)e expecte(cid:36) (cid:34)enefits of our restructuring plans an(cid:36) our restructuring
(cid:45)a(cid:57) a(cid:36)versel(cid:57) affect our (cid:34)usiness(cid:6)
(cid:50)e engage in restructuring actions, including (cid:43)ro(cid:64)ect Own It, as well as other transformation efforts in order to
reduce our cost structure, realign it to the changing nature of our business and achieve operating efficiencies. In
addition, these actions are expected to simplify our organi(cid:80)ational structure, upgrade our IT infrastructure and
redesign business processes. (cid:50)e may not be able to obtain the cost savings and benefits that were initially
anticipated in connection with our restructuring actions. Additionally, as a result of our restructuring initiatives, we
may experience a loss of continuity, loss of accumulated (cid:65)nowledge and(cid:14)or inefficiency during transitional periods.
Transformation and restructuring may require a significant amount of time and focus from both management and
other employees, which may divert attention from operating and growing our business. The wide-ranging nature and
number of actions underway at any point in time may also become difficult for the organi(cid:80)ation to satisfactorily
manage and implement as actions may have impacts across the organi(cid:80)ation, processes and systems that are not
apparent by individual pro(cid:64)ect but may have unintended consequences in the aggregate. Furthermore, the expected
savings associated with these initiatives may be offset to some extent by business disruption during the
implementation phase as well as investments in new processes and systems until the initiatives are fully
implemented and stabili(cid:80)ed. If we fail to achieve some or all of the expected benefits of restructuring, it could have a
material adverse effect on our competitive position, business, financial condition, results of operations and cash
flows.
As part of our efforts to streamline operations and reduce costs, we have offshored and outsourced certain of our
operations, services and other functions through captive arrangements as well as with third-parties (e.g. HCL) and
we will continue to evaluate additional offshoring or outsourcing possibilities in the future. If our outsourcing partners
or operations fail to perform their obligations in a timely manner or at satisfactory quality levels or if we are unable to
attract or retain sufficient personnel with the necessary s(cid:65)ill sets to meet our offshoring or outsourcing needs, the
quality of our services, products and operations, as well as our reputation, could suffer. Our success depends, in
part, on our ability to manage these potential transitions and issues, which in certain circumstances could be largely
Xerox 2020 Annual Report 15
Xerox 2020 Annual Report 15
outside of our control. In addition, much of our offshoring ta(cid:65)es place in developing countries and as a result may
also be sub(cid:64)ect to geopolitical uncertainty. Diminished service quality from offshoring and outsourcing could have an
adverse material impact to our operating results due to service interruptions and negative customer reactions.
(cid:32)e are su(cid:34)(cid:42)ect to la(cid:55)s of t(cid:40)e (cid:30)nite(cid:36) (cid:28)tates an(cid:36) foreign (cid:42)uris(cid:36)ictions relating to in(cid:36)ivi(cid:36)uall(cid:57) i(cid:36)entifia(cid:34)le
infor(cid:45)ation(cid:4) an(cid:36) failure to co(cid:45)pl(cid:57) (cid:55)it(cid:40) t(cid:40)ose la(cid:55)s coul(cid:36) su(cid:34)(cid:42)ect us to legal actions an(cid:36) negativel(cid:57) i(cid:45)pact
our operations(cid:6)
(cid:50)e receive, process, transmit and store information relating to identifiable individuals, both in our role as a
technology provider and as an employer. As a result, we are sub(cid:64)ect to numerous United States (both federal and
state) and foreign (cid:64)urisdiction laws and regulations designed to protect individually identifiable information. These
laws have been sub(cid:64)ect to frequent changes, and new legislation in this area may be enacted at any time. For
example, the (cid:34)eneral Data (cid:43)rotection Regulation that came into force in the European Union in (cid:40)ay 2018.
Changes to existing laws, introduction of new laws in this area, or failure to comply with existing laws that are
applicable to us may sub(cid:64)ect us to, among other things, additional costs or changes to our business practices,
liability for monetary damages, fines and(cid:14)or criminal prosecution, unfavorable publicity, restrictions on our ability to
obtain and process information and allegations by our customers and clients that we have not performed our
contractual obligations, any of which may have a material adverse effect on our profitability and cash flow.
(cid:32)e are su(cid:34)(cid:42)ect to (cid:34)reac(cid:40)es of our securit(cid:57) s(cid:57)ste(cid:45)s(cid:4) c(cid:57)(cid:34)er(cid:5)attac(cid:43)s an(cid:36) service interruptions(cid:4) (cid:55)(cid:40)ic(cid:40) coul(cid:36)
expose us to lia(cid:34)ilit(cid:57)(cid:4) litigation(cid:4) an(cid:36) regulator(cid:57) action an(cid:36) (cid:36)a(cid:45)age our reputation(cid:6)
(cid:50)e have implemented security systems with the intent of maintaining and protecting our own, and our customers',
clients' and suppliers' confidential information, including information related to identifiable individuals, against
unauthori(cid:80)ed access or disclosure. Despite such efforts, we may be sub(cid:64)ect to breaches of our security systems
resulting in unauthori(cid:80)ed access to our facilities or information systems and the information we are trying to protect.
(cid:40)oreover, the ris(cid:65) of such attac(cid:65)s includes attempted breaches not only of our systems, but also those of our
customers, clients and suppliers. The techniques used to obtain unauthori(cid:80)ed access are constantly changing, are
becoming increasingly more sophisticated and often are not recogni(cid:80)ed until after an exploitation of information has
occurred. Therefore, we may be unable to anticipate these techniques or implement sufficient preventative
measures.
Threat actors regularly attempt and, from time to time, have been successful in breaching our security systems, to
gain access to our information and infrastructure through various techniques, including phishing, ransomware and
other targeted attac(cid:65)s. The Company has retained and, in the future, may retain third-party experts to assist with the
containment of and response to security incidents and, in coordination with law enforcement, with the investigation
of such incidents. The Company has incurred, and expects to continue to incur, costs, including to retain such third-
party experts, in connection with such incidents. (cid:50)e may also find it necessary to ma(cid:65)e significant further
investments to protect this information and our infrastructure. These investments, and costs we incur in connection
with security incidents, could be material.
(cid:50)hile we do not believe cybersecurity incidents have resulted in any material impact on our business, operations or
financial results or on our ability to service our customers or run our business, past and future incidents resulting in
unauthori(cid:80)ed access to our facilities or information systems, or those of our suppliers, or accidental loss or
disclosure of proprietary or confidential information about us, our clients or our customers could result in, among
other things, a total shutdown of our systems that would disrupt our ability to conduct business or pay vendors and
employees. In addition, cybersecurity ris(cid:65)s and data security incidents could lead to unfavorable publicity,
governmental inquiry and oversight, litigation by affected parties and possible financial obligations for damages
related to the theft or misuse of such information, any of which could have a material adverse effect on our
profitability and cash flow.
(cid:50)hile social distancing measures restricting the ability of our employees to wor(cid:65) at our offices are in place to
combat the CO(cid:49)ID-19 pandemic, it may exacerbate certain ris(cid:65)s to our business, including an increased demand
for information technology resources, increased ris(cid:65) of phishing and other cybersecurity attac(cid:65)s, and increased ris(cid:65)
of unauthori(cid:80)ed dissemination of sensitive personal information or proprietary or confidential information about us or
our customers or other third-parties and we may be more susceptible to security breaches and other security
incidents because we have less capability to implement, monitor and enforce our information security and data
protection policies.
16
Xerox 2020 Annual Report 16
(cid:32)e (cid:40)ave outsource(cid:36) a significant portion of our (cid:45)anufacturing operations an(cid:36) increasingl(cid:57) rel(cid:57) on t(cid:40)ir(cid:36)(cid:5)
part(cid:57) (cid:45)anufacturers(cid:4) su(cid:34)contractors an(cid:36) suppliers(cid:6)
(cid:50)e have outsourced a significant portion of our manufacturing operations to third parties, such as Fu(cid:64)i Xerox Co.,
Ltd. In the normal course of business, we regularly reevaluate our relationships with these third parties and have
discussions with other third parties in order to maintain competitive tension and see(cid:65) more optimal terms. There is
no guarantee that such discussions will lead to better arrangements, and our existing suppliers could react
negatively to any alternative arrangements we see(cid:65) to negotiate with other third parties. In addition, we could incur
significant costs in order to transition from one third-party manufacturing partner to another.
(cid:50)e face the ris(cid:65) that our third-party manufacturing partners may not be able to develop manufacturing methods
appropriate for our products, quic(cid:65)ly respond to changes in customer demand, and obtain supplies and materials
necessary for the manufacturing process. In addition, in the normal course of business and as a result of the
CO(cid:49)ID-19 pandemic, they may experience labor shortages and(cid:14)or disruptions, manufacturing costs could be higher
than planned and lead to higher prices for our products and the reliability of our products could decline. Further,
since certain third parties we have outsourced manufacturing to also are our competitors in the print mar(cid:65)et, or may
be in the future, we could experience product disruption as a result of competitive pressures that increase the cost
of the products supplied. If any of these ris(cid:65)s were to be reali(cid:80)ed, and similar third-party manufacturing relationships
could not be established and(cid:14)or successfully transitioned to, we could experience interruptions in supply or
increases in costs that might result in our being unable to meet customer demand for our products, damage our
relationships with our customers and reduce our mar(cid:65)et share, all of which could materially adversely affect our
results of operations and financial condition.
In addition, in our services business we may partner with other parties, including software and hardware vendors, to
provide the complex solutions required by our customers. Therefore, our ability to deliver the solutions and provide
the services required by our customers is dependent on our and our partners' ability to meet our customers'
requirements and schedules. If we or our partners fail to deliver services or products as required and on time, our
ability to complete the contract may be adversely affected, which may have an adverse impact on our revenue and
profits.
(cid:32)e nee(cid:36) to successfull(cid:57) (cid:45)anage c(cid:40)anges in t(cid:40)e printing environ(cid:45)ent an(cid:36) (cid:45)ar(cid:43)et (cid:34)ecause our operating
results (cid:45)a(cid:57) (cid:34)e negativel(cid:57) i(cid:45)pacte(cid:36) (cid:34)(cid:57) lo(cid:55)er e(cid:49)uip(cid:45)ent place(cid:45)ents an(cid:36) usage tren(cid:36)s(cid:6)
The printing mar(cid:65)et and environment is changing as a result of the CO(cid:49)ID-19 pandemic, development of new
technologies, shifts in customer preferences in printing and the expansion of new printing mar(cid:65)ets as well as
ancillary mar(cid:65)ets. The process of developing new high-technology products, software, services and solutions and
enhancing existing hardware and software products, services and solutions is complex, costly and uncertain, and
any failure by us to anticipate customers' changing needs and emerging technological trends accurately could
significantly harm our mar(cid:65)et share, results of operations and financial condition. Examples include mobile printing,
color printing, pac(cid:65)aging, print on ob(cid:64)ects, continuous-feed in(cid:65)(cid:64)et printing and the expansion of the mar(cid:65)et for entry
products (A4 printers) and high-end products as well as electronic delivery, and cloud-based computing and
software. These changing mar(cid:65)et trends are also opening up new ancillary mar(cid:65)ets for our products, services and
software.
A significant part of our strategy and ultimate success in this changing mar(cid:65)et is our ability to develop and mar(cid:65)et
technology that produces products, services and software that meet these changes. (cid:50)e expect that revenue growth
can be improved through improvements in the software features of our multifunction devices, increases in the color
printer through expansion to metallic, fluorescent, and clear in(cid:65) and digital pac(cid:65)aging, and leveraging a strong base
in managed print services with new digital, analytics, security features. Our software strategy involves software for
integrated solutions and delivery of industry-focused services into an existing customer base. (cid:50)e also expect to
extend our presence in the S(cid:40)B mar(cid:65)et through organic and inorganic investments as well as further expansion into
channels and eCommerce and invest in innovation including digital pac(cid:65)aging, AI wor(cid:65)flow assistants for (cid:65)nowledge
wor(cid:65)ers, 3D printing and digital manufacturing, sensors and services for IoT and clean tech. Our future success in
executing on this strategy depends on our ability to ma(cid:65)e the investments and commit the necessary resources in
this highly competitive mar(cid:65)et. Despite this investment, the process of developing new products or technologies is
inherently complex and uncertain and there are a number of ris(cid:65)s that we are sub(cid:64)ect to including the ris(cid:65) that our
products or technologies will successfully satisfy our customers(cid:85) needs or gain mar(cid:65)et acceptance. Additionally, the
CO(cid:49)ID-19 pandemic has negatively impacted our ability to execute our near-term business strategies and
initiatives. The long-term impact will depend on future developments, including the duration and severity of the
pandemic and the extent and effectiveness of containment actions, which are uncertain and cannot be predicted. If
we are unable to develop and mar(cid:65)et advanced and competitive technologies, it may negatively impact our future
Xerox 2020 Annual Report 17
Xerox 2020 Annual Report 1(cid:22)
revenue growth and mar(cid:65)et share as well as our planned expansion into new or alternative mar(cid:65)ets. Additionally, it
may negatively impact expansion of our worldwide equipment placements, as well as sales of services and supplies
occurring after the initial equipment placement (post sale revenue) in the (cid:65)ey growth mar(cid:65)ets of digital printing, color
and multifunction system. If we are unable to maintain a consistent level of revenue, it could materially adversely
affect our results of operations and financial condition.
Our a(cid:34)ilit(cid:57) to fun(cid:36) our custo(cid:45)er financing activities at econo(cid:45)icall(cid:57) co(cid:45)petitive levels (cid:36)epen(cid:36)s on our
a(cid:34)ilit(cid:57) to (cid:34)orro(cid:55) an(cid:36) t(cid:40)e cost of (cid:34)orro(cid:55)ing in t(cid:40)e cre(cid:36)it (cid:45)ar(cid:43)ets(cid:6)
The long-term viability and profitability of our customer financing activities is dependent, in part, on our ability to
borrow and the cost of borrowing in the credit mar(cid:65)ets. This ability and cost, in turn, is dependent on our credit
rating, which is currently non-investment grade, and is sub(cid:64)ect to credit mar(cid:65)et volatility, which has increased as a
result of the CO(cid:49)ID-19 pandemic. (cid:50)e primarily fund our customer financing activity through a combination of cash
generated from operations, cash on hand, capital mar(cid:65)et offerings, sales and securiti(cid:80)ations of finance receivables
and commercial paper borrowings. Our ability to continue to offer customer financing and be successful in the
placement of equipment with customers is largely dependent on our ability to obtain funding at a reasonable cost. If
we are unable to continue to offer customer financing, or find an economic alternative, it could materially adversely
affect our results of operations and financial condition.
Our significant (cid:36)e(cid:34)t coul(cid:36) a(cid:36)versel(cid:57) affect our financial (cid:40)ealt(cid:40) an(cid:36) pose c(cid:40)allenges for con(cid:36)ucting our
(cid:34)usiness(cid:6)
Our ability to provide customer financing is a significant competitive advantage. (cid:50)e have and will continue to have
a significant amount of debt and other obligations, including that arising as a result of the newly-expanded XFS
business scope, the ma(cid:64)ority of which support our customer financing activities. Our substantial debt and other
obligations could have important consequences. For example, it could (i) increase our vulnerability to general
adverse economic and industry conditions(cid:26) (ii) limit our ability to obtain additional financing for future wor(cid:65)ing capital,
capital expenditures, acquisitions and other general corporate requirements(cid:26) (iii) increase our vulnerability to interest
rate fluctuations because a portion of our debt has variable interest rates(cid:26) (iv) require us to dedicate a substantial
portion of our cash flows from operations to service debt and other obligations thereby reducing the availability of
our cash flows from operations for other purposes(cid:26) (v) limit our flexibility in planning for, or reacting to, changes in
our businesses and the industries in which we operate(cid:26) (vi) place us at a competitive disadvantage compared to our
competitors that have less debt(cid:26) and (vii) become due and payable upon a change in control. If new debt is added to
our current debt levels, these related ris(cid:65)s could increase.
Our financial con(cid:36)ition an(cid:36) results of operations coul(cid:36) (cid:34)e a(cid:36)versel(cid:57) affecte(cid:36) (cid:34)(cid:57) e(cid:45)plo(cid:57)ee (cid:34)enefit(cid:5)relate(cid:36)
fun(cid:36)ing re(cid:49)uire(cid:45)ents(cid:6)
(cid:50)e sponsor several defined benefit pension and retiree-health benefit plans throughout the world. (cid:50)e are required
to ma(cid:65)e contributions to these plans to comply with minimum funding requirements imposed by laws governing
these employee benefit plans. Although most of our ma(cid:64)or defined benefit plans have been amended to free(cid:80)e
current benefits and eliminate benefit accruals for future service, the pro(cid:64)ected benefit obligations under these
benefit plans is measured annually and at December 31, 2020 exceeded the value of the assets of those plans by
approximately (cid:3)900 million. The current underfunded status of these plans is a significant factor in determining the
ongoing future contributions we will be required to ma(cid:65)e to these plans. Accordingly, we expect to have additional
funding requirements in future years, and we may ma(cid:65)e additional, voluntary contributions to the plans. Depending
on our cash position at the time, any such funding or contributions to our defined benefit plans could impact our
operating flexibility and financial position, including adversely affecting our cash flow for the quarter in which such
funding or contributions are made. (cid:50)ea(cid:65) economic conditions, including the negative impacts from the CO(cid:49)ID-19
pandemic, and related under-performance of asset mar(cid:65)ets could also lead to increases in our funding
requirements.
(cid:32)e nee(cid:36) to (cid:45)aintain a(cid:36)e(cid:49)uate li(cid:49)ui(cid:36)it(cid:57) in or(cid:36)er to (cid:45)eet our operating cas(cid:40) flo(cid:55) re(cid:49)uire(cid:45)ents(cid:4) repa(cid:57)
(cid:45)aturing (cid:36)e(cid:34)t an(cid:36) (cid:45)eet ot(cid:40)er financial o(cid:34)ligations(cid:4) suc(cid:40) as pa(cid:57)(cid:45)ent of (cid:36)ivi(cid:36)en(cid:36)s to t(cid:40)e extent (cid:36)eclare(cid:36) (cid:34)(cid:57)
our (cid:13)oar(cid:36) of Directors(cid:6) (cid:20)f (cid:55)e fail to co(cid:45)pl(cid:57) (cid:55)it(cid:40) t(cid:40)e covenants containe(cid:36) in our various (cid:34)orro(cid:55)ing
agree(cid:45)ents(cid:4) it (cid:45)a(cid:57) a(cid:36)versel(cid:57) affect our li(cid:49)ui(cid:36)it(cid:57)(cid:4) results of operations an(cid:36) financial con(cid:36)ition(cid:6)
Our liquidity is a function of our ability to successfully generate cash flows from a combination of efficient operations
and continuing operating improvements, access to capital mar(cid:65)ets and funding from third parties. (cid:50)e believe our
liquidity (including operating and other cash flows that we expect to generate) will be sufficient to meet operating
requirements as they occur(cid:26) however, our ability to maintain sufficient liquidity going forward sub(cid:64)ect to the general
18
Xerox 2020 Annual Report 18
liquidity of and on-going changes in the credit mar(cid:65)ets as well as general economic, financial, competitive,
legislative, regulatory and other mar(cid:65)et factors that are beyond our control.
Our (cid:3)1.8 billion credit facility (the Credit Facility) contains financial maintenance covenants, including maximum
leverage (debt for borrowed money divided by consolidated EBITDA, as defined) and a minimum interest coverage
ratio (consolidated EBITDA divided by consolidated interest expense, as defined). At December 31, 2020, we were
in full compliance with the covenants and other provisions of the Credit Facility, which terminates in 2022. Failure to
comply with material provisions or covenants in the Credit Facility could have a material adverse effect on our
liquidity, results of operations and financial condition.
(cid:29)(cid:53)(cid:62)(cid:53)(cid:66)(cid:49)(cid:60) (cid:40)(cid:57)(cid:67)(cid:59) (cid:28)(cid:49)(cid:51)(cid:68)(cid:63)(cid:66)(cid:67)
Our (cid:34)usiness(cid:4) results of operations an(cid:36) financial con(cid:36)ition (cid:45)a(cid:57) (cid:34)e negativel(cid:57) i(cid:45)pacte(cid:36) (cid:34)(cid:57) legal an(cid:36)
regulator(cid:57) (cid:45)atters(cid:6)
(cid:50)e have various contingent liabilities that are not reflected on our balance sheet, including those arising as a result
of being involved in a variety of claims, lawsuits, investigations and proceedings concerning: securities law(cid:26) tax law(cid:26)
governmental entity contracting, servicing and procurement laws(cid:26) intellectual property law(cid:26) environmental law(cid:26)
employment law(cid:26) the Employee Retirement Income Security Act (ERISA)(cid:26) and other laws and regulations, as
discussed in Note 21 - Contingencies and Litigation in the Consolidated Financial Statements. Should
developments in any of these matters cause a change in our determination as to an unfavorable outcome and result
in the need to recogni(cid:80)e a material accrual or materially increase an existing accrual, or should any of these matters
result in a final adverse (cid:64)udgment or be settled for significant amounts above any existing accruals, it 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, (cid:64)udgment or settlement occurs.
Due to the international scope of our operations, we are sub(cid:64)ect to a complex system of commercial and trade
regulations around the world. Recent years have seen an increase in the development and enforcement of laws
regarding trade compliance and anti-corruption, such as the U.S. Foreign Corrupt (cid:43)ractices Act and similar laws
from other countries. Our numerous foreign subsidiaries, affiliates and (cid:64)oint venture partners are governed by laws,
rules and business practices that differ from those of the U.S. The activities of these entities may not comply with
U.S. laws or business practices or our Code of Business Conduct. (cid:49)iolations of these laws may result in severe
criminal or civil sanctions, could disrupt our business, and result in an adverse effect on our reputation, business
and results of operations or financial condition. (cid:50)e cannot predict the nature, scope or effect of future regulatory
requirements to which our operations might be sub(cid:64)ect or the manner in which existing laws might be administered
or interpreted.
Our operations and our products are sub(cid:64)ect to environmental regulations in each of the (cid:64)urisdictions in which we
conduct our business and sell our products. Xerox is party to, or otherwise involved in, proceedings brought by U.S.
or state environmental agencies under the Comprehensive Environmental Response, Compensation and Liability
Act (CERCLA), (cid:65)nown as (cid:2)Superfund,(cid:2) or state laws. Some of our manufacturing operations use, and some of our
products contain, substances that are regulated in various (cid:64)urisdictions. For example, various countries and
(cid:64)urisdictions have adopted, or are expected to adopt, restrictions on the types and amounts of chemicals that may
be present in electronic equipment or other items that we use or sell. Recently, a number of studies have been
published by third parties regarding chemicals utili(cid:80)ed in our industry, as well as potential health(cid:14)safety impacts of
machine emissions. Additional studies are planned, and depending on the results of such studies, regulatory
initiatives could follow. (cid:50)e are monitoring these developments. If we do not comply with applicable rules and
regulations in connection with the use of such substances and the sale of products containing such substances,
then we could be sub(cid:64)ect to liability and could be prohibited from selling our products in their existing forms, which
could have a material adverse effect on our results of operations and financial condition. Further, various countries
and (cid:64)urisdictions have adopted or are expected to adopt, programs that ma(cid:65)e producers of electrical goods,
including computers and printers, responsible for certain labeling, collection, recycling, treatment and disposal of
these recovered products. If we are unable to collect, recycle, treat and dispose of our products in a cost-effective
manner and in accordance with applicable requirements, it could materially adversely affect our results of
operations and financial condition.
Other potentially relevant initiatives throughout the world include proposals for more extensive chemical registration
requirements and(cid:14)or possible bans on the use of certain chemicals, various efforts to limit energy use in products
and other environmentally-related programs impacting products and operations, such as those associated with
climate change accords, agreements and regulations. For example, the European Union's Energy-Related (cid:43)roducts
Directive (ER(cid:43)) has led to the adoption of (cid:86)implementing measures(cid:87) or (cid:2)voluntary agreements(cid:2) that require certain
Xerox 2020 Annual Report 19
Xerox 2020 Annual Report 19
classes of products to achieve certain design and(cid:14)or performance standards, in connection with energy use and
potentially other environmental parameters and impacts. A number of our products are already required to comply
with ER(cid:43) requirements and further regulations are being developed by the E.U. authorities. Another example is the
European Union (cid:86)REACH(cid:87) Regulation (Registration, Evaluation, Authori(cid:80)ation and Restriction of Chemicals), a
broad initiative that requires parties throughout the supply chain to register, assess and disclose information
regarding many chemicals in their products. Depending on the types, applications, forms and uses of chemical
substances in various products, REACH and similar regulatory programs in other (cid:64)urisdictions could lead to
restrictions and(cid:14)or bans on certain chemical usage. In the United States, the Toxics Substances Control Act (TSCA)
is undergoing a ma(cid:64)or overhaul with similar potential for regulatory challenges. Xerox continues its efforts toward
monitoring and evaluating the applicability of these and numerous other regulatory initiatives in an effort to develop
compliance strategies. As these and similar initiatives and programs become regulatory requirements throughout
the world and(cid:14)or are adopted as public or private procurement requirements, we must comply or potentially face
mar(cid:65)et access limitations that could have a material adverse effect on our operations and financial condition.
Similarly, environmentally driven procurement requirements voluntarily adopted by customers in the mar(cid:65)etplace
(e.g., U.S. E(cid:43)A EnergyStar, E(cid:43)EAT) are constantly evolving and becoming more stringent, presenting further
mar(cid:65)et access challenges if our products fail to comply. Concern over climate change, including global warming,
has led to legislative and regulatory initiatives directed at limiting greenhouse gas emissions. For example,
proposals that would impose mandatory requirements on greenhouse gas emissions continue to be considered by
policy ma(cid:65)ers in the countries, states and territories in which we operate. Enacted laws and(cid:14)or regulatory actions to
address concerns about climate change and greenhouse gas emissions could negatively impact our business,
including the availability of our products or the cost to obtain or sell those products.
(cid:29)(cid:40)e (cid:30)nite(cid:36) (cid:22)ing(cid:36)o(cid:45) leaving t(cid:40)e E(cid:6)(cid:30)(cid:6) coul(cid:36) a(cid:36)versel(cid:57) affect us(cid:6)
On (cid:37)anuary 31, 2020, the United Kingdom (U.K.) formally left the European Union (E.U.) when the U.K.-E.U.
(cid:50)ithdrawal Agreement became effective. Under the (cid:50)ithdrawal Agreement, a transition period began that ran until
December 31, 2020. In general, E.U. law no longer applies in the U.K. except where, at least temporarily, it has
been retained as U.K. law (though there are certain exceptions regarding the application of E.U. regulations in
Northern Ireland). On December 24, 2020, the European Commission reached a trade agreement with the U.K. on
the terms of its future cooperation with the E.U. (Trade and Cooperation Agreement or TCA). The TCA offers U.K.
and E.U. companies preferential access to each other(cid:85)s mar(cid:65)ets, ensuring imported goods will be free of tariffs and
quotas(cid:26) however, economic relations between the U.K. and the E.U. will now be on more restricted terms than
existed previously. At this time, we cannot predict the impact that the TCA and any future agreements will have on
our business, suppliers and customers. However, we continue to assess the situation and expect to ta(cid:65)e necessary
steps to mitigate any potential volatility, increased costs or disruptions to our supply chain or customers that may
result from this situation.
(cid:50)e have operations and customers in the U.K. and the E.U., and as a result, we face ris(cid:65)s associated with the
potential uncertainty and disruptions that may follow Brexit, including with respect to volatility in exchange rates and
interest rates and potential material changes to the regulatory regime applicable to our operations in the United
Kingdom as well as potential for disruptions in our supply chain in the United Kingdom. The impacts of Brexit could
disrupt political, regulatory, financial, or other mar(cid:65)et conditions, both internally and beyond U.K. and European
borders. Disruptions and uncertainty caused by Brexit may also cause our customers to closely monitor their costs
and reduce their spending budget on our products and services. Any of these effects of Brexit, and others we
cannot anticipate or that may evolve over time, could adversely affect our business, operating results and financial
condition.
(cid:31)(cid:68)(cid:53)(cid:61) (cid:13)(cid:24)(cid:10) (cid:43)(cid:62)(cid:66)(cid:53)(cid:67)(cid:63)(cid:60)(cid:70)(cid:53)(cid:52) (cid:41)(cid:68)(cid:49)(cid:54)(cid:54) (cid:25)(cid:63)(cid:61)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)
None
20
Xerox 2020 Annual Report 20
(cid:31)(cid:68)(cid:53)(cid:61) (cid:14)(cid:10) (cid:38)(cid:66)(cid:63)(cid:64)(cid:53)(cid:66)(cid:68)(cid:57)(cid:53)(cid:67)
(cid:50)e own several manufacturing, engineering and research facilities and lease other facilities. Our principal
manufacturing and engineering facilities are located in New (cid:52)or(cid:65), California, O(cid:65)lahoma, Oregon, Canada, the U.K.,
Ireland, and a leased site in the Netherlands. Our principal research facilities are located in California, New (cid:52)or(cid:65),
and Canada. Our Corporate Headquarters is a leased facility located in Norwal(cid:65), Connecticut.
In 2020, we owned or leased numerous facilities globally, which house general offices, sales offices, service
locations, data centers, call centers, warehouses and distribution centers. The si(cid:80)e of our property portfolio at
December 31, 2020 was approximately 13.8 million square feet, comprised of 393 leased facilities and 19 owned
properties with (cid:22)1 facilities (of which 50 are located on our (cid:50)ebster, New (cid:52)or(cid:65) campus). (cid:50)e occupied
approximately 10.0 million square feet and 3.4 million square feet were surplus of which approximately 0.4 million
square feet are sublet to third parties. It is our opinion that our properties have been well maintained, are in sound
operating condition and contain all the necessary equipment and facilities to perform their functions. (cid:50)e believe that
our current facilities are suitable and adequate for our current businesses.
Refer to Note 11 - Lessee, in the Consolidated Financial Statements, for additional information regarding our leased
assets.
(cid:31)(cid:68)(cid:53)(cid:61) (cid:15)(cid:10) (cid:34)(cid:53)(cid:55)(cid:49)(cid:60) (cid:38)(cid:66)(cid:63)(cid:51)(cid:53)(cid:53)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67)
Refer to the information set forth under Note 21 - Contingencies and Litigation in the Consolidated Financial
Statements.
(cid:31)(cid:68)(cid:53)(cid:61) (cid:16)(cid:10) (cid:35)(cid:57)(cid:62)(cid:53) (cid:41)(cid:49)(cid:54)(cid:53)(cid:68)(cid:73) (cid:26)(cid:57)(cid:67)(cid:51)(cid:60)(cid:63)(cid:67)(cid:69)(cid:66)(cid:53)(cid:67)
Not applicable.
Xerox 2020 Annual Report 21
Xerox 2020 Annual Report 21
(cid:38)(cid:49)(cid:66)(cid:68) (cid:31)(cid:31)
(cid:31)(cid:68)(cid:53)(cid:61) (cid:17)(cid:10) (cid:35)(cid:49)(cid:66)(cid:59)(cid:53)(cid:68) (cid:54)(cid:63)(cid:66) (cid:40)(cid:53)(cid:55)(cid:57)(cid:67)(cid:68)(cid:66)(cid:49)(cid:62)(cid:68)(cid:5)(cid:67) (cid:25)(cid:63)(cid:61)(cid:61)(cid:63)(cid:62) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73)(cid:8) (cid:40)(cid:53)(cid:60)(cid:49)(cid:68)(cid:53)(cid:52) (cid:41)(cid:68)(cid:63)(cid:51)(cid:59)(cid:56)(cid:63)(cid:60)(cid:52)(cid:53)(cid:66) (cid:35)(cid:49)(cid:68)(cid:68)(cid:53)(cid:66)(cid:67) (cid:49)(cid:62)(cid:52) (cid:31)(cid:67)(cid:67)(cid:69)(cid:53)(cid:66)
(cid:38)(cid:69)(cid:66)(cid:51)(cid:56)(cid:49)(cid:67)(cid:53)(cid:67) (cid:63)(cid:54) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73) (cid:41)(cid:53)(cid:51)(cid:69)(cid:66)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
(cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:53) (cid:31)(cid:62)(cid:54)(cid:63)(cid:66)(cid:61)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:41)(cid:68)(cid:63)(cid:51)(cid:59) (cid:27)(cid:72)(cid:51)(cid:56)(cid:49)(cid:62)(cid:55)(cid:53) (cid:31)(cid:62)(cid:54)(cid:63)(cid:66)(cid:61)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
Xerox Holdings Corporation's common stoc(cid:65) (XRX) is listed on the New (cid:52)or(cid:65) Stoc(cid:65) Exchange.
There is no established public trading mar(cid:65)et for Xerox Corporation's common stoc(cid:65), as all of the outstanding Xerox
common stoc(cid:65) is held solely by Xerox Holdings.
(cid:25)(cid:63)(cid:61)(cid:61)(cid:63)(cid:62) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)(cid:56)(cid:63)(cid:60)(cid:52)(cid:53)(cid:66)(cid:67) (cid:63)(cid:54) (cid:40)(cid:53)(cid:51)(cid:63)(cid:66)(cid:52)
See Item 6 - Selected Financial Data, Xerox Holdings Corporation Five (cid:52)ears in Review - Common Shareholders of
Record at (cid:52)ear-End, for additional information.
(cid:38)(cid:53)(cid:66)(cid:54)(cid:63)(cid:66)(cid:61)(cid:49)(cid:62)(cid:51)(cid:53) (cid:29)(cid:66)(cid:49)(cid:64)(cid:56)
(cid:25)(cid:63)(cid:61)(cid:64)(cid:49)(cid:66)(cid:57)(cid:67)(cid:63)(cid:62) (cid:63)(cid:54) (cid:25)(cid:69)(cid:61)(cid:69)(cid:60)(cid:49)(cid:68)(cid:57)(cid:70)(cid:53) (cid:28)(cid:57)(cid:70)(cid:53)(cid:9)(cid:47)(cid:53)(cid:49)(cid:66) (cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:68)(cid:69)(cid:66)(cid:62)
(cid:3)400
(cid:3)300
(cid:3)200
(cid:3)100
(cid:3)0
5
1
0
2
6
1
0
2
(cid:22)
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Xerox Holdings Corporation
S(cid:5)(cid:43) 500 Index
S(cid:5)(cid:43) 500 Information Technology Index
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:68)(cid:69)(cid:66)(cid:62) (cid:68)(cid:63) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)(cid:56)(cid:63)(cid:60)(cid:52)(cid:53)(cid:66)(cid:67)
(Includes reinvestment of dividends)
2015
2016
201(cid:22)
2018
2019
2020
Xerox Holdings Corporation
(cid:3)
100.00 (cid:3)
86.14 (cid:3)
112.82 (cid:3)
(cid:22)9.66 (cid:3)
153.1(cid:22) (cid:3)
S(cid:5)(cid:43) 500 Index
S(cid:5)(cid:43) 500 Information Technology Index
100.00
100.00
111.96
113.85
136.40
158.06
130.42
15(cid:22).60
1(cid:22)1.49
236.86
101.69
203.04
340.83
(cid:52)ear Ended December 31,
_____________
(cid:43)ource(cid:23) (cid:43)tandard (cid:5) (cid:40)oor(cid:6)s Investment (cid:43)ervices
(cid:38)otes(cid:23) (cid:31)raph assumes (cid:3)1(cid:13)(cid:13) invested on December (cid:16)1, 2(cid:13)1(cid:18) in (cid:48)erox (cid:32)oldings, the (cid:43)(cid:5)(cid:40) (cid:18)(cid:13)(cid:13) Index and the (cid:43)(cid:5)(cid:40) (cid:18)(cid:13)(cid:13) Information Technology
Index, respectively, and assumes dividends are reinvested.
22
Xerox 2020 Annual Report 22
(cid:41)(cid:49)(cid:60)(cid:53)(cid:67) (cid:37)(cid:54) (cid:43)(cid:62)(cid:66)(cid:53)(cid:55)(cid:57)(cid:67)(cid:68)(cid:53)(cid:66)(cid:53)(cid:52) (cid:41)(cid:53)(cid:51)(cid:69)(cid:66)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67) (cid:26)(cid:69)(cid:66)(cid:57)(cid:62)(cid:55) (cid:42)(cid:56)(cid:53) (cid:39)(cid:69)(cid:49)(cid:66)(cid:68)(cid:53)(cid:66) (cid:27)(cid:62)(cid:52)(cid:53)(cid:52) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:14)(cid:12)
During the quarter ended December 31, 2020, Xerox Holdings Corporation issued the following securities in
transactions that were not registered under the Securities Act of 1933, as amended (the Act).
(cid:26)(cid:57)(cid:70)(cid:57)(cid:52)(cid:53)(cid:62)(cid:52) (cid:27)(cid:65)(cid:69)(cid:57)(cid:70)(cid:49)(cid:60)(cid:53)(cid:62)(cid:68)
(a)
(b)
(c)
(d)
Securities issued on October 30, 2020: Xerox Holdings Corporation issued 2,35(cid:22) deferred stoc(cid:65) units (DSUs),
representing the right to receive shares of Common Stoc(cid:65), par value (cid:3)1 per share, at a future date.
No underwriters participated. The shares were issued to each of the non-employee Directors of Xerox
Holdings Corporation: (cid:37)onathan Christodoro, Keith Co(cid:80)(cid:80)a, (cid:37)oseph (cid:37). Echevarria, Nicholas (cid:34)ra(cid:80)iano, Cheryl
(cid:34)ordon Krongard and Scott Letier.
The DSUs were issued at a deemed purchase price of (cid:3)18.(cid:22)1 per DSU (aggregate price (cid:3)44,099), based
upon the mar(cid:65)et value on the date of record, in payment of the dividend equivalents due to DSU holders
pursuant to Xerox Holdings Corporation(cid:85)s 2004 Equity Compensation (cid:43)lan for Non-Employee Directors (as
amended and restated in 2019 (the 2019 Restatement)).
Exemption from registration under the Act was claimed based upon Section 4(2) as a sale by an issuer not
involving a public offering.
(cid:31)(cid:67)(cid:67)(cid:69)(cid:53)(cid:66) (cid:38)(cid:69)(cid:66)(cid:51)(cid:56)(cid:49)(cid:67)(cid:53)(cid:67) (cid:63)(cid:54) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73) (cid:41)(cid:53)(cid:51)(cid:69)(cid:66)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67) (cid:26)(cid:69)(cid:66)(cid:57)(cid:62)(cid:55) (cid:68)(cid:56)(cid:53) (cid:39)(cid:69)(cid:49)(cid:66)(cid:68)(cid:53)(cid:66) (cid:27)(cid:62)(cid:52)(cid:53)(cid:52) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:14)(cid:12)
In (cid:37)anuary 2021, the Xerox Holdings Corporation's Board of Directors authori(cid:80)ed an additional (cid:3)100 million of
share repurchase authority, bringing the total authori(cid:80)ation of the already existing share repurchase program to (cid:3)1.1
billion (excluding fees and expenses).
Repurchases of Xerox Holdings Corporation(cid:85)s Common Stoc(cid:65), par value (cid:3)1 per share, include the following:
(cid:24)(cid:63)(cid:49)(cid:66)(cid:52) (cid:23)(cid:69)(cid:68)(cid:56)(cid:63)(cid:66)(cid:57)(cid:74)(cid:53)(cid:52) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53) (cid:40)(cid:53)(cid:64)(cid:69)(cid:66)(cid:51)(cid:56)(cid:49)(cid:67)(cid:53) (cid:38)(cid:66)(cid:63)(cid:55)(cid:66)(cid:49)(cid:61)(cid:22)
Total Number of
Shares (cid:43)urchased
Average (cid:43)rice
(cid:43)aid per Share(1)
Total Number of Shares
(cid:43)urchased as (cid:43)art of
(cid:43)ublicly Announced
(cid:43)lans or (cid:43)rograms(2)
(cid:40)aximum Approximate
Dollar (cid:49)alue of Shares
That (cid:40)ay (cid:52)et Be
(cid:43)urchased Under the
(cid:43)lans or (cid:43)rograms(2)(3)
(cid:22),58(cid:22),1(cid:22)4 (cid:3)
19.(cid:22)1
(cid:22),58(cid:22),1(cid:22)4 (cid:3)
(cid:84)
(cid:84)
(cid:22),58(cid:22),1(cid:22)4
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:22),58(cid:22),1(cid:22)4
400,450,199
400,450,199
400,450,199
October 1 through 31
November 1 through 30
December 1 through 31
Total
_____________
(1) (cid:29)xclusive of fees and costs.
(2) Of the (cid:3)1.1 billion of share repurchase authority previously granted by the (cid:48)erox (cid:32)oldings (cid:27)orporation(cid:6)s Board of Directors, exclusive of fees
and expenses, approximately (cid:3)(cid:19)(cid:13)(cid:13) million has been used through December (cid:16)1, 2(cid:13)2(cid:13). Repurchases may be made on the open mar(cid:61)et, or
through derivative or negotiated contracts. Open-mar(cid:61)et repurchases will be made in compliance with the (cid:43)ecurities and (cid:29)xchange
(cid:27)ommission(cid:79)s Rule 1(cid:13)b-1(cid:21), and are subject to mar(cid:61)et conditions, as well as applicable legal and other considerations.
((cid:16)) Balances do not include the (cid:3)1(cid:13)(cid:13) million of additional share repurchase authority authori(cid:76)ed in (cid:34)anuary 2(cid:13)21.
(cid:40)(cid:53)(cid:64)(cid:69)(cid:66)(cid:51)(cid:56)(cid:49)(cid:67)(cid:53)(cid:67) (cid:40)(cid:53)(cid:60)(cid:49)(cid:68)(cid:53)(cid:52) (cid:68)(cid:63) (cid:41)(cid:68)(cid:63)(cid:51)(cid:59) (cid:25)(cid:63)(cid:61)(cid:64)(cid:53)(cid:62)(cid:67)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:38)(cid:66)(cid:63)(cid:55)(cid:66)(cid:49)(cid:61)(cid:67)(cid:6)(cid:13)(cid:7)(cid:22)
Total Number of
Shares (cid:43)urchased
Average (cid:43)rice
(cid:43)aid per Share(2)
18.30
9,104 (cid:3)
(cid:84)
(cid:22)58
9,862
(cid:84)
22.48
Total Number of Shares
(cid:43)urchased as (cid:43)art of
(cid:43)ublicly Announced
(cid:43)lans or (cid:43)rograms
(cid:40)aximum Approximate
Dollar (cid:49)alue of Shares
That (cid:40)ay (cid:52)et Be
(cid:43)urchased Under the
(cid:43)lans or (cid:43)rograms
n(cid:14)a
n(cid:14)a
n(cid:14)a
n(cid:14)a
n(cid:14)a
n(cid:14)a
October 1 through 31
November 1 through 30
December 1 through 31
Total
_____________
(1) These repurchases are made under a provision in our restricted stoc(cid:61) compensation programs for the indirect repurchase of shares through
a net-settlement feature upon the vesting of shares in order to satisfy minimum statutory tax-withholding re(cid:67)uirements.
(2) (cid:29)xclusive of fees and costs.
Xerox 2020 Annual Report 23
Xerox 2020 Annual Report 23
(cid:31)(cid:68)(cid:53)(cid:61) (cid:18)(cid:10) (cid:41)(cid:53)(cid:60)(cid:53)(cid:51)(cid:68)(cid:53)(cid:52) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:26)(cid:49)(cid:68)(cid:49)
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:28)(cid:57)(cid:70)(cid:53) (cid:47)(cid:53)(cid:49)(cid:66)(cid:67) (cid:57)(cid:62) (cid:40)(cid:53)(cid:70)(cid:57)(cid:53)(cid:71)
(in millions, except per-share data)
(cid:38)(cid:53)(cid:66)(cid:9)(cid:41)(cid:56)(cid:49)(cid:66)(cid:53) (cid:26)(cid:49)(cid:68)(cid:49)
Income from continuing operations
Basic
Diluted
Net Income (Loss) Attributable to Xerox Holdings
Basic
Diluted
Common stoc(cid:65) dividends declared
(cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Revenues
Sales
Services, maintenance and rentals
Financing
Income from continuing operations
Income from continuing operations - Xerox Holdings
Net income (loss)
Net income (loss) - Xerox Holdings
(cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:38)(cid:63)(cid:67)(cid:57)(cid:68)(cid:57)(cid:63)(cid:62)(cid:6)(cid:13)(cid:7)(cid:6)(cid:14)(cid:7)
(cid:50)or(cid:65)ing capital
Total Assets
(cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:25)(cid:49)(cid:64)(cid:57)(cid:68)(cid:49)(cid:60)(cid:57)(cid:74)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:6)(cid:13)(cid:7)
2020
2019
2018
201(cid:22)
2016
(cid:3)
0.85 (cid:3)
2.86 (cid:3)
1.1(cid:22) (cid:3)
0.20 (cid:3)
0.84
2.(cid:22)8
1.16
0.20
0.85
0.84
1.00
6.03
5.80
1.00
1.40
1.38
1.00
0.(cid:22)1
0.(cid:22)1
1.00
1.81
1.(cid:22)9
(1.95)
(1.93)
1.24
(cid:3)
(cid:22),022 (cid:3)
9,066 (cid:3)
9,662 (cid:3)
9,991 (cid:3)
10,440
2,449
4,34(cid:22)
226
192
192
192
192
3,22(cid:22)
5,595
244
651
648
1,361
1,353
3,454
5,940
268
310
306
3(cid:22)4
361
3,412
6,285
294
(cid:22)0
66
20(cid:22)
195
3,532
6,583
325
486
483
(468)
(4(cid:22)1)
(cid:3)
3,305 (cid:3)
2,(cid:22)05 (cid:3)
1,462 (cid:3)
2,50(cid:22) (cid:3)
2,35(cid:22)
14,(cid:22)41
15,04(cid:22)
14,8(cid:22)4
15,946
18,051
Short-term debt and current portion of long-term debt
(cid:3)
394 (cid:3)
1,049 (cid:3)
961 (cid:3)
282 (cid:3)
Long-term debt
Total Debt(2)
Convertible preferred stoc(cid:65)
Xerox Holdings shareholders' equity
Noncontrolling interests
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:25)(cid:49)(cid:64)(cid:57)(cid:68)(cid:49)(cid:60)(cid:57)(cid:74)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:41)(cid:53)(cid:60)(cid:53)(cid:51)(cid:68)(cid:53)(cid:52) (cid:26)(cid:49)(cid:68)(cid:49) (cid:49)(cid:62)(cid:52) (cid:40)(cid:49)(cid:68)(cid:57)(cid:63)(cid:67)
4,050
4,444
214
5,592
4
3,233
4,282
214
5,58(cid:22)
(cid:22)
4,269
5,230
214
5,005
34
5,235
5,51(cid:22)
214
5,256
3(cid:22)
1,011
5,305
6,316
214
4,(cid:22)09
38
(cid:3)
10,254 (cid:3)
10,090 (cid:3)
10,483 (cid:3)
11,024 (cid:3)
11,2(cid:22)(cid:22)
Common shareholders of record at year-end
23,916
25,398
26,(cid:22)42
28,(cid:22)52
31,803
Boo(cid:65) value per common share
(cid:52)ear-end common stoc(cid:65) mar(cid:65)et price
_____________
(cid:3)
(cid:3)
28.19 (cid:3)
26.28 (cid:3)
21.80 (cid:3)
20.64 (cid:3)
23.19 (cid:3)
36.8(cid:22) (cid:3)
19.(cid:22)6 (cid:3)
29.15 (cid:3)
18.5(cid:22)
23.00
(1) Balance sheet amounts prior to 2(cid:13)1(cid:22) include balances related to our investments in (cid:48)I(cid:40) and (cid:30)uji (cid:48)erox, which were sold in (cid:38)ovember 2(cid:13)1(cid:22).
Refer to (cid:38)ote (cid:19) - Divestitures in our (cid:27)onsolidated (cid:30)inancial (cid:43)tatements for additional information.
(2) (cid:25)s a result of the adoption of (cid:25)(cid:43)(cid:27) (cid:21)(cid:17)2, (cid:36)eases effective (cid:34)anuary 1, 2(cid:13)1(cid:22), finance lease obligations are reported in Other current and (cid:36)ong-
term liabilities. (cid:40)rior to 2(cid:13)1(cid:22), finance lease obligations are included in Debt. Refer to (cid:38)ote 1 - Basis of (cid:40)resentation and (cid:43)ummary of
(cid:43)ignificant (cid:25)ccounting (cid:40)olicies and, (cid:38)ote 11 - (cid:36)essee, in our (cid:27)onsolidated (cid:30)inancial (cid:43)tatements for additional information.
24
Xerox 2020 Annual Report 24
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:28)(cid:57)(cid:70)(cid:53) (cid:47)(cid:53)(cid:49)(cid:66)(cid:67) (cid:57)(cid:62) (cid:40)(cid:53)(cid:70)(cid:57)(cid:53)(cid:71)
(in millions)
(cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Revenues
Sales
Services, maintenance and rentals
Financing
Income from continuing operations
Income from continuing operations - Xerox
Net income (loss)
Net income (loss) - Xerox
(cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:38)(cid:63)(cid:67)(cid:57)(cid:68)(cid:57)(cid:63)(cid:62)(cid:6)(cid:13)(cid:7)(cid:6)(cid:14)(cid:7)
(cid:50)or(cid:65)ing capital
Total Assets
(cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:25)(cid:49)(cid:64)(cid:57)(cid:68)(cid:49)(cid:60)(cid:57)(cid:74)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:6)(cid:13)(cid:7)
2020
2019
2018
201(cid:22)
2016
(cid:3)
(cid:22),022 (cid:3)
9,066 (cid:3)
9,662 (cid:3)
9,991 (cid:3)
10,440
2,449
4,34(cid:22)
226
193
193
193
193
3,22(cid:22)
5,595
244
651
648
1,361
1,353
3,454
5,940
268
310
306
3(cid:22)4
361
3,412
6,285
294
(cid:22)0
66
20(cid:22)
195
3,532
6,583
325
486
483
(468)
(4(cid:22)1)
(cid:3)
3,395 (cid:3)
2,(cid:22)(cid:22)1 (cid:3)
1,462 (cid:3)
2,50(cid:22) (cid:3)
2,35(cid:22)
14,(cid:22)30
15,04(cid:22)
14,8(cid:22)4
15,946
18,051
Short-term debt and current portion of long-term debt
(cid:3)
394 (cid:3)
1,049 (cid:3)
961 (cid:3)
282 (cid:3)
Long-term debt
Total Debt(2)
Convertible preferred stoc(cid:65)
Xerox shareholders' equity
Noncontrolling interests
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:25)(cid:49)(cid:64)(cid:57)(cid:68)(cid:49)(cid:60)(cid:57)(cid:74)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
_____________
2,55(cid:22)
2,951
(cid:84)
(cid:22),381
4
3,233
4,282
(cid:84)
5,86(cid:22)
(cid:22)
4,269
5,230
214
5,005
34
5,235
5,51(cid:22)
214
5,256
3(cid:22)
1,011
5,305
6,316
214
4,(cid:22)09
38
(cid:3)
10,336 (cid:3)
10,156 (cid:3)
10,483 (cid:3)
11,024 (cid:3)
11,2(cid:22)(cid:22)
(1) Balance sheet amounts prior to 2(cid:13)1(cid:22) include balances related to our investments in (cid:48)I(cid:40) and (cid:30)uji (cid:48)erox, which were sold in (cid:38)ovember 2(cid:13)1(cid:22).
Refer to (cid:38)ote (cid:19) - Divestitures in our (cid:27)onsolidated (cid:30)inancial (cid:43)tatements for additional information.
(2) (cid:25)s a result of the adoption of (cid:25)(cid:43)(cid:27) (cid:21)(cid:17)2, (cid:36)eases effective (cid:34)anuary 1, 2(cid:13)1(cid:22), finance lease obligations are reported in Other current and (cid:36)ong-
term liabilities. (cid:40)rior to 2(cid:13)1(cid:22), finance lease obligations are included in Debt. Refer to (cid:38)ote 1 - Basis of (cid:40)resentation and (cid:43)ummary of
(cid:43)ignificant (cid:25)ccounting (cid:40)olicies and (cid:38)ote 11 - (cid:36)essee, in our (cid:27)onsolidated (cid:30)inancial (cid:43)tatements for additional information.
Xerox 2020 Annual Report 25
Xerox 2020 Annual Report 25
(cid:31)(cid:68)(cid:53)(cid:61) (cid:19)(cid:10) (cid:35)(cid:49)(cid:62)(cid:49)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:5)(cid:67) (cid:26)(cid:57)(cid:67)(cid:51)(cid:69)(cid:67)(cid:67)(cid:57)(cid:63)(cid:62) (cid:49)(cid:62)(cid:52) (cid:23)(cid:62)(cid:49)(cid:60)(cid:73)(cid:67)(cid:57)(cid:67) (cid:63)(cid:54) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:25)(cid:63)(cid:62)(cid:52)(cid:57)(cid:68)(cid:57)(cid:63)(cid:62) (cid:49)(cid:62)(cid:52) (cid:40)(cid:53)(cid:67)(cid:69)(cid:60)(cid:68)(cid:67) (cid:63)(cid:54)
(cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Throughout the (cid:40)anagement(cid:85)s Discussion and Analysis ((cid:40)D(cid:5)A) that follows, references to (cid:2)Xerox Holdings(cid:2) refer to
Xerox Holdings Corporation and its consolidated subsidiaries, while references to (cid:2)Xerox(cid:2) refer to Xerox
Corporation and its consolidated subsidiaries. References herein to (cid:86)we,(cid:87) (cid:2)us,(cid:2) (cid:86)our,(cid:87) the (cid:86)Company,(cid:87) refer
collectively to both Xerox Holdings and Xerox unless the context suggests otherwise. References to (cid:86)Xerox
Holdings Corporation(cid:87) refer to the stand-alone parent company and do not include its subsidiaries. References to
(cid:86)Xerox Corporation(cid:87) refer to the stand-alone company and do not include subsidiaries.
Currently, Xerox Holdings' primary direct operating subsidiary is Xerox and Xerox reflects nearly all of Xerox
Holdings' operations. Accordingly, the following (cid:40)D(cid:5)A primarily focuses on the operations of Xerox and is intended
to help the reader understand Xerox's business and its results of operations and financial condition. Throughout this
combined Form 10-K, references are made to various notes in the Consolidated Financial Statements which appear
in (cid:43)art II, Item 8 of this combined Form 10-K, and the information contained in such notes is incorporated by
reference into the (cid:40)D(cid:5)A in the places where such references are made.
Xerox Holdings' other direct operating subsidiary is CareAR, a small SaaS solutions provider, which was acquired
for (cid:3)9 million in 2020. CareAR incurred approximately (cid:3)1 million of Selling, administrative and general expenses in
2020, which are included in this discussion with Xerox's costs and expenses since immaterial and for ease of
discussion.
(cid:27)(cid:72)(cid:53)(cid:51)(cid:69)(cid:68)(cid:57)(cid:70)(cid:53) (cid:37)(cid:70)(cid:53)(cid:66)(cid:70)(cid:57)(cid:53)(cid:71)
(cid:31)(cid:61)(cid:64)(cid:49)(cid:51)(cid:68) (cid:63)(cid:54) (cid:25)(cid:37)(cid:44)(cid:31)(cid:26)(cid:9)(cid:13)(cid:21)
The CO(cid:49)ID-19 pandemic and the measures ta(cid:65)en to prevent its spread impacted our business and presented
significant challenges throughout 2020. To reduce the transmission of CO(cid:49)ID-19, governments, worldwide,
implemented a wide range of restrictions on business and individual activities, including closures or limitations on
the operations of businesses along with restrictions on travel and other actions to promote or enforce physical
distancing. The pandemic has significantly impacted how our customers use our products and services, how they
interact with us, and how our employees wor(cid:65) and provide services to our customers. The pandemic has also
presented unprecedented business challenges, and we have experienced impacts related to the CO(cid:49)ID-19
pandemic, primarily related to impacts of travel restrictions, site access and quarantine requirements, and the
impacts of remote wor(cid:65) and ad(cid:64)usted wor(cid:65) schedules. In response to the CO(cid:49)ID-19 pandemic, we have prioriti(cid:80)ed
the health and safety of our employees, customers and partners to support their needs in the current hybrid
environment so wor(cid:65) can be done flawlessly migrating between the wor(cid:65)place and the home-office. The CO(cid:49)ID-19
pandemic significantly impacted our results of operations during 2020 and we expect that there will continue to be
effects through 2021. Refer to (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:37)(cid:70)(cid:53)(cid:66)(cid:70)(cid:57)(cid:53)(cid:71) for additional discussion regarding the impacts of the CO(cid:49)ID-19
pandemic on our business in 2020.
(cid:24)(cid:69)(cid:67)(cid:57)(cid:62)(cid:53)(cid:67)(cid:67) (cid:37)(cid:70)(cid:53)(cid:66)(cid:70)(cid:57)(cid:53)(cid:71)
(cid:50)ith annual revenues of approximately (cid:3)(cid:22).0 billion, we remain a leading global provider of digital print technology
and related services, software and solutions. Our primary offerings span three main areas: (cid:50)or(cid:65)place Solutions,
(cid:34)raphic Communications and (cid:43)roduction Solutions and Xerox Services:
(cid:77) (cid:50)or(cid:65)place Solutions includes two strategic product groups, Entry and (cid:40)id-Range, which share common
technology, manufacturing and product platforms. (cid:50)or(cid:65)place Solutions revenues include the sale of products
and supplies, as well as the associated technical service and financing of those products.
(cid:77) (cid:34)raphic Communications and (cid:43)roduction Solutions are designed for customers in the graphic communications,
in-plant and production print environments with high-volume printing requirements.
(cid:77)
Xerox Services includes a continuum of solutions and services that helps our customers optimi(cid:80)e their print and
communications infrastructure, apply automation and simplification to maximi(cid:80)e productivity, and ensure the
highest levels of security. Our primary offerings in this area are Intelligent (cid:50)or(cid:65)place Services (I(cid:50)S) and a
range of Digital Services that leverage our software capabilities in (cid:50)or(cid:65)flow Automation, (cid:43)ersonali(cid:80)ation and
Communication Software, Content (cid:40)anagement Solutions, and Digiti(cid:80)ation Services.
In addition to our three primary offering areas described above, a smaller portion of our revenues comes from non-
core streams including paper sales in our developing mar(cid:65)et countries, wide-format systems, licensing revenue, as
well as from Software and IT Services, which are two areas of business in which we have enhanced our focus and
investments.
26
Xerox 2020 Annual Report 26
Headquartered in Norwal(cid:65), Connecticut, with approximately 24,(cid:22)00 employees, Xerox serves customers in
approximately 160 countries. (cid:50)e have a broad and diverse base of customers by both geography and industry,
ranging from small and medium-si(cid:80)ed businesses (S(cid:40)Bs) to printing production (including graphic communications)
companies, governmental entities, educational institutions and Fortune 1000 corporations. Our business does not
depend upon a single customer, or a few customers, the loss of which would have a material adverse effect on our
business. In 2020, approximately 40(cid:4) of our revenue was generated outside the United States.
(cid:35)(cid:49)(cid:66)(cid:59)(cid:53)(cid:68) (cid:49)(cid:62)(cid:52) (cid:24)(cid:69)(cid:67)(cid:57)(cid:62)(cid:53)(cid:67)(cid:67) (cid:41)(cid:68)(cid:66)(cid:49)(cid:68)(cid:53)(cid:55)(cid:73)
Our mar(cid:65)et and business strategy is to maintain overall mar(cid:65)et share leadership in our core mar(cid:65)et and increase
our participation in the growth areas, while expanding into ad(cid:64)acent mar(cid:65)ets and leveraging our innovation
capabilities to enter new mar(cid:65)ets.
The company(cid:85)s four strategic initiatives, summari(cid:80)ed below, remain at the core of how we operate and deliver
results for all sta(cid:65)eholders.
1. Optimi(cid:80)e Operations for Simplicity
(cid:77)
(cid:77)
(cid:77)
Continuously improve operating model for greater efficiency
Invest further in robotic process automation, augmented reality and analytics to drive efficiencies
Reduce complexity and simplify billing and offerings
2. Drive Revenue
Scale IT Services in the S(cid:40)B
(cid:77)
(cid:77) (cid:34)row Xerox Financial Services (XFS) as a global payment solutions business
(cid:77)
Expand software offerings in enterprise content management and customer experience
3. Re-energi(cid:80)e the Innovation Engine
(cid:77)
(cid:77)
(cid:77)
Deliver revenue growth from 3D and the Internet of Things (IoT)
Launch a (cid:3)250 million corporate venture capital fund
Embed (cid:43)ARC(cid:85)s AI technology into new and existing software offerings
4. Focus on cash flow and increasing capital returns
(cid:77) (cid:40)aximi(cid:80)e annual free cash flow1 generation
Deploy excess capital for strategic (cid:40)(cid:5)A
(cid:77)
(cid:77) Opportunistic share repurchases
_____________
(1) (cid:30)ree cash flow is defined as Operating cash flow from continuing operations less capital expenditures.
(cid:38)(cid:63)(cid:67)(cid:68)(cid:9)(cid:67)(cid:49)(cid:60)(cid:53) (cid:24)(cid:49)(cid:67)(cid:53)(cid:52) (cid:24)(cid:69)(cid:67)(cid:57)(cid:62)(cid:53)(cid:67)(cid:67) (cid:35)(cid:63)(cid:52)(cid:53)(cid:60)
In 2020, (cid:22)8(cid:4) of our total revenue was post-sale based, which includes contracted services, equipment
maintenance, supplies and financing. These revenue streams generally follow equipment placements and provide
some stability to our revenue and cash flows. Key indicators of future post sale revenue include installs and related
removals of printers and multifunction devices, the number and type of machines in the field ((cid:40)IF), page volumes
(including the mix of pages printed on color devices) and the type and nature of related software and services
provided to customers. (cid:43)ost sale revenue also includes transactional IT hardware sales and implementation
services primarily from our XBS organi(cid:80)ation.
(cid:38)(cid:66)(cid:63)(cid:58)(cid:53)(cid:51)(cid:68) (cid:37)(cid:71)(cid:62) (cid:31)(cid:68)
During the second half of 2018, we initiated a transformation pro(cid:64)ect - (cid:43)ro(cid:64)ect Own It - centered on creating a more
effective organi(cid:80)ation to enhance our focus on our customers and our partners, instill a culture of continuous
improvement and improve our financial results through on-going cost reductions and savings. The primary goal of
this pro(cid:64)ect is to improve productivity by driving end-to-end transformation of our processes and systems to improve
effectiveness and to reduce costs. These efforts are considered critical to ma(cid:65)ing us more competitive and giving us
the capacity to invest in growth and maximi(cid:80)e shareholder returns. Key opportunities under (cid:43)ro(cid:64)ect Own It include
establishing more effective shared service centers (captive and through our outsource partners), rationali(cid:80)ing our IT
infrastructure, reducing our real estate footprint, improving our supply chain management and the productivity of our
supplier base. (cid:43)ro(cid:64)ect Own It is on trac(cid:65) to deliver against our 3 year gross cost reduction ob(cid:64)ective of (cid:3)1.5 billion.
This pro(cid:64)ect also involves evaluating the sourcing of all of our products in an effort to optimi(cid:80)e our options. Our
approach is to analy(cid:80)e our potential options both by product category and holistically to determine what sourcing
ma(cid:65)es the most strategic and economic sense.
Xerox 2020 Annual Report 27
Xerox 2020 Annual Report 2(cid:22)
In (cid:40)arch 2019, as part of (cid:43)ro(cid:64)ect Own It, Xerox entered into a shared services arrangement with HCL Technologies
(HCL) pursuant to which we transitioned certain global administrative and support functions, including selected
finance functions, from Xerox to HCL.
(cid:50)e incurred restructuring and related costs, net of (cid:3)93 million for the year ended December 31, 2020 primarily
related to costs incurred to implement initiatives under our business transformation pro(cid:64)ects including (cid:43)ro(cid:64)ect Own
It. Refer to (cid:40)(cid:53)(cid:67)(cid:68)(cid:66)(cid:69)(cid:51)(cid:68)(cid:69)(cid:66)(cid:57)(cid:62)(cid:55) (cid:49)(cid:62)(cid:52) (cid:40)(cid:53)(cid:60)(cid:49)(cid:68)(cid:53)(cid:52) (cid:25)(cid:63)(cid:67)(cid:68)(cid:67)(cid:8) (cid:36)(cid:53)(cid:68) section of the (cid:40)D(cid:5)A and Note 14 - Restructuring (cid:43)rograms in
the Consolidated Financial Statements for additional information.
(cid:36)(cid:53)(cid:71) (cid:24)(cid:69)(cid:67)(cid:57)(cid:62)(cid:53)(cid:67)(cid:67)(cid:53)(cid:67) (cid:41)(cid:68)(cid:66)(cid:49)(cid:68)(cid:53)(cid:55)(cid:73)
In (cid:37)anuary 2021, we announced our intention to stand up our Software, Financing and Innovation organi(cid:80)ations as
separate and distinct businesses by 2022.
The Software business will include a growing portfolio comprised of: DocuShare(cid:82), a cloud-based content
management system(cid:26) FreeFlow(cid:82), automation software for production print(cid:26) X(cid:40)(cid:43)ie, a multi-channel mar(cid:65)eting
software company(cid:26) and CareAR, an enterprise augmented reality business Xerox acquired in late 2020.
Xerox Financial Services (XFS) will become a global payment solutions business, offering leasing for Xerox and
third-party technology and office equipment. This will expand the Company(cid:85)s customer base, create cross-selling
opportunities and provide more leasing options for small and medium-si(cid:80)ed businesses.
The Innovation business will include the scientists and engineers located in (cid:43)alo Alto, Calif.(cid:26) (cid:50)ebster, N.(cid:52).(cid:26) Cary,
N.C., and Toronto and will be named (cid:43)ARC Innovation. This team will be focused on incubating, producti(cid:80)ing and
commerciali(cid:80)ing disruptive technology aligned with our innovation focus areas such as 3D (cid:43)rinting and Digital
(cid:40)anufacturing, Sensors and Services for the IoT, AI and clean tech.
In the coming months, Xerox plans to establish a (cid:3)250 million corporate venture capital fund to invest in startups
and early and mid-stage growth companies aligned with the Company(cid:85)s innovation focus areas and targeted
ad(cid:64)acencies. The corporate venture capital fund will further enhance the Company(cid:85)s existing innovation ecosystem
and drive growth through investment, commercial partnerships and co-development of new technologies.
(cid:41)(cid:49)(cid:60)(cid:53)(cid:67) (cid:63)(cid:54) (cid:37)(cid:71)(cid:62)(cid:53)(cid:66)(cid:67)(cid:56)(cid:57)(cid:64) (cid:31)(cid:62)(cid:68)(cid:53)(cid:66)(cid:53)(cid:67)(cid:68)(cid:67) (cid:57)(cid:62) (cid:28)(cid:69)(cid:58)(cid:57) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:10)(cid:8) (cid:34)(cid:68)(cid:52)(cid:10) (cid:49)(cid:62)(cid:52) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:31)(cid:62)(cid:68)(cid:53)(cid:66)(cid:62)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:49)(cid:60) (cid:38)(cid:49)(cid:66)(cid:68)(cid:62)(cid:53)(cid:66)(cid:67)
In November 2019, Xerox Holdings completed a series of transactions to restructure its relationship with FU(cid:37)IFIL(cid:40)
Holdings Corporation (FH), including the sale of its indirect 25(cid:4) equity interest in Fu(cid:64)i Xerox (FX) for approximately
(cid:3)2.2 billion as well as the sale of its indirect 51(cid:4) partnership interest in Xerox International (cid:43)artners (XI(cid:43)) for
approximately (cid:3)23 million (collectively the Sales). Refer to Note 6 - Divestitures in the Consolidated Financial
Statements for additional information related to the Sales.
The transactions with FH also included an OE(cid:40) license agreement by and between FX and Xerox, granting FX the
right to use specific Xerox Intellectual (cid:43)roperty (I(cid:43)) in providing certain named original equipment manufacturers
(OE(cid:40)(cid:85)s) with products (such as printer engines) in exchange for an upfront license fee of (cid:3)(cid:22)(cid:22) million.
The (cid:3)(cid:22)(cid:22) million ((cid:3)58 million after-tax) OE(cid:40) license fee, which was recorded in Service, maintenance and rentals
revenue in 2019, had the following impact on our financial results for the years ended December 31, 2020 and
2019, respectively:
28
Xerox 2020 Annual Report 28
(in millions, except per share amounts)
(cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:40)(cid:53)(cid:67)(cid:69)(cid:60)(cid:68)(cid:67) (cid:54)(cid:66)(cid:63)(cid:61) (cid:25)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:69)(cid:57)(cid:62)(cid:55)
(cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Total Revenue
Total Revenue - CC (1)
(cid:43)ost sale revenue
(cid:43)ost sale revenue - CC (1)
(cid:34)ross (cid:40)argin
Ad(cid:64)usted Operating (cid:40)argin(1)
E(cid:43)S - (cid:34)AA(cid:43)
E(cid:43)S - Ad(cid:64)usted(1)
Operating Cash Flow
_____________
(cid:52)ear Ended
December 31, 2020
(cid:52)ear Ended
December 31, 2019
As Reported
OE(cid:40)
License
Impact
As Reported
Excluding OE(cid:40)
License Impact
As Reported
OE(cid:40)
License
Impact
As Reported
Excluding OE(cid:40)
License Impact
(22.5) (cid:4)
(22.(cid:22)) (cid:4)
(22.1) (cid:4)
(22.1) (cid:4)
(0.6) (cid:4)
(0.(cid:22)) (cid:4)
(0.9) (cid:4)
(0.8) (cid:4)
(21.9) (cid:4)
(22.0) (cid:4)
(21.2) (cid:4)
(21.3) (cid:4)
n(cid:14)a
n(cid:14)a
n(cid:14)a
n(cid:14)a
n(cid:14)a
n(cid:14)a
n(cid:14)a
n(cid:14)a
n(cid:14)a
n(cid:14)a
n(cid:14)a
n(cid:14)a
n(cid:14)a
n(cid:14)a
n(cid:14)a
(6.2) (cid:4)
(4.(cid:22)) (cid:4)
(6.4) (cid:4)
(4.9) (cid:4)
40.3 (cid:4)
13.1 (cid:4)
0.8 (cid:4)
0.8 (cid:4)
1.0 (cid:4)
1.0 (cid:4)
0.6 (cid:4)
0.(cid:22) (cid:4)
((cid:22).0) (cid:4)
(5.5) (cid:4)
((cid:22).4) (cid:4)
(5.9) (cid:4)
39.(cid:22) (cid:4)
12.4 (cid:4)
(cid:3)
(cid:3)
(cid:3)
2.(cid:22)8
3.55
1,244
(cid:3)
(cid:3)
(cid:3)
0.25
0.25
58
(cid:3)
(cid:3)
(cid:3)
2.53
3.30
1,186
(cid:27)(cid:27) - (cid:43)ee (cid:2)(cid:27)urrency Impact(cid:2) section for description of (cid:27)onstant (cid:27)urrency.
(1) Refer to the (cid:2)(cid:38)on-(cid:31)(cid:25)(cid:25)(cid:40) (cid:30)inancial (cid:37)easures(cid:2) section for an explanation of the non-(cid:31)(cid:25)(cid:25)(cid:40) financial measure.
(cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:37)(cid:70)(cid:53)(cid:66)(cid:70)(cid:57)(cid:53)(cid:71)
(cid:31)(cid:61)(cid:64)(cid:49)(cid:51)(cid:68) (cid:63)(cid:54) (cid:25)(cid:37)(cid:44)(cid:31)(cid:26)(cid:9)(cid:13)(cid:21) (cid:63)(cid:62) (cid:37)(cid:69)(cid:66) (cid:24)(cid:69)(cid:67)(cid:57)(cid:62)(cid:53)(cid:67)(cid:67) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
The CO(cid:49)ID-19 pandemic has significantly impacted our sales of equipment and unbundled supplies as businesses
hold off or delay purchases(cid:26) due to their transactional nature, we expect that these sales will continue to fluctuate
and gradually improve concurrent with office building reopenings and the roll-out of vaccinations, which is
anticipated to allow more of our customers' employees to return to the office. Our bundled services contracts, on
average, include a significant variable component based on print volumes, and a minimum fixed charge. The
variable charges are impacted by our customers' employees not being in the office using our equipment and
services due to loc(cid:65)-downs or capacity restrictions in office buildings(cid:26) we expect that this contractual relationship will
continue to enable us to ramp up and support our customers' needs as businesses resume operations.
(cid:50)ith our (cid:43)ro(cid:64)ect Own It transformation and cost savings, we built a leaner and more flexible cost structure, and
have also focused our efforts on incremental actions to prioriti(cid:80)e and preserve cash as we manage through the
pandemic. These actions include the reduction of discretionary spend such as near-term targeted mar(cid:65)eting
programs, the use of contract employees, and the temporary suspension of 401((cid:65)) matching contributions, as well
as lower compensation incentives consistent with lower sales and operating results. In addition, we also actively
too(cid:65) advantage of available temporary government assistance measures and furlough programs to offset related
employee costs.
The resurgence of the virus in several European countries and U.S. regions in the fourth quarter of 2020 contribute
to the remaining uncertainty around the tra(cid:64)ectory, duration and economic impact of the pandemic in the near term,
however, we expect that measures to control the infection rate and expand economic activity will result in moderate
economic improvement in 2021. (cid:50)e expect to continue our actions to mitigate the effects of the pandemic on our
business operations and financial performance.
(cid:29)(cid:63)(cid:70)(cid:53)(cid:66)(cid:62)(cid:61)(cid:53)(cid:62)(cid:68) (cid:23)(cid:67)(cid:67)(cid:57)(cid:67)(cid:68)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:62)(cid:52) (cid:28)(cid:69)(cid:66)(cid:60)(cid:63)(cid:69)(cid:55)(cid:56) (cid:38)(cid:66)(cid:63)(cid:55)(cid:66)(cid:49)(cid:61)(cid:67)
In response to the CO(cid:49)ID-19 pandemic, various governments have enacted or continue to contemplate temporary
measures to provide aid and economic stimulus directly to companies through cash grants and credits or indirectly
through payments to temporarily furloughed employees.
In (cid:40)arch 2020, in response to the CO(cid:49)ID-19 pandemic, the U.S. government enacted the Coronavirus Aid, Relief,
and Economic Security Act (the CARES Act). In addition to including temporary changes to income and non-
income-based tax laws, the CARES Act provides refundable employee retention credits and defers the requirement
to remit the employer-paid portion of social security payroll taxes. Similar pay protection programs were enacted in
Canada and Europe that primarily provide direct grants to companies to cover the salary and wages of employees
(retained or temporarily furloughed). In 2020, we recogni(cid:80)ed savings of approximately (cid:3)10(cid:22) million from these
temporary measures in the U.S., Canada and Europe, including (cid:3)92 million from various government assistance
programs and (cid:3)15 million from furlough programs. Through the use of these programs, we have thus far been able
to provide an offset to our costs, without further use of cash.
Xerox 2020 Annual Report 29
Xerox 2020 Annual Report 29
There were no material impacts to our income tax expense in 2020 as a result of the temporary changes included in
the CARES Act. In addition, we deferred payment of the employer-paid portion of social security payroll taxes
through the end of calendar year 2020 to the extent not reduced by employee retention credits earned during 2020.
This deferral ended in 2020 and we expect to pay 50(cid:4) of the net deferred amount in 2021 and the remaining 50(cid:4)
in 2022 together with amounts normally due for the employer-paid portion of social security payroll taxes in those
years.
Estimated savings were recorded as follows in the Consolidated Statements of Income:
(in millions)
Cost of sales
Cost of services, maintenance and rentals
Research, development and engineering expenses
Selling, administrative and general expenses
Total Estimated savings
(cid:52)ear Ended
December 31, 2020
(cid:3)
(cid:3)
1
(cid:22)3
1
32
10(cid:22)
(cid:50)e continue to monitor government programs and actions being implemented or expected to be implemented to
counter the economic impacts of the CO(cid:49)ID-19 pandemic. In December 2020, an additional (cid:3)900 billion stimulus
pac(cid:65)age, the Consolidated Appropriations Act, 2021, was enacted in the U.S. extending the refundable employee
retention credits into 2021. Other governments are li(cid:65)ewise considering new programs or the extension of existing
programs.
(cid:14)(cid:12)(cid:14)(cid:12) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:62)(cid:55) (cid:40)(cid:53)(cid:67)(cid:69)(cid:60)(cid:68)(cid:67)
Total revenue of (cid:3)(cid:22).0 billion in 2020 decreased 22.5(cid:4) from the prior year, including a 0.2-percentage point
favorable impact from currency and an approximate 1.2-percentage point favorable impact from 2020 partner dealer
acquisitions, partially offset by an approximate 0.6-percentage point unfavorable impact from the upfront OE(cid:40)
license fee of (cid:3)(cid:22)(cid:22) million received in the prior year. The decrease in revenue reflected a 22.1(cid:4) decrease in (cid:43)ost
sale revenue, including no impact from currency and an approximate 0.9-percentage point unfavorable impact from
the OE(cid:40) license fee(cid:26) and a 24.2(cid:4) decrease in Equipment sales revenue, including a 0.4-percentage point
favorable impact from currency. The CO(cid:49)ID-19 pandemic significantly impacted our 2020 revenues due to business
closures and office building capacity restrictions that slowed our customers' purchasing decisions and caused lower
printing volumes on our devices.
Net income from continuing operations attributable to Xerox Holdings was as follows:
(in millions)
Net income from continuing operations attributable to Xerox
Holdings
Ad(cid:64)usted(1) Net income from continuing operations attributable to
Xerox Holdings
(cid:52)ear Ended December 31,
B(cid:14)((cid:50))
2020
2019
2018
2020
2019
(cid:3)
192 (cid:3)
648 (cid:3)
306 (cid:3)
(456) (cid:3)
342
313
828
(cid:22)45
(515)
83
Net income from continuing operations attributable to Xerox Holdings for 2020 decreased (cid:3)456 million as compared
to the prior year primarily reflecting lower revenues as a result of the CO(cid:49)ID-19 pandemic, which were only partially
offset by lower costs and expense, which includes savings from our (cid:43)ro(cid:64)ect Own It transformation actions and other
actions in response to the CO(cid:49)ID-19 pandemic, as well as lower Restructuring and related costs, net and Income
tax expense.
Ad(cid:64)usted1 net income from continuing operations attributable to Xerox Holdings for 2020 decreased (cid:3)515 million as
compared to the prior year primarily reflecting lower revenues as a result of the CO(cid:49)ID-19 pandemic, which were
only partially offset by lower cost and expense, which includes savings from our (cid:43)ro(cid:64)ect Own It transformation
actions. Ad(cid:64)ustments in 2020 include Restructuring and related costs, net, Amorti(cid:80)ation of intangible assets,
Transaction and related costs, net as well as non-service retirement-related costs and other discrete, unusual or
infrequent items, which included the loss on the early extinguishment of debt.
Operating cash flow provided by continuing operations of Xerox Holdings was (cid:3)548 million in 2020 as compared to
(cid:3)1,244 million in 2019. The decrease is primarily due to lower profits and higher levels of inventory due to decline in
sales as well as lower accounts payable, accrued compensation and other liabilities due to lower spending. These
decreases were partially offset by reductions in accounts receivables, li(cid:65)ewise due to decline in revenues, a higher
run-off of finance receivables, lower placements of equipment on operating leases and lower cash tax payments.
30
Xerox 2020 Annual Report 30
Table of Contents
Cash used in investing activities of continuing operations of Xerox Holdings was (cid:3)246 million in 2020 reflecting
acquisitions of (cid:3)203 million and capital expenditures of (cid:3)(cid:22)4 million, which were partially offset by (cid:3)30 million from
the sales of non-core business assets. Cash used in financing activities of Xerox Holdings was (cid:3)416 million in 2020
reflecting repayments of (cid:3)2,13(cid:22) million on Senior Notes and (cid:3)(cid:22)3 million for secured borrowings, partially offset by
the issuance of Senior Notes of (cid:3)1,50(cid:22) million and (cid:3)840 million from secured borrowings, as well as payments of
(cid:3)300 million for share repurchases and dividend payments of (cid:3)230 million.
_____________
(1) Refer to the (cid:2)(cid:38)on-(cid:31)(cid:25)(cid:25)(cid:40) (cid:30)inancial (cid:37)easures(cid:2) section for an explanation of this non-(cid:31)(cid:25)(cid:25)(cid:40) financial measure.
(cid:14)(cid:12)(cid:14)(cid:13) (cid:37)(cid:69)(cid:68)(cid:60)(cid:63)(cid:63)(cid:59)
(cid:50)e currently expect a modest recovery in 2021, however, the first quarter of 2021 will li(cid:65)ely remain challenged due
to continuing CO(cid:49)ID-19-related loc(cid:65)downs and business closures. (cid:50)e expect total revenues to increase in 2021 to
at least (cid:3)(cid:22).2 billion, or approximately 2.5(cid:4), excluding the impact of currency.
(cid:50)e are confident in our ability to generate cash and plan to continue our capital allocation policy of returning at least
50(cid:4) of our annual free cash flow to shareholders. (cid:50)e expect 2021 operating cash flows from continuing operations
to be approximately (cid:3)600 million, with capital expenditures of approximately (cid:3)100 million. During 2021, we expect to
opportunistically ma(cid:65)e share repurchases utili(cid:80)ing our remaining share repurchase authori(cid:80)ation of approximately
(cid:3)500 million.
(cid:35)(cid:49)(cid:51)(cid:66)(cid:63) (cid:27)(cid:51)(cid:63)(cid:62)(cid:63)(cid:61)(cid:57)(cid:51) (cid:49)(cid:62)(cid:52) (cid:35)(cid:49)(cid:66)(cid:59)(cid:53)(cid:68) (cid:28)(cid:49)(cid:51)(cid:68)(cid:63)(cid:66)(cid:67)
Tariffs - Our business, results of operations and financial condition may be negatively impacted by a potential
increase in the cost of our products as a result of new or incremental trade protection measures such as, increased
import tariffs, import or export restrictions and requirements and the revocation or material modification of trade
agreements. Beginning in the fourth quarter of 2019 and extending into 2020, incremental tariff costs negatively
impacted gross margin. (cid:50)e expect margins will continue to be negatively impacted in future periods as a result of
an increase in the cost of our imported products due to higher import tariffs, although the year-over-year impact
should lessen in 2021 due to mitigation efforts. (cid:50)e continue to ta(cid:65)e actions to mitigate the impact of these tariffs to
the extent possible, such as raising prices on certain products.
Brexit - On (cid:37)anuary 31, 2020, the United Kingdom (U.K.) formally left the European Union (E.U.) when the U.K.-
E.U. (cid:50)ithdrawal Agreement became effective. Under the (cid:50)ithdrawal Agreement, a transition period began that ran
until December 31, 2020. In general, E.U. law no longer applies in the U.K. except where, at least temporarily, it has
been retained as U.K. law (though there are certain exceptions regarding the application of E.U. regulations in
Northern Ireland). On December 24, 2020, the European Commission reached a trade agreement with the U.K. on
the terms of its future cooperation with the E.U. (Trade and Cooperation Agreement or TCA). The TCA offers U.K.
and E.U. companies preferential access to each other(cid:85)s mar(cid:65)ets, ensuring imported goods will be free of tariffs and
quotas(cid:26) however, economic relations between the U.K. and the E.U. will now be on more restricted terms than
existed previously. At this time, we cannot predict the impact that the TCA and any future agreements will have on
our business, suppliers and customers. However, we continue to assess the situation and expect to ta(cid:65)e necessary
steps to mitigate any potential volatility, increased costs or disruptions to our supply chain or customers that may
result from this situation. For the year ended December 31, 2020, revenues and assets in Europe, including the
U.K., represented approximately 2(cid:22)(cid:4) of both our consolidated revenues and total assets.
Xerox 2020 Annual Report 31
Xerox 2020 Annual Report 31
Table of Contents
(cid:25)(cid:69)(cid:66)(cid:66)(cid:53)(cid:62)(cid:51)(cid:73) (cid:31)(cid:61)(cid:64)(cid:49)(cid:51)(cid:68)
To understand the trends in the business, we believe that it is helpful to analy(cid:80)e the impact of changes in the
translation of foreign currencies into U.S. Dollars on revenue and expenses. (cid:50)e refer to this analysis as (cid:2)constant
currency(cid:2), (cid:86)currency impact(cid:87) or (cid:86)the impact from currency.(cid:87) This impact is calculated by translating current period
activity in local currency using the comparable prior year period's currency translation rate and is calculated for all
countries where the functional currency is the local country currency. (cid:50)e do not hedge the translation effect of
revenues or expenses denominated in currencies where the local currency is the functional currency. (cid:40)anagement
believes the constant currency measure provides investors an additional perspective on revenue trends. Currency
impact can be determined as the difference between actual growth rates and constant currency growth rates.
Approximately 40(cid:4) of our consolidated revenues are derived from operations outside of the U.S. where the U.S.
Dollar is normally not the functional currency. As a result, foreign currency translation had a 0.2-percentage point
favorable impact on revenue in 2020 and a 1.5-percentage point unfavorable impact on revenue in 2019.
(cid:23)(cid:64)(cid:64)(cid:60)(cid:57)(cid:51)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:63)(cid:54) (cid:25)(cid:66)(cid:57)(cid:68)(cid:57)(cid:51)(cid:49)(cid:60) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55) (cid:38)(cid:63)(cid:60)(cid:57)(cid:51)(cid:57)(cid:53)(cid:67)
In preparing our Consolidated Financial Statements and accounting for the underlying transactions and balances,
we apply various accounting policies. Senior management has discussed the development and selection of the
critical accounting policies, estimates and related disclosures included herein with the Audit Committee of the Xerox
Holdings Board of Directors. (cid:50)e consider the policies discussed below as critical to understanding our Consolidated
Financial Statements, as their application places the most significant demands on management's (cid:64)udgment, since
financial reporting results rely on estimates of the effects of matters that are inherently uncertain. In instances where
different estimates could have reasonably been used, we disclosed the impact of these different estimates on our
operations. In certain instances, such as revenue recognition for leases, the accounting rules are prescriptive(cid:26)
therefore, it would not have been possible to reasonably use different estimates. Changes in assumptions and
estimates are reflected in the period in which they occur. The impact of such changes could be material to our
results of operations and financial condition in any quarterly or annual period.
As discussed above (see (cid:31)(cid:61)(cid:64)(cid:49)(cid:51)(cid:68) (cid:63)(cid:54) (cid:25)(cid:37)(cid:44)(cid:31)(cid:26)(cid:9)(cid:13)(cid:21) (cid:63)(cid:62) (cid:37)(cid:69)(cid:66) (cid:24)(cid:69)(cid:67)(cid:57)(cid:62)(cid:53)(cid:67)(cid:67) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)), during 2020 the Company was
significantly impacted by the economic disruption caused by the CO(cid:49)ID-19 pandemic. This disruption required us to
review the ma(cid:64)ority of our estimates to ensure we appropriately considered the impacts caused by the CO(cid:49)ID-19
pandemic. As the extent and duration of the impacts from the CO(cid:49)ID-19 pandemic remain uncertain, the
Company(cid:85)s estimates and assumptions may evolve as conditions change.
Specific ris(cid:65)s associated with these critical accounting policies are discussed throughout the (cid:40)D(cid:5)A, where such
policies affect our reported and expected financial results. For a detailed discussion of the application of these and
other accounting policies, refer to Note 1 - Basis of (cid:43)resentation and Summary of Significant Accounting (cid:43)olicies in
the Consolidated Financial Statements.
(cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53) (cid:40)(cid:53)(cid:51)(cid:63)(cid:55)(cid:62)(cid:57)(cid:68)(cid:57)(cid:63)(cid:62)
Application of the various accounting principles in (cid:34)AA(cid:43) related to the measurement and recognition of revenue
requires us to ma(cid:65)e (cid:64)udgments and estimates including ASC Topic 606 - Revenue from (cid:27)ontracts with (cid:27)ustomers
and ASC Topic 842 (cid:36)eases. (cid:50)e adopted (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:13)(cid:16)(cid:9)(cid:12)(cid:21)(cid:8) Revenue from (cid:27)ontracts with (cid:27)ustomers ((cid:25)(cid:43)(cid:27) Topic (cid:19)(cid:13)(cid:19))
on (cid:37)anuary 1, 2018 and (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:13)(cid:18)(cid:9)(cid:12)(cid:14)(cid:8) (cid:36)eases ((cid:25)(cid:43)(cid:27) Topic (cid:21)(cid:17)2) on (cid:37)anuary 1 2019. Refer to Note 1 - Basis of
(cid:43)resentation and Summary of Significant Accounting (cid:43)olicies in the Consolidated Financial Statements for
additional information regarding our revenue recognition and lease revenue recognition policies(cid:5) Complex
arrangements with nonstandard terms and conditions may require significant contract interpretation to determine the
appropriate accounting. Specifically, the revenue related to the following areas involves significant (cid:64)udgments and
estimates:
Bundled Lease Arrangements: (cid:50)e sell our equipment direct to end customers under bundled lease arrangements,
which typically include the equipment, service, supplies and a financing component for which 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. Lease
deliverables include the equipment and financing, while the non-lease deliverables generally consist of the services,
which include supplies. Sales made under bundled lease arrangements directly to end customers or through third
party leasing companies comprise 3(cid:22)(cid:4) or (cid:3)5(cid:22)3 million of our equipment sales revenue. Revenues under these
bundled lease arrangements are allocated considering the relative standalone selling prices of the lease and non-
lease deliverables included in the bundled arrangement. The allocation of revenue among the elements (cid:83)
32
Xerox 2020 Annual Report 32
Table of Contents
equipment vs. post-sale (service, supplies and financing) (cid:83) has remained fairly consistent at approximately 25(cid:4) and
(cid:22)5(cid:4), respectively, over the past three years.
Sales to Distributors and Resellers: (cid:50)e utili(cid:80)e distributors and resellers to sell many of our products, supplies and
parts to end-user customers. Sales to distributors and resellers are generally recogni(cid:80)ed as revenue when products
are shipped to such distributors and resellers. Distributors and resellers participate in various discount, rebate,
price-support, cooperative mar(cid:65)eting and other programs, and we record provisions and allowances for these
programs as a reduction to revenue when the sales occur. Similarly, we also record estimates for sales returns and
other discounts and allowances when the sales occur. (cid:50)e consider various factors, including a review of specific
transactions and programs, historical experience and mar(cid:65)et and economic conditions when calculating these
provisions and allowances. Total sales of equipment, supplies and parts to distributors and resellers were (cid:3)910
million for the year ended December 31, 2020 and provisions and allowances recorded on these sales were
approximately 25(cid:4) of the associated gross revenues.
Service Arrangements: Revenues associated with our service arrangements (cid:83) maintenance and document
management - are generally recogni(cid:80)ed as maintenance and printing services are rendered, which is generally on
the basis of the number of images produced. Accordingly, this recognition methodology requires us to estimate
customer usage at the end of a period since the customer is typically not invoiced for that usage until the following
period. Normally this estimation process is straight-forward and ob(cid:64)ective based on our significant history with
different types of customers and device usage as well as the fact that a ma(cid:64)ority of our devices have connectivity to
Xerox so we can remotely read and collect usage data. In addition, our service arrangements normally include a
minimum volume charge together with a variable charge, so the estimation process is limited to the variable
component, which will vary based on the channel and geography. However, the impacts from the CO(cid:49)ID-19
economic disruption that began in (cid:40)arch 2020, as well as the related shutdowns of some of our customers, required
us to further review our estimation process for the variable component to ensure we properly and ob(cid:64)ectively
captured the impacts of the decline in volumes and did not solely rely on historical usage data. (cid:50)e will continue to
assess the usage data of our customers to ensure we properly ad(cid:64)ust historical averages and recogni(cid:80)e revenue
consistent with those revised usage patterns and ultimately what is invoiced to the customer.
(cid:23)(cid:60)(cid:60)(cid:63)(cid:71)(cid:49)(cid:62)(cid:51)(cid:53) (cid:54)(cid:63)(cid:66) (cid:26)(cid:63)(cid:69)(cid:50)(cid:68)(cid:54)(cid:69)(cid:60) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:25)(cid:66)(cid:53)(cid:52)(cid:57)(cid:68) (cid:34)(cid:63)(cid:67)(cid:67)(cid:53)(cid:67)
Consistent with our adoption of (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:13)(cid:18)(cid:9)(cid:13)(cid:15) effective (cid:37)anuary 1, 2020 (Refer to Note 1 - Basis of (cid:43)resentation and
Summary of Significant Accounting (cid:43)olicies in the Consolidated Financial Statements for additional information), the
allowance for doubtful accounts and credit losses is 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. (cid:50)e
recorded bad debt provisions of (cid:3)116 million, (cid:3)46 million and (cid:3)36 million in Selling, administrative and general
(SA(cid:34)) expenses in our Consolidated Statements of Income for the years ended December 31, 2020, 2019 and
2018, respectively. Reserves, as a percentage of trade and finance receivables, were 4.8(cid:4) at December 31, 2020,
as compared to 3.0(cid:4) at December 31, 2019 and 2018, respectively. (cid:50)e continue to assess our receivables portfolio
in light of the current economic environment and its impact on our estimation of the adequacy of the allowance for
doubtful accounts.
The significant increase in bad debt provision and reserve percentage in 2020 are principally due to the impact of
the CO(cid:49)ID-19 pandemic on our customers. In assessing the level of provision and related reserve for 2020, we
critically assessed current and forecasted economic conditions as a result of the CO(cid:49)ID-19 pandemic to ensure we
ob(cid:64)ectively included those expected impacts in the determination of our reserve. Our assessment also included
current portfolio credit metrics and the level of reserves and write-offs we recorded on our receivables portfolio
during the credit crisis in 2008(cid:14)09 as additional reference points to ob(cid:64)ectively determine the adequacy of our
allowance.
As discussed above, we estimated our provision for doubtful accounts based on historical experience, expected
future economic conditions and customer-specific collection issues. Our methodology was updated in 2020
consistent with the adoption of (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:13)(cid:18)(cid:9)(cid:13)(cid:15), but is essentially consistent with prior periods, as our previous
methodology for assessing the adequacy of our allowance for doubtful accounts for finance receivables, the larger
component of our receivables reserves, incorporated an expected loss model and the methodology for both
allowances included an assessment of current economic conditions. During the five year period ended
December 31, 2020, our reserve for doubtful accounts ranged from 3.0(cid:4) to 4.8(cid:4) of gross receivables. Holding all
assumptions constant, a 0.5-percentage point increase or decrease in the reserve from the December 31, 2020 rate
of 4.8(cid:4) would change the 2020 provision by approximately (cid:3)21 million.
Refer to Note 1 - Basis of (cid:43)resentation and Summary of Significant Accounting (cid:43)olicies in the Consolidated
Financial Statements for additional information regarding our adoption of (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:13)(cid:18)(cid:9)(cid:13)(cid:15) and Note (cid:22) - Accounts
Xerox 2020 Annual Report 33
Xerox 2020 Annual Report 33
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Receivable, Net and Note 8 - Finance Receivables, Net in the Consolidated Financial Statements for additional
information regarding our allowance for doubtful accounts. Refer also to the (cid:41)(cid:53)(cid:60)(cid:60)(cid:57)(cid:62)(cid:55)(cid:8) (cid:23)(cid:52)(cid:61)(cid:57)(cid:62)(cid:57)(cid:67)(cid:68)(cid:66)(cid:49)(cid:68)(cid:57)(cid:70)(cid:53) (cid:49)(cid:62)(cid:52) (cid:29)(cid:53)(cid:62)(cid:53)(cid:66)(cid:49)(cid:60)
(cid:27)(cid:72)(cid:64)(cid:53)(cid:62)(cid:67)(cid:53)(cid:67) (cid:6)(cid:41)(cid:23)(cid:29)(cid:7) section for additional discussion regarding the incremental bad debt provision recorded in the first
quarter 2020 primarily related to the economic impact of the CO(cid:49)ID-19 pandemic.
(cid:38)(cid:53)(cid:62)(cid:67)(cid:57)(cid:63)(cid:62) (cid:38)(cid:60)(cid:49)(cid:62) (cid:23)(cid:67)(cid:67)(cid:69)(cid:61)(cid:64)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
(cid:50)e sponsor defined benefit pension plans in various forms in several countries covering employees who meet
eligibility requirements. (cid:50)here legally possible, we have amended our ma(cid:64)or defined benefit pension plans to free(cid:80)e
current benefits and eliminate benefit accruals for future service, including our primary U.S. defined benefit plan for
salaried employees, the Canadian Salary (cid:43)ension (cid:43)lan and the U.K. Final Salary (cid:43)ension (cid:43)lan. 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. Our pension plan in the Netherlands was changed to a Collective Defined Contribution
(CDC) plan. From a Company ris(cid:65) perspective, this plan operates (cid:64)ust li(cid:65)e a defined contribution plan as the
Company is only responsible for a contribution for annual benefit accruals under 5-year agreements. Although the
Company ris(cid:65) has been mitigated, under U.S. (cid:34)AA(cid:43) this plan doesn(cid:85)t meet the definition of a defined contribution
plan and therefore is accounted for as a defined benefit plan.
Several statistical and other factors that attempt to anticipate future events are used in calculating the expense,
liability and asset values related to our defined benefit pension plans. These factors include assumptions we ma(cid:65)e
about the expected return on plan assets, discount rate, lump-sum settlement rates, the rate of future compensation
increases and mortality. Differences between these assumptions and actual experiences are reported as net
actuarial gains and losses and are sub(cid:64)ect to amorti(cid:80)ation to net periodic benefit cost over future periods.
Cumulative net actuarial losses for our defined benefit pension plans of (cid:3)2.3 billion as of December 31, 2020
decreased by (cid:3)1(cid:22)6 million from December 31, 2019, primarily due to the excess of actual returns over expected
returns and the recognition of actuarial losses through amorti(cid:80)ation and U.S. settlement losses, partially offset by
lower discount rates and the resultant increase in the (cid:43)ro(cid:64)ected Benefit Obligation ((cid:43)BO) as well as currency. The
total actuarial loss at December 31, 2020 is sub(cid:64)ect to offsetting gains or losses in the future due to both changes in
actuarial assumptions and future experience and will be recogni(cid:80)ed in future periods through amorti(cid:80)ation or
settlement losses.
(cid:50)e used a consolidated weighted average expected rate of return on plan assets of 4.1(cid:4) for 2020, 4.6(cid:4) for 2019
and 4.5(cid:4) for 2018, on a worldwide basis. During 2020, the actual return on plan assets was a gain of (cid:3)1,200 million
as compared to an expected return of (cid:3)408 million, with the difference largely due to positive equity mar(cid:65)et returns,
the positive impact of decreasing interest rates on our fixed income investments and the impact of our hedging
portfolio in the U.S. (cid:50)hen estimating the 2021 expected rate of return, in addition to assessing recent performance,
we considered the historical returns earned on plan assets, the rates of return expected in the future, particularly in
light of current economic conditions, and our investment strategy and asset mix with respect to the plans' funds. The
weighted average expected rate of return on plan assets we will use in 2021 is 3.9(cid:4) with the decrease from 2020
primarily in our non-U.S. plans.
Another significant assumption affecting our defined benefit pension obligations and the net periodic benefit cost is
the rate that we use to discount our future anticipated benefit obligations. In the U.S. and the U.K., which comprise
approximately (cid:22)5(cid:4) of our (cid:43)BO, we consider yield curves derived from (cid:40)oody's Aa or better rated Corporate Bonds
and U.K. Corporate bonds rated AA by at least one of the main ratings agencies, respectively, in the determination
of the appropriate discount rate assumptions. The consolidated weighted average discount rate we used to
measure our pension obligations as of December 31, 2020 and to calculate our 2021 expense was 1.6(cid:4)(cid:26) the rate
used to calculate our obligations as of December 31, 2019 and our 2020 expense was 2.3(cid:4). The decrease reflects
lower interest rates in both U.S. and non-U.S. regions.
Holding all other assumptions constant, the following table summari(cid:80)es the estimated impacts of a 0.25(cid:4) change in
the discount rate and a 0.25(cid:4) change in the expected return on plan assets:
(in millions)
Increase(cid:14)(Decrease)
Discount Rate
0.25(cid:4)
Increase
0.25(cid:4)
Decrease
Expected Return
0.25(cid:4)
Increase
0.25(cid:4)
Decrease
2021 (cid:43)ro(cid:64)ected net periodic pension cost
(cid:43)ro(cid:64)ected benefit obligation as of December 31, 2020
(cid:3)
(10) (cid:3)
(390)
10 (cid:3)
425
(20) (cid:3)
N(cid:14)A
20
N(cid:14)A
34
Xerox 2020 Annual Report 34
Table of Contents
One of the most significant and volatile elements of our net periodic defined benefit pension plan expense is
settlement losses. Our primary domestic plans allow participants the option of settling their vested benefits through
the receipt of a lump-sum payment. (cid:50)e recogni(cid:80)e the losses associated with these settlements immediately upon
the settlement of the vested benefits. Settlement accounting requires us to recogni(cid:80)e a pro-rata portion of the
aggregate unamorti(cid:80)ed net actuarial losses upon settlement. As noted above, cumulative unamorti(cid:80)ed net actuarial
losses were (cid:3)2.3 billion at December 31, 2020, of which the U.S. primary domestic plans, with a lump-sum feature,
represented approximately (cid:3)(cid:22)10 million. The pro-rata factor is computed as the percentage reduction in the
pro(cid:64)ected benefit obligation due to the settlement of a participant(cid:2)s vested benefit. Settlement accounting is only
applied when the event of settlement occurs (cid:4) i.e. the lump-sum payment is made. Since settlement is dependent on
an employee's decision and election, the level of settlements and the associated losses can fluctuate significantly
from period to period. During the three years ended December 31, 2020, 2019 and 2018, U.S. plan settlements
were approximately (cid:3)220 million, (cid:3)355 million and (cid:3)660 million, respectively, and the associated settlement losses
on those plan settlements were (cid:3)53 million, (cid:3)93 million and (cid:3)1(cid:22)3 million, respectively. In 2021, on average, we
estimate that approximately (cid:3)100 million of plan settlements will result in settlement losses of approximately (cid:3)25
million.
The following is a summary of our benefit plan costs for the three years ended December 31, 2020, 2019 and 2018,
as well as estimated amounts for 2021:
(in millions)
Defined benefit pension plans(1)
U.S. settlement losses
Defined contribution plans(2)
Retiree health benefit plans
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68) (cid:38)(cid:60)(cid:49)(cid:62) (cid:27)(cid:72)(cid:64)(cid:53)(cid:62)(cid:67)(cid:53)
_____________
Estimated
2021
2020
Actual
2019
2018
(10) (cid:3)
5 (cid:3)
16 (cid:3)
(cid:22)0
40
(55)
53
19
(63)
93
49
(65)
45 (cid:3)
14 (cid:3)
93 (cid:3)
(cid:3)
(cid:3)
2
1(cid:22)3
66
8
249
(1) (cid:29)xcludes (cid:45).(cid:43). settlement losses.
(2) The decrease in 2(cid:13)2(cid:13) reflects the (cid:27)ompany(cid:6)s decision to suspend and not ma(cid:61)e the 2(cid:13)2(cid:13) employer matching contribution to our (cid:45).(cid:43). based
(cid:17)(cid:13)1((cid:61)) savings plans for salaried employees. The employer matching contribution is expected to be resumed and provided for in 2(cid:13)21.
The following is a summary of our benefit plan funding for the three years ended December 31, 2020, 2019 and
2018, as well as estimated amounts for 2021:
(in millions)
U.S. Defined benefit pension plans
Non-U.S. Defined benefit pension plans
Defined contribution plans(1)
Retiree health benefit plans
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68) (cid:38)(cid:60)(cid:49)(cid:62) (cid:28)(cid:69)(cid:62)(cid:52)(cid:57)(cid:62)(cid:55)
_____________
Estimated
2021
2020
Actual
2019
2018
(cid:3)
25 (cid:3)
35 (cid:3)
26 (cid:3)
105
25
30
104
19
25
115
49
30
(cid:3)
185 (cid:3)
183 (cid:3)
220 (cid:3)
2(cid:22)
11(cid:22)
66
5(cid:22)
26(cid:22)
(1) The difference between the estimated funding amount and the estimated expense in 2(cid:13)21 of (cid:3)1(cid:18) million is due to estimated contributions for
our (cid:45).(cid:43). based (cid:17)(cid:13)1((cid:61)) savings plan expensed in 2(cid:13)21 as earned but which are expected to be contributed in (cid:34)anuary of 2(cid:13)22.
Contributions to our U.S. Defined benefit plans in 2020 include (cid:3)25 million associated with our non-qualified plan
and (cid:3)10 million for one of our tax-qualified defined benefit plans. Estimated contributions to our U.S. Defined benefit
plans in 2021 are associated with our non-qualified plan as no other amounts were required to meet the minimum
funding requirements for our tax qualified plans.
Refer to Note 19 - Employee Benefit (cid:43)lans in the Consolidated Financial Statements for additional information
regarding defined benefit pension plan assumptions, expense and funding.
(cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:42)(cid:49)(cid:72)(cid:53)(cid:67)
(cid:50)e are sub(cid:64)ect to income taxes in the U.S. and numerous foreign (cid:64)urisdictions. Significant (cid:64)udgments are required in
determining the consolidated provision for income taxes. Our provision is based on nonrecurring events as well as
recurring factors, including the taxation of foreign income. In addition, our provision will change based on discrete or
other nonrecurring events such as audit settlements, tax law changes, changes in valuation allowances, etc., that
may not be predictable.
Xerox 2020 Annual Report 35
Xerox 2020 Annual Report 35
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(cid:50)e record the estimated future tax effects of temporary differences between the tax bases of assets and liabilities
and the amounts reported in our Consolidated Balance Sheets, as well as operating loss and tax credit
carryforwards. Deferred tax assets are assessed for reali(cid:80)ability and, where applicable, a valuation allowance is
recorded to reduce the total deferred tax asset to an amount that will, more-li(cid:65)ely-than-not, be reali(cid:80)ed in the future.
(cid:50)e apply (cid:64)udgment in assessing the reali(cid:80)ability of these deferred tax assets and the need for any valuation
allowances. In determining the amount of deferred tax assets that are more-li(cid:65)ely-than-not to be reali(cid:80)ed, we
considered historical profitability, pro(cid:64)ected future taxable income, the expected timing of the reversals of existing
temporary differences and tax planning strategies. Refer to Note 20 - Income and Other Taxes in the Consolidated
Financial Statements for additional information regarding the valuation of our allowance against our deferred tax
assets.
As a result of the CO(cid:49)ID-19 pandemic, we reviewed the valuation allowances to determine if any change was
required based on the rapid change in the economic environment and the expected changes in our financial
pro(cid:64)ections resulting from the impacts of the CO(cid:49)ID-19 pandemic.
Our effective tax rate for the year ended December 31, 2020 included an approximate 9.9-percentage point impact
for additional valuation allowances, which partly reflect the negative impacts of the CO(cid:49)ID-19 pandemic. Increases
to our valuation allowance, through income tax expense, were (cid:3)25 million, (cid:3)16 million and (cid:3)3 million for the years
ended December 31, 2020, 2019 and 2018, respectively. There were other (decreases) increases to our valuation
allowance, including the effects of currency, of (cid:3)(28) million, (cid:3)(14) million and (cid:3)(41) million for the years ended
December 31, 2020, 2019 and 2018, respectively. These did not affect income tax expense in total as there was a
corresponding ad(cid:64)ustment to Deferred tax assets or Other comprehensive income.
The following is a summary of gross deferred tax assets and the related valuation allowances for the three years
ended December 31, 2020:
(in millions)
(cid:34)ross deferred tax assets
(cid:49)aluation allowance
(cid:36)(cid:53)(cid:68) (cid:52)(cid:53)(cid:54)(cid:53)(cid:66)(cid:66)(cid:53)(cid:52) (cid:68)(cid:49)(cid:72) (cid:49)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:3)
(cid:3)
1,3(cid:22)9 (cid:3)
(396)
983 (cid:3)
1,463 (cid:3)
(399)
1,064 (cid:3)
1,566
(39(cid:22))
1,169
(cid:50)e are sub(cid:64)ect to ongoing tax examinations and assessments in various (cid:64)urisdictions. Accordingly, we may incur
additional tax expense based upon our assessment of the more-li(cid:65)ely-than-not outcomes of such matters. In
addition, when applicable, we ad(cid:64)ust the previously recorded tax expense to reflect examination results. Our
ongoing assessments of the more-li(cid:65)ely-than-not outcomes of the examinations and related tax positions require
(cid:64)udgment and can materially increase or decrease our effective tax rate, as well as impact our operating results.
Unrecogni(cid:80)ed tax benefits were (cid:3)115 million, (cid:3)12(cid:22) million and (cid:3)108 million at December 31, 2020, 2019 and 2018,
respectively.
Refer to Note 20 - Income and Other Taxes in the Consolidated Financial Statements for additional information
regarding deferred income taxes and unrecogni(cid:80)ed tax benefits.
(cid:24)(cid:69)(cid:67)(cid:57)(cid:62)(cid:53)(cid:67)(cid:67) (cid:25)(cid:63)(cid:61)(cid:50)(cid:57)(cid:62)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67) (cid:49)(cid:62)(cid:52) (cid:29)(cid:63)(cid:63)(cid:52)(cid:71)(cid:57)(cid:60)(cid:60)
(cid:50)e allocate the fair value of purchase consideration to tangible assets, liabilities assumed and intangible assets
acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair
values of these identifiable assets and liabilities is allocated to (cid:34)oodwill. The allocation of the purchase
consideration requires management to ma(cid:65)e significant estimates and assumptions, especially with respect to
intangible assets. These estimates can include, but are not limited to, future expected cash flows of acquired
customers, acquired technology and trade names from a mar(cid:65)et participant perspective, as well as estimates of
useful lives and discount rates. (cid:40)anagement(cid:85)s estimates of fair value are based upon assumptions believed to be
reasonable and when appropriate, include assistance from independent third-party valuation firms. During the
measurement period, which is up to one year from the acquisition date, we may record ad(cid:64)ustments to the assets
acquired and liabilities assumed, with the corresponding offset to (cid:34)oodwill. Upon the conclusion of the
measurement period, any subsequent ad(cid:64)ustments are recorded to earnings. Refer to Note 5 - Acquisitions in the
Consolidated Financial Statements for additional information regarding the allocation of the purchase price
consideration for our acquisitions.
Our (cid:34)oodwill balance was (cid:3)4.1 billion at December 31, 2020. (cid:50)e assess (cid:34)oodwill for impairment at least annually,
during the fourth quarter based on balances as of October 1st, and more frequently on an interim basis if we believe
indicators of impairment exist. The application of an interim or the annual (cid:34)oodwill impairment test begins with the
36
Xerox 2020 Annual Report 36
Table of Contents
identification of reporting units, which requires (cid:64)udgment. Consistent with the determination that we have one
operating segment, we determined that there is one reporting unit and therefore we tested (cid:34)oodwill for impairment
at the Company or entity level.
The process of evaluating the potential impairment of (cid:34)oodwill is highly sub(cid:64)ective and requires significant
(cid:64)udgment. Our review of impairment starts with an assessment of qualitative factors to determine whether events or
circumstances lead to a determination that it is more-li(cid:65)ely-than-not that the fair value of the Company is less than
net boo(cid:65) value. Our qualitative assessment of the recoverability of (cid:34)oodwill, whether performed annually or based
on specific events or circumstances, considers various macroeconomic, industry-specific and company-specific
factors. These factors include: (i) severe adverse industry or economic trends(cid:26) (ii) significant company-specific
actions, including exiting an activity in con(cid:64)unction with restructuring of operations(cid:26) (iii) current, historical or pro(cid:64)ected
deterioration of our financial performance(cid:26) or (iv) a sustained decrease in our mar(cid:65)et capitali(cid:80)ation below our net
boo(cid:65) value. After assessing the totality of events and circumstances, if we determine that it is not more-li(cid:65)ely-than-
not that the fair value of the Company is less than its net boo(cid:65) value, no further assessment is performed. If we
determine that it is more li(cid:65)ely-than-not that the fair value of the Company is less than net boo(cid:65) value or if we elect
to bypass the qualitative assessment, we proceed to a quantitative assessment or test of (cid:34)oodwill.
If a quantitative assessment of (cid:34)oodwill is required, the determination of the fair value of the Company will involve
the use of significant estimates and assumptions. Our quantitative (cid:34)oodwill impairment test uses both the income
approach and the mar(cid:65)et approach to estimate fair value. The income approach is based on the discounted cash
flow method that uses the Company's estimates of forecasted future financial performance including revenues,
gross margins, operating expenses, and taxes, as well as wor(cid:65)ing capital and capital asset requirements. These
estimates are developed as part of our long-term planning process based on assumed mar(cid:65)et segment growth
rates and our assumed mar(cid:65)et segment share, estimated costs based on historical data and various internal
estimates. (cid:43)ro(cid:64)ected cash flows are then discounted to a present value employing a discount rate that properly
accounts for the estimated mar(cid:65)et weighted-average cost of capital, as well as any ris(cid:65)s unique to the sub(cid:64)ect cash
flows. (cid:50)hen performing our mar(cid:65)et approach, we rely specifically on the guideline public company method. Our
guideline public company method incorporates revenues and earnings multiples from publicly traded companies
with operations and other characteristics similar to our entity. The selected multiples consider our entity's growth,
profitability, si(cid:80)e and ris(cid:65) relative to those of the selected publicly traded companies.
In the second quarter 2020, as a result of the continued negative financial impacts from the CO(cid:49)ID-19 pandemic on
our current and near-term future operations, the expected slower recovery during the latter half of 2020 as
businesses return to their respective offices, as well as a sustained mar(cid:65)et capitali(cid:80)ation below our boo(cid:65) value, we
determined there was a triggering event requiring an interim quantitative evaluation of (cid:34)oodwill.
As a result of limited mar(cid:65)et comparables due to companies not providing guidance in this current economic
environment, our interim quantitative evaluation of (cid:34)oodwill in the second quarter 2020 was based solely on the
income approach to estimate fair value. The income approach was based on the discounted cash flow method of
the Company's estimates of future forecasted financial performance including revenues, gross margins, operating
expenses, and taxes, as well as wor(cid:65)ing capital and capital asset requirements. Our estimates regarding future
forecasted cash flows accordingly reflected consideration of the negative financial impacts from the CO(cid:49)ID-19
pandemic on our current and future operations as well as expected recovery scenarios and we believe provided a
result that was equally or more representative of the fair value at that time given the circumstances. After completing
our interim impairment review, we concluded that (cid:34)oodwill was not impaired in the second quarter 2020.
Although business performance improved in the second half of 2020, the CO(cid:49)ID-19 pandemic continued to have a
significant impact on the Company(cid:85)s revenues, expenses, cash flows and mar(cid:65)et capitali(cid:80)ation in 2020. As a result
of these impacts as well as related macroeconomic and industry factors, we elected to utili(cid:80)e a quantitative model
for the assessment of the recoverability of our (cid:34)oodwill balance for our annual fourth quarter 2020 impairment test.
After completing our quantitative impairment review, we concluded that (cid:34)oodwill was not impaired. Based on
various forecast models, which we believe reflect the inherent uncertainty of the future, we estimated that the
excess of fair value over carrying value ranged between 15(cid:4) and 20(cid:4). This estimate reflected a (cid:22)5(cid:14)25 allocation
between the income and mar(cid:65)et approach and the application of a discount rate applied to our pro(cid:64)ected cash flows
that ranged from (cid:22).(cid:22)5(cid:4) to 8.25(cid:4). Similar to the second quarter 2020 assessment, we believe the heavier weighting
to the income approach was appropriate due to the inherent limitations of a mar(cid:65)et comparison during a year
impacted by the CO(cid:49)ID-19 pandemic. (cid:50)e li(cid:65)ewise believe the discount rate applied was reasonable based on the
estimated capital costs of applicable mar(cid:65)et participants and an appropriate company-specific ris(cid:65) premium that
reflects current mar(cid:65)et and industry conditions. (cid:50)e also ran sensitivity cases on both the income(cid:14)mar(cid:65)et allocation
as well as the discount rate and, although in certain scenarios our excess fair value declined to approximately 10(cid:4),
no impairment was indicated.
Xerox 2020 Annual Report 37
Xerox 2020 Annual Report 3(cid:22)
Table of Contents
Table of Contents
Although our current results and our internal future forecasts clearly indicate that Xerox has been and will continue
to be significantly impacted by the economic disruption caused by the CO(cid:49)ID-19 pandemic, based on a review of
macroeconomic and industry considerations as well as internal growth strategies, the business is expected to
continue to recover in 2021 with the expectation of a return to normal trends by 2023. This expectation is extended
a year from the expectation in the second quarter 2020 of a return to normal trends by 2022, primarily due to recent
economic data that suggests a slower recovery of the global economy before the full benefits from the distribution of
vaccines and other therapies materiali(cid:80)e to facilitate the reopening of businesses that closed and the return of more
employees bac(cid:65) to the office. In addition, consistent with our historical results, we believe we have the ability, within
a relevant range, to offset potential delays in the recovery of our revenue base with cost reductions and productivity
improvements to help manage and maintain our pro(cid:64)ected level of cash flows. Lastly, although our estimates of the
fair value of the entity were in excess of our mar(cid:65)et capitali(cid:80)ation, we believe the implied premiums that would be
indicated at net boo(cid:65) value or at our estimated fair values are reasonable.
In performing its assessment, the Company believes it has made reasonable estimates based on the facts and
circumstances that were available as of the reporting date in light of the continuing impacts from the CO(cid:49)ID-19
pandemic. However, the determination of fair value includes assumptions that are sub(cid:64)ect to ris(cid:65) and uncertainty.
The discounted cash flow calculations are dependent on sub(cid:64)ective factors including the timing of future cash flows
and the discount rate. If assumptions or estimates in the fair value calculations change or if future cash flows vary
from what was forecasted, including those assumptions relating to the duration and severity of the financial impact
from the CO(cid:49)ID-19 pandemic, this may impact the impairment analysis and could reduce the underlying cash flows
used to estimate fair values and result in a decline in fair value that may trigger future impairment charges. (cid:50)e will
continue to monitor developments in 2021 including updates to our forecasts as well as our mar(cid:65)et capitali(cid:80)ation
and an update of our assessment and related estimates may be required in the future as the situation evolves. If the
extent and duration of the economic disruption caused by the pandemic is longer or more severe than currently
estimated, and actions ta(cid:65)en by the Company do not sufficiently compensate for those impacts, there could be a
material impact to our revenues and expected cash flows which in turn could negatively impact the recoverability of
our (cid:34)oodwill balance.
Subsequent to our fourth quarter impairment test, we did not identify any triggering events that required an update
to the annual impairment test.
Refer to Note 13 - (cid:34)oodwill and Intangible Assets, Net in the Consolidated Financial Statements for additional
information regarding (cid:34)oodwill.
Add: Financing
(cid:38)(cid:63)(cid:67)(cid:68) (cid:67)(cid:49)(cid:60)(cid:53) (cid:66)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)
Americas
E(cid:40)EA
Other
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)(cid:6)(cid:13)(cid:7)
(cid:35)(cid:53)(cid:61)(cid:63)(cid:22)
Xerox Services
_____________
(cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)
(cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53) (cid:40)(cid:53)(cid:67)(cid:69)(cid:60)(cid:68)(cid:67) (cid:41)(cid:69)(cid:61)(cid:61)(cid:49)(cid:66)(cid:73)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)
Revenue for the three years ended December 31, 2020, 2019 and 2018 was as follows:
(in millions)
Equipment sales
(cid:43)ost sale revenue
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)
Revenue
(cid:4) Change
CC (cid:4) Change
(cid:4) of Total Revenue
2020
2019
2018
2020
2019
2020
2019
2020
2019
2018
(cid:3) 1,564 (cid:3) 2,062 (cid:3) 2,1(cid:22)8
(24.2) (cid:4) (5.3) (cid:4) (24.6) (cid:4) (4.0) (cid:4)
5,458
(cid:22),004
(cid:22),484
(22.1) (cid:4) (6.4) (cid:4) (22.1) (cid:4) (4.9) (cid:4)
22 (cid:4)
(cid:22)8 (cid:4)
23 (cid:4)
(cid:22)(cid:22) (cid:4)
23 (cid:4)
(cid:22)(cid:22) (cid:4)
(cid:3) (cid:22),022 (cid:3) 9,066 (cid:3) 9,662
(22.5) (cid:4) (6.2) (cid:4) (22.(cid:22)) (cid:4) (4.(cid:22)) (cid:4)
100 (cid:4)
100 (cid:4)
100 (cid:4)
(cid:40)(cid:53)(cid:51)(cid:63)(cid:62)(cid:51)(cid:57)(cid:60)(cid:57)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:68)(cid:63) (cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:63)(cid:54) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)(cid:22)
Sales
(cid:3) 2,449 (cid:3) 3,22(cid:22) (cid:3) 3,454
(24.1) (cid:4) (6.6) (cid:4) (24.3) (cid:4) (5.3) (cid:4)
Less: Supplies, paper and other sales
(885)
(1,165)
(1,2(cid:22)6)
(24.0) (cid:4) (8.(cid:22)) (cid:4) (23.6) (cid:4) ((cid:22).4) (cid:4)
(cid:27)(cid:65)(cid:69)(cid:57)(cid:64)(cid:61)(cid:53)(cid:62)(cid:68) (cid:67)(cid:49)(cid:60)(cid:53)(cid:67)
(cid:3) 1,564 (cid:3) 2,062 (cid:3) 2,1(cid:22)8
(24.2) (cid:4) (5.3) (cid:4) (24.6) (cid:4) (4.0) (cid:4)
Services, maintenance and rentals
(cid:3) 4,34(cid:22) (cid:3) 5,595 (cid:3) 5,940
(22.3) (cid:4) (5.8) (cid:4) (22.5) (cid:4) (4.4) (cid:4)
Add: Supplies, paper and other sales
885
1,165
1,2(cid:22)6
(24.0) (cid:4) (8.(cid:22)) (cid:4) (23.6) (cid:4) ((cid:22).4) (cid:4)
226
244
268
((cid:22).4) (cid:4) (9.0) (cid:4) ((cid:22).(cid:22)) (cid:4) ((cid:22).5) (cid:4)
(cid:3) 5,458 (cid:3) (cid:22),004 (cid:3) (cid:22),484
(22.1) (cid:4) (6.4) (cid:4) (22.1) (cid:4) (4.9) (cid:4)
(cid:3) 4,589 (cid:3) 5,963 (cid:3) 6,308
(23.0) (cid:4) (5.5) (cid:4) (22.(cid:22)) (cid:4) (5.2) (cid:4)
2,246
2,81(cid:22)
3,13(cid:22)
(20.3) (cid:4) (10.2) (cid:4) (21.5) (cid:4) (6.4) (cid:4)
18(cid:22)
286
21(cid:22)
(34.6) (cid:4) 31.8 (cid:4) (34.6) (cid:4) 31.8 (cid:4)
65 (cid:4)
32 (cid:4)
3 (cid:4)
66 (cid:4)
31 (cid:4)
3 (cid:4)
65 (cid:4)
33 (cid:4)
2 (cid:4)
(cid:3) (cid:22),022 (cid:3) 9,066 (cid:3) 9,662
(22.5) (cid:4) (6.2) (cid:4) (22.(cid:22)) (cid:4) (4.(cid:22)) (cid:4)
100 (cid:4)
100 (cid:4)
100 (cid:4)
(cid:3) 2,(cid:22)56 (cid:3) 3,406 (cid:3) 3,621
(19.1) (cid:4) (5.9) (cid:4) (19.2) (cid:4) (4.0) (cid:4)
39 (cid:4)
38 (cid:4)
3(cid:22) (cid:4)
(cid:27)(cid:27) - (cid:43)ee (cid:2)(cid:27)urrency Impact(cid:2) section for description of (cid:27)onstant (cid:27)urrency.
(1) Refer to the (cid:2)(cid:31)eographic (cid:43)ales (cid:27)hannels and (cid:40)roduct and Offerings Definitions(cid:2) section.
Total revenue decreased 22.5(cid:4) for the year ended December 31, 2020 including a 0.2-percentage point favorable
impact from currency and an approximate 1.2-percentage point favorable impact from 2020 partner dealer
acquisitions, partially offset by an approximate 0.6-percentage point unfavorable impact from a one-time upfront
OE(cid:40) license fee of (cid:3)(cid:22)(cid:22) million received in the prior year. Total revenue decreased 6.2(cid:4) for the year ended
December 31, 2019 compared to the prior year, including a 1.5-percentage point unfavorable impact from currency
and an approximate 0.8-percentage point favorable impact from the OE(cid:40) license fee.
The CO(cid:49)ID-19 pandemic significantly impacted our 2020 revenues due to business closures and office building
capacity restrictions that slowed our customers' purchasing decisions and caused lower printing volumes on our
devices. The biggest impact from the pandemic occurred in the second quarter 2020. The rate of revenue declines
in our business moderated through the third quarter 2020, consistent with business reopenings. This trend
continued in the earlier part of the fourth quarter, however, the resurgence of the virus in several European countries
and U.S. regions at the end of the year halted the recovery in the latter part of the fourth quarter and, as a result,
our rate of revenue decline during the fourth quarter remained virtually unchanged as compared to the third quarter
after excluding the one-time OE(cid:40) license fee received in the prior year, as described above.
(cid:34)eographically, revenue declines from our E(cid:40)EA operations were smaller, primarily as a result of the favorable
impact from recent acquisitions in the region, as well as higher installation of mono devices in our developing
regions of E(cid:40)EA associated with our hybrid wor(cid:65)place promotions. The E(cid:40)EA region also benefited from wider
reopenings of wor(cid:65)places and economies earlier in 2020, as compared to our Americas Organi(cid:80)ation, for which
reopenings did not begin until later in the third quarter 2020. Revenue declines in our Americas Organi(cid:80)ation were
larger in our indirect channels in the U.S, whereas higher sales of IT Services through our XBS sales organi(cid:80)ation,
as well as higher sales to our U.S. government accounts and higher installs of our mono personal printers in Latin
America provided a partial offset. Total revenues included the following:
38
Xerox 2020 Annual Report 38
Xerox 2020 Annual Report 39
Table of Contents
(cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53) (cid:40)(cid:53)(cid:67)(cid:69)(cid:60)(cid:68)(cid:67) (cid:41)(cid:69)(cid:61)(cid:61)(cid:49)(cid:66)(cid:73)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)
Revenue for the three years ended December 31, 2020, 2019 and 2018 was as follows:
(in millions)
Equipment sales
(cid:43)ost sale revenue
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)
Revenue
(cid:4) Change
CC (cid:4) Change
(cid:4) of Total Revenue
2020
2019
2018
2020
2019
2020
2019
2020
2019
2018
(cid:3) 1,564 (cid:3) 2,062 (cid:3) 2,1(cid:22)8
(24.2) (cid:4) (5.3) (cid:4) (24.6) (cid:4) (4.0) (cid:4)
5,458
(cid:22),004
(cid:22),484
(22.1) (cid:4) (6.4) (cid:4) (22.1) (cid:4) (4.9) (cid:4)
22 (cid:4)
(cid:22)8 (cid:4)
23 (cid:4)
(cid:22)(cid:22) (cid:4)
23 (cid:4)
(cid:22)(cid:22) (cid:4)
(cid:3) (cid:22),022 (cid:3) 9,066 (cid:3) 9,662
(22.5) (cid:4) (6.2) (cid:4) (22.(cid:22)) (cid:4) (4.(cid:22)) (cid:4)
100 (cid:4)
100 (cid:4)
100 (cid:4)
(cid:40)(cid:53)(cid:51)(cid:63)(cid:62)(cid:51)(cid:57)(cid:60)(cid:57)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:68)(cid:63) (cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:63)(cid:54) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)(cid:22)
Sales
(cid:3) 2,449 (cid:3) 3,22(cid:22) (cid:3) 3,454
(24.1) (cid:4) (6.6) (cid:4) (24.3) (cid:4) (5.3) (cid:4)
Less: Supplies, paper and other sales
(885)
(1,165)
(1,2(cid:22)6)
(24.0) (cid:4) (8.(cid:22)) (cid:4) (23.6) (cid:4) ((cid:22).4) (cid:4)
(cid:27)(cid:65)(cid:69)(cid:57)(cid:64)(cid:61)(cid:53)(cid:62)(cid:68) (cid:67)(cid:49)(cid:60)(cid:53)(cid:67)
(cid:3) 1,564 (cid:3) 2,062 (cid:3) 2,1(cid:22)8
(24.2) (cid:4) (5.3) (cid:4) (24.6) (cid:4) (4.0) (cid:4)
Services, maintenance and rentals
(cid:3) 4,34(cid:22) (cid:3) 5,595 (cid:3) 5,940
(22.3) (cid:4) (5.8) (cid:4) (22.5) (cid:4) (4.4) (cid:4)
Add: Supplies, paper and other sales
885
1,165
1,2(cid:22)6
(24.0) (cid:4) (8.(cid:22)) (cid:4) (23.6) (cid:4) ((cid:22).4) (cid:4)
Add: Financing
(cid:38)(cid:63)(cid:67)(cid:68) (cid:67)(cid:49)(cid:60)(cid:53) (cid:66)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)
Americas
E(cid:40)EA
Other
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)(cid:6)(cid:13)(cid:7)
(cid:35)(cid:53)(cid:61)(cid:63)(cid:22)
Xerox Services
_____________
226
244
268
((cid:22).4) (cid:4) (9.0) (cid:4) ((cid:22).(cid:22)) (cid:4) ((cid:22).5) (cid:4)
(cid:3) 5,458 (cid:3) (cid:22),004 (cid:3) (cid:22),484
(22.1) (cid:4) (6.4) (cid:4) (22.1) (cid:4) (4.9) (cid:4)
(cid:3) 4,589 (cid:3) 5,963 (cid:3) 6,308
(23.0) (cid:4) (5.5) (cid:4) (22.(cid:22)) (cid:4) (5.2) (cid:4)
2,246
2,81(cid:22)
3,13(cid:22)
(20.3) (cid:4) (10.2) (cid:4) (21.5) (cid:4) (6.4) (cid:4)
18(cid:22)
286
21(cid:22)
(34.6) (cid:4) 31.8 (cid:4) (34.6) (cid:4) 31.8 (cid:4)
65 (cid:4)
32 (cid:4)
3 (cid:4)
66 (cid:4)
31 (cid:4)
3 (cid:4)
65 (cid:4)
33 (cid:4)
2 (cid:4)
(cid:3) (cid:22),022 (cid:3) 9,066 (cid:3) 9,662
(22.5) (cid:4) (6.2) (cid:4) (22.(cid:22)) (cid:4) (4.(cid:22)) (cid:4)
100 (cid:4)
100 (cid:4)
100 (cid:4)
(cid:3) 2,(cid:22)56 (cid:3) 3,406 (cid:3) 3,621
(19.1) (cid:4) (5.9) (cid:4) (19.2) (cid:4) (4.0) (cid:4)
39 (cid:4)
38 (cid:4)
3(cid:22) (cid:4)
(cid:27)(cid:27) - (cid:43)ee (cid:2)(cid:27)urrency Impact(cid:2) section for description of (cid:27)onstant (cid:27)urrency.
(1) Refer to the (cid:2)(cid:31)eographic (cid:43)ales (cid:27)hannels and (cid:40)roduct and Offerings Definitions(cid:2) section.
(cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)
Total revenue decreased 22.5(cid:4) for the year ended December 31, 2020 including a 0.2-percentage point favorable
impact from currency and an approximate 1.2-percentage point favorable impact from 2020 partner dealer
acquisitions, partially offset by an approximate 0.6-percentage point unfavorable impact from a one-time upfront
OE(cid:40) license fee of (cid:3)(cid:22)(cid:22) million received in the prior year. Total revenue decreased 6.2(cid:4) for the year ended
December 31, 2019 compared to the prior year, including a 1.5-percentage point unfavorable impact from currency
and an approximate 0.8-percentage point favorable impact from the OE(cid:40) license fee.
The CO(cid:49)ID-19 pandemic significantly impacted our 2020 revenues due to business closures and office building
capacity restrictions that slowed our customers' purchasing decisions and caused lower printing volumes on our
devices. The biggest impact from the pandemic occurred in the second quarter 2020. The rate of revenue declines
in our business moderated through the third quarter 2020, consistent with business reopenings. This trend
continued in the earlier part of the fourth quarter, however, the resurgence of the virus in several European countries
and U.S. regions at the end of the year halted the recovery in the latter part of the fourth quarter and, as a result,
our rate of revenue decline during the fourth quarter remained virtually unchanged as compared to the third quarter
after excluding the one-time OE(cid:40) license fee received in the prior year, as described above.
(cid:34)eographically, revenue declines from our E(cid:40)EA operations were smaller, primarily as a result of the favorable
impact from recent acquisitions in the region, as well as higher installation of mono devices in our developing
regions of E(cid:40)EA associated with our hybrid wor(cid:65)place promotions. The E(cid:40)EA region also benefited from wider
reopenings of wor(cid:65)places and economies earlier in 2020, as compared to our Americas Organi(cid:80)ation, for which
reopenings did not begin until later in the third quarter 2020. Revenue declines in our Americas Organi(cid:80)ation were
larger in our indirect channels in the U.S, whereas higher sales of IT Services through our XBS sales organi(cid:80)ation,
as well as higher sales to our U.S. government accounts and higher installs of our mono personal printers in Latin
America provided a partial offset. Total revenues included the following:
Xerox 2020 Annual Report 39
Xerox 2020 Annual Report 39
Table of Contents
(cid:38)(cid:63)(cid:67)(cid:68) (cid:67)(cid:49)(cid:60)(cid:53) (cid:66)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)
(cid:43)ost sale revenue primarily reflects contracted services, equipment maintenance, supplies and financing. These
revenues are associated not only with the population of devices in the field, which is affected by installs and
removals, but also by the page volumes generated from the usage of such devices and the revenue per printed
page. (cid:43)ost sale revenue also includes transactional IT hardware sales and implementation services primarily from
our XBS organi(cid:80)ation. For the year ended December 31, 2020, (cid:43)ost sale revenue decreased 22.1(cid:4) compared to
the prior year with no impact from currency and an approximate 0.8-percentage point unfavorable impact from the
upfront OE(cid:40) license fee in the prior year, excluding the impact of currency. For the year ended December 31, 2019,
(cid:43)ost sale revenue decreased 6.4(cid:4) compared to the prior year including a 1.5-percentage point unfavorable impact
from currency and an approximate 1.0-percentage point favorable impact from the OE(cid:40) license fee, excluding the
impact of currency.
(cid:43)ost sale revenue is comprised of the following:
(cid:77)
(cid:41)(cid:53)(cid:66)(cid:70)(cid:57)(cid:51)(cid:53)(cid:67)(cid:8) (cid:61)(cid:49)(cid:57)(cid:62)(cid:68)(cid:53)(cid:62)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:62)(cid:52) (cid:66)(cid:53)(cid:62)(cid:68)(cid:49)(cid:60)(cid:67) (cid:66)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53) includes rental and maintenance revenue (including bundled
supplies) as well as the post sale component of the document services revenue from our Xerox Services
offerings.
(cid:89)
(cid:89)
For the year ended December 31, 2020, these revenues decreased 22.3(cid:4), including a 0.2-percentage
point favorable impact from currency and an approximate 1.1-percentage point unfavorable impact from the
one-time OE(cid:40) license fee in the prior year. The decline at constant currency1 reflected a lower population of
devices (which is partially associated with lower installs in prior and current periods), an ongoing
competitive price environment and lower page volumes (including a higher mix of lower average-page-
volume products) that are worse than pre-CO(cid:49)ID-19 decline trends due to the impact of business closures
since (cid:40)arch 2020. (cid:50)hile these revenues are contractual in nature, on average, our bundled services
contracts include a minimum fixed charge and a significant variable component based on print volumes.
The rate of decline of these revenues moderated during third quarter 2020 (consistent with business
reopenings), however, in the fourth quarter 2020, the rate of decline began to increase as a second wave of
the CO(cid:49)ID-19 virus drove new business shutdowns in certain geographical areas in the U.S. and E(cid:40)EA
regions.
For the year ended December 31, 2019, these revenues decreased 5.8(cid:4), including a 1.4-percentage point
unfavorable impact from currency and an approximate 1.3-percentage point favorable impact from the OE(cid:40)
license fee. The decline at constant currency1 reflected the continuing trends of lower page volumes
(including a higher mix of lower usage products), an ongoing competitive price environment and a lower
population of devices, which are partially associated with continued lower Enterprise signings and lower
installs from prior and current periods. These declines were larger in the U.S. during the first half as a result
of organi(cid:80)ational changes being implemented as part of our (cid:43)ro(cid:64)ect Own It transformation actions. The
impact began to moderate late in the second quarter, and was much less in the second half of 2019.
(cid:41)(cid:69)(cid:64)(cid:64)(cid:60)(cid:57)(cid:53)(cid:67)(cid:8) (cid:64)(cid:49)(cid:64)(cid:53)(cid:66) (cid:49)(cid:62)(cid:52) (cid:63)(cid:68)(cid:56)(cid:53)(cid:66) (cid:67)(cid:49)(cid:60)(cid:53)(cid:67) includes unbundled supplies and other sales.
(cid:89)
For the year ended December 31, 2020, these revenues decreased 24.0(cid:4), including a 0.4-percentage
point unfavorable impact from currency. The decline at constant currency1 primarily reflected lower supplies
revenues associated with lower page volume trends, partially offset by higher IT revenues from our XBS
channel and from recently acquired IT dealers outside of the U.S. The decrease in supplies was significantly
impacted by lower sales through indirect channels, as resellers, in response to the lower demand caused by
the pandemic, have reduced their inventory purchases to manage liquidity. (cid:50)e expect that such resellers
will maintain lower inventories until there is a stable recovery in sales activity.
(cid:89)
For the year ended December 31, 2019, these revenues decreased 8.(cid:22)(cid:4), including a 1.3-percentage point
unfavorable impact from currency. The decline at constant currency1 primarily reflected the impact of lower
supplies revenues, primarily associated with lower page volume trends as well as the impact of lower paper
sales from developing mar(cid:65)ets (primarily from the Latin America region).
(cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:62)(cid:55) (cid:66)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53) is generated from financed equipment sale transactions. For the year ended December 31,
2020, Financing revenue decreased (cid:22).4(cid:4), including a 0.3-percentage point favorable impact from currency,
while Financing revenue for the year ended December 31, 2019 decreased 9.0(cid:4), including a 1.5-percentage
point unfavorable impact from currency. The decline in both periods reflected a continued decline in finance
receivables balance due to lower equipment sales in prior periods. The decline in 2019 also reflected a greater
mix of equipment sales to channels where our financing penetration rate and return is lower.
(cid:77)
(cid:77)
40
Xerox 2020 Annual Report 40
Table of Contents
(cid:27)(cid:65)(cid:69)(cid:57)(cid:64)(cid:61)(cid:53)(cid:62)(cid:68) (cid:67)(cid:49)(cid:60)(cid:53)(cid:67) (cid:66)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)
Equipment revenue for the three years ended December 31, 2020, 2019 and 2018 was as follows:
Revenue
(cid:4) Change
CC (cid:4) Change
(cid:4) of Equipment Revenue
(in millions)
Entry
(cid:40)id-range
High-end
Other
(cid:27)(cid:65)(cid:69)(cid:57)(cid:64)(cid:61)(cid:53)(cid:62)(cid:68) (cid:67)(cid:49)(cid:60)(cid:53)(cid:67)
_____________
2020
2019
2018
188 (cid:3)
21(cid:22) (cid:3)
(cid:3)
1,043
312
21
23(cid:22)
1,493
423
25
(cid:3) 1,564 (cid:3) 2,062 (cid:3) 2,1(cid:22)8
1,404
421
20
2019
2020
2020
2019
(13.4)(cid:4) (8.4)(cid:4) (13.8)(cid:4) (6.9)(cid:4)
(25.(cid:22))(cid:4) (6.0)(cid:4) (26.2)(cid:4) (4.9)(cid:4)
1.2(cid:4)
(25.9)(cid:4) (0.5)(cid:4) (26.5)(cid:4)
(20.0)(cid:4)
(20.0)(cid:4)
(24.2)(cid:4) (5.3)(cid:4) (24.6)(cid:4) (4.0)(cid:4)
5.0(cid:4)
5.0(cid:4)
2020
12(cid:4)
6(cid:22)(cid:4)
20(cid:4)
1(cid:4)
100(cid:4)
2019
11(cid:4)
68(cid:4)
20(cid:4)
1(cid:4)
100(cid:4)
2018
11(cid:4)
69(cid:4)
19(cid:4)
1(cid:4)
100(cid:4)
(cid:27)(cid:27) - (cid:43)ee (cid:2)(cid:27)urrency Impact(cid:2) section for description of (cid:27)onstant (cid:27)urrency.
Equipment sales revenue decreased 24.2(cid:4) for the year ended December 31, 2020 including a 0.4-percentage point
favorable impact from currency as well as the impact of price declines of approximately 5(cid:4). The CO(cid:49)ID-19
pandemic has significantly impacted our equipment sales revenue during 2020 as a result of business closures and
office building capacity restrictions that impacted our customers' purchasing decisions and caused delayed
installations. Additionally, our mix of revenues from lower-end blac(cid:65)-and-white devices increased as a result of
hybrid wor(cid:65)place trends associated with the CO(cid:49)ID-19 pandemic. For the year ended December 31, 2019,
Equipment sales decreased 5.3(cid:4) including a 1.3-percentage point unfavorable impact from currency. The decline at
constant currency1 was primarily driven by lower sales of our office-centric devices (entry and mid-range products)
partially offset by higher sales of our production-centric devices (high-end) as well as the benefit of targeted price
actions. The change at constant currency1 reflected the following:
(cid:77)
For the year ended December 31, 2020, the decrease was primarily due to lower sales of devices in our
indirect channels in E(cid:40)EA, Latin America and the U.S. affected in part by the CO(cid:49)ID-19 pandemic, partially
offset by higher installs of our blac(cid:65)-and-white devices in developing regions in E(cid:40)EA, including large-order
government deals in Eurasia.
For the year ended December 31, 2019, the decrease reflected lower sales of devices primarily in the
indirect channels in E(cid:40)EA, reflecting continued wea(cid:65)ness and delayed decisions as a result of uncertainty
in the economic environment, as well as lower revenues from our indirect channels in the U.S., reflecting
targeted price investments in the fourth quarter of 2019, partially offset by higher installs.
(cid:27)(cid:62)(cid:68)(cid:66)(cid:73)
(cid:89)
(cid:77) (cid:35)(cid:57)(cid:52)(cid:9)(cid:66)(cid:49)(cid:62)(cid:55)(cid:53)
(cid:89)
(cid:89)
For the year ended December 31, 2020, the decrease was primarily driven by the CO(cid:49)ID-19 pandemic and
related office closures, which has significantly impacted our sales through indirect channels in the U.S. and
Europe, as resellers, in response to lower demand caused by the pandemic, have reduced their inventory
purchases to manage liquidity, partially offset by strong demand for our recently launched (cid:43)rimeLin(cid:65)
devices and our new generation ConnectKey devices.
For the year ended December 31, 2019, the decrease reflected lower sales from our XBS sales
organi(cid:80)ation, which continued to recover from the impact of organi(cid:80)ational changes in the first half of 2019
that were implemented as part of our (cid:43)ro(cid:64)ect Own It transformation actions (including the transitioning of
accounts to implement coverage changes, consolidation of real estate locations and reduction of
management layers), as well as lower revenues from our indirect channels in the U.S. and E(cid:40)EA. The
decrease was partially offset by higher revenues from our U.S. Enterprise organi(cid:80)ation, which had higher
activity from light-production devices associated with the recent launch of (cid:43)rimeLin(cid:65) (an entry-level
production printer) and the benefit of a large account refresh in the second half.
(cid:77)
(cid:30)(cid:57)(cid:55)(cid:56)(cid:9)(cid:53)(cid:62)(cid:52)
(cid:89)
For the year ended December 31, 2020, the decrease primarily reflected lower installs of our (cid:49)ersant entry-
production systems and i(cid:34)en production presses, as well as lower installs of our Iridesse production
presses in E(cid:40)EA, which were partially offset by demand for our larger Baltoro cut-sheet in(cid:65)(cid:64)et press and
higher sales in the U.S. of our continuous-feed color systems.
For the year ended December 31, 2019, the increase primarily reflected higher sales of color systems
associated with continued demand for our Iridesse production press, as well as global demand for our
newly-launched Baltoro in(cid:65)(cid:64)et press. The increase also reflected higher revenues from our U.S. Enterprise
organi(cid:80)ation and from our indirect channels in the U.S., which was partially offset by lower revenues in
E(cid:40)EA, as well as lower sales from (cid:49)ersant (our lower-end production devices) and i(cid:34)en print production
systems.
_____________
(1) (cid:43)ee (cid:2)(cid:27)urrency Impact(cid:2) section for description of (cid:27)onstant (cid:27)urrency.
Xerox 2020 Annual Report 41
Xerox 2020 Annual Report 41
(cid:89)
(cid:89)
Table of Contents
(cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53) (cid:35)(cid:53)(cid:68)(cid:66)(cid:57)(cid:51)(cid:67)
Installs reflect new placements of devices only (i.e., measure does not ta(cid:65)e into account removal of devices which
may occur as a result of contract renewals or cancellations). Revenue associated with equipment installations may
be reflected up-front in Equipment sales or over time either through rental income or as part of our Xerox Services
revenues (which are both reported within our (cid:43)ost sale revenues), depending on the terms and conditions of our
agreements with customers. Installs include activity from Xerox Services as well as Xerox and non-Xerox branded
products installed by our XBS sales unit1. Detail by product group (see (cid:31)eographic (cid:43)ales (cid:27)hannels and (cid:40)roduct
and Offerings Definitions) is shown below:
Installs1 for the year ended December 31, 2020 were:
(cid:77)
(cid:77)
(cid:77)
(cid:77)
(cid:27)(cid:62)(cid:68)(cid:66)(cid:73)
(cid:77)
(cid:35)(cid:57)(cid:52)(cid:9)(cid:40)(cid:49)(cid:62)(cid:55)(cid:53)(cid:6)(cid:14)(cid:7)
(cid:77)
(cid:30)(cid:57)(cid:55)(cid:56)(cid:9)(cid:27)(cid:62)(cid:52)(cid:6)(cid:14)(cid:7)
(cid:77)
(cid:27)(cid:62)(cid:68)(cid:66)(cid:73)
(cid:77)
(cid:35)(cid:57)(cid:52)(cid:9)(cid:40)(cid:49)(cid:62)(cid:55)(cid:53)(cid:6)(cid:14)(cid:7)
(cid:77)
(cid:77)
(cid:30)(cid:57)(cid:55)(cid:56)(cid:9)(cid:27)(cid:62)(cid:52)(cid:6)(cid:14)(cid:7)
(cid:77)
(cid:77)
_____________
21(cid:4) decrease in color multifunction devices reflecting lower installs of ConnectKey devices through our indirect
channels in the U.S. and E(cid:40)EA.
20(cid:4) increase in blac(cid:65)-and-white multifunction devices reflecting higher activity primarily from sales in the lower
end of the portfolio through indirect channels in our developing regions in E(cid:40)EA and Latin America associated
with wor(cid:65)-from-home sales programs, partially offset by lower installs through our indirect channels in the U.S.
26(cid:4) decrease in mid-range color installs primarily reflecting lower installs of multifunction color devices partially
offset by strong demand for our recently launched (cid:43)rimeLin(cid:65) entry-production color devices and our new
generation of ConnectKey multifunction devices.
22(cid:4) decrease in mid-range blac(cid:65)-and-white installs reflecting in part global mar(cid:65)et trends, partially offset by
strong demand for our recently launched (cid:43)rimeLin(cid:65) light-production multi-function devices and our new
generation of ConnectKey multifunction devices.
42(cid:4) decrease in high-end color installs primarily reflecting lower installs of our lower-end (cid:49)ersant devices,
along with lower installs of our Iridesse and i(cid:34)en production systems, partially offset by strong demand for our
Baltoro cut-sheet in(cid:65)(cid:64)et press and higher installs in the U.S. of our continuous-feed systems.
13(cid:4) decrease in high-end blac(cid:65)-and-white systems reflecting lower installs of our Nuvera devices along with
mar(cid:65)et trends.
Installs1 for the year ended December 31, 2019 were:
Color multifunction devices were flat, reflecting higher installs of ConnectKey products primarily from our indirect
channels in the U.S., offset by lower installs of devices from E(cid:40)EA.
4(cid:4) decrease in blac(cid:65)-and-white multifunction devices, reflecting lower activity primarily from U.S. Enterprise
and E(cid:40)EA, as well as from our developing regions in the Americas, partially offset by higher activity from our
indirect channels in Canada, as well as XBS.
(cid:22)(cid:4) decrease in mid-range color installs, primarily reflecting lower installs of multifunction color devices through
our U.S. enterprise, partially offset by higher installs of light-production devices that sit at the higher end of the
portfolio range.
1(cid:22)(cid:4) decrease in mid-range blac(cid:65)-and-white, reflecting, in part, global mar(cid:65)et trends.
4(cid:4) decrease in high-end color installs primarily reflecting lower activity from i(cid:34)en and (cid:49)ersant production
systems, partially offset by global demand for our newly-launched Baltoro in(cid:65)(cid:64)et press and continued strong
demand for our Iridesse production press.
14(cid:4) decrease in high-end blac(cid:65)-and-white systems reflecting global mar(cid:65)et trends.
(1) During fourth (cid:67)uarter 2(cid:13)2(cid:13), we revised the measurement of total installs to include installations of (cid:48)erox and non-(cid:48)erox branded devices
made directly by our (cid:48)B(cid:43) sales unit. (cid:40)reviously, total installs were based on intercompany transfers of devices to (cid:48)B(cid:43) and was limited to
(cid:48)erox-branded devices only. (cid:25)lthough the overall impact from the change was not material, we believe the new measurement basis
provides a stronger connection between (cid:29)(cid:67)uipment sales revenues and installations. (cid:43)ee (cid:29)(cid:67)uipment Installs - (cid:37)easurement (cid:37)ethodology
(cid:45)pdate for the revision of prior (cid:67)uarters in 2(cid:13)2(cid:13) based on the new methodology. Installs growth rates for 2(cid:13)1(cid:22) were not revised and are
presented on the previously reported basis.
(2) (cid:37)id-range and (cid:32)igh-end color installations exclude (cid:30)uji (cid:48)erox digital front-end sales(cid:24) including (cid:30)uji (cid:48)erox digital front-end sales, (cid:37)id-range
color devices decreased 2(cid:19)(cid:4) and (cid:20)(cid:4) for the years ended December (cid:16)1, 2(cid:13)2(cid:13) and 2(cid:13)1(cid:22), respectively, while (cid:32)igh-end color systems
decreased (cid:17)2(cid:4) and (cid:17)(cid:4) for the years ended December (cid:16)1, 2(cid:13)2(cid:13) and 2(cid:13)1(cid:22), respectively.
42
Xerox 2020 Annual Report 42
Table of Contents
(cid:29)(cid:53)(cid:63)(cid:55)(cid:66)(cid:49)(cid:64)(cid:56)(cid:57)(cid:51) (cid:41)(cid:49)(cid:60)(cid:53)(cid:67) (cid:25)(cid:56)(cid:49)(cid:62)(cid:62)(cid:53)(cid:60)(cid:67) (cid:49)(cid:62)(cid:52) (cid:38)(cid:66)(cid:63)(cid:52)(cid:69)(cid:51)(cid:68) (cid:49)(cid:62)(cid:52) (cid:37)(cid:54)(cid:54)(cid:53)(cid:66)(cid:57)(cid:62)(cid:55)(cid:67) (cid:26)(cid:53)(cid:54)(cid:57)(cid:62)(cid:57)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Our business is aligned to a geographic focus and is primarily organi(cid:80)ed on the basis of go-to-mar(cid:65)et sales
channels, which are structured to serve a range of customers for our products and services. In 2019, we changed
our geographic structure to create a more streamlined, flatter and more effective organi(cid:80)ation, as follows:
(cid:77)
Americas, which includes our sales channels in the U.S. and Canada, as well as (cid:40)exico, and Central and South
America.
E(cid:40)EA, which includes our sales channels in Europe, the (cid:40)iddle East, Africa and India.
(cid:77)
(cid:77) Other, primarily includes sales to and royalties from Fu(cid:64)i Xerox, and our licensing revenue.
Our products and offerings include:
(cid:77)
(cid:77)
(cid:77)
(cid:77)
(cid:86)Entry(cid:87), which includes A4 devices and des(cid:65)top printers. (cid:43)rices in this product group can range from
approximately (cid:3)150 to (cid:3)3,000.
(cid:86)(cid:40)id-Range(cid:87), which includes A3 Office and Light (cid:43)roduction devices that generally serve wor(cid:65)group
environments in mid to large enterprises. (cid:43)rices in this product group can range from approximately (cid:3)2,000 to
(cid:3)(cid:22)5,000(cid:10).
(cid:86)High-End(cid:87), which includes production printing and publishing systems that generally serve the graphic
communications mar(cid:65)etplace and large enterprises. (cid:43)rices for these systems can range from approximately
(cid:3)30,000 to (cid:3)1,000,000(cid:10).
Xerox Services, which includes solutions and services that span from managing print to automating processes
to managing content. Our primary offerings are Intelligent (cid:50)or(cid:65)place Services (I(cid:50)S), as well as Digital and
Cloud (cid:43)rint Services (including centrali(cid:80)ed print services) and Communications and (cid:40)ar(cid:65)eting Solutions.
(cid:27)(cid:65)(cid:69)(cid:57)(cid:64)(cid:61)(cid:53)(cid:62)(cid:68) (cid:31)(cid:62)(cid:67)(cid:68)(cid:49)(cid:60)(cid:60)(cid:67) (cid:9) (cid:35)(cid:53)(cid:49)(cid:67)(cid:69)(cid:66)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68) (cid:35)(cid:53)(cid:68)(cid:56)(cid:63)(cid:52)(cid:63)(cid:60)(cid:63)(cid:55)(cid:73) (cid:43)(cid:64)(cid:52)(cid:49)(cid:68)(cid:53)
In the fourth quarter 2020, we updated our equipment installation measurement methodology to reflect the following:
i) activity from our XBS sales unit based on the timing of installations, whereas prior to this methodology update
XBS activity was based on units shipped to the XBS sales unit, and (ii) installations of non-Xerox branded devices
by our XBS sales unit, which, although not material, are included in equipment sales. Note: Entry installations
exclude OE(cid:40) sales(cid:26) (cid:40)id-range and High-end color installations exclude Fu(cid:64)i Xerox digital front-end sales.
(cid:27)(cid:62)(cid:68)(cid:66)(cid:73) (cid:23)(cid:16) (cid:35)(cid:28)(cid:38)(cid:67)
Color
B(cid:5)(cid:50)
(cid:35)(cid:57)(cid:52)(cid:9)(cid:66)(cid:49)(cid:62)(cid:55)(cid:53)
Color
B(cid:5)(cid:50)
(cid:30)(cid:57)(cid:55)(cid:56)(cid:9)(cid:53)(cid:62)(cid:52)
Color
B(cid:5)(cid:50)
As Reported
Updated (cid:40)ethodology
(cid:44)1
(cid:44)2
(cid:44)3
(cid:44)1
(cid:44)2
(cid:44)3
(cid:44)4
F(cid:52)
(cid:14)(cid:12)(cid:14)(cid:12) (cid:31)(cid:62)(cid:67)(cid:68)(cid:49)(cid:60)(cid:60)(cid:67) (cid:3) (cid:25)(cid:56)(cid:49)(cid:62)(cid:55)(cid:53) (cid:47)(cid:37)(cid:47)
(20) (cid:4)
2 (cid:4)
(35) (cid:4)
(9) (cid:4)
(9) (cid:4)
52 (cid:4)
(19) (cid:4)
3 (cid:4)
(33) (cid:4)
(8) (cid:4)
(9) (cid:4)
54 (cid:4)
(22) (cid:4)
28 (cid:4)
(21) (cid:4)
20 (cid:4)
(26) (cid:4)
(14) (cid:4)
(46) (cid:4)
(42) (cid:4)
(21) (cid:4)
(19) (cid:4)
(26) (cid:4)
(16) (cid:4)
(42) (cid:4)
(35) (cid:4)
(19) (cid:4)
(20) (cid:4)
(20) (cid:4)
(16) (cid:4)
(26) (cid:4)
(22) (cid:4)
(52) (cid:4)
(25) (cid:4)
(58) (cid:4)
2 (cid:4)
(38) (cid:4)
(13) (cid:4)
(50) (cid:4)
(30) (cid:4)
(55) (cid:4)
(2) (cid:4)
(39) (cid:4)
(13) (cid:4)
(26) (cid:4)
(6) (cid:4)
(42) (cid:4)
(13) (cid:4)
Xerox 2020 Annual Report 43
Xerox 2020 Annual Report 43
Table of Contents
(cid:25)(cid:63)(cid:67)(cid:68)(cid:67)(cid:8) (cid:27)(cid:72)(cid:64)(cid:53)(cid:62)(cid:67)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
(cid:41)(cid:69)(cid:61)(cid:61)(cid:49)(cid:66)(cid:73) (cid:63)(cid:54) (cid:33)(cid:53)(cid:73) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:40)(cid:49)(cid:68)(cid:57)(cid:63)(cid:67)
The following is a summary of our (cid:65)ey financial ratios used to assess our performance:
(in millions)
(cid:34)ross (cid:43)rofit
RD(cid:5)E
SA(cid:34)
Equipment (cid:34)ross (cid:40)argin
(cid:43)ost sale (cid:34)ross (cid:40)argin
Total (cid:34)ross (cid:40)argin
RD(cid:5)E as a (cid:4) of Revenue
SA(cid:34) as a (cid:4) of Revenue
(cid:43)re-tax Income
(cid:43)re-tax Income (cid:40)argin
Ad(cid:64)usted(1) Operating (cid:43)rofit
Ad(cid:64)usted(1) Operating (cid:40)argin
2020
2019
2018
2020 B(cid:14)((cid:50))
2019 B(cid:14)((cid:50))
(cid:52)ear Ended December 31,
(cid:3)
2,626
(cid:3)
3,650
(cid:3)
3,869
(cid:3)
(1,024)
(cid:3)
311
1,851
3(cid:22)3
2,085
39(cid:22)
2,3(cid:22)9
2(cid:22).4 (cid:4)
40.3 (cid:4)
3(cid:22).4 (cid:4)
4.4 (cid:4)
26.4 (cid:4)
32.6 (cid:4)
42.5 (cid:4)
40.3 (cid:4)
4.1 (cid:4)
23.0 (cid:4)
33.9 (cid:4)
41.8 (cid:4)
40.0 (cid:4)
4.1 (cid:4)
24.6 (cid:4)
62
234
(5.2) pts.
(2.2) pts.
(2.9) pts.
(0.3) pts.
(3.4) pts.
(cid:3)
(cid:3)
(cid:3)
(cid:3)
252
3.6 (cid:4)
464
6.6 (cid:4)
822
9.1 (cid:4)
1,192
13.1 (cid:4)
(cid:3)
(cid:3)
549
5.(cid:22) (cid:4)
1,093
11.3 (cid:4)
(cid:3)
(cid:3)
(5(cid:22)0)
(5.5) pts.
((cid:22)28)
(6.5) pts.
(cid:3)
(cid:3)
(219)
24
294
(1.3) pts.
0.(cid:22) pts.
0.3 pts.
(cid:84) pts.
1.6 pts.
2(cid:22)3
3.4 pts.
99
1.8 pts.
_____________
(1) Refer to the (cid:2)(cid:38)on-(cid:31)(cid:25)(cid:25)(cid:40) (cid:30)inancial (cid:37)easures(cid:2) section for an explanation of the non-(cid:31)(cid:25)(cid:25)(cid:40) financial measure.
(cid:38)(cid:66)(cid:53)(cid:9)(cid:68)(cid:49)(cid:72) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:35)(cid:49)(cid:66)(cid:55)(cid:57)(cid:62)
(cid:43)re-tax income margin for the year ended December 31, 2020 of 3.6(cid:4) decreased 5.5-percentage points compared
to 2019. The decrease primarily reflected the impact of lower ad(cid:64)usted1 operating margin (see below), of 6.5-
percentage points, as well as higher Amorti(cid:80)ation of intangible assets and Transaction and related cost, net, partially
offset by lower Restructuring and related costs, net and Other expenses, net.
(cid:43)re-tax income margin for the year ended December 31, 2019 of 9.1(cid:4) increased 3.4-percentage points compared
to 2018, reflecting the impact of higher ad(cid:64)usted1 operating margin (see below), of 1.8-percentage points, which
included an approximate 0.(cid:22)-percentage point favorable impact from the (cid:3)(cid:22)(cid:22) million OE(cid:40) license fee. The increase
also reflected the impact of lower Other expenses, net and Transactions and related costs, net. These benefits were
partially offset by higher Restructuring and related costs, net. Transaction currency had a 0.3-percentage point
unfavorable impact.
(cid:43)re-tax income margin includes Restructuring and related costs, net, the Amorti(cid:80)ation of intangible assets,
Transaction and related costs, net and Other expenses, net(cid:3) all of which are separately discussed in subsequent
sections. Ad(cid:64)usted1 Operating margin, discussed below, excludes these items.
(cid:23)(cid:52)(cid:58)(cid:69)(cid:67)(cid:68)(cid:53)(cid:52)(cid:13) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:62)(cid:55) (cid:35)(cid:49)(cid:66)(cid:55)(cid:57)(cid:62)
Ad(cid:64)usted1 operating margin for the year ended December 31, 2020 of 6.6(cid:4) decreased 6.5-percentage points
compared to 2019. The decrease reflects the impact of lower revenues, primarily as a result of the significant effect
of the CO(cid:49)ID-19 pandemic on our business and a 0.9-percentage point unfavorable impact due to an increase in
bad debt expense of (cid:3)61 million in the first quarter of 2020 to reflect the expected impact to our customer base and
related outstanding trade and finance receivable portfolio as a result of the economic disruption caused by the
pandemic. These negative impacts were partially offset by lower costs and expenses, which include savings
associated with our (cid:43)ro(cid:64)ect Own It transformation actions as well as additional savings from various cost reductions
actions to mitigate the impact of the pandemic. These actions include approximately (cid:3)10(cid:22) million from temporary
government assistance measures and furlough programs (see the (cid:29)(cid:63)(cid:70)(cid:53)(cid:66)(cid:62)(cid:61)(cid:53)(cid:62)(cid:68) (cid:23)(cid:67)(cid:67)(cid:57)(cid:67)(cid:68)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:62)(cid:52) (cid:28)(cid:69)(cid:66)(cid:60)(cid:63)(cid:69)(cid:55)(cid:56)
(cid:38)(cid:66)(cid:63)(cid:55)(cid:66)(cid:49)(cid:61)(cid:67) section for additional details) and other reductions in discretionary spending such as near-term targeted
mar(cid:65)eting programs, the use of contract employees and the temporary suspension of 401((cid:65)) matching contributions
for the year 2020, as well as lower compensation incentives consistent with lower sales and operating results. The
decrease also included an approximate 0.4-percentage point unfavorable impact from transaction currency and was
affected by an approximate 0.(cid:22)-percentage point unfavorable impact from the one-time OE(cid:40) license fee received in
the prior year.
Ad(cid:64)usted1 operating margin for the year ended December 31, 2019 of 13.1(cid:4) increased 1.8-percentage points as
compared to 2018, primarily reflecting an approximate 0.(cid:22)-percentage point favorable impact from the (cid:3)(cid:22)(cid:22) million
OE(cid:40) license fee, as well as the impact of cost and expense reductions associated with our (cid:43)ro(cid:64)ect Own It
44
Xerox 2020 Annual Report 44
Table of Contents
transformation actions, which more than offset the pace of revenue decline. The increase also reflected a (cid:3)44
million favorable impact from higher costs in the prior year related to the exit of a surplus real estate facility and the
termination of certain IT pro(cid:64)ects. Ad(cid:64)usted1 operating margin also included a 0.3-percentage point unfavorable
impact from transaction currency.
(cid:1)_____________
(1) Refer to Operating Income and (cid:37)argin reconciliation table in the (cid:2)(cid:38)on-(cid:31)(cid:25)(cid:25)(cid:40) (cid:30)inancial (cid:37)easures(cid:2) section.
(cid:29)(cid:66)(cid:63)(cid:67)(cid:67) (cid:35)(cid:49)(cid:66)(cid:55)(cid:57)(cid:62)
Total gross margin for the year ended December 31, 2020 of 3(cid:22).4(cid:4) decreased 2.9-percentage points compared to
2019, reflecting the impact of lower revenues (including from our higher margin post sale stream) primarily as a
result of the significant effect of the CO(cid:49)ID-19 pandemic due to business closures, as well as price promotion
programs, and an approximate 0.5-percentage point adverse combined impact from transaction currency and higher
tariffs. The decrease was also affected by an approximate 0.6-percentage point unfavorable impact from the one-
time OE(cid:40) license fee received in the prior year. These headwinds were partially offset by the cost savings from our
(cid:43)ro(cid:64)ect Own It transformation actions, as well as additional cost reduction actions to mitigate the impact of the
pandemic, including savings of approximately (cid:3)(cid:22)4 million from temporary government assistance measures and
furlough programs and other reductions in discretionary spend such as the use of contract employees and the
temporary suspension of 401((cid:65)) matching contributions.
Total gross margin for the year ended December 31, 2019 of 40.3(cid:4) increased 0.3-percentage points compared to
2018, primarily reflecting an approximate 0.6-percentage point favorable impact from the (cid:3)(cid:22)(cid:22) million OE(cid:40) license
fee, as well as an unfavorable impact from transaction currency of 0.3-percentage points. (cid:34)ross margin also reflects
cost reductions from our business transformation actions as part of (cid:43)ro(cid:64)ect Own It, which were entirely offset by the
impact of targeted pricing actions.
Equipment gross margin for the year ended December 31, 2020 of 2(cid:22).4(cid:4) decreased 5.2-percentage points
compared to 2019, primarily reflecting the impact of lower revenues (primarily as a result of CO(cid:49)ID-19-related
business closures) as well as the adverse impact of price promotion programs, incremental tariff costs and the 0.6-
percentage point unfavorable impact from transaction currency partially offset by cost reductions from (cid:43)ro(cid:64)ect Own
It.
Equipment gross margin for the year ended December 31, 2019 of 32.6(cid:4) decreased 1.3-percentage points
compared to 2018, primarily as a result of targeted pricing actions, which were partially offset by savings from cost
productivity, as well as a more profitable mix of revenues from the higher end of the portfolio. Equipment gross
margin included the unfavorable impact from transaction currency of 0.8-percentage points.
(cid:43)ost sale gross margin for the year ended December 31, 2020 of 40.3(cid:4) decreased 2.2-percentage points
compared to 2019, reflecting the impact of lower revenues (primarily as a result of CO(cid:49)ID-19-related business
closures impacting page volumes) and price erosion on contract renewals, partially offset by productivity and cost
savings and restructuring savings associated with (cid:43)ro(cid:64)ect Own It transformation actions, as well as savings from our
additional cost reduction actions to mitigate the impact of the pandemic. These actions include approximately (cid:3)(cid:22)3
million of savings from temporary government assistance measures and furlough programs and other reductions in
discretionary spend such as the use of contract employees and the temporary suspension of 401((cid:65)) matching
contributions. The decrease was also affected by an approximate 0.6-percentage point unfavorable impact from the
one-time OE(cid:40) license fee received in the prior year.
(cid:43)ost sale gross margin for the year ended December 31, 2019 of 42.5(cid:4) increased 0.(cid:22)-percentage points compared
to 2018, including an approximate 0.6-percentage point favorable impact from the (cid:3)(cid:22)(cid:22) million OE(cid:40) license fee, as
well as cost reductions from our business transformation actions, offset by lower revenues and lower pricing on
contract renewals.
(cid:40)(cid:53)(cid:67)(cid:53)(cid:49)(cid:66)(cid:51)(cid:56)(cid:8) (cid:26)(cid:53)(cid:70)(cid:53)(cid:60)(cid:63)(cid:64)(cid:61)(cid:53)(cid:62)(cid:68) (cid:49)(cid:62)(cid:52) (cid:27)(cid:62)(cid:55)(cid:57)(cid:62)(cid:53)(cid:53)(cid:66)(cid:57)(cid:62)(cid:55) (cid:27)(cid:72)(cid:64)(cid:53)(cid:62)(cid:67)(cid:53)(cid:67) (cid:6)(cid:40)(cid:26)(cid:4)(cid:27)(cid:7)
(in millions)
R(cid:5)D
Sustaining engineering
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:26)(cid:4)(cid:27) (cid:27)(cid:72)(cid:64)(cid:53)(cid:62)(cid:67)(cid:53)(cid:67)
(cid:52)ear Ended December 31,
Change
2020
2019
2018
2020
2019
(cid:3)
(cid:3)
25(cid:22) (cid:3)
54
311 (cid:3)
311 (cid:3)
62
3(cid:22)3 (cid:3)
325 (cid:3)
(cid:22)2
39(cid:22) (cid:3)
(54) (cid:3)
(8)
(62) (cid:3)
(14)
(10)
(24)
RD(cid:5)E as a percentage of revenue for the year ended December 31, 2020 of 4.4(cid:4) was 0.3-percentage points
higher compared to 2019, as the impact of revenue declines outpaced the rate of cost reductions.
Xerox 2020 Annual Report 45
Xerox 2020 Annual Report 45
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Table of Contents
RD(cid:5)E of (cid:3)311 million for the year ended December 31, 2020, decreased (cid:3)62 million from 2019, reflecting savings
from (cid:43)ro(cid:64)ect Own It that enhanced simplification and rationali(cid:80)ation in our core technology spend, and other
temporary cost actions, as well as the impact from the timing of investments, partially offset by higher spend in our
innovation areas.
RD(cid:5)E as a percentage of revenue for the year ended December 31, 2019 of 4.1(cid:4) was flat compared to 2018.
RD(cid:5)E of (cid:3)3(cid:22)3 million for the year ended December 31, 2019 decreased (cid:3)24 million from 2018 reflecting cost
reductions from our (cid:43)ro(cid:64)ect Own It transformation actions, including lower sustaining engineering expenses, partially
offset by modest investments in innovation in complementary mar(cid:65)et areas.
(cid:41)(cid:53)(cid:60)(cid:60)(cid:57)(cid:62)(cid:55)(cid:8) (cid:23)(cid:52)(cid:61)(cid:57)(cid:62)(cid:57)(cid:67)(cid:68)(cid:66)(cid:49)(cid:68)(cid:57)(cid:70)(cid:53) (cid:49)(cid:62)(cid:52) (cid:29)(cid:53)(cid:62)(cid:53)(cid:66)(cid:49)(cid:60) (cid:27)(cid:72)(cid:64)(cid:53)(cid:62)(cid:67)(cid:53)(cid:67) (cid:6)(cid:41)(cid:23)(cid:29)(cid:7)
SA(cid:34) as a percentage of revenue of 26.4(cid:4) increased 3.4-percentage points for the year ended December 31, 2020
compared to 2019 and included a 0.9-percentage point unfavorable impact due to the increase in bad debt expense
of (cid:3)61 million in the first quarter 2020. The increase also reflected the impact of lower revenues, partially offset by
the benefits from cost reductions associated with our (cid:43)ro(cid:64)ect Own It transformation actions and savings from
additional cost reduction actions to mitigate the impact of the pandemic. These actions included approximately (cid:3)32
million from temporary government assistance measures and furlough programs, and other reductions in
discretionary spend such as near-term targeted mar(cid:65)eting programs, the use of contract employees and the
temporary suspension of the 401((cid:65)) matching contributions, as well as lower compensation incentives consistent
with lower sales and operating results.
SA(cid:34) expenses of (cid:3)1,851 million for the year ended December 31, 2020 were (cid:3)234 million lower than 2019,
reflecting cost savings and restructuring savings associated with our (cid:43)ro(cid:64)ect Own It transformation actions and from
additional cost reduction actions to mitigate the impact of the pandemic, as noted above. These savings were
partially offset by higher bad debt expense, as well as expenses from recent acquisitions.
Bad debt expense for the year ended December 31, 2020 was (cid:3)116 million or (cid:3)(cid:22)0 million higher than the prior year
primarily as a result of the increase in the bad debt provision recorded in first quarter 2020, which reflects the
estimated impact on our customer base and related outstanding receivables portfolio as a result of the economic
disruption caused by the CO(cid:49)ID-19 pandemic. The ma(cid:64)ority of the increased provision is related to finance
receivables due to their larger balance and longer-term nature. During the remainder of 2020, write-offs as well as
the bad debt reserves for our trade and finance receivables portfolios were in line with our pro(cid:64)ections and
consistent with future expectations regarding our estimated impacts from the CO(cid:49)ID-19 pandemic. (cid:50)e continue to
monitor developments regarding the pandemic, including business closures and mitigating government support
actions and as a result our reserves may need to be updated in future periods. Bad debt expense of approximately
2.(cid:22)(cid:4) percent of total gross receivables on a trailing-twelve-month basis (TT(cid:40)) was higher than the 2019 trend of
less than one percent, reflecting the significant increase in 2020 due to impacts from the CO(cid:49)ID-19 pandemic.
SA(cid:34) as a percentage of revenue of 23.0(cid:4) decreased 1.6-percentage points for the year ended December 31, 2019
compared to 2018 primarily reflecting expense reductions from our business transformation actions. The decrease
in SA(cid:34) as a percentage of revenue includes the benefit from a 0.4-percentage point unfavorable impact from the
exit of a real estate facility and the cancellation of certain IT pro(cid:64)ects in 2018.
SA(cid:34) expenses of (cid:3)2,085 million for the year ended December 31, 2019 were (cid:3)294 million lower than 2018,
including an approximate (cid:3)30 million unfavorable impact from currency. The decrease primarily reflected expense
reductions from our (cid:43)ro(cid:64)ect Own It transformation actions as well as lower compensation expense(cid:26) the reduction
also includes the favorable impact of (cid:3)44 million higher costs in 2018 related to the accelerated depreciation
associated with the exit of a surplus real estate facility and the termination of certain IT pro(cid:64)ects. Bad debt expense
for the year ended December 31, 2019 was (cid:3)46 million or (cid:3)10 million higher than the prior year primarily due to an
increased level of sales-type leases as a result of our adoption of ASC Topic 842 - Leases and associated changes
in the collectibility assessment of certain leases as well as an increased mix of high-end equipment sales (Refer to
Note 4 - Lessor in the Consolidated Financial Statements for additional information regarding our adoption of ASC
842). On a trailing twelve-month basis (TT(cid:40)), bad debt expense remained at less than one percent of total
receivables.
(cid:40)(cid:53)(cid:67)(cid:68)(cid:66)(cid:69)(cid:51)(cid:68)(cid:69)(cid:66)(cid:57)(cid:62)(cid:55) (cid:49)(cid:62)(cid:52) (cid:40)(cid:53)(cid:60)(cid:49)(cid:68)(cid:53)(cid:52) (cid:25)(cid:63)(cid:67)(cid:68)(cid:67)(cid:8) (cid:36)(cid:53)(cid:68)
(cid:50)e incurred restructuring and related costs, net of (cid:3)93 million for the year ended December 31, 2020, as compared
to (cid:3)229 million for the year ended December 31, 2019. These costs were primarily related to the implementation of
initiatives under our business transformation pro(cid:64)ects including (cid:43)ro(cid:64)ect Own It. The decrease in restructuring and
related costs in 2020 is partially due to a higher level of asset impairments and severance and related costs in 2019
for employees transferred as part of an outsourcing arrangement. The following is a brea(cid:65)down of costs:
(in millions)
Restructuring and severance costs(1)
Asset impairments(2)
Other contractual termination costs(3)
Net reversals(4)
Restructuring and asset impairment costs
Retention related severance(cid:14)bonuses(5)
Contractual severance costs(6)
Consulting and other costs((cid:22))
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)
respectively.
(cid:52)ear Ended December 31,
2020
2019
(cid:3)
10(cid:22)
(cid:3)
6
3
(29)
8(cid:22)
4
(2)
4
(cid:3)
93
(cid:3)
81
61
19
(34)
12(cid:22)
39
43
20
229
(1) Reflects headcount reductions of approximately 1,(cid:21)(cid:18)(cid:13) and 1,(cid:13)(cid:13)(cid:13) employees worldwide for the years ended December (cid:16)1, 2(cid:13)2(cid:13) and 2(cid:13)1(cid:22),
(2) (cid:40)rimarily related to the exit and abandonment of leased and owned facilities. (cid:30)or the years ended December (cid:16)1, 2(cid:13)2(cid:13) and 2(cid:13)1(cid:22), the charge
includes the accelerated write-off of (cid:3)(cid:17) million and (cid:3)(cid:16)(cid:22) million, respectively, for leased right-of-use assets and (cid:3)2 million and (cid:3)22 million,
respectively, for owned assets, upon exit from the facilities, net of any potential sublease income and other recoveries.
((cid:16)) (cid:40)rimarily includes additional costs incurred upon the exit from our facilities including decommissioning costs and associated contractual
((cid:17)) Reflects net reversals for changes in estimated reserves from prior period initiatives.
((cid:18))
Includes retention related severance and bonuses for employees expected to continue wor(cid:61)ing beyond their minimum retention period
termination costs.
before termination.
((cid:19)) (cid:40)rimarily reflects severance and other related costs associated with employees transferred (approximately 2,2(cid:13)(cid:13)) as part of a shared
service arrangement entered into with (cid:32)(cid:27)(cid:36) Technologies.
((cid:20)) Represents professional support services associated with our business transformation initiatives.
Restructuring and asset impairment costs were (cid:3)116 million for the year ended December 31, 2020 and included
(cid:3)10(cid:22) million of severance costs related to headcount reductions of approximately 1,850 employees worldwide, (cid:3)3
million of other contractual termination costs and (cid:3)6 million of asset impairment charges. These costs were partially
offset by (cid:3)29 million of net reversals, primarily resulting from changes in estimated reserves from prior period
initiatives.
leases.
2020 actions impacted several functional areas, with approximately 55(cid:4) focused on gross margin improvements
and approximately 45(cid:4) focused on SA(cid:34) reductions. (cid:50)e expect 2021 pre-tax savings of approximately (cid:3)(cid:22)0 million
from our 2020 restructuring actions.
Restructuring and asset impairment costs were (cid:3)161 million for the year ended December 31, 2019 and included
(cid:3)81 million of severance costs related to headcount reductions of approximately 1,000 employees worldwide, (cid:3)19
million of other contractual termination costs and (cid:3)61 million of asset impairment charges. These costs were
partially offset by (cid:3)34 million of net reversals, primarily resulting from changes in estimated reserves from prior
period initiatives as well as (cid:3)10 million in favorable ad(cid:64)ustments from the early termination of prior period impaired
2019 actions impacted several functional areas, with approximately 15(cid:4) focused on gross margin improvements,
approximately 80(cid:4) focused on SA(cid:34) reductions, and the remainder focused on RD(cid:5)E optimi(cid:80)ation.
The implementation of our (cid:43)ro(cid:64)ect Own It initiatives as well as other business transformation initiatives is expected
to continue to deliver significant cost savings in 2021. (cid:50)hile many initiatives are underway and have yet to yield the
full transformation benefits expected upon their completion, the changes implemented thus far have improved our
cost structure and are beginning to yield longer-term benefits. However, expected savings associated with these
initiatives may be offset to some extent by business disruption during the implementation phase as well as
investments in new processes and systems until the initiatives are fully implemented and stabili(cid:80)ed.
46
Xerox 2020 Annual Report 46
Xerox 2020 Annual Report 4(cid:22)
Table of Contents
(cid:40)(cid:53)(cid:67)(cid:68)(cid:66)(cid:69)(cid:51)(cid:68)(cid:69)(cid:66)(cid:57)(cid:62)(cid:55) (cid:49)(cid:62)(cid:52) (cid:40)(cid:53)(cid:60)(cid:49)(cid:68)(cid:53)(cid:52) (cid:25)(cid:63)(cid:67)(cid:68)(cid:67)(cid:8) (cid:36)(cid:53)(cid:68)
(cid:50)e incurred restructuring and related costs, net of (cid:3)93 million for the year ended December 31, 2020, as compared
to (cid:3)229 million for the year ended December 31, 2019. These costs were primarily related to the implementation of
initiatives under our business transformation pro(cid:64)ects including (cid:43)ro(cid:64)ect Own It. The decrease in restructuring and
related costs in 2020 is partially due to a higher level of asset impairments and severance and related costs in 2019
for employees transferred as part of an outsourcing arrangement. The following is a brea(cid:65)down of costs:
(in millions)
Restructuring and severance costs(1)
Asset impairments(2)
Other contractual termination costs(3)
Net reversals(4)
Restructuring and asset impairment costs
Retention related severance(cid:14)bonuses(5)
Contractual severance costs(6)
Consulting and other costs((cid:22))
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)(cid:54)
(cid:52)ear Ended December 31,
2020
2019
(cid:3)
10(cid:22)
(cid:3)
6
3
(29)
8(cid:22)
4
(2)
4
(cid:3)
93
(cid:3)
81
61
19
(34)
12(cid:22)
39
43
20
229
(1) Reflects headcount reductions of approximately 1,(cid:21)(cid:18)(cid:13) and 1,(cid:13)(cid:13)(cid:13) employees worldwide for the years ended December (cid:16)1, 2(cid:13)2(cid:13) and 2(cid:13)1(cid:22),
respectively.
(2) (cid:40)rimarily related to the exit and abandonment of leased and owned facilities. (cid:30)or the years ended December (cid:16)1, 2(cid:13)2(cid:13) and 2(cid:13)1(cid:22), the charge
includes the accelerated write-off of (cid:3)(cid:17) million and (cid:3)(cid:16)(cid:22) million, respectively, for leased right-of-use assets and (cid:3)2 million and (cid:3)22 million,
respectively, for owned assets, upon exit from the facilities, net of any potential sublease income and other recoveries.
((cid:16)) (cid:40)rimarily includes additional costs incurred upon the exit from our facilities including decommissioning costs and associated contractual
termination costs.
((cid:17)) Reflects net reversals for changes in estimated reserves from prior period initiatives.
((cid:18))
Includes retention related severance and bonuses for employees expected to continue wor(cid:61)ing beyond their minimum retention period
before termination.
((cid:19)) (cid:40)rimarily reflects severance and other related costs associated with employees transferred (approximately 2,2(cid:13)(cid:13)) as part of a shared
service arrangement entered into with (cid:32)(cid:27)(cid:36) Technologies.
((cid:20)) Represents professional support services associated with our business transformation initiatives.
Restructuring and asset impairment costs were (cid:3)116 million for the year ended December 31, 2020 and included
(cid:3)10(cid:22) million of severance costs related to headcount reductions of approximately 1,850 employees worldwide, (cid:3)3
million of other contractual termination costs and (cid:3)6 million of asset impairment charges. These costs were partially
offset by (cid:3)29 million of net reversals, primarily resulting from changes in estimated reserves from prior period
initiatives.
2020 actions impacted several functional areas, with approximately 55(cid:4) focused on gross margin improvements
and approximately 45(cid:4) focused on SA(cid:34) reductions. (cid:50)e expect 2021 pre-tax savings of approximately (cid:3)(cid:22)0 million
from our 2020 restructuring actions.
Restructuring and asset impairment costs were (cid:3)161 million for the year ended December 31, 2019 and included
(cid:3)81 million of severance costs related to headcount reductions of approximately 1,000 employees worldwide, (cid:3)19
million of other contractual termination costs and (cid:3)61 million of asset impairment charges. These costs were
partially offset by (cid:3)34 million of net reversals, primarily resulting from changes in estimated reserves from prior
period initiatives as well as (cid:3)10 million in favorable ad(cid:64)ustments from the early termination of prior period impaired
leases.
2019 actions impacted several functional areas, with approximately 15(cid:4) focused on gross margin improvements,
approximately 80(cid:4) focused on SA(cid:34) reductions, and the remainder focused on RD(cid:5)E optimi(cid:80)ation.
The implementation of our (cid:43)ro(cid:64)ect Own It initiatives as well as other business transformation initiatives is expected
to continue to deliver significant cost savings in 2021. (cid:50)hile many initiatives are underway and have yet to yield the
full transformation benefits expected upon their completion, the changes implemented thus far have improved our
cost structure and are beginning to yield longer-term benefits. However, expected savings associated with these
initiatives may be offset to some extent by business disruption during the implementation phase as well as
investments in new processes and systems until the initiatives are fully implemented and stabili(cid:80)ed.
Xerox 2020 Annual Report 47
Xerox 2020 Annual Report 4(cid:22)
Table of Contents
(cid:40)(cid:53)(cid:67)(cid:68)(cid:66)(cid:69)(cid:51)(cid:68)(cid:69)(cid:66)(cid:57)(cid:62)(cid:55) (cid:41)(cid:69)(cid:61)(cid:61)(cid:49)(cid:66)(cid:73)
The restructuring reserve balance as of December 31, 2020 for all programs was (cid:3)103 million, which is expected to
be paid over the next twelve months.
Refer to Note 14 - Restructuring (cid:43)rograms in the Consolidated Financial Statements for additional information
regarding our restructuring programs.
(cid:42)(cid:66)(cid:49)(cid:62)(cid:67)(cid:49)(cid:51)(cid:68)(cid:57)(cid:63)(cid:62) (cid:49)(cid:62)(cid:52) (cid:40)(cid:53)(cid:60)(cid:49)(cid:68)(cid:53)(cid:52) (cid:25)(cid:63)(cid:67)(cid:68)(cid:67)(cid:8) (cid:36)(cid:53)(cid:68)
Transaction and related costs, net primarily reflect costs from third party providers for professional services
associated with certain strategic (cid:40)(cid:5)A pro(cid:64)ects. Transaction and related costs, net, were (cid:3)18 million in 2020 as
compared to (cid:3)12 million incurred in 2019.
Transaction and related costs, net, were (cid:3)68 million in 2018 and reflect costs related to the proposed combination
transaction with Fu(cid:64)i Xerox including financing costs and costs associated with litigation that resulted from the
proposed transaction, which was terminated in (cid:40)ay 2018. These costs were partially offset by insurance recoveries
and a settlement refund from a financial adviser that had been associated with the terminated transaction. (cid:50)e
continue to pursue additional recoveries from insurance carriers and other parties for costs and expenses related to
the terminated transaction and therefore additional recoveries and ad(cid:64)ustments may be recorded in future periods,
when finali(cid:80)ed.
(cid:23)(cid:61)(cid:63)(cid:66)(cid:68)(cid:57)(cid:74)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:63)(cid:54) (cid:31)(cid:62)(cid:68)(cid:49)(cid:62)(cid:55)(cid:57)(cid:50)(cid:60)(cid:53) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
Amorti(cid:80)ation of intangible assets for the three years ended December 31, 2020(cid:3) 2019 and 2018 was (cid:3)56 million,
(cid:3)45 million and (cid:3)48 million, respectively. The increase of (cid:3)11 million in 2020 as compared to 2019 was primarily due
to the accelerated write-off of certain XBS tradenames as part of our continued efforts to realign and consolidate this
sales unit as part of (cid:43)ro(cid:64)ect Own It, as well as the impact from intangible assets recorded on the partner dealer
acquisitions in 2020. The decrease of (cid:3)3 million in 2019 as compared to 2018, was primarily the result of a lower
level of acquisitions in prior years, and was partially offset by the accelerated write-off of trade names associated
with our realignment and consolidation of certain XBS sales units as part of (cid:43)ro(cid:64)ect Own It.
Refer to Note 13 - (cid:34)oodwill and Intangible Assets, Net in the Consolidated Financial Statements for additional
information regarding our intangible assets.
(cid:45)(cid:63)(cid:66)(cid:60)(cid:52)(cid:71)(cid:57)(cid:52)(cid:53) (cid:27)(cid:61)(cid:64)(cid:60)(cid:63)(cid:73)(cid:61)(cid:53)(cid:62)(cid:68)
(cid:50)orldwide employment was approximately 24,(cid:22)00 as of December 31, 2020 and decreased by approximately 2,300
from December 31, 2019. The reduction resulted from net attrition (attrition net of gross hires), a large portion of
which is not expected to be bac(cid:65)filled, as well as the impact of organi(cid:80)ational changes.
(cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:27)(cid:72)(cid:64)(cid:53)(cid:62)(cid:67)(cid:53)(cid:67)(cid:8) (cid:36)(cid:53)(cid:68)
(in millions)
Non-financing interest expense
Interest income
Non-service retirement-related costs
(cid:34)ains on sales of businesses and assets
Currency losses, net
Loss on sales of accounts receivable
Loss on early extinguishment of debt
Litigation matters
Contract termination costs - IT services
Tax indemnification from Conduent
All other expenses, net
(cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:53)(cid:72)(cid:64)(cid:53)(cid:62)(cid:67)(cid:53)(cid:67)(cid:8) (cid:62)(cid:53)(cid:68)
(cid:36)(cid:63)(cid:62)(cid:9)(cid:54)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:62)(cid:55) (cid:57)(cid:62)(cid:68)(cid:53)(cid:66)(cid:53)(cid:67)(cid:68) (cid:53)(cid:72)(cid:64)(cid:53)(cid:62)(cid:67)(cid:53)
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:3)
94 (cid:3)
105 (cid:3)
(14)
(29)
(30)
3
2
26
(1)
3
(9)
(cid:84)
(16)
18
(21)
(cid:22)
3
(cid:84)
(8)
(12)
(cid:84)
8
(cid:3)
45 (cid:3)
84 (cid:3)
114
(15)
150
(35)
5
3
(cid:84)
1
43
(cid:84)
5
2(cid:22)1
Non-financing interest expense for the year ended December 31, 2020 of (cid:3)94 million was (cid:3)11 million lower than
2019. (cid:50)hen non-financing interest expense is combined with financing interest expense (Cost of financing), total
interest expense of (cid:3)215 million decreased by (cid:3)21 million from the prior year period reflecting a lower average debt
balance primarily due to the full-year effect of the 2019 debt repayments that were not refinanced.
48
Xerox 2020 Annual Report 48
Table of Contents
NOTE: Both Xerox Holdings and Xerox reported total interest expense of (cid:3)215 million, however, the amount
reported by Xerox includes (cid:3)32 million of interest paid to Xerox Holdings as reimbursement for the interest expense
incurred on the Xerox Holdings Corporation Senior Notes as the net proceeds from those notes were contributed in
full to Xerox and used to repay existing debt of Xerox Corporation.
Non-financing interest expense for the year ended December 31, 2019 of (cid:3)105 million was (cid:3)9 million lower than
2018. (cid:50)hen non-financing interest expense is combined with financing interest expense (Cost of financing), total
interest expense decreased by (cid:3)10 million from the prior year. The decrease is primarily due to a lower debt
balance reflecting the repayment of approximately (cid:3)960 million of debt maturing in 2019 that was not refinanced.
Refer to Note 16 - Debt in the Consolidated Financial Statements for additional information regarding our debt
activity as well as information regarding the allocation of interest expense.
(cid:36)(cid:63)(cid:62)(cid:9)(cid:67)(cid:53)(cid:66)(cid:70)(cid:57)(cid:51)(cid:53) (cid:66)(cid:53)(cid:68)(cid:57)(cid:66)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:9)(cid:66)(cid:53)(cid:60)(cid:49)(cid:68)(cid:53)(cid:52) (cid:51)(cid:63)(cid:67)(cid:68)(cid:67)
Non-service retirement-related costs decreased (cid:3)4(cid:22) million for the year ended December 31, 2020 as compared to
2019 primarily driven by lower losses from pension settlements in the U.S. of (cid:3)53 million, a (cid:3)40 million decrease
compared to 2019.
Non-service retirement-related costs decreased (cid:3)132 million for the year ended December 31, 2019 as compared to
the prior year primarily due to the favorable impact of a 2018 amendment to our U.S. Retiree Health (cid:43)lan and lower
losses from pension settlements in the U.S. of (cid:3)93 million, an (cid:3)80 million decrease compared to the prior year.
Refer to Note 19 - Employee Benefit (cid:43)lans in the Consolidated Financial Statements for additional information
regarding non-service retirement-related costs.
(cid:29)(cid:49)(cid:57)(cid:62)(cid:67) (cid:63)(cid:62) (cid:67)(cid:49)(cid:60)(cid:53)(cid:67) (cid:63)(cid:54) (cid:50)(cid:69)(cid:67)(cid:57)(cid:62)(cid:53)(cid:67)(cid:67)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:49)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
The gains on sales of businesses and assets in all periods reflect the sales of non-core business assets.
(cid:34)(cid:63)(cid:67)(cid:67) (cid:63)(cid:62) (cid:53)(cid:49)(cid:66)(cid:60)(cid:73) (cid:53)(cid:72)(cid:68)(cid:57)(cid:62)(cid:55)(cid:69)(cid:57)(cid:67)(cid:56)(cid:61)(cid:53)(cid:62)(cid:68) (cid:63)(cid:54) (cid:52)(cid:53)(cid:50)(cid:68)
During fourth quarter 2020 we recorded a (cid:3)26 million loss associated with the early extinguishment of (cid:3)1,062 million
of the Senior Notes due (cid:40)ay 2021. The net loss included the payment of a redemption premium of (cid:3)24 million as
well as the write-off of unamorti(cid:80)ed debt issuance costs and other debt carrying value ad(cid:64)ustments.
Refer to Note 16 - Debt in the Consolidated Financial Statements for additional information regarding our debt
activity.
(cid:34)(cid:57)(cid:68)(cid:57)(cid:55)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:61)(cid:49)(cid:68)(cid:68)(cid:53)(cid:66)(cid:67)
Litigation matters for the year ended December 31, 2020 were (cid:3)(cid:22) million higher as compared to 2019 and (cid:3)9 million
lower for the year ended December 31, 2019, as compared to 2018. The year-over-year changes reflect the
favorable resolution of certain litigation matters in 2019.
(cid:25)(cid:63)(cid:62)(cid:68)(cid:66)(cid:49)(cid:51)(cid:68) (cid:68)(cid:53)(cid:66)(cid:61)(cid:57)(cid:62)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:51)(cid:63)(cid:67)(cid:68)(cid:67) (cid:9) (cid:31)(cid:42) (cid:67)(cid:53)(cid:66)(cid:70)(cid:57)(cid:51)(cid:53)(cid:67)
Contract termination costs were a (cid:3)3 million charge in 2020 and a (cid:3)12 million credit in 2019 both of which are
ad(cid:64)ustments to a (cid:3)43 million penalty recorded in 2018 related to the termination of an IT services arrangement. The
penalty was associated with a minimum purchase commitment that would not be fulfilled due to the termination of
the related IT services arrangement. The ad(cid:64)ustments in 2020 and 2019 reflect changes in the estimate regarding
the expected spending in the run-off of this terminated IT services arrangement and the amount due under the
minimum purchase agreement. The minimum purchase commitment had originally been entered into in connection
with the sale of our Information Technology Outsourcing (ITO) business in 2015.
(cid:42)(cid:49)(cid:72) (cid:57)(cid:62)(cid:52)(cid:53)(cid:61)(cid:62)(cid:57)(cid:54)(cid:57)(cid:51)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:54)(cid:66)(cid:63)(cid:61) (cid:25)(cid:63)(cid:62)(cid:52)(cid:69)(cid:53)(cid:62)(cid:68)
Represents an indemnification payment expected to be received from Conduent as part of the settlement of pre-
separation unrecogni(cid:80)ed tax positions related to Conduent when included in of our consolidated return. The equal
and offsetting charge to this receipt is recorded in Income tax expense, as part of our obligation to pay the taxing
authorities.
Xerox 2020 Annual Report 49
Xerox 2020 Annual Report 49
Table of Contents
(cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:42)(cid:49)(cid:72)(cid:53)(cid:67)
The 2020 effective tax rate was 25.4(cid:4). On an ad(cid:64)usted1 basis, the 2020 effective tax rate was 26.3(cid:4). These rates
were higher than the U.S. statutory tax rate of 21(cid:4) primarily due to state taxes, non-deductible items on lower pre-
tax income and an increase in deferred tax asset valuation allowances partially offset by the impact from various tax
law changes. The ad(cid:64)usted1 effective tax rate excludes the tax impacts associated with the following charges:
Restructuring and related costs, net, Amorti(cid:80)ation of intangible assets, Transaction and related costs, net as well as
non-service retirement-related costs and other discrete, unusual or infrequent items as described in our Non-(cid:34)AA(cid:43)
Financial (cid:40)easures section.
The 2019 effective tax rate was 21.8(cid:4) and included a credit of (cid:3)35 million related to the 201(cid:22) Tax Cuts and (cid:37)obs
Act (the Tax Act). On an ad(cid:64)usted1 basis, the 2019 effective tax rate was 26.1(cid:4). Both rates were higher than the
U.S. statutory tax rate of 21(cid:4) primarily due to state taxes. In addition to excluding the impact of the Tax Act, the
ad(cid:64)usted1 effective tax rate excludes the tax impacts associated with the following charges: Restructuring and
related costs, net, Amorti(cid:80)ation of intangible assets, Transaction and related costs, net, non-service retirement-
related costs as well as other discrete, unusual or infrequent items as described in our Non-(cid:34)AA(cid:43) Financial
(cid:40)easures section.
The 2018 effective tax rate was 45.0(cid:4) and included a charge of (cid:3)89 million related to the 201(cid:22) Tax Act. On an
ad(cid:64)usted1 basis, the 2018 effective tax rate was 2(cid:22).0(cid:4). Both rates were higher than the U.S. statutory tax rate of
21(cid:4) primarily due to the geographical mix of earnings. In addition to excluding the impact of the Tax Act, the
ad(cid:64)usted1 effective tax rate excludes the tax impacts associated with the following charges: Restructuring and
related costs, net, Amorti(cid:80)ation of intangible assets, Transaction and related costs, net, non-service retirement-
related costs as well as other discrete, unusual or infrequent items as described in our Non-(cid:34)AA(cid:43) Financial
(cid:40)easures section.
Xerox operations are widely dispersed. However, no one country outside of the U.S. is a significant factor in
determining our overall effective tax rate. The tax impact from these non-U.S. operations on our full-year effective
tax rate for 2020 was (2.6)(cid:4). Refer to Note 20 - Income and Other Taxes in the Consolidated Financial Statements
for additional information regarding the geographic mix of income before taxes and the related impacts on our
effective tax rate.
Our effective tax rate is based on nonrecurring events as well as recurring factors, including the taxation of foreign
income. In addition, our effective tax rate will change based on discrete or other nonrecurring events that may not
be predictable. Excluding the effects of the Restructuring and related costs, net, Amorti(cid:80)ation of intangible assets,
Transaction and related costs, net, non-service retirement-related costs and other discrete items, we anticipate that
our ad(cid:64)usted1 effective tax rate will be approximately 26(cid:4) to 29(cid:4) for full year 2021.
(cid:1)_____________
(1) Refer to the (cid:29)ffective Tax Rate reconciliation table in the (cid:2)(cid:38)on-(cid:31)(cid:25)(cid:25)(cid:40) (cid:30)inancial (cid:37)easures(cid:2) section.
(cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73) (cid:57)(cid:62) (cid:36)(cid:53)(cid:68) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:63)(cid:54) (cid:43)(cid:62)(cid:51)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:23)(cid:54)(cid:54)(cid:57)(cid:60)(cid:57)(cid:49)(cid:68)(cid:53)(cid:67)
In November 2019, Xerox Holdings sold its remaining indirect 25(cid:4) equity interest in Fu(cid:64)i Xerox, which had been
previously accounted for as an equity method investment. Accordingly, our remaining Investment in Affiliates, at
Equity largely consists of several minor investments in entities in the (cid:40)iddle East region. Refer to Note 6 -
Divestitures, in the Consolidated Financial Statements for additional information regarding the sale Fu(cid:64)i Xerox.
(in millions)
Equity in net income of unconsolidated affiliates - Fu(cid:64)i Xerox(1)
Equity in net income of unconsolidated affiliates - continuing operations
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73) (cid:57)(cid:62) (cid:62)(cid:53)(cid:68) (cid:57)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:63)(cid:54) (cid:69)(cid:62)(cid:51)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:49)(cid:54)(cid:54)(cid:57)(cid:60)(cid:57)(cid:49)(cid:68)(cid:53)(cid:67)
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:3)
(cid:3)
(cid:84) (cid:3)
4
4 (cid:3)
14(cid:22) (cid:3)
8
155 (cid:3)
Fu(cid:64)i Xerox after-tax restructuring and other charges included in equity income
(cid:84)
20
_____________
25
8
33
95
(1) (cid:29)(cid:67)uity in net income for (cid:30)uji (cid:48)erox is reported in Income from discontinued operations, net of tax for all years presented. The e(cid:67)uity in net
income for (cid:30)uji (cid:48)erox in 2(cid:13)1(cid:22) is through the date of sale.
For the year ended December 31, 2019 equity income from Fu(cid:64)i Xerox increased (cid:3)122 million as compared to 2018,
primarily due to lower restructuring costs of (cid:3)(cid:22)5 million as well as an out-of-period ad(cid:64)ustment of (cid:3)28 million in 2018.
Refer to Note 12 - Investment in Affiliates, at Equity in the Consolidated Financial Statements for additional
information regarding our equity investments.
50
Xerox 2020 Annual Report 50
Table of Contents
(cid:36)(cid:53)(cid:68) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:54)(cid:66)(cid:63)(cid:61) (cid:25)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:69)(cid:57)(cid:62)(cid:55) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Net income from continuing operations attributable to Xerox Holdings for the year ended December 31, 2020 was
(cid:3)192 million, or (cid:3)0.84 per diluted share. On an ad(cid:64)usted1 basis, Net income from continuing operations attributable
to Xerox Holdings was (cid:3)313 million, or (cid:3)1.41 per diluted share, and includes ad(cid:64)ustments for Restructuring and
related costs, net, Amorti(cid:80)ation of intangible assets, Transaction and related costs, net as well as non-service
retirement-related costs and other discrete, unusual or infrequent items, which included a Loss on the early
extinguishment of debt, as described in our Non-(cid:34)AA(cid:43) Financial (cid:40)easures.
Net income from continuing operations attributable to Xerox Holdings for the year ended December 31, 2019 was
(cid:3)648 million, or (cid:3)2.(cid:22)8 per diluted share. On an ad(cid:64)usted1 basis, Net income from continuing operations attributable
to Xerox Holdings was (cid:3)828 million, or (cid:3)3.55 per diluted share, and includes ad(cid:64)ustments for Restructuring and
related costs, net, Amorti(cid:80)ation of intangible assets, Transaction and related costs, net as well as non-service
retirement-related costs and other discrete, unusual or infrequent items, including the impact from the Tax Act, as
described in our Non-(cid:34)AA(cid:43) Financial (cid:40)easures.
Net income from continuing operations attributable to Xerox Holdings for the year ended December 31, 2018 was
(cid:3)306 million, or (cid:3)1.16 per diluted share. On an ad(cid:64)usted1 basis, Net income from continuing operations attributable
to Xerox Holdings was (cid:3)(cid:22)45 million, or (cid:3)2.88 per diluted share, and includes ad(cid:64)ustments for Restructuring and
related costs, net, Amorti(cid:80)ation of intangible assets, Transaction and related costs, net as well as non-service
retirement-related costs and other discrete, unusual or infrequent items, including the impact from the Tax Act, as
described in our Non-(cid:34)AA(cid:43) Financial (cid:40)easures.
Refer to Note 26 - Earnings per Share in the Consolidated Financial Statements, for additional information regarding
the calculation of basic and diluted earnings per share.
_____________
(1) Refer to the (cid:38)et Income and (cid:29)(cid:40)(cid:43) reconciliation table in the (cid:2)(cid:38)on-(cid:31)(cid:25)(cid:25)(cid:40) (cid:30)inancial (cid:37)easures(cid:2) section.
(cid:26)(cid:57)(cid:67)(cid:51)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:69)(cid:53)(cid:52) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Discontinued operations relate to the November 2019 Sales of our indirect 25(cid:4) equity interest in Fu(cid:64)i Xerox (FX)
and our indirect 51(cid:4) partnership interest in Xerox International (cid:43)artners (XI(cid:43)), which had been consolidated.
Refer to Note 6 - Divestitures in the Consolidated Financial Statements for additional information regarding
discontinued operations.
(cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:25)(cid:63)(cid:61)(cid:64)(cid:66)(cid:53)(cid:56)(cid:53)(cid:62)(cid:67)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
The historical statement of Comprehensive Income was not revised to reflect the Sales of our investments in Fu(cid:64)i
Xerox and XI(cid:43) and instead reflects discontinued operations as a final ad(cid:64)ustment to the Accumulated Other
Comprehensive Loss (AOCL) balances at December 31, 2019. Accordingly, all reported amounts in 2018 reflect
movements in AOCL for both continuing operations and discontinued operations. Refer to Note 6 - Divestitures in
the Consolidated Financial Statements for additional information regarding discontinued operations.
Other comprehensive income attributable to Xerox was (cid:3)314 million in 2020 and included the following: i) net
translation ad(cid:64)ustment gains of (cid:3)241 million reflecting the strengthening of our ma(cid:64)or foreign currencies against the
U.S. Dollar during 2020(cid:26) ii) (cid:3)69 million of net gains from changes in defined benefit plans primarily reflecting net
actuarial gains due to actual returns in excess of expected returns offsetting the impacts from lower discount rates
as well as the amorti(cid:80)ation or recognition through settlement losses of accumulated losses from AOCL. These
impacts were partially offset by other losses, primarily due to unfavorable currency(cid:26) and iii) (cid:3)4 million in unreali(cid:80)ed
gains, net.
Other comprehensive income attributable to Xerox was (cid:3)46 million in 2019 and included the following: i) net
translation ad(cid:64)ustment gains of (cid:3)62 million reflecting aggregate translation gains of (cid:3)45 million from the
strengthening of most of our ma(cid:64)or foreign currencies against the U.S. Dollar during 2019, as well as a
reclassification of (cid:3)1(cid:22) million of accumulated translation losses from AOCL into earnings as a result of the
divestiture of our investments in FX and XI(cid:43)(cid:26) ii) (cid:3)10 million of net losses from changes in defined benefit plans
reflecting net losses of (cid:3)138 million associated with defined benefit plan changes during 2019, primarily as a result
of lower discount rates, as well as other losses of (cid:3)21 million, primarily due to unfavorable currency. These losses
were partially offset by the reclassification of (cid:3)148 million of accumulated losses from AOCL into earnings as a
result of the divestiture of our investments in FX and XI(cid:43)(cid:26) and iii) (cid:3)6 million in unreali(cid:80)ed losses, net.
Other comprehensive income attributable to Xerox was (cid:3)183 million in 2018 and included the following: i) (cid:3)409
million of net gains from the changes in defined benefit plans primarily due to prior service credits resulting from an
amendment to our U.S. and Canadian Retiree Health plans, settlements and the positive impacts from currency on
accumulated net actuarial losses, as well as a (cid:3)43 million out-of-period pension ad(cid:64)ustment (refer to Note 1 - Basis
Xerox 2020 Annual Report 51
Xerox 2020 Annual Report 51
Table of Contents
of (cid:43)resentation and Summary of Significant Accounting (cid:43)olicies in the Consolidated Financial Statements for
additional information on the out-of-period ad(cid:64)ustment)(cid:26) ii) (cid:3)16 million in unreali(cid:80)ed gains, net, and iii) net translation
ad(cid:64)ustment losses of (cid:3)242 million reflecting the wea(cid:65)ening of most of our ma(cid:64)or foreign currencies against the U.S.
Dollar.
Refer to our discussion of (cid:43)ension (cid:43)lan Assumptions in the (cid:23)(cid:64)(cid:64)(cid:60)(cid:57)(cid:51)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:63)(cid:54) (cid:25)(cid:66)(cid:57)(cid:68)(cid:57)(cid:51)(cid:49)(cid:60) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55) (cid:38)(cid:63)(cid:60)(cid:57)(cid:51)(cid:57)(cid:53)(cid:67) section of
the (cid:40)D(cid:5)A as well as Note 19 - Employee Benefit (cid:43)lans in the Consolidated Financial Statements for additional
information regarding changes in our defined benefit plans. Refer to Note 1(cid:22) - Financial Instruments in the
Consolidated Financial Statements for additional information regarding our foreign currency derivatives and
associated unreali(cid:80)ed gains and losses.
(cid:40)(cid:53)(cid:51)(cid:53)(cid:62)(cid:68) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55) (cid:38)(cid:66)(cid:63)(cid:62)(cid:63)(cid:69)(cid:62)(cid:51)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)
Refer to Note 1 - Basis of (cid:43)resentation and Summary of Significant Accounting (cid:43)olicies in the Consolidated
Financial Statements for a description of recent accounting pronouncements including the respective dates of
adoption and the effects on results of operations and financial conditions.
52
Xerox 2020 Annual Report 52
Table of Contents
(cid:25)(cid:49)(cid:64)(cid:57)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:67)(cid:63)(cid:69)(cid:66)(cid:51)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:34)(cid:57)(cid:65)(cid:69)(cid:57)(cid:52)(cid:57)(cid:68)(cid:73)
Our 2020 financial results were significantly impacted by CO(cid:49)ID-19 related business closures and office building
capacity restrictions that slowed our customers' purchasing decisions and caused delayed installations and lower
printing volumes on our devices. However, we believe we have sufficient liquidity to manage our business through
the economic disruption caused by this pandemic:
(cid:77)
(cid:77)
(cid:77)
(cid:77)
A ma(cid:64)ority of our business is contractually based and our bundled services contracts, on average, include not
only a variable component lin(cid:65)ed to print volumes, but also a fixed minimum, which provides us with a continuing
stream of operating cash flow.
As of December 31, 2020 and 2019, total cash, cash equivalents and restricted cash were (cid:3)2,691 million and
(cid:3)2,(cid:22)95 million, respectively, and apart from restricted cash of (cid:3)66 million and (cid:3)55 million, respectively, was
readily accessible for use.
As of December 31, 2020 and 2019, there were no borrowings or letters of credit outstanding under our (cid:3)1.8
billion Credit Facility that matures in August 2022. In connection with the issuance of our (cid:3)1.5 billion of new
Senior Notes in August 2020, we amended the Credit Facility debt covenants to consider our level of cash on
hand as part of our principal debt balance.
In fourth quarter, we completed the early redemption of Xerox Corporation's (cid:3)1.1 billion Senior Notes due (cid:40)ay
2021. (cid:50)e have utili(cid:80)ed a combination of capital mar(cid:65)ets financing and securiti(cid:80)ation to refinance all 2020 and
2021 debt maturities, significantly reducing our near-term debt commitments and improving our long-term
liquidity.
(cid:77) (cid:50)e have focused our efforts on incremental actions to prioriti(cid:80)e and preserve cash as we manage through the
pandemic. These actions include the use of available temporary government assistance measures and furlough
programs and the reduction of discretionary spend such as near-term targeted mar(cid:65)eting programs, the use of
contract employees and the temporary suspension of 401((cid:65)) matching contributions, as well as lower
compensation incentives consistent with lower sales and operating results.
(cid:77) (cid:50)e expect operating cash flows from continuing operations to be approximately (cid:3)600 million in 2021, reflecting
the continued negative impacts of the CO(cid:49)ID-19 pandemic.
Refer to Note 16 - Debt in the Consolidated Financial Statements for additional information regarding debt activity in
2020.
(cid:25)(cid:49)(cid:67)(cid:56) (cid:28)(cid:60)(cid:63)(cid:71) (cid:23)(cid:62)(cid:49)(cid:60)(cid:73)(cid:67)(cid:57)(cid:67)
The following summari(cid:80)es our cash flows for the three years ended December 31, 2020, 2019 and 2018, as reported
in our Consolidated Statements of Cash Flows in the accompanying Consolidated Financial Statements:
(in millions)
(cid:52)ear Ended December 31,
Change
2020
2019
2018
2020
2019
Net cash provided by operating activities of continuing operations
(cid:3)
548 (cid:3)
1,244 (cid:3)
1,082 (cid:3)
(696) (cid:3)
Net cash provided by operating activities of discontinued operations
Net cash provided by operating activities
Net cash used in investing activities of continuing operations
Net cash provided by investing activities of discontinued operations
Net cash (used in) provided by investing activities
(cid:84)
548
(246)
(cid:84)
(246)
89
1,333
(85)
2,233
2,148
58
1,140
(29)
(cid:84)
(29)
(89)
((cid:22)85)
(161)
(2,233)
(2,394)
162
31
193
(56)
2,233
2,1(cid:22)(cid:22)
Net cash used in financing activities
(416)
(1,834)
(1,301)
1,418
(533)
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
10
(cid:84)
(30)
10
30
(Decrease) increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
(104)
2,(cid:22)95
1,64(cid:22)
1,148
(220)
1,368
(1,(cid:22)51)
1,64(cid:22)
1,86(cid:22)
(220)
Cash, Cash Equivalents and Restricted Cash at End of (cid:52)ear
(cid:3)
2,691 (cid:3)
2,(cid:22)95 (cid:3)
1,148 (cid:3)
(104) (cid:3)
1,64(cid:22)
Xerox 2020 Annual Report 53
Xerox 2020 Annual Report 53
Table of Contents
(cid:25)(cid:49)(cid:67)(cid:56) (cid:28)(cid:60)(cid:63)(cid:71)(cid:67) (cid:54)(cid:66)(cid:63)(cid:61) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:62)(cid:55) (cid:23)(cid:51)(cid:68)(cid:57)(cid:70)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
Net cash provided by operating activities of continuing operations was (cid:3)548 million for the year ended December 31,
2020. The (cid:3)696 million decrease in operating cash from 2019 was primarily due to the following:
(cid:77)
(cid:77)
(cid:77)
(cid:77)
(cid:77)
(cid:77)
(cid:77)
(cid:77)
(cid:77)
(cid:3)(cid:22)29 million decrease in pre-tax income before depreciation and amorti(cid:80)ation, provisions, gain on sales of
businesses and assets, restructuring and related costs, net, defined benefit pension costs and loss on early
extinguishment of debt.
(cid:3)243 million decrease from higher levels of inventory primarily due to lower sales volume.
(cid:3)14(cid:22) million decrease in other current and long-term liabilities, reflecting lower accruals, particularly incentive-
related payments associated with our direct channel partners and decrease in deferred revenue reflecting lower
sales activity.
(cid:3)95 million decrease from accrued compensation primarily due to decreased spending and the year-over-year
timing of payments.
(cid:3)(cid:22)6 million decrease from lower accounts payable primarily related to lower inventory and other spending
partially offset by the timing of supplier and vendor payments.
(cid:3)359 million increase from accounts receivable primarily due to lower revenue and the timing of invoicing and
collections.
(cid:3)11(cid:22) million increase primarily related to a higher level of net run-off due to lower originations of finance
receivables of (cid:3)82 million and lower equipment on operating leases of (cid:3)35 million.
(cid:3)5(cid:22) million increase from net taxes primarily due to lower payments in 2020 as a result of lower pre-tax income.
(cid:3)51 million increase primarily due to lower restructuring and related costs, net as compared to the prior year.
Net cash provided by operating activities of continuing operations was (cid:3)1,244 million for the year ended
December 31, 2019. The (cid:3)162 million increase in operating cash from 2018 was primarily due to the following:
(cid:77)
(cid:77)
(cid:77)
(cid:77)
(cid:77)
(cid:77)
(cid:77)
(cid:3)95 million increase due to lower placements of equipment on operating leases.
(cid:3)92 million increase primarily due to lower levels of inventories partially reflecting lower sales volume and
improved inventory management.
(cid:3)58 million increase from the after-tax impact of the OE(cid:40) license agreement with FX.
(cid:3)4(cid:22) million increase due to lower net payments for transaction and related costs as current year payments are
primarily limited to costs related to on-going litigation.
(cid:3)65 million decrease due to a lower net run-off of finance receivables.
(cid:3)54 million decrease from the change in accounts payable primarily related to lower inventory and other
spending as well as the year-over-year timing of supplier and vendor payments.
(cid:3)21 million decrease from accounts receivable primarily due to the timing of invoicing and collections.
(cid:25)(cid:49)(cid:67)(cid:56) (cid:28)(cid:60)(cid:63)(cid:71)(cid:67) (cid:54)(cid:66)(cid:63)(cid:61) (cid:31)(cid:62)(cid:70)(cid:53)(cid:67)(cid:68)(cid:57)(cid:62)(cid:55) (cid:23)(cid:51)(cid:68)(cid:57)(cid:70)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
Net cash used in investing activities of continuing operations for Xerox Holdings was (cid:3)246 million for the year ended
December 31, 2020. The (cid:3)161 million change in cash from 2019 was primarily due to four acquisitions completed by
Xerox for (cid:3)194 million and one additional acquisition completed by Xerox Holdings of (cid:3)9 million in the current year
compared to two acquisitions in the prior year for (cid:3)42 million.
Net cash used in investing activities of continuing operations was (cid:3)85 million for the year ended December 31, 2019.
The (cid:3)56 million change in cash from 2018 was primarily due to the following:
(cid:77)
(cid:77)
(cid:77)
(cid:3)42 million decrease from acquisitions.
(cid:3)38 million decrease due to lower proceeds from the sales of assets.
(cid:3)25 million increase reflecting lower capital expenditures.
(cid:25)(cid:49)(cid:67)(cid:56) (cid:28)(cid:60)(cid:63)(cid:71)(cid:67) (cid:54)(cid:66)(cid:63)(cid:61) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:62)(cid:55) (cid:23)(cid:51)(cid:68)(cid:57)(cid:70)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
Net cash used in financing activities for Xerox Holdings was (cid:3)416 million for the year ended December 31, 2020. The
(cid:3)1,418 million decrease in the use of cash from 2019 was primarily due to the following:
(cid:77)
(cid:3)1,083 million decrease from net debt activity. 2020 reflects payments of (cid:3)2,13(cid:22) million on Senior Notes, (cid:3)(cid:22)3
million for secured financing arrangements and (cid:3)16 million of deferred debt issuance costs offset by proceeds of
(cid:3)1,50(cid:22) million from a Senior Notes offering and (cid:3)840 million from secured financing arrangements. 2019 reflects
payments of (cid:3)960 million on Senior Notes.
(cid:3)300 million decrease due to lower share repurchases.
(cid:3)13 million decrease due to lower common stoc(cid:65) dividends due to lower outstanding shares.
(cid:3)11 million decrease from lower distributions of noncontrolling interests.
(cid:77)
(cid:77)
(cid:77)
54
Xerox 2020 Annual Report 54
Table of Contents
Net cash used in financing activities for Xerox was (cid:3)425 million for the year ended December 31, 2020. 2020 reflects
payments of (cid:3)2,13(cid:22) million on Senior Notes, (cid:3)(cid:22)3 million for secured financing arrangements and (cid:3)3 million of
deferred debt issuance costs offset by proceeds of (cid:3)840 million from secured financing arrangements. Distributions
to Xerox Holdings were (cid:3)558 million and were primarily used to fund Xerox Holdings continuing dividends to
shareholders and share repurchases. Xerox's distributions to the parent are expected to continue with those
distributions primarily being used by Xerox Holdings to fund dividends and share repurchases. Contributions from
parent of (cid:3)1,494 million primarily represent the contribution by Xerox Holdings of aggregate net debt proceeds
received from its Senior Note offerings in the third quarter of 2020 to Xerox.
Net cash used in financing activities for Xerox Holdings, on a consolidated basis, was (cid:3)1,834 million for the year
ended December 31, 2019. The (cid:3)533 million increase in the use of cash from 2018 was primarily due to the
following:
•
(cid:3)643 million increase from net debt activity. 2019 reflects payments of (cid:3)960 million on Senior Notes compared
to prior year payments of (cid:3)265 million on Senior Notes, (cid:3)25 million related to the termination of a capital lease
obligation and (cid:3)19 million of bridge facility costs.
(cid:3)26 million decrease due to lower common stoc(cid:65) dividends.
(cid:3)100 million decrease from lower share repurchases due to timing.
•
•
Net cash used in financing activities for Xerox, on a consolidated basis, was (cid:3)1,834 million for the year ended
December 31, 2019. Dividends of (cid:3)181 million and share repurchases of (cid:3)300 million were through the date of the
holding company reorgani(cid:80)ation, (cid:37)uly 31, 2019. Distributions to Xerox Holdings were (cid:3)3(cid:22)3 million and are
subsequent to the date of the reorgani(cid:80)ation and are primarily to fund Xerox Holdings continuing dividends to
shareholders and share repurchases. Xerox's distributions to the parent are expected to continue on a regular basis
in the future with those distributions primarily being used by Xerox Holdings to fund dividends and share
repurchases.
(cid:25)(cid:49)(cid:67)(cid:56)(cid:8) (cid:25)(cid:49)(cid:67)(cid:56) (cid:27)(cid:65)(cid:69)(cid:57)(cid:70)(cid:49)(cid:60)(cid:53)(cid:62)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:40)(cid:53)(cid:67)(cid:68)(cid:66)(cid:57)(cid:51)(cid:68)(cid:53)(cid:52) (cid:25)(cid:49)(cid:67)(cid:56)
Refer to Note 15 - Supplementary Financial Information in the Consolidated Financial Statements for additional
information regarding Cash, cash equivalents and restricted cash.
(cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:62)(cid:55) (cid:34)(cid:53)(cid:49)(cid:67)(cid:53)(cid:67)
(cid:50)e 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 twelve years and a variety of renewal and(cid:14)or termination options. As of December 31, 2020 and 2019, total
operating lease liabilities were (cid:3)333 million and (cid:3)34(cid:22) million, respectively. Refer to Note 11 - Lessee in the
Consolidated Financial Statements for additional information regarding our right-of-use (ROU) assets and lease
obligations associated with our operating leases.
Xerox 2020 Annual Report 55
Xerox 2020 Annual Report 55
Table of Contents
(cid:26)(cid:53)(cid:50)(cid:68) (cid:49)(cid:62)(cid:52) (cid:25)(cid:69)(cid:67)(cid:68)(cid:63)(cid:61)(cid:53)(cid:66) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:62)(cid:55) (cid:23)(cid:51)(cid:68)(cid:57)(cid:70)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
The following summari(cid:80)es our total debt:
(in millions)
Xerox Holdings Corporation
Xerox Corporation
Xerox - Other Subsidiaries(1)
(cid:41)(cid:69)(cid:50)(cid:68)(cid:63)(cid:68)(cid:49)(cid:60) (cid:9) (cid:38)(cid:66)(cid:57)(cid:62)(cid:51)(cid:57)(cid:64)(cid:49)(cid:60) (cid:52)(cid:53)(cid:50)(cid:68) (cid:50)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53)(cid:6)(cid:14)(cid:7)
(cid:26)(cid:53)(cid:50)(cid:68) (cid:57)(cid:67)(cid:67)(cid:69)(cid:49)(cid:62)(cid:51)(cid:53) (cid:51)(cid:63)(cid:67)(cid:68)(cid:67)
Xerox Holdings Corporation
Xerox Corporation
Xerox - Other Subsidiaries(1)
(cid:41)(cid:69)(cid:50)(cid:68)(cid:63)(cid:68)(cid:49)(cid:60) (cid:9) (cid:26)(cid:53)(cid:50)(cid:68) (cid:57)(cid:67)(cid:67)(cid:69)(cid:49)(cid:62)(cid:51)(cid:53) (cid:51)(cid:63)(cid:67)(cid:68)(cid:67)
Net unamorti(cid:80)ed discount (premium)
Fair value ad(cid:64)ustments(3)
- terminated swaps
- current swaps
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:26)(cid:53)(cid:50)(cid:68)
_____________
December 31,
2020
2019
(cid:3)
(cid:3)
1,500 (cid:3)
2,200
(cid:22)6(cid:22)
4,46(cid:22) (cid:3)
(13)
(11)
(3)
(2(cid:22))
3
1
(cid:84)
(cid:84)
4,313
(cid:84)
4,313
(cid:84)
(1(cid:22))
(cid:84)
(1(cid:22))
(16)
1
1
(cid:3)
4,444 (cid:3)
4,282
(1) Represents subsidiaries of (cid:48)erox (cid:27)orporation.
(2) There were no (cid:38)otes (cid:40)ayable at December (cid:16)1, 2(cid:13)2(cid:13) and December (cid:16)1, 2(cid:13)1(cid:22), respectively.
((cid:16)) (cid:30)air value adjustments include the following(cid:23) (i) fair value adjustments to debt associated with terminated interest rate swaps, which are being
amorti(cid:76)ed to interest expense over the remaining term of the related notes(cid:24) and (ii) changes in fair value of hedged debt obligations
attributable to movements in benchmar(cid:61) interest rates. (cid:32)edge accounting re(cid:67)uires hedged debt instruments to be reported inclusive of any
fair value adjustment.
Refer to Note 16 - Debt in the Consolidated Financial Statements for additional information regarding our debt
activity.
(cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:53) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:40)(cid:53)(cid:60)(cid:49)(cid:68)(cid:53)(cid:52) (cid:26)(cid:53)(cid:50)(cid:68)
(cid:50)e provide lease equipment financing to our customers. Our lease contracts permit customers to pay for equipment
over time rather than at the date of installation. Our investment in these contracts is reflected in total finance assets,
net. (cid:50)e primarily fund our customer financing activity through cash generated from operations, cash on hand, sales
and securiti(cid:80)ations of finance receivables and proceeds from capital mar(cid:65)ets offerings.
(cid:50)e have arrangements, in certain international countries and domestically, with our small and mid-si(cid:80)ed customers
in which third-party financial institutions independently provide lease financing directly to our customers, on a non-
recourse basis to Xerox. In these arrangements, we sell and transfer title of the equipment to these financial
institutions. (cid:34)enerally, we have no continuing ownership rights in the equipment subsequent to its sale(cid:26) therefore, the
unrelated third-party finance receivable and debt are not included in our Consolidated Financial Statements.
The following represents our total finance assets, net associated with our lease and finance operations:
(in millions)
Total finance receivables, net(1)
Equipment on operating leases, net
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)(cid:8) (cid:62)(cid:53)(cid:68) (cid:6)(cid:14)(cid:7)
____________
December 31,
2020
2019
(cid:3)
(cid:3)
3,165 (cid:3)
296
3,461 (cid:3)
3,351
364
3,(cid:22)15
(1)
Includes (i) Billed portion of finance receivables, net, (ii) (cid:30)inance receivables, net and (iii) (cid:30)inance receivables due after one year, net as
included in our (cid:27)onsolidated Balance (cid:43)heets.
(2) The change from December (cid:16)1, 2(cid:13)1(cid:22) includes an increase of (cid:3)(cid:22)(cid:19) million due to currency.
Our lease contracts permit customers to pay for equipment over time rather than at the date of installation(cid:26) therefore,
we maintain a certain level of debt (that we refer to as financing debt) to support our investment in these lease
contracts, which are reflected in total finance receivables, net. For this financing aspect of our business, we maintain
an assumed (cid:22):1 leverage ratio of debt to equity as compared to our finance assets. Approximately 35(cid:4) of our Total
Finance assets, net balance at December 31, 2020 include lease financing provided to end-user customers who
purchased equipment sold through distributors, resellers and dealers.
56
Xerox 2020 Annual Report 56
Table of Contents
Based on this leverage, the following represents the brea(cid:65)down of total debt between financing debt and core debt:
(in millions)
Finance receivables debt(1)
Equipment on operating leases debt
Financing debt
Core debt
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:26)(cid:53)(cid:50)(cid:68)
December 31,
2020
2019
(cid:3)
2,(cid:22)69 (cid:3)
259
3,028
1,416
(cid:3)
4,444 (cid:3)
2,932
319
3,251
1,031
4,282
_____________
(1) (cid:30)inance receivables debt is the basis for our calculation of (cid:80)(cid:27)ost of financing(cid:81) expense in the (cid:27)onsolidated (cid:43)tatements of Income.
At December 31, 2020, leverage was assessed against the Total Debt of Xerox Holdings Corporation and Xerox
Corporation since the debt held by Xerox Holdings Corporation is guaranteed by Xerox Corporation and the funds
from that borrowing were contributed in full by Xerox Holdings Corporation to Xerox Corporation. In 2021, we expect
to continue leveraging our finance assets on a Total Debt basis at an assumed (cid:22):1 ratio of debt to equity.
(cid:25)(cid:49)(cid:64)(cid:57)(cid:68)(cid:49)(cid:60) (cid:35)(cid:49)(cid:66)(cid:59)(cid:53)(cid:68) (cid:23)(cid:51)(cid:68)(cid:57)(cid:70)(cid:57)(cid:68)(cid:73)
During 2020 we repaid (cid:3)2,113 million of Xerox Corporation's Senior Notes maturing in 2020 and 2021 and issued
(cid:3)1.5 billion in a Senior Notes offering and received (cid:3)840 million from secured financing arrangements.
Refer to Note 16 - Debt in the Consolidated Financial Statements for additional information regarding our debt
activity.
(cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:31)(cid:62)(cid:67)(cid:68)(cid:66)(cid:69)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)
Refer to Note 1(cid:22) - Financial Instruments in the Consolidated Financial Statements for additional information.
(cid:41)(cid:49)(cid:60)(cid:53)(cid:67) (cid:63)(cid:54) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:67) (cid:40)(cid:53)(cid:51)(cid:53)(cid:57)(cid:70)(cid:49)(cid:50)(cid:60)(cid:53)
The net impact from the sales of accounts receivable on reported net cash flows is summari(cid:80)ed below:
(in millions)
Estimated (decrease) increase to net cash flows(1)
2020
(cid:52)ear Ended December 31,
2019
2018
(cid:3)
(41) (cid:3)
3(cid:22) (cid:3)
(23)
_____________
(1) Represents the difference between current and prior year fourth (cid:67)uarter accounts receivable sales adjusted for the effects of(cid:23) (i) the deferred
proceeds, (ii) collections prior to the end of the year and (iii) currency. The decrease in 2(cid:13)2(cid:13) reflects a decrease in the level of accounts
receivable sold due to lower sales revenue as a result of impacts from the (cid:27)O(cid:46)ID-1(cid:22) pandemic.
Refer to Note (cid:22) - Accounts Receivable, Net in the Consolidated Financial Statements for additional information
regarding our accounts receivable sales arrangements.
(cid:41)(cid:56)(cid:49)(cid:66)(cid:53) (cid:40)(cid:53)(cid:64)(cid:69)(cid:66)(cid:51)(cid:56)(cid:49)(cid:67)(cid:53) (cid:38)(cid:66)(cid:63)(cid:55)(cid:66)(cid:49)(cid:61)(cid:67) (cid:9) (cid:42)(cid:66)(cid:53)(cid:49)(cid:67)(cid:69)(cid:66)(cid:73) (cid:41)(cid:68)(cid:63)(cid:51)(cid:59)
During 2020, Xerox Holdings repurchased 15.6 million shares of our common stoc(cid:65) for an aggregate cost of (cid:3)300
million, including fees.
In (cid:37)anuary 2021, the Xerox Holdings Corporation's Board of Directors authori(cid:80)ed an additional (cid:3)100 million of share
repurchase authority, bringing the total authori(cid:80)ation of the existing share repurchase program to (cid:3)1.1 billion
(exclusive of any commissions and other transaction fees and costs related thereto).
The cumulative total of shares repurchased by Xerox Holdings under the current share repurchase program that
commenced in (cid:37)uly 2019 is 24.(cid:22) million shares for an aggregate cost of (cid:3)600 million, including fees, leaving a
remaining authori(cid:80)ation of (cid:3)500 million.
During 2019, Xerox Holdings repurchased 9.1 million shares of our common stoc(cid:65) for an aggregate cost of (cid:3)300
million, including fees. Including the shares repurchased under Xerox Corporation's previously authori(cid:80)ed share
repurchase program, Xerox Holdings repurchased 18.3 million shares of our common stoc(cid:65) for an aggregate cost of
(cid:3)600 million, including fees, during 2019.
During 2018, Xerox Corporation repurchased 26.1 million shares of our common stoc(cid:65) for an aggregate cost of (cid:3)(cid:22)00
million, including fees. These shares were repurchased under Xerox Corporation's previously authori(cid:80)ed share
repurchase program, which was cancelled upon the reorgani(cid:80)ation of Xerox Corporation's corporate structure into a
holding company structure on (cid:37)uly 31, 2019.
Refer to Note 23 - Shareholders' Equity in the Consolidated Financial Statements for additional information regarding
our share repurchase program.
Xerox 2020 Annual Report 57
Xerox 2020 Annual Report 5(cid:22)
Table of Contents
Table of Contents
(cid:26)(cid:57)(cid:70)(cid:57)(cid:52)(cid:53)(cid:62)(cid:52)(cid:67)
Aggregate dividends of (cid:3)209 million, (cid:3)226 million and (cid:3)251 million were declared on common stoc(cid:65) in 2020, 2019
and 2018, respectively. The decrease in dividends since 2018 primarily reflects lower shares of common stoc(cid:65)
outstanding as a result of our share repurchase programs.
Aggregate dividends of (cid:3)14 million in 2020, 2019 and 2018, respectively, were declared on preferred stoc(cid:65).
(cid:34)(cid:57)(cid:65)(cid:69)(cid:57)(cid:52)(cid:57)(cid:68)(cid:73) (cid:49)(cid:62)(cid:52) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:28)(cid:60)(cid:53)(cid:72)(cid:57)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:73)
(cid:50)e manage our worldwide liquidity using internal cash management practices, which are sub(cid:64)ect to (i) the statutes,
regulations and practices of each of the local (cid:64)urisdictions in which we operate, (ii) the legal requirements of the
agreements to which we are a party and (iii) the policies and cooperation of the financial institutions we utili(cid:80)e to
maintain and provide cash management services.
Our principal debt maturities are in line with historical and pro(cid:64)ected cash flows and are spread over the next five
years as follows:
Xerox Holdings
Corporation
Xerox Corporation
Xerox - Other
Subsidiaries(1)
Total
(cid:3)
(cid:84) (cid:3)
(cid:84) (cid:3)
96 (cid:3)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:22)50
(cid:22)50
1,500 (cid:3)
(cid:84)
(cid:84)
(cid:84)
300
1,000
300
(cid:84)
600
2,200 (cid:3)
10(cid:22)
100
92
291
81
(cid:84)
(cid:84)
(cid:84)
(cid:22)6(cid:22) (cid:3)
96
10(cid:22)
100
92
591
1,081
300
(cid:22)50
1,350
4,46(cid:22)
(in millions)
2021 - (cid:44)1
2021 - (cid:44)2
2021 - (cid:44)3
2021 - (cid:44)4
2022
2023
2024
2025
2026 and thereafter
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)(cid:6)(cid:14)(cid:7)
(cid:3)
_____________
(1) Represents subsidiaries of (cid:48)erox (cid:27)orporation.
(2)
Includes fair value adjustments.
(cid:34)(cid:63)(cid:49)(cid:62) (cid:25)(cid:63)(cid:70)(cid:53)(cid:62)(cid:49)(cid:62)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:25)(cid:63)(cid:61)(cid:64)(cid:60)(cid:57)(cid:49)(cid:62)(cid:51)(cid:53)
At December 31, 2020, we were in full compliance with the covenants and other provisions of our Credit Facility and
Senior Notes. (cid:50)e have the right to terminate the Credit Facility without penalty. Failure to comply with material
provisions or covenants of the Credit Facility and Senior Notes could have a material adverse effect on our liquidity
and operations and our ability to continue to fund our customers' purchases of Xerox equipment.
Refer to Note 16 - Debt in the Consolidated Financial Statements for additional information regarding debt
arrangements and our Credit Facility.
requirements.
58
Xerox 2020 Annual Report 58
Xerox 2020 Annual Report 59
(cid:25)(cid:63)(cid:62)(cid:68)(cid:66)(cid:49)(cid:51)(cid:68)(cid:69)(cid:49)(cid:60) (cid:25)(cid:49)(cid:67)(cid:56) (cid:37)(cid:50)(cid:60)(cid:57)(cid:55)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67) (cid:49)(cid:62)(cid:52) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:25)(cid:63)(cid:61)(cid:61)(cid:53)(cid:66)(cid:51)(cid:57)(cid:49)(cid:60) (cid:25)(cid:63)(cid:61)(cid:61)(cid:57)(cid:68)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:25)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55)(cid:53)(cid:62)(cid:51)(cid:57)(cid:53)(cid:67)
At December 31, 2020, we had the following contractual cash obligations and other commercial commitments and
2021
2022
2023
2024
2025
Thereafter
(cid:3)
395 (cid:3)
591 (cid:3)
1,081 (cid:3)
300 (cid:3)
(cid:22)50 (cid:3)
1,350
194
104
130
30
1,0(cid:22)(cid:22)
108
196
146
1(cid:22)6
88
(cid:84)
29
(cid:84)
(cid:84)
189
63
13(cid:22)
68
(cid:84)
28
(cid:84)
(cid:84)
18(cid:22)
29
119
3(cid:22)
(cid:84)
26
(cid:84)
(cid:84)
185
(cid:84)
100
25
(cid:84)
25
(cid:84)
(cid:84)
183
(cid:84)
549
52
(cid:84)
10(cid:22)
(cid:84)
(cid:84)
45
(cid:84)
(cid:3)
2,380 (cid:3)
1,136 (cid:3)
1,530 (cid:3)
66(cid:22) (cid:3)
1,083 (cid:3)
2,103
(cid:40)inimum operating lease commitments(2)
Defined benefit pension plans
Retiree health payments
Estimated (cid:43)urchase Commitments:
contingencies:
(in millions)
Total debt(1)
Interest on debt(1)
Fu(cid:64)i Xerox(3)
Flex(4)
HCL(5)
Other(6)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
_____________
commitments.
(cid:30)uji (cid:48)erox.
(1) Refer to (cid:38)ote 1(cid:19) - Debt in the (cid:27)onsolidated (cid:30)inancial (cid:43)tatements for additional information regarding debt and interest on debt.
(2) Refer to (cid:38)ote 11 (cid:77) (cid:36)essee in the (cid:27)onsolidated (cid:30)inancial (cid:43)tatements for additional information related to minimum operating lease
((cid:16)) (cid:30)uji (cid:48)erox(cid:23) The amount included in the table reflects our estimate of purchases over the next year and is not a contractual commitment. Refer
to (cid:38)ote 12 - Investments in (cid:25)ffiliates, at (cid:29)(cid:67)uity in the (cid:27)onsolidated (cid:30)inancial (cid:43)tatements for additional information related to transactions with
((cid:17)) (cid:30)lex(cid:23) (cid:47)e outsource certain manufacturing activities to (cid:30)lex. The amount included in the table reflects our estimate of purchases over the next
year and is not a contractual commitment. In the past two years, actual purchases from (cid:30)lex averaged approximately (cid:3)12(cid:16) million per year.
((cid:18)) (cid:32)(cid:27)(cid:36)(cid:23) (cid:43)hared services arrangement with (cid:32)(cid:27)(cid:36) Technologies.
((cid:19)) Other purchase commitments(cid:23) (cid:47)e enter into other purchase commitments with vendors in the ordinary course of business. Our policy with
respect to all purchase commitments is to record losses, if any, when they are probable and reasonably estimable. (cid:47)e currently do not have,
nor do we anticipate, material loss contracts.
(cid:38)(cid:53)(cid:62)(cid:67)(cid:57)(cid:63)(cid:62) (cid:49)(cid:62)(cid:52) (cid:40)(cid:53)(cid:68)(cid:57)(cid:66)(cid:53)(cid:53) (cid:30)(cid:53)(cid:49)(cid:60)(cid:68)(cid:56) (cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68) (cid:38)(cid:60)(cid:49)(cid:62)(cid:67)
(cid:50)e sponsor defined benefit pension plans and retiree health plans that require periodic cash contributions. Our 2020
cash contributions for these plans were (cid:3)139 million for our defined benefit pension plans and (cid:3)25 million for our
retiree health plans.
In 2021, based on current actuarial calculations, we expect to ma(cid:65)e contributions of approximately (cid:3)130 million to
our worldwide defined benefit pension plans and (cid:3)30 million to our retiree health benefit plans. There are no
contributions required in 2021 for our U.S. tax-qualified defined benefit plans to meet the minimum funding
Contributions to our defined benefit pension plans in subsequent years will depend on a number of factors, including
the investment performance of plan assets and discount rates as well as potential legislative and plan changes. At
December 31, 2020, the net unfunded balance of our U.S. defined benefit pension plans was (cid:3)945 million and the
net funded balance of our Non-U.S. defined benefit pension plans was (cid:3)40 million, or an aggregate unfunded
balance of (cid:3)905 million, which is a (cid:3)30(cid:22) million decrease from the balance at December 31, 2019. The decrease is
primarily due to contributions and favorable asset returns as compared to expected returns, partially offset by lower
discount rates. Approximately (cid:3)851 million of the (cid:3)905 million net unfunded balance is attributable to certain plans
that by design do not require or allow for advanced funding. The remaining net deficit in funded plans of (cid:3)54 million
includes an under-funded position for our U.S. (cid:43)rimary (cid:43)lans of (cid:3)606 million and (cid:3)552 million of net over funded
positions for our international plans (primarily in the U.K.).
Cash contributions to our retiree health plans are made each year to cover medical claims costs incurred during the
year. The amounts reported in the above table as retiree health payments represent our estimate of future benefit
payments. Our retiree health benefit plans are non-funded and are primarily related to domestic operations. The
unfunded balance of our retiree health plans of (cid:3)3(cid:22)0 million at December 31, 2020 decreased (cid:3)15 million from the
balance at December 31, 2019.
Refer to Note 19 - Employee Benefit (cid:43)lans in the Consolidated Financial Statements for additional information
regarding contributions to our defined benefit pension and retiree health plans.
Table of Contents
(cid:25)(cid:63)(cid:62)(cid:68)(cid:66)(cid:49)(cid:51)(cid:68)(cid:69)(cid:49)(cid:60) (cid:25)(cid:49)(cid:67)(cid:56) (cid:37)(cid:50)(cid:60)(cid:57)(cid:55)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67) (cid:49)(cid:62)(cid:52) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:25)(cid:63)(cid:61)(cid:61)(cid:53)(cid:66)(cid:51)(cid:57)(cid:49)(cid:60) (cid:25)(cid:63)(cid:61)(cid:61)(cid:57)(cid:68)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:25)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55)(cid:53)(cid:62)(cid:51)(cid:57)(cid:53)(cid:67)
At December 31, 2020, we had the following contractual cash obligations and other commercial commitments and
contingencies:
(in millions)
Total debt(1)
Interest on debt(1)
(cid:40)inimum operating lease commitments(2)
Defined benefit pension plans
Retiree health payments
Estimated (cid:43)urchase Commitments:
Fu(cid:64)i Xerox(3)
Flex(4)
HCL(5)
Other(6)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
_____________
2021
2022
2023
2024
2025
Thereafter
(cid:3)
395 (cid:3)
591 (cid:3)
1,081 (cid:3)
300 (cid:3)
(cid:22)50 (cid:3)
1,350
194
104
130
30
1,0(cid:22)(cid:22)
108
196
146
1(cid:22)6
88
(cid:84)
29
(cid:84)
(cid:84)
189
63
13(cid:22)
68
(cid:84)
28
(cid:84)
(cid:84)
18(cid:22)
29
119
3(cid:22)
(cid:84)
26
(cid:84)
(cid:84)
185
(cid:84)
100
25
(cid:84)
25
(cid:84)
(cid:84)
183
(cid:84)
549
52
(cid:84)
10(cid:22)
(cid:84)
(cid:84)
45
(cid:84)
(cid:3)
2,380 (cid:3)
1,136 (cid:3)
1,530 (cid:3)
66(cid:22) (cid:3)
1,083 (cid:3)
2,103
(1) Refer to (cid:38)ote 1(cid:19) - Debt in the (cid:27)onsolidated (cid:30)inancial (cid:43)tatements for additional information regarding debt and interest on debt.
(2) Refer to (cid:38)ote 11 (cid:77) (cid:36)essee in the (cid:27)onsolidated (cid:30)inancial (cid:43)tatements for additional information related to minimum operating lease
commitments.
((cid:16)) (cid:30)uji (cid:48)erox(cid:23) The amount included in the table reflects our estimate of purchases over the next year and is not a contractual commitment. Refer
to (cid:38)ote 12 - Investments in (cid:25)ffiliates, at (cid:29)(cid:67)uity in the (cid:27)onsolidated (cid:30)inancial (cid:43)tatements for additional information related to transactions with
(cid:30)uji (cid:48)erox.
((cid:17)) (cid:30)lex(cid:23) (cid:47)e outsource certain manufacturing activities to (cid:30)lex. The amount included in the table reflects our estimate of purchases over the next
year and is not a contractual commitment. In the past two years, actual purchases from (cid:30)lex averaged approximately (cid:3)12(cid:16) million per year.
((cid:18)) (cid:32)(cid:27)(cid:36)(cid:23) (cid:43)hared services arrangement with (cid:32)(cid:27)(cid:36) Technologies.
((cid:19)) Other purchase commitments(cid:23) (cid:47)e enter into other purchase commitments with vendors in the ordinary course of business. Our policy with
respect to all purchase commitments is to record losses, if any, when they are probable and reasonably estimable. (cid:47)e currently do not have,
nor do we anticipate, material loss contracts.
(cid:38)(cid:53)(cid:62)(cid:67)(cid:57)(cid:63)(cid:62) (cid:49)(cid:62)(cid:52) (cid:40)(cid:53)(cid:68)(cid:57)(cid:66)(cid:53)(cid:53) (cid:30)(cid:53)(cid:49)(cid:60)(cid:68)(cid:56) (cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68) (cid:38)(cid:60)(cid:49)(cid:62)(cid:67)
(cid:50)e sponsor defined benefit pension plans and retiree health plans that require periodic cash contributions. Our 2020
cash contributions for these plans were (cid:3)139 million for our defined benefit pension plans and (cid:3)25 million for our
retiree health plans.
In 2021, based on current actuarial calculations, we expect to ma(cid:65)e contributions of approximately (cid:3)130 million to
our worldwide defined benefit pension plans and (cid:3)30 million to our retiree health benefit plans. There are no
contributions required in 2021 for our U.S. tax-qualified defined benefit plans to meet the minimum funding
requirements.
Contributions to our defined benefit pension plans in subsequent years will depend on a number of factors, including
the investment performance of plan assets and discount rates as well as potential legislative and plan changes. At
December 31, 2020, the net unfunded balance of our U.S. defined benefit pension plans was (cid:3)945 million and the
net funded balance of our Non-U.S. defined benefit pension plans was (cid:3)40 million, or an aggregate unfunded
balance of (cid:3)905 million, which is a (cid:3)30(cid:22) million decrease from the balance at December 31, 2019. The decrease is
primarily due to contributions and favorable asset returns as compared to expected returns, partially offset by lower
discount rates. Approximately (cid:3)851 million of the (cid:3)905 million net unfunded balance is attributable to certain plans
that by design do not require or allow for advanced funding. The remaining net deficit in funded plans of (cid:3)54 million
includes an under-funded position for our U.S. (cid:43)rimary (cid:43)lans of (cid:3)606 million and (cid:3)552 million of net over funded
positions for our international plans (primarily in the U.K.).
Cash contributions to our retiree health plans are made each year to cover medical claims costs incurred during the
year. The amounts reported in the above table as retiree health payments represent our estimate of future benefit
payments. Our retiree health benefit plans are non-funded and are primarily related to domestic operations. The
unfunded balance of our retiree health plans of (cid:3)3(cid:22)0 million at December 31, 2020 decreased (cid:3)15 million from the
balance at December 31, 2019.
Refer to Note 19 - Employee Benefit (cid:43)lans in the Consolidated Financial Statements for additional information
regarding contributions to our defined benefit pension and retiree health plans.
Xerox 2020 Annual Report 59
Xerox 2020 Annual Report 59
Table of Contents
Table of Contents
customers and non-consolidated affiliates. Nonperformance under a contract including a guarantee, indemnification
or claim could trigger an obligation of the Company.
(cid:50)e determine whether an estimated loss from a contingency should be accrued by assessing whether a loss is
deemed probable and can be reasonably estimated. Should developments in any of these areas cause a change in
our determination as to an unfavorable outcome and result in the need to recogni(cid:80)e a material accrual, or should any
of these matters result in a final adverse (cid:64)udgment or be settled for significant amounts, they could have a material
adverse effect on our results of operations, financial position and cash flows in the period or periods in which such
change in determination, (cid:64)udgment or settlement occurs.
(cid:43)(cid:62)(cid:66)(cid:53)(cid:51)(cid:63)(cid:55)(cid:62)(cid:57)(cid:74)(cid:53)(cid:52) (cid:42)(cid:49)(cid:72) (cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68)(cid:67)
As of December 31, 2020, we had (cid:3)115 million of unrecogni(cid:80)ed tax benefits. This represents the tax benefits
associated with various tax positions ta(cid:65)en, or expected to be ta(cid:65)en, on domestic and foreign tax returns that have
not been recogni(cid:80)ed in our financial statements due to uncertainty regarding their resolution. The resolution or
settlement of these tax positions with the taxing authorities is at various stages and, therefore, we are unable to
ma(cid:65)e a reliable estimate of the eventual cash flows by period that may be required to settle these matters. In
addition, certain of these matters may not require cash settlement due to the existence of credit and net operating
loss carryforwards, as well as other offsets, including the indirect benefit from other taxing (cid:64)urisdictions that may be
Refer to Note 20 - Income and Other Taxes in the Consolidated Financial Statements for additional information
available.
regarding unrecogni(cid:80)ed tax benefits.
(cid:37)(cid:54)(cid:54)(cid:9)(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:41)(cid:56)(cid:53)(cid:53)(cid:68) (cid:23)(cid:66)(cid:66)(cid:49)(cid:62)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)
(cid:50)e may occasionally utili(cid:80)e off-balance sheet arrangements in our operations (as defined by the SEC Financial
Reporting Release 6(cid:22) (FRR-6(cid:22)), (cid:86)Disclosure in (cid:40)anagement(cid:85)s Discussion and Analysis about Off-Balance Sheet
Arrangements and Aggregate Contractual Obligations(cid:87)). Accounts receivable sales facilities arrangements that we
enter into may have off-balance sheet elements. During 201(cid:22), we terminated all accounts receivable sales
arrangements in North America and all but one arrangement in Europe. Refer to Note (cid:22) - Accounts Receivable, Net
in the Consolidated Financial Statements for further information regarding accounts receivable sales.
As of December 31, 2020, we do not believe we have any off-balance sheet arrangements that have, or are
reasonably li(cid:65)ely to have, a material current or future effect on financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
In addition, see the preceding table for the Company's contractual cash obligations and other commercial
commitments and contingencies and Note 21 - Contingencies and Litigation in the Consolidated Financial
Statements for additional information regarding contingencies, guarantees, indemnifications and warranty liabilities.
(cid:28)(cid:69)(cid:58)(cid:57) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72)
As previously disclosed, in November 2019, Xerox Holdings completed the sale of its indirect 25(cid:4) equity interest in
Fu(cid:64)i Xerox (FX). Arrangements with FX whereby we purchase inventory from and sell inventory to FX continued after
the sale.
(cid:50)e purchased products, including parts and supplies, from FX totaling (cid:3)1.1 billion, (cid:3)1.3 billion and (cid:3)1.5 billion in
2020, 2019 and 2018, respectively. Our product supply agreements with Fu(cid:64)i Xerox are designed to support the
entire product lifecycle, end-to-end, including the availability of spare parts, consumables and technical support
throughout the time such products are with our customers. Our purchase orders under such agreements are made in
the normal course of business and typically have a lead time of three months. Transactions with Fu(cid:64)i Xerox are
discussed further in Note 12 - Investments in Affiliates, at Equity in the Consolidated Financial Statements.
(cid:41)(cid:56)(cid:49)(cid:66)(cid:53)(cid:52) (cid:41)(cid:53)(cid:66)(cid:70)(cid:57)(cid:51)(cid:53)(cid:67) (cid:23)(cid:66)(cid:66)(cid:49)(cid:62)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68) (cid:71)(cid:57)(cid:68)(cid:56) (cid:30)(cid:25)(cid:34) (cid:42)(cid:53)(cid:51)(cid:56)(cid:62)(cid:63)(cid:60)(cid:63)(cid:55)(cid:57)(cid:53)(cid:67)
In (cid:40)arch 2019, as part of (cid:43)ro(cid:64)ect Own It, Xerox entered into a shared services arrangement with HCL Technologies
(HCL) pursuant to which we transitioned certain global administrative and support functions, including selected
finance functions, from Xerox to HCL. The shared services arrangement with HCL includes a remaining aggregate
spending commitment of approximately (cid:3)985 million over the next 5 years. However, we can terminate the
arrangement at any time at our discretion, sub(cid:64)ect to payment of termination fees that decline over the term, or for
cause.
(cid:50)e incurred net charges of approximately (cid:3)185 million for the year ended December 31, 2020 associated with this
arrangement. The cost has been allocated to the various functional expense lines in the Consolidated Statements of
Income based on an assessment of the nature and amount of the costs incurred for the various transferred functions
prior to their transfer to HCL.
(cid:24)(cid:66)(cid:49)(cid:74)(cid:57)(cid:60) (cid:25)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55)(cid:53)(cid:62)(cid:51)(cid:57)(cid:53)(cid:67)
Our Bra(cid:80)ilian operations have received or been the sub(cid:64)ect 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. (cid:50)e 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 Bra(cid:80)ilian tax contingencies:
(in millions)
Tax contingency - unreserved
Escrow cash deposits
Surety bonds
Letters of credit
Liens on Bra(cid:80)ilian assets
December 31,
2020
December 31,
2019
(cid:3)
355 (cid:3)
39
112
(cid:22)8
(cid:84)
442
51
135
91
(cid:84)
The decrease in the unreserved portion of the tax contingency, inclusive of any related interest, was primarily related
to closed cases. (cid:50)ith respect to the unreserved tax contingency, the ma(cid:64)ority has been assessed by management as
being remote as to the li(cid:65)elihood of ultimately resulting in a loss to the Company. In connection with the above
proceedings, customary local regulations may require us to ma(cid:65)e 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. (cid:34)enerally, any escrowed amounts would be refundable and any liens on assets would be removed to the
extent the matters are resolved in our favor. (cid:50)e 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, 2020.
(cid:50)e routinely assess all these matters as to probability of ultimately incurring a liability against our Bra(cid:80)ilian
operations and record our best estimate of the ultimate loss in situations where we assess the li(cid:65)elihood of an
ultimate loss as probable.
(cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:25)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55)(cid:53)(cid:62)(cid:51)(cid:57)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:25)(cid:63)(cid:61)(cid:61)(cid:57)(cid:68)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)
As more fully discussed in Note 21 - Contingencies and Litigation in the Consolidated Financial Statements, we are
involved in a variety of claims, lawsuits, investigations and proceedings concerning: securities law(cid:26) governmental
entity contracting, servicing and procurement law(cid:26) intellectual property law(cid:26) environmental law(cid:26) employment law(cid:26) the
Employee Retirement Income Security Act (ERISA)(cid:26) and other laws and regulations. In addition, guarantees,
indemnifications and claims may arise during the ordinary course of business from relationships with suppliers,
60
Xerox 2020 Annual Report 60
Xerox 2020 Annual Report 61
Table of Contents
customers and non-consolidated affiliates. Nonperformance under a contract including a guarantee, indemnification
or claim could trigger an obligation of the Company.
(cid:50)e determine whether an estimated loss from a contingency should be accrued by assessing whether a loss is
deemed probable and can be reasonably estimated. Should developments in any of these areas cause a change in
our determination as to an unfavorable outcome and result in the need to recogni(cid:80)e a material accrual, or should any
of these matters result in a final adverse (cid:64)udgment or be settled for significant amounts, they could have a material
adverse effect on our results of operations, financial position and cash flows in the period or periods in which such
change in determination, (cid:64)udgment or settlement occurs.
(cid:43)(cid:62)(cid:66)(cid:53)(cid:51)(cid:63)(cid:55)(cid:62)(cid:57)(cid:74)(cid:53)(cid:52) (cid:42)(cid:49)(cid:72) (cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68)(cid:67)
As of December 31, 2020, we had (cid:3)115 million of unrecogni(cid:80)ed tax benefits. This represents the tax benefits
associated with various tax positions ta(cid:65)en, or expected to be ta(cid:65)en, on domestic and foreign tax returns that have
not been recogni(cid:80)ed in our financial statements due to uncertainty regarding their resolution. The resolution or
settlement of these tax positions with the taxing authorities is at various stages and, therefore, we are unable to
ma(cid:65)e a reliable estimate of the eventual cash flows by period that may be required to settle these matters. In
addition, certain of these matters may not require cash settlement due to the existence of credit and net operating
loss carryforwards, as well as other offsets, including the indirect benefit from other taxing (cid:64)urisdictions that may be
available.
Refer to Note 20 - Income and Other Taxes in the Consolidated Financial Statements for additional information
regarding unrecogni(cid:80)ed tax benefits.
(cid:37)(cid:54)(cid:54)(cid:9)(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:41)(cid:56)(cid:53)(cid:53)(cid:68) (cid:23)(cid:66)(cid:66)(cid:49)(cid:62)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)
(cid:50)e may occasionally utili(cid:80)e off-balance sheet arrangements in our operations (as defined by the SEC Financial
Reporting Release 6(cid:22) (FRR-6(cid:22)), (cid:86)Disclosure in (cid:40)anagement(cid:85)s Discussion and Analysis about Off-Balance Sheet
Arrangements and Aggregate Contractual Obligations(cid:87)). Accounts receivable sales facilities arrangements that we
enter into may have off-balance sheet elements. During 201(cid:22), we terminated all accounts receivable sales
arrangements in North America and all but one arrangement in Europe. Refer to Note (cid:22) - Accounts Receivable, Net
in the Consolidated Financial Statements for further information regarding accounts receivable sales.
As of December 31, 2020, we do not believe we have any off-balance sheet arrangements that have, or are
reasonably li(cid:65)ely to have, a material current or future effect on financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
In addition, see the preceding table for the Company's contractual cash obligations and other commercial
commitments and contingencies and Note 21 - Contingencies and Litigation in the Consolidated Financial
Statements for additional information regarding contingencies, guarantees, indemnifications and warranty liabilities.
Xerox 2020 Annual Report 61
Xerox 2020 Annual Report 61
Table of Contents
(cid:36)(cid:63)(cid:62)(cid:9)(cid:29)(cid:23)(cid:23)(cid:38) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:35)(cid:53)(cid:49)(cid:67)(cid:69)(cid:66)(cid:53)(cid:67)
(cid:50)e have reported our financial results in accordance with generally accepted accounting principles ((cid:34)AA(cid:43)). In
addition, we have discussed our financial results using the non-(cid:34)AA(cid:43) measures described below. (cid:50)e believe these
non-(cid:34)AA(cid:43) measures allow investors to better understand the trends in our business and to better understand and
compare our results. Accordingly, we believe it is necessary to ad(cid:64)ust several reported amounts, determined in
accordance with (cid:34)AA(cid:43), to exclude the effects of certain items as well as their related income tax effects.
A reconciliation of these non-(cid:34)AA(cid:43) financial measures to the most directly comparable financial measures
calculated and presented in accordance with (cid:34)AA(cid:43) are set forth below in the following tables.
These non-(cid:34)AA(cid:43) financial measures should be viewed in addition to, and not as a substitute for, the Company(cid:85)s
reported results prepared in accordance with (cid:34)AA(cid:43).
(cid:23)(cid:52)(cid:58)(cid:69)(cid:67)(cid:68)(cid:53)(cid:52) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:35)(cid:53)(cid:49)(cid:67)(cid:69)(cid:66)(cid:53)(cid:67)
(cid:77)
(cid:77)
Net income and Earnings per share (E(cid:43)S)
Effective tax rate
The above measures were ad(cid:64)usted for the following items:
Restructuring and related costs, net:(cid:1)Restructuring and related costs, net include restructuring and asset impairment
charges as well as costs associated with our transformation programs beyond those normally included in
restructuring and asset impairment charges. Restructuring consists of costs primarily related to severance and
benefits paid to employees pursuant to formal restructuring and wor(cid:65)force reduction plans. Asset impairment
includes costs incurred for those assets sold, abandoned or made obsolete as a result of our restructuring actions,
exiting from a business or other strategic business changes. Additional costs for our transformation programs are
primarily related to the implementation of strategic actions and initiatives and include third-party professional service
costs as well as one-time incremental costs. All of these costs can vary significantly in terms of amount and
frequency based on the nature of the actions as well as the changing needs of the business. Accordingly, due to that
significant variability, we will exclude these charges since we do not believe they provide meaningful insight into our
current or past operating performance nor do we believe they are reflective of our expected future operating
expenses as such charges are expected to yield future benefits and savings with respect to our operational
performance.
Amorti(cid:80)ation of intangible assets: The amorti(cid:80)ation of intangible assets is driven by our acquisition activity which can
vary in si(cid:80)e, nature and timing as compared to other companies within our industry and from period to period. The
use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our
future period revenues as well. Amorti(cid:80)ation of intangible assets will recur in future periods.
Transaction and related costs, net: Transaction and related costs, net primarily reflect costs from third party providers
for professional services associated with certain strategic (cid:40)(cid:5)A pro(cid:64)ects. These costs and expense are primarily for
third-party legal, accounting, consulting and other similar type professional services as well as costs associated with
potential legal actions or matters that may arise in connection with those (cid:40)(cid:5)A transactions. These costs are
considered incremental to our normal operating charges and were incurred or are expected to be incurred solely as a
result of the planned transactions. Accordingly, we are excluding these expenses from our Ad(cid:64)usted Earnings
(cid:40)easures in order to evaluate our performance on a comparable basis.
Non-service retirement-related costs:(cid:1)Our defined benefit pension and retiree health costs include several elements
impacted by changes in plan assets and obligations that are primarily driven by changes in the debt and equity
mar(cid:65)ets as well as those that are predominantly legacy in nature and related to employees who are no longer
providing current service to the company (e.g. retirees and ex-employees). These elements include (i) interest cost,
(ii) expected return on plan assets, (iii) amorti(cid:80)ation of prior plan amendments, (iv) amorti(cid:80)ed actuarial gains(cid:14)losses
and (v) the impacts of any plan settlements(cid:14)curtailments. Accordingly, we consider these elements of our periodic
retirement plan costs to be outside the operational performance of the business or legacy costs and not necessarily
indicative of current or future cash flow requirements. This approach is consistent with the classification of these
costs as non-operating in Other expenses, net. Ad(cid:64)usted earnings will continue to include the service cost elements
of our retirement costs, which is related to current employee service as well as the cost of our defined contribution
plans.
62
Xerox 2020 Annual Report 62
Table of Contents
Other discrete, unusual or infrequent items: In addition, we have also excluded the following items given their
discrete, unusual or infrequent nature and their impact on our results for the period:
(cid:77)
(cid:77)
(cid:77)
Contract termination costs - IT services.
Losses on early extinguishment of debt.
Impacts associated with the Tax Cuts and (cid:37)obs Act (the Tax Act) enacted in December 201(cid:22).
(cid:50)e believe the exclusion of these items allows investors to better understand and analy(cid:80)e the results for the period
as compared to prior periods and expected future trends in our business.
(cid:23)(cid:52)(cid:58)(cid:69)(cid:67)(cid:68)(cid:53)(cid:52) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:62)(cid:55) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:49)(cid:62)(cid:52) (cid:35)(cid:49)(cid:66)(cid:55)(cid:57)(cid:62)
(cid:50)e calculate and utili(cid:80)e ad(cid:64)usted operating income and margin measures by ad(cid:64)usting our reported pre-tax income
and margin amounts. In addition to the costs and expenses noted as ad(cid:64)ustments for our Ad(cid:64)usted Earnings
measures, ad(cid:64)usted operating income and margin also exclude the remaining amounts included in Other expenses,
net, which are primarily non-financing interest expense and certain other non-operating costs and expenses. (cid:50)e
exclude these amounts in order to evaluate our current and past operating performance and to better understand the
expected future trends in our business.
(cid:25)(cid:63)(cid:62)(cid:67)(cid:68)(cid:49)(cid:62)(cid:68) (cid:25)(cid:69)(cid:66)(cid:66)(cid:53)(cid:62)(cid:51)(cid:73) (cid:6)(cid:25)(cid:25)(cid:7)
Refer to the (cid:25)(cid:69)(cid:66)(cid:66)(cid:53)(cid:62)(cid:51)(cid:73) (cid:31)(cid:61)(cid:64)(cid:49)(cid:51)(cid:68) section in the (cid:40)D(cid:5)A for discussion of this measure and its use in our analysis of
revenue growth.
(cid:41)(cid:69)(cid:61)(cid:61)(cid:49)(cid:66)(cid:73)
(cid:40)anagement believes that all of these non-(cid:34)AA(cid:43) financial measures provide an additional means of analy(cid:80)ing the
current period(cid:85)s results against the corresponding prior period(cid:85)s results. However, these non-(cid:34)AA(cid:43) financial
measures should be viewed in addition to, and not as a substitute for, the Company(cid:85)s reported results prepared in
accordance with (cid:34)AA(cid:43). Our non-(cid:34)AA(cid:43) financial measures are not meant to be considered in isolation or as a
substitute for comparable (cid:34)AA(cid:43) measures and should be read only in con(cid:64)unction with our consolidated financial
statements prepared in accordance with (cid:34)AA(cid:43). Our management regularly uses our supplemental non-(cid:34)AA(cid:43)
financial measures internally to understand, manage and evaluate our business and ma(cid:65)e operating decisions.
These non-(cid:34)AA(cid:43) measures are among the primary factors management uses in planning for and forecasting future
periods. Compensation of our executives is based in part on the performance of our business based on these non-
(cid:34)AA(cid:43) measures.
(cid:36)(cid:53)(cid:68) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:49)(cid:62)(cid:52) (cid:27)(cid:38)(cid:41) (cid:66)(cid:53)(cid:51)(cid:63)(cid:62)(cid:51)(cid:57)(cid:60)(cid:57)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(in millions, except per share amounts)
(cid:40)(cid:53)(cid:64)(cid:63)(cid:66)(cid:68)(cid:53)(cid:52)(cid:6)(cid:13)(cid:7)
(cid:23)(cid:52)(cid:58)(cid:69)(cid:67)(cid:68)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)(cid:22)
Restructuring and related costs, net
Amorti(cid:80)ation of intangible assets
Transaction and related costs, net
Non-service retirement-related costs
Loss on early extinguishment of debt
Contract termination costs - IT services
Income tax on ad(cid:64)ustments(2)
Tax Act
(cid:52)ear Ended December 31,
2020
2019
2018
Net Income
E(cid:43)S
Net Income
E(cid:43)S
Net Income
E(cid:43)S
(cid:3)
192 (cid:3)
0.84 (cid:3)
648 (cid:3)
2.(cid:22)8 (cid:3)
306 (cid:3)
1.16
93
56
18
(29)
26
3
(46)
(cid:84)
229
45
12
18
(cid:84)
(12)
((cid:22)(cid:22))
(35)
15(cid:22)
48
68
150
(cid:84)
43
(116)
89
(cid:23)(cid:52)(cid:58)(cid:69)(cid:67)(cid:68)(cid:53)(cid:52)
Dividends on preferred stoc(cid:65) used in ad(cid:64)usted E(cid:43)S
calculation(3)
(cid:50)eighted average shares for ad(cid:64)usted E(cid:43)S(3)
Fully diluted shares at December 31, 2020(4)
(cid:3)
313 (cid:3)
1.41 (cid:3)
828 (cid:3)
3.55 (cid:3)
(cid:22)45 (cid:3)
2.88
(cid:3)
14
211
20(cid:22)
(cid:3)
(cid:84)
233
(cid:3)
(cid:84)
258
_____________
(1) (cid:38)et income and (cid:29)(cid:40)(cid:43) from continuing operations attributable to (cid:48)erox (cid:32)oldings.
(2) Refer to (cid:29)ffective Tax Rate reconciliation.
((cid:16)) (cid:30)or those periods that exclude the preferred stoc(cid:61) dividend, the average shares for the calculations of diluted (cid:29)(cid:40)(cid:43) include (cid:20) million shares
associated with (cid:48)erox (cid:32)oldings (cid:27)orporation(cid:6)s (cid:43)eries (cid:25) (cid:27)onvertible preferred stoc(cid:61), as applicable.
((cid:17)) Represents common shares outstanding at December (cid:16)1, 2(cid:13)2(cid:13) as well as shares associated with (cid:48)erox (cid:32)oldings (cid:27)orporation(cid:6)s (cid:43)eries (cid:25)
convertible preferred stoc(cid:61) plus potential dilutive common shares used for the calculation of adjusted diluted earnings per share for the year
ended December (cid:16)1, 2(cid:13)2(cid:13).
Xerox 2020 Annual Report 63
Xerox 2020 Annual Report 63
Table of Contents
(cid:27)(cid:54)(cid:54)(cid:53)(cid:51)(cid:68)(cid:57)(cid:70)(cid:53) (cid:42)(cid:49)(cid:72) (cid:40)(cid:49)(cid:68)(cid:53) (cid:66)(cid:53)(cid:51)(cid:63)(cid:62)(cid:51)(cid:57)(cid:60)(cid:57)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(in millions)
(cid:40)(cid:53)(cid:64)(cid:63)(cid:66)(cid:68)(cid:53)(cid:52)(cid:6)(cid:13)(cid:7)
Non-(cid:34)AA(cid:43) Ad(cid:64)ustments(2)
Tax Act
(cid:23)(cid:52)(cid:58)(cid:69)(cid:67)(cid:68)(cid:53)(cid:52)(cid:6)(cid:15)(cid:7)
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:43)re-Tax
Income
Income Tax
Expense
Effective
Tax Rate
(cid:43)re-Tax
Income
Income Tax
Expense
Effective
Tax Rate
(cid:43)re-Tax
Income
Income Tax
Expense
Effective
Tax Rate
(cid:3)
252 (cid:3)
16(cid:22)
(cid:84)
64
46
(cid:84)
25.4 (cid:4) (cid:3)
822 (cid:3)
1(cid:22)9
21.8 (cid:4) (cid:3)
549 (cid:3)
292
(cid:84)
(cid:22)(cid:22)
35
466
(cid:84)
(cid:3)
419 (cid:3)
110
26.3 (cid:4) (cid:3) 1,114 (cid:3)
291
26.1 (cid:4) (cid:3) 1,015 (cid:3)
24(cid:22)
116
(89)
2(cid:22)4
45.0 (cid:4)
2(cid:22).0 (cid:4)
_____________
(1) (cid:40)re-tax Income and Income tax expense from continuing operations.
(2) Refer to (cid:38)et Income and (cid:29)(cid:40)(cid:43) reconciliation for details.
((cid:16)) The tax impact on (cid:25)djusted (cid:40)re-Tax Income from continuing operations is calculated under the same accounting principles applied to the
Reported (cid:40)re-Tax Income under (cid:25)(cid:43)(cid:27) (cid:20)(cid:17)(cid:13), which employs an annual effective tax rate method to the results.
(cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:62)(cid:55) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:49)(cid:62)(cid:52) (cid:35)(cid:49)(cid:66)(cid:55)(cid:57)(cid:62) (cid:66)(cid:53)(cid:51)(cid:63)(cid:62)(cid:51)(cid:57)(cid:60)(cid:57)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(in millions)
(cid:40)(cid:53)(cid:64)(cid:63)(cid:66)(cid:68)(cid:53)(cid:52)(cid:6)(cid:13)(cid:7)
(cid:23)(cid:52)(cid:58)(cid:69)(cid:67)(cid:68)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)(cid:22)
Restructuring and related costs, net
Amorti(cid:80)ation of intangible assets
Transaction and related costs, net
Other expenses, net(2)
(cid:23)(cid:52)(cid:58)(cid:69)(cid:67)(cid:68)(cid:53)(cid:52)
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:43)rofit
Revenue
(cid:40)argin
(cid:43)rofit
Revenue
(cid:40)argin
(cid:43)rofit
Revenue
(cid:40)argin
(cid:3)
252 (cid:3) (cid:22),022
3.6 (cid:4) (cid:3)
822 (cid:3) 9,066
9.1 (cid:4) (cid:3)
549 (cid:3) 9,662
5.(cid:22) (cid:4)
93
56
18
45
229
45
12
84
15(cid:22)
48
68
2(cid:22)1
(cid:3)
464 (cid:3) (cid:22),022
6.6 (cid:4) (cid:3) 1,192 (cid:3) 9,066
13.1 (cid:4) (cid:3) 1,093 (cid:3) 9,662
11.3 (cid:4)
_____________
(1) (cid:43)re-tax Income and revenue from continuing operations.
(2)
Includes non-service retirement-related costs of (cid:3)(29) million, (cid:3)18 million and (cid:3)150 million for the years ended December 31, 2020, 2019 and
2018, respectively.
64
Xerox 2020 Annual Report 64
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(cid:31)(cid:68)(cid:53)(cid:61) (cid:19)(cid:23)(cid:10) (cid:39)(cid:69)(cid:49)(cid:62)(cid:68)(cid:57)(cid:68)(cid:49)(cid:68)(cid:57)(cid:70)(cid:53) (cid:49)(cid:62)(cid:52) (cid:39)(cid:69)(cid:49)(cid:60)(cid:57)(cid:68)(cid:49)(cid:68)(cid:57)(cid:70)(cid:53) (cid:26)(cid:57)(cid:67)(cid:51)(cid:60)(cid:63)(cid:67)(cid:69)(cid:66)(cid:53)(cid:67) (cid:23)(cid:50)(cid:63)(cid:69)(cid:68) (cid:35)(cid:49)(cid:66)(cid:59)(cid:53)(cid:68) (cid:40)(cid:57)(cid:67)(cid:59)
(cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:40)(cid:57)(cid:67)(cid:59) (cid:35)(cid:49)(cid:62)(cid:49)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)
(cid:50)e are exposed to mar(cid:65)et ris(cid:65) from foreign currency exchange rates and interest rates, which could affect operating
results, financial position and cash flows. (cid:50)e manage our exposure to these mar(cid:65)et ris(cid:65)s through our regular
operating and financing activities and, when appropriate, through the use of derivative financial instruments. (cid:50)e
utili(cid:80)ed derivative financial instruments to hedge economic exposures, as well as reduce earnings and cash flow
volatility resulting from shifts in mar(cid:65)et rates.
Recent mar(cid:65)et events have not caused us to materially modify or change our financial ris(cid:65) management strategies
with respect to our exposures to interest rate and foreign currency ris(cid:65). Refer to Note 1(cid:22) - Financial Instruments in
the Consolidated Financial Statements for additional discussion on our financial ris(cid:65) management.
(cid:28)(cid:63)(cid:66)(cid:53)(cid:57)(cid:55)(cid:62) (cid:27)(cid:72)(cid:51)(cid:56)(cid:49)(cid:62)(cid:55)(cid:53) (cid:40)(cid:57)(cid:67)(cid:59) (cid:35)(cid:49)(cid:62)(cid:49)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)
Assuming a 10(cid:4) appreciation or depreciation in foreign currency exchange rates from the quoted foreign currency
exchange rates at December 31, 2020, it would not significantly change the fair value of foreign currency-
denominated assets and liabilities as all material currency asset and liability exposures were economically hedged
as of December 31, 2020. A 10(cid:4) appreciation or depreciation of the U.S. Dollar against all currencies from the
quoted foreign currency exchange rates at December 31, 2020 would have an impact on our cumulative translation
ad(cid:64)ustment portion of equity of approximately (cid:3)315 million. The net amount invested in foreign subsidiaries and
affiliates, primarily Xerox Limited and Xerox Canada Inc. and translated into U.S. Dollars using the year-end
exchange rates, was approximately (cid:3)3.2 billion at December 31, 2020.
(cid:31)(cid:62)(cid:68)(cid:53)(cid:66)(cid:53)(cid:67)(cid:68) (cid:40)(cid:49)(cid:68)(cid:53) (cid:40)(cid:57)(cid:67)(cid:59) (cid:35)(cid:49)(cid:62)(cid:49)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)
The consolidated average interest rate associated with our total debt for 2020, 2019 and 2018 approximated 4.8(cid:4),
4.9(cid:4), and 4.6(cid:4), respectively. Interest expense includes the impact of our interest rate derivatives.
(cid:49)irtually all customer-financing assets earn fixed rates of interest. The interest rates on a significant portion of the
Company's term debt are fixed.
As of December 31, 2020, of our total debt of (cid:3)4.4 billion, a total of (cid:3)(cid:22)64 million of secured borrowings carried
variable interest rates, of which (cid:3)265 million has a variable interest rate based on LIBOR plus a spread and the
remaining (cid:3)499 million has a variable interest rate based on the financial institution's cost of funds plus a spread.
The fair mar(cid:65)et values of our fixed-rate financial instruments are sensitive to changes in interest rates. At
December 31, 2020, a 10(cid:4) change in mar(cid:65)et interest rates would change the fair values of such financial
instruments by approximately (cid:3)(cid:22)9 million.
Refer to Note 16 - Debt in our Consolidated Financial Statements for additional information regarding our interest
expense and our secured borrowings.
(cid:31)(cid:68)(cid:53)(cid:61) (cid:20)(cid:10) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:41)(cid:69)(cid:64)(cid:64)(cid:60)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:49)(cid:66)(cid:73) (cid:26)(cid:49)(cid:68)(cid:49)
Xerox 2020 Annual Report 65
Xerox 2020 Annual Report 65
Table of Contents
(cid:27)eport of (cid:20)n(cid:36)epen(cid:36)ent (cid:27)egistere(cid:36) Pu(cid:34)lic Accounting Fir(cid:45)
To the Board of Directors and Shareholders of Xerox Holdings Corporation
Opinions on t(cid:40)e Financial (cid:28)tate(cid:45)ents an(cid:36) (cid:20)nternal (cid:14)ontrol over Financial (cid:27)eporting
(cid:50)e have audited the accompanying consolidated balance sheets of Xerox Holdings Corporation and its subsidiaries
(the (cid:86)Company(cid:87)) as of December 31, 2020 and 2019, and the related consolidated statements of income,
comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended
December 31, 2020, including the related notes and financial statement schedule listed in the index appearing
under Item 15(a)(2) (collectively referred to as the (cid:2)consolidated financial statements(cid:2)). (cid:50)e also have audited the
Company's internal control over financial reporting as of December 31, 2020, based on criteria established in
Internal (cid:27)ontrol - Integrated (cid:30)ramewor(cid:61) (2013) issued by the Committee of Sponsoring Organi(cid:80)ations 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, 2020 and 2019, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2020 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, 2020, based on criteria established in
Internal (cid:27)ontrol - Integrated (cid:30)ramewor(cid:61) (2013) issued by the COSO.
(cid:27)hanges in (cid:25)ccounting (cid:40)rinciples
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it
accounts for leases in 2019 and the manner in which it accounts for revenues from contracts with customers in
2018.
(cid:13)asis 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 (cid:40)anagement'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. (cid:50)e are a public accounting firm registered with the
(cid:43)ublic Company Accounting Oversight Board (United States) ((cid:43)CAOB) 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 (cid:43)CAOB.
(cid:50)e conducted our audits in accordance with the standards of the (cid:43)CAOB. 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 ris(cid:65)s of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those ris(cid:65)s. 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 ris(cid:65) that a material wea(cid:65)ness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed ris(cid:65). Our
audits also included performing such other procedures as we considered necessary in the circumstances. (cid:50)e
believe that our audits provide a reasonable basis for our opinions.
Definition an(cid:36) (cid:23)i(cid:45)itations of (cid:20)nternal (cid:14)ontrol over Financial (cid:27)eporting
A company(cid:85)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(cid:85)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(cid:26) (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
66
Xerox 2020 Annual Report 66
Table of Contents
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authori(cid:80)ations of management and directors of the company(cid:26) and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthori(cid:80)ed acquisition, use, or disposition of the company(cid:85)s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, pro(cid:64)ections of any evaluation of effectiveness to future periods are sub(cid:64)ect to the ris(cid:65) that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
(cid:14)ritical Au(cid:36)it (cid:24)atters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated
financial statements that were communicated or required to be communicated to the audit committee and that (i)
relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our
especially challenging, sub(cid:64)ective, or complex (cid:64)udgments. The communication of critical audit matters does not alter
in any way our opinion on the consolidated financial statements, ta(cid:65)en as a whole, and we are not, by
communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
Reali(cid:76)ability of Deferred Tax (cid:25)ssets
As described in Note 20 to the consolidated financial statements, the Company has recorded (cid:3)983 million of
deferred tax assets as of December 31, 2020, net of a valuation allowance of (cid:3)396 million. (cid:40)anagement 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 reali(cid:80)ability and, where
applicable, a valuation allowance is recorded to reduce the total deferred tax asset to an amount that will, more-
li(cid:65)ely-than-not, be reali(cid:80)ed in the future. (cid:40)anagement applied (cid:64)udgment in assessing the reali(cid:80)ability of these
deferred tax assets and the need for any valuation allowances, in particular the reali(cid:80)ability of US tax credit
carryforwards with a limited life. In determining the amount of deferred tax assets that are more-li(cid:65)ely-than-not to be
reali(cid:80)ed, management considered historical profitability, pro(cid:64)ected 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 reali(cid:80)ability of deferred
tax assets is a critical audit matter are the significant (cid:64)udgment by management in assessing the available positive
and negative evidence surrounding the reali(cid:80)ability of deferred tax assets related to US tax credit carryforwards with
a limited life, which in turn led to a high degree of auditor (cid:64)udgment, sub(cid:64)ectivity, and effort in performing procedures
and in evaluating management(cid:85)s significant assumptions related to pro(cid:64)ected future taxable income and application
of income tax law. In addition, the audit effort involved the use of professionals with speciali(cid:80)ed s(cid:65)ill and (cid:65)nowledge.
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 reali(cid:80)ability of deferred tax assets, including controls over pro(cid:64)ected future taxable income.
These procedures also included, among others, evaluating management(cid:85)s assessment of the reali(cid:80)ability of
deferred tax assets, including evaluating the assumption relating to pro(cid:64)ected future taxable income. Evaluating
management(cid:85)s assumption related to pro(cid:64)ected future taxable income involved evaluating historical profitability as
well as other audit evidence related to management(cid:85)s forecasts. (cid:43)rofessionals with speciali(cid:80)ed s(cid:65)ill and (cid:65)nowledge
were also used to assist in evaluating management(cid:85)s application of income tax law and the reali(cid:80)ability of deferred
tax assets relating to US tax credit carryforwards with a limited life.
(cid:31)oodwill Impairment (cid:25)ssessments
As described in Notes 1 and 13 to the consolidated financial statements, the Company has recorded (cid:3)4,0(cid:22)1 million
of goodwill as of December 31, 2020 for its single reporting unit. (cid:40)anagement assesses goodwill for impairment at
least annually, during the fourth quarter based on balances as of October 1st, and more frequently if indicators of
impairment exist or if a decision is made to sell or exit a business. If the fair value exceeds carrying value, goodwill
is not considered impaired. If the carrying value exceeds the fair value, goodwill is considered impaired and
management would recogni(cid:80)e an impairment loss for the excess. (cid:40)anagement performs an assessment of
goodwill, utili(cid:80)ing either a qualitative or quantitative impairment test. The qualitative impairment test assesses
several factors to determine whether it is more-li(cid:65)ely-than-not that the fair value of the Company is less than its
carrying value. In a quantitative impairment test, management assesses goodwill by comparing the carrying amount
of the entity to its fair value, and the fair value of the entity is determined by using a weighted combination of an
Xerox 2020 Annual Report 67
Xerox 2020 Annual Report 6(cid:22)
Table of Contents
income approach and a mar(cid:65)et approach. In the second quarter 2020, management determined there was a
triggering event requiring an interim quantitative evaluation of goodwill. After completing the interim impairment
review, management concluded that goodwill was not impaired in the second quarter 2020. After completing the
annual quantitative review in the fourth quarter 2020, management concluded that goodwill was not impaired. As
disclosed by management, the income approach is based on the discounted cash flow method that uses the
Company(cid:85)s estimates of forecasted future financial performance including revenues, gross margins, operating
expenses, taxes, wor(cid:65)ing capital, and capital asset requirements. (cid:43)ro(cid:64)ected cash flows are then discounted to a
present value employing a discount rate that properly accounts for the estimated mar(cid:65)et weighted-average cost of
capital, as well as any ris(cid:65) unique to the sub(cid:64)ect cash flows.
The principal considerations for our determination that performing procedures relating to the goodwill impairment
assessments is a critical audit matter are the significant (cid:64)udgment by management in determining the fair value
estimate of the reporting unit, which in turn led to a high degree of auditor (cid:64)udgment, sub(cid:64)ectivity, and effort in
performing procedures and evaluating management(cid:85)s discounted cash flow method and significant assumptions
related to forecasted revenues, gross margins and operating expenses, and the discount rates. In addition, the audit
effort involved the use of professionals with speciali(cid:80)ed s(cid:65)ill and (cid:65)nowledge.
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 management(cid:85)s goodwill impairment assessments, including controls over the valuation of the
Company(cid:85)s reporting unit and the controls over the development of the assumptions related to forecasted revenues,
gross margins and operating expenses, and the discount rates. These procedures also included, among others, (i)
testing management(cid:85)s process for determining the fair value estimate(cid:26) (ii) evaluating the appropriateness of the
discounted cash flow method(cid:26) (iii) testing the completeness and accuracy of underlying data used in the estimate(cid:26)
and (iv) evaluating reasonableness of the significant assumptions used by management, relating to the forecasted
revenues, gross margins and operating expenses, and the discount rates. Evaluating management(cid:85)s assumptions
related to forecasted revenues, gross margins and operating expenses involved evaluating whether the
assumptions used by management were reasonable considering (i) the current and past performance of the
reporting unit, (ii) the consistency with external mar(cid:65)et and industry data, and (iii) whether these assumptions were
consistent with evidence obtained in other areas of the audit. (cid:43)rofessionals with speciali(cid:80)ed s(cid:65)ill and (cid:65)nowledge
were also used to assist in evaluation of the Company(cid:85)s discounted cash flow method and the discount rates.
(cid:14)s(cid:14) (cid:43)RICE(cid:50)ATERHOUSECOO(cid:43)ERS LL(cid:43)
Stamford, Connecticut
February 25, 2021
(cid:50)e have served as the Company(cid:85)s or its predecessor's auditor since 2001.
68
Xerox 2020 Annual Report 68
Table of Contents
(cid:27)eport of (cid:20)n(cid:36)epen(cid:36)ent (cid:27)egistere(cid:36) Pu(cid:34)lic Accounting Fir(cid:45)
To the Board of Directors and Shareholder of Xerox Corporation
Opinions on t(cid:40)e Financial (cid:28)tate(cid:45)ents an(cid:36) (cid:20)nternal (cid:14)ontrol over Financial (cid:27)eporting
(cid:50)e have audited the accompanying consolidated balance sheets of Xerox Corporation and its subsidiaries (the
(cid:86)Company(cid:87)) as of December 31, 2020 and 2019, and the related consolidated statements of income,
comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended
December 31, 2020, including the related notes and financial statement schedule listed in the index appearing
under Item 15(a)(2) (collectively referred to as the (cid:2)consolidated financial statements(cid:2)). (cid:50)e also have audited the
Company's internal control over financial reporting as of December 31, 2020, based on criteria established in
Internal (cid:27)ontrol - Integrated (cid:30)ramewor(cid:61) (2013) issued by the Committee of Sponsoring Organi(cid:80)ations 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, 2020 and 2019, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2020 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, 2020, based on criteria established in
Internal (cid:27)ontrol - Integrated (cid:30)ramewor(cid:61) (2013) issued by the COSO.
(cid:27)hanges in (cid:25)ccounting (cid:40)rinciples
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it
accounts for leases in 2019 and the manner in which it accounts for revenues from contracts with customers in
2018.
(cid:13)asis 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 (cid:40)anagement'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. (cid:50)e are a public accounting firm registered
with the (cid:43)ublic Company Accounting Oversight Board (United States) ((cid:43)CAOB) 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 (cid:43)CAOB.
(cid:50)e conducted our audits in accordance with the standards of the (cid:43)CAOB. 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 ris(cid:65)s of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those ris(cid:65)s. 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 ris(cid:65) that a material wea(cid:65)ness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed ris(cid:65). Our
audits also included performing such other procedures as we considered necessary in the circumstances. (cid:50)e
believe that our audits provide a reasonable basis for our opinions.
Definition an(cid:36) (cid:23)i(cid:45)itations of (cid:20)nternal (cid:14)ontrol over Financial (cid:27)eporting
A company(cid:85)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(cid:85)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(cid:26) (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
Xerox 2020 Annual Report 69
Xerox 2020 Annual Report 69
Table of Contents
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authori(cid:80)ations of management and directors of the company(cid:26) and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthori(cid:80)ed acquisition, use, or disposition of the company(cid:85)s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, pro(cid:64)ections of any evaluation of effectiveness to future periods are sub(cid:64)ect to the ris(cid:65) that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
(cid:14)ritical Au(cid:36)it (cid:24)atters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated
financial statements that were communicated or required to be communicated to the audit committee and that (i)
relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our
especially challenging, sub(cid:64)ective, or complex (cid:64)udgments. The communication of critical audit matters does not alter
in any way our opinion on the consolidated financial statements, ta(cid:65)en as a whole, and we are not, by
communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
Reali(cid:76)ability of Deferred Tax (cid:25)ssets
As described in Note 20 to the consolidated financial statements, the Company has recorded (cid:3)983 million of
deferred tax assets as of December 31, 2020, net of a valuation allowance of (cid:3)396 million. (cid:40)anagement 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 reali(cid:80)ability and,
where applicable, a valuation allowance is recorded to reduce the total deferred tax asset to an amount that will,
more-li(cid:65)ely-than-not, be reali(cid:80)ed in the future. (cid:40)anagement applied (cid:64)udgment in assessing the reali(cid:80)ability of these
deferred tax assets and the need for any valuation allowances, in particular the reali(cid:80)ability of US tax credit
carryforwards with a limited life. In determining the amount of deferred tax assets that are more-li(cid:65)ely-than-not to be
reali(cid:80)ed, management considered historical profitability, pro(cid:64)ected 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 reali(cid:80)ability of deferred
tax assets is a critical audit matter are the significant (cid:64)udgment by management in assessing the available positive
and negative evidence surrounding the reali(cid:80)ability of deferred tax assets related to US tax credit carryforwards
with a limited life, which in turn led to a high degree of auditor (cid:64)udgment, sub(cid:64)ectivity, and effort in performing
procedures and in evaluating management(cid:85)s significant assumptions related to pro(cid:64)ected future taxable income and
application of income tax law. In addition, the audit effort involved the use of professionals with speciali(cid:80)ed s(cid:65)ill and
(cid:65)nowledge.
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 reali(cid:80)ability of deferred tax assets, including controls over pro(cid:64)ected future taxable income.
These procedures also included, among others, evaluating management(cid:85)s assessment of the reali(cid:80)ability of
deferred tax assets, including evaluating the assumption relating to pro(cid:64)ected future taxable income. Evaluating
management(cid:85)s assumption related to pro(cid:64)ected future taxable income involved evaluating historical profitability as
well as other audit evidence related to management(cid:85)s forecasts. (cid:43)rofessionals with speciali(cid:80)ed s(cid:65)ill and (cid:65)nowledge
were also used to assist in evaluating management(cid:85)s application of income tax law and the reali(cid:80)ability of deferred
tax assets relating to US tax credit carryforwards with a limited life.
(cid:31)oodwill Impairment (cid:25)ssessments
As described in Notes 1 and 13 to the consolidated financial statements, the Company has recorded (cid:3)4,068 million
of goodwill as of December 31, 2020 for its single reporting unit. (cid:40)anagement assesses goodwill for impairment at
least annually, during the fourth quarter based on balances as of October 1st, and more frequently if indicators of
impairment exist or if a decision is made to sell or exit a business. If the fair value exceeds carrying value, goodwill
is not considered impaired. If the carrying value exceeds the fair value, goodwill is considered impaired and
management would recogni(cid:80)e an impairment loss for the excess. (cid:40)anagement performs an assessment of
goodwill, utili(cid:80)ing either a qualitative or quantitative impairment test. The qualitative impairment test assesses
several factors to determine whether it is more-li(cid:65)ely-than-not that the fair value of the Company is less than its
carrying value. In a quantitative impairment test, management assesses goodwill by comparing the carrying amount
70
Xerox 2020 Annual Report (cid:22)0
Table of Contents
of the entity to its fair value, and the fair value of the entity is determined by using a weighted combination of an
income approach and a mar(cid:65)et approach. In the second quarter 2020, management determined there was a
triggering event requiring an interim quantitative evaluation of goodwill. After completing the interim impairment
review, management concluded that goodwill was not impaired in the second quarter 2020. After completing the
annual quantitative review in the fourth quarter 2020, management concluded that goodwill was not impaired. As
disclosed by management, the income approach is based on the discounted cash flow method that uses the
Company(cid:85)s estimates of forecasted future financial performance including revenues, gross margins, operating
expenses, taxes, wor(cid:65)ing capital, and capital asset requirements. (cid:43)ro(cid:64)ected cash flows are then discounted to a
present value employing a discount rate that properly accounts for the estimated mar(cid:65)et weighted-average cost of
capital, as well as any ris(cid:65) unique to the sub(cid:64)ect cash flows.
The principal considerations for our determination that performing procedures relating to the goodwill impairment
assessments is a critical audit matter are the significant (cid:64)udgment by management in determining the fair value
estimate of the reporting unit, which in turn led to a high degree of auditor (cid:64)udgment, sub(cid:64)ectivity, and effort in
performing procedures and evaluating management(cid:85)s discounted cash flow method and significant assumptions
related to forecasted revenues, gross margins and operating expenses, and the discount rates. In addition, the
audit effort involved the use of professionals with speciali(cid:80)ed s(cid:65)ill and (cid:65)nowledge.
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 management(cid:85)s goodwill impairment assessments, including controls over the valuation of the
Company(cid:85)s reporting unit and the controls over the development of the assumptions related to forecasted
revenues, gross margins and operating expenses, and the discount rates. These procedures also included, among
others, (i) testing management(cid:85)s process for determining the fair value estimate(cid:26) (ii) evaluating the appropriateness
of the discounted cash flow method(cid:26) (iii) testing the completeness and accuracy of underlying data used in the
estimate(cid:26) and (iv) evaluating reasonableness of the significant assumptions used by management, relating to the
forecasted revenues, gross margins and operating expenses, and the discount rates. Evaluating management(cid:85)s
assumptions related to forecasted revenues, gross margins and operating expenses involved evaluating whether
the assumptions used by management were reasonable considering (i) the current and past performance of the
reporting unit, (ii) the consistency with external mar(cid:65)et and industry data, and (iii) whether these assumptions were
consistent with evidence obtained in other areas of the audit. (cid:43)rofessionals with speciali(cid:80)ed s(cid:65)ill and (cid:65)nowledge
were also used to assist in evaluation of the Company(cid:85)s discounted cash flow method and the discount rates.
(cid:14)s(cid:14) (cid:43)RICE(cid:50)ATERHOUSECOO(cid:43)ERS LL(cid:43)
Stamford, Connecticut
February 25, 2021
(cid:50)e have served as the Company(cid:85)s auditor since 2001.
Xerox 2020 Annual Report 71
Xerox 2020 Annual Report (cid:22)1
Table of Contents
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:40)(cid:53)(cid:64)(cid:63)(cid:66)(cid:68)(cid:67) (cid:63)(cid:54) (cid:35)(cid:49)(cid:62)(cid:49)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)
(cid:24)anage(cid:45)ent(cid:3)s (cid:27)esponsi(cid:34)ilit(cid:57) for Financial (cid:28)tate(cid:45)ents
The management of Xerox Holdings Corporation is responsible for the integrity and ob(cid:64)ectivity 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 (cid:64)udgments. (cid:40)anagement 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, (cid:43)ricewaterhouseCoopers LL(cid:43), 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.
(cid:24)anage(cid:45)ent(cid:3)s (cid:27)eport on (cid:20)nternal (cid:14)ontrol Over Financial (cid:27)eporting
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 framewor(cid:65) in (cid:80)Internal (cid:27)ontrol - Integrated (cid:30)ramewor(cid:61) (2013)(cid:81) issued by the
Committee of Sponsoring Organi(cid:80)ations 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, 2020. The effectiveness of our internal control over financial reporting as of
December 31, 2020 has been audited by (cid:43)ricewaterhouseCoopers LL(cid:43), an independent registered public
accounting firm, as stated in their report, which is included herein.
(cid:14)s(cid:14) (cid:34)IO(cid:49)ANNI (cid:49)ISENTIN
(cid:25)(cid:56)(cid:57)(cid:53)(cid:54) (cid:27)(cid:72)(cid:53)(cid:51)(cid:69)(cid:68)(cid:57)(cid:70)(cid:53) (cid:37)(cid:54)(cid:54)(cid:57)(cid:51)(cid:53)(cid:66)
(cid:14)s(cid:14) XA(cid:49)IER HEISS
(cid:25)(cid:56)(cid:57)(cid:53)(cid:54) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:37)(cid:54)(cid:54)(cid:57)(cid:51)(cid:53)(cid:66)
(cid:14)s(cid:14) (cid:37)OSE(cid:43)H H. (cid:40)ANCINI, (cid:37)R.
(cid:25)(cid:56)(cid:57)(cid:53)(cid:54) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55) (cid:37)(cid:54)(cid:54)(cid:57)(cid:51)(cid:53)(cid:66)
72
Xerox 2020 Annual Report (cid:22)2
Table of Contents
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:40)(cid:53)(cid:64)(cid:63)(cid:66)(cid:68)(cid:67) (cid:63)(cid:54) (cid:35)(cid:49)(cid:62)(cid:49)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)
(cid:24)anage(cid:45)ent(cid:3)s (cid:27)esponsi(cid:34)ilit(cid:57) for Financial (cid:28)tate(cid:45)ents
The management of Xerox Corporation is responsible for the integrity and ob(cid:64)ectivity 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 (cid:64)udgments. (cid:40)anagement 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, (cid:43)ricewaterhouseCoopers LL(cid:43), 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.
(cid:24)anage(cid:45)ent(cid:3)s (cid:27)eport on (cid:20)nternal (cid:14)ontrol Over Financial (cid:27)eporting
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 framewor(cid:65) in (cid:80)Internal (cid:27)ontrol - Integrated (cid:30)ramewor(cid:61) (2013)(cid:81) issued by the
Committee of Sponsoring Organi(cid:80)ations 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, 2020. The effectiveness of our internal control over financial reporting as of
December 31, 2020 has been audited by (cid:43)ricewaterhouseCoopers LL(cid:43), an independent registered public
accounting firm, as stated in their report, which is included herein.
(cid:14)s(cid:14) (cid:34)IO(cid:49)ANNI (cid:49)ISENTIN
(cid:25)(cid:56)(cid:57)(cid:53)(cid:54) (cid:27)(cid:72)(cid:53)(cid:51)(cid:69)(cid:68)(cid:57)(cid:70)(cid:53) (cid:37)(cid:54)(cid:54)(cid:57)(cid:51)(cid:53)(cid:66)
(cid:14)s(cid:14) XA(cid:49)IER HEISS
(cid:25)(cid:56)(cid:57)(cid:53)(cid:54) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:37)(cid:54)(cid:54)(cid:57)(cid:51)(cid:53)(cid:66)
(cid:14)s(cid:14) (cid:37)OSE(cid:43)H H. (cid:40)ANCINI, (cid:37)R.
(cid:25)(cid:56)(cid:57)(cid:53)(cid:54) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55) (cid:37)(cid:54)(cid:54)(cid:57)(cid:51)(cid:53)(cid:66)
Xerox 2020 Annual Report 73
Xerox 2020 Annual Report (cid:22)3
Table of Contents
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:63)(cid:54) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
(in millions, except per-share data)
(cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)(cid:67)
Sales
Services, maintenance and rentals
Financing
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)(cid:67)
(cid:25)(cid:63)(cid:67)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:27)(cid:72)(cid:64)(cid:53)(cid:62)(cid:67)(cid:53)(cid:67)
Cost of sales
Cost of services, maintenance and rentals
Cost of financing
Research, development and engineering expenses
Selling, administrative and general expenses
Restructuring and related costs, net
Amorti(cid:80)ation of intangible assets
Transaction and related costs, net
Other expenses, net
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:25)(cid:63)(cid:67)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:27)(cid:72)(cid:64)(cid:53)(cid:62)(cid:67)(cid:53)(cid:67)
(cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:50)(cid:53)(cid:54)(cid:63)(cid:66)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:42)(cid:49)(cid:72)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
Income tax expense
Equity in net income of unconsolidated affiliates
(cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:54)(cid:66)(cid:63)(cid:61) (cid:25)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:69)(cid:57)(cid:62)(cid:55) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Income from discontinued operations, net of tax
(cid:36)(cid:53)(cid:68) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
Less: Income from continuing operations attributable to noncontrolling
interests
Less: Income from discontinued operations attributable to noncontrolling
interests
(cid:36)(cid:53)(cid:68) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:23)(cid:68)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:49)(cid:50)(cid:60)(cid:53) (cid:68)(cid:63) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67)
(cid:23)(cid:61)(cid:63)(cid:69)(cid:62)(cid:68)(cid:67) (cid:49)(cid:68)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:49)(cid:50)(cid:60)(cid:53) (cid:68)(cid:63) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67)(cid:22)
Income from continuing operations
Income from discontinued operations
(cid:36)(cid:53)(cid:68) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:23)(cid:68)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:49)(cid:50)(cid:60)(cid:53) (cid:68)(cid:63) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67)
(cid:24)(cid:49)(cid:67)(cid:57)(cid:51) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:64)(cid:53)(cid:66) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)(cid:22)
Continuing operations
Discontinued operations
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:24)(cid:49)(cid:67)(cid:57)(cid:51) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:64)(cid:53)(cid:66) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)
(cid:26)(cid:57)(cid:60)(cid:69)(cid:68)(cid:53)(cid:52) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:64)(cid:53)(cid:66) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)(cid:22)
Continuing operations
Discontinued operations
(cid:26)(cid:57)(cid:60)(cid:69)(cid:68)(cid:53)(cid:52) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:64)(cid:53)(cid:66) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:3)
2,449 (cid:3)
3,22(cid:22) (cid:3)
4,34(cid:22)
226
(cid:22),022
1,(cid:22)42
2,533
121
311
1,851
93
56
18
45
6,(cid:22)(cid:22)0
252
64
4
192
(cid:84)
192
(cid:84)
(cid:84)
5,595
244
9,066
2,09(cid:22)
3,188
131
3(cid:22)3
2,085
229
45
12
84
8,244
822
1(cid:22)9
8
651
(cid:22)10
1,361
3
5
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
192 (cid:3)
1,353 (cid:3)
192 (cid:3)
(cid:84)
192 (cid:3)
0.85 (cid:3)
(cid:84)
0.85 (cid:3)
0.84 (cid:3)
(cid:84)
0.84 (cid:3)
648 (cid:3)
(cid:22)05
1,353 (cid:3)
2.86 (cid:3)
3.1(cid:22)
6.03 (cid:3)
2.(cid:22)8 (cid:3)
3.02
5.80 (cid:3)
3,454
5,940
268
9,662
2,188
3,4(cid:22)3
132
39(cid:22)
2,3(cid:22)9
15(cid:22)
48
68
2(cid:22)1
9,113
549
24(cid:22)
8
310
64
3(cid:22)4
4
9
361
306
55
361
1.1(cid:22)
0.23
1.40
1.16
0.22
1.38
The accompanying notes are an integral part of these (cid:27)onsolidated (cid:30)inancial (cid:43)tatements.
74
Xerox 2020 Annual Report (cid:22)4
Table of Contents
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:63)(cid:54) (cid:25)(cid:63)(cid:61)(cid:64)(cid:66)(cid:53)(cid:56)(cid:53)(cid:62)(cid:67)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
(in millions)
(cid:36)(cid:53)(cid:68) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
Less: Income from continuing operations attributable to noncontrolling
interests
Less: Income from discontinued operations attributable to
noncontrolling interests
(cid:36)(cid:53)(cid:68) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:23)(cid:68)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:49)(cid:50)(cid:60)(cid:53) (cid:68)(cid:63) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67)
(cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:25)(cid:63)(cid:61)(cid:64)(cid:66)(cid:53)(cid:56)(cid:53)(cid:62)(cid:67)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:7)(cid:8) (cid:36)(cid:53)(cid:68)(cid:6)(cid:13)(cid:7)
Translation ad(cid:64)ustments, net
Unreali(cid:80)ed gains (losses), net
Changes in defined benefit plans, net
(cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:25)(cid:63)(cid:61)(cid:64)(cid:66)(cid:53)(cid:56)(cid:53)(cid:62)(cid:67)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)(cid:8) (cid:36)(cid:53)(cid:68) (cid:23)(cid:68)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:49)(cid:50)(cid:60)(cid:53) (cid:68)(cid:63) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67)
(cid:25)(cid:63)(cid:61)(cid:64)(cid:66)(cid:53)(cid:56)(cid:53)(cid:62)(cid:67)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)(cid:8) (cid:36)(cid:53)(cid:68)
Less: Comprehensive income, net from continuing operations
attributable to noncontrolling interests
Less: Comprehensive income, net from discontinued operations
attributable to noncontrolling interests
(cid:25)(cid:63)(cid:61)(cid:64)(cid:66)(cid:53)(cid:56)(cid:53)(cid:62)(cid:67)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)(cid:8) (cid:36)(cid:53)(cid:68) (cid:23)(cid:68)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:49)(cid:50)(cid:60)(cid:53) (cid:68)(cid:63) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67)
_____________
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:52)ear Ended December 31,
2020
2019
2018
192 (cid:3)
1,361 (cid:3)
(cid:84)
(cid:84)
3
5
192 (cid:3)
1,353 (cid:3)
241 (cid:3)
4
69
314 (cid:3)
62 (cid:3)
(6)
(10)
46 (cid:3)
506 (cid:3)
1,40(cid:22) (cid:3)
(cid:84)
(cid:84)
3
5
506 (cid:3)
1,399 (cid:3)
3(cid:22)4
4
9
361
(242)
16
409
183
55(cid:22)
4
9
544
(1) Refer to (cid:38)ote 2(cid:18) - Other (cid:27)omprehensive Income ((cid:36)oss) for gross components of Other (cid:27)omprehensive Income, reclassification
adjustments out of (cid:25)ccumulated Other (cid:27)omprehensive (cid:36)oss and related tax effects.
.
The accompanying notes are an integral part of these (cid:27)onsolidated (cid:30)inancial (cid:43)tatements.
Xerox 2020 Annual Report 75
Xerox 2020 Annual Report (cid:22)5
Table of Contents
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:41)(cid:56)(cid:53)(cid:53)(cid:68)(cid:67)
(in millions, except share data in thousands)
(cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
Cash and cash equivalents
Accounts receivable (net of allowance of (cid:3)69 and (cid:3)55, respectively)(1)
Billed portion of finance receivables (net of allowance of (cid:3)4 and (cid:3)3, respectively)(1)
Finance receivables, net
Inventories
Other current assets
Total current assets
Finance receivables due after one year (net of allowance of (cid:3)129 and (cid:3)86, respectively)(1)
Equipment on operating leases, net
Land, buildings and equipment, net
Intangible assets, net
(cid:34)oodwill
Deferred tax assets
Other long-term assets
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
(cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73)
Short-term debt and current portion of long-term debt
Accounts payable
Accrued compensation and benefits costs
Accrued expenses and other current liabilities
Total current liabilities
Long-term debt
(cid:43)ension and other benefit liabilities
(cid:43)ost-retirement medical benefits
Other long-term liabilities
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
(cid:25)(cid:63)(cid:61)(cid:61)(cid:57)(cid:68)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:25)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55)(cid:53)(cid:62)(cid:51)(cid:57)(cid:53)(cid:67) (cid:6)(cid:41)(cid:53)(cid:53) (cid:36)(cid:63)(cid:68)(cid:53) (cid:14)(cid:13)(cid:7)
(cid:25)(cid:63)(cid:62)(cid:70)(cid:53)(cid:66)(cid:68)(cid:57)(cid:50)(cid:60)(cid:53) (cid:38)(cid:66)(cid:53)(cid:54)(cid:53)(cid:66)(cid:66)(cid:53)(cid:52) (cid:41)(cid:68)(cid:63)(cid:51)(cid:59)
Common stoc(cid:65)
Additional paid-in capital
Treasury stoc(cid:65), at cost
Retained earnings
Accumulated other comprehensive loss
Xerox Holdings shareholders(cid:85) equity
Noncontrolling interests
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73)
Shares of common stoc(cid:65) issued
Treasury stoc(cid:65)
(cid:41)(cid:56)(cid:49)(cid:66)(cid:53)(cid:67) (cid:63)(cid:54) (cid:25)(cid:63)(cid:61)(cid:61)(cid:63)(cid:62) (cid:41)(cid:68)(cid:63)(cid:51)(cid:59) (cid:37)(cid:69)(cid:68)(cid:67)(cid:68)(cid:49)(cid:62)(cid:52)(cid:57)(cid:62)(cid:55)
_____________
December 31,
2020
2019
(cid:3)
2,625 (cid:3)
883
99
1,082
843
251
5,(cid:22)83
1,984
296
40(cid:22)
23(cid:22)
4,0(cid:22)1
508
1,455
(cid:3)
(cid:3)
14,(cid:22)41 (cid:3)
394 (cid:3)
983
261
840
2,4(cid:22)8
4,050
1,566
340
49(cid:22)
8,931
2,(cid:22)40
1,236
111
1,158
694
201
6,140
2,082
364
426
199
3,900
598
1,338
15,04(cid:22)
1,049
1,053
349
984
3,435
3,233
1,(cid:22)0(cid:22)
352
512
9,239
214
214
198
2,445
(cid:84)
6,281
(3,332)
5,592
4
5,596
(cid:3)
14,(cid:22)41 (cid:3)
198,386
(cid:84)
198,386
215
2,(cid:22)82
((cid:22)6)
6,312
(3,646)
5,58(cid:22)
(cid:22)
5,594
15,04(cid:22)
214,621
(2,031)
212,590
(1) (cid:25)llowances at December (cid:16)1, 2(cid:13)2(cid:13) determined in accordance with (cid:25)(cid:43)(cid:45) 2(cid:13)1(cid:19)-1(cid:16) adopted effective (cid:34)anuary 1, 2(cid:13)2(cid:13). Refer to (cid:38)otes 1, (cid:20) and
(cid:21) for additional information.
The accompanying notes are an integral part of these (cid:27)onsolidated (cid:30)inancial (cid:43)tatements.
76
Xerox 2020 Annual Report (cid:22)6
Table of Contents
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:63)(cid:54) (cid:25)(cid:49)(cid:67)(cid:56) (cid:28)(cid:60)(cid:63)(cid:71)(cid:67)
(in millions)
(cid:25)(cid:49)(cid:67)(cid:56) (cid:28)(cid:60)(cid:63)(cid:71)(cid:67) (cid:54)(cid:66)(cid:63)(cid:61) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:62)(cid:55) (cid:23)(cid:51)(cid:68)(cid:57)(cid:70)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
Net income
Income from discontinued operations, net of tax
Income from continuing operations
Ad(cid:64)ustments required to reconcile Net income to Cash flows from operating
activities
Depreciation and amorti(cid:80)ation
(cid:43)rovisions
Deferred tax expense
Net gain on sales of businesses and assets
Stoc(cid:65)-based compensation
Restructuring and asset impairment charges
(cid:43)ayments for restructurings
Defined benefit pension cost
Contributions to defined benefit pension plans
Decrease in accounts receivable and billed portion of finance receivables
(Increase) decrease in inventories
Increase in equipment on operating leases
Decrease in finance receivables
Decrease (increase) in other current and long-term assets
(Decrease) increase in accounts payable
Decrease in accrued compensation
(Decrease) increase in other current and long-term liabilities
Net change in income tax assets and liabilities
Net change in derivative assets and liabilities
Other operating, net
Net cash provided by operating activities of continuing operations
Net cash provided by operating activities of discontinued operations
Net cash provided by operating activities
(cid:25)(cid:49)(cid:67)(cid:56) (cid:28)(cid:60)(cid:63)(cid:71)(cid:67) (cid:54)(cid:66)(cid:63)(cid:61) (cid:31)(cid:62)(cid:70)(cid:53)(cid:67)(cid:68)(cid:57)(cid:62)(cid:55) (cid:23)(cid:51)(cid:68)(cid:57)(cid:70)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
Cost of additions to land, buildings, equipment and software
(cid:43)roceeds from sales of businesses and assets
Acquisitions, net of cash acquired
Other investing, net
Net cash used in investing activities of continuing operations
Net cash provided by investing activities of discontinued operations
Net cash (used in) provided by investing activities
(cid:25)(cid:49)(cid:67)(cid:56) (cid:28)(cid:60)(cid:63)(cid:71)(cid:67) (cid:54)(cid:66)(cid:63)(cid:61) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:62)(cid:55) (cid:23)(cid:51)(cid:68)(cid:57)(cid:70)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
Net payments on short-term debt
(cid:43)roceeds from issuance of long-term debt
(cid:43)ayments on long-term debt
Dividends
(cid:43)ayments to acquire treasury stoc(cid:65), including fees
Other financing, net
Net cash used in financing activities
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:3)
192 (cid:3)
(cid:84)
192
368
14(cid:22)
34
(30)
42
8(cid:22)
(81)
58
(139)
369
(134)
(118)
183
8
(123)
(189)
(165)
(2)
1
40
548
(cid:84)
548
((cid:22)4)
30
(203)
1
(246)
(cid:84)
(246)
(cid:84)
2,359
(2,226)
(230)
(300)
(19)
(416)
10
(104)
2,(cid:22)95
2,691 (cid:3)
1,361 (cid:3)
((cid:22)10)
651
430
(cid:22)3
124
(21)
50
12(cid:22)
(93)
109
(141)
10
109
(153)
101
(14)
(4(cid:22))
(94)
40
(34)
11
6
1,244
89
1,333
(65)
21
(42)
1
(85)
2,233
2,148
(cid:84)
10
(960)
(243)
(600)
(41)
(1,834)
(cid:84)
1,64(cid:22)
1,148
2,(cid:22)95 (cid:3)
3(cid:22)4
(64)
310
526
(cid:22)0
135
(35)
5(cid:22)
156
(169)
1(cid:22)5
(144)
31
1(cid:22)
(248)
166
29
1
(111)
52
41
(14)
3(cid:22)
1,082
58
1,140
(90)
59
(cid:84)
2
(29)
(cid:84)
(29)
(5)
9
(311)
(269)
((cid:22)00)
(25)
(1,301)
(30)
(220)
1,368
1,148
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(Decrease) increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
(cid:25)(cid:49)(cid:67)(cid:56)(cid:8) (cid:25)(cid:49)(cid:67)(cid:56) (cid:27)(cid:65)(cid:69)(cid:57)(cid:70)(cid:49)(cid:60)(cid:53)(cid:62)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:40)(cid:53)(cid:67)(cid:68)(cid:66)(cid:57)(cid:51)(cid:68)(cid:53)(cid:52) (cid:25)(cid:49)(cid:67)(cid:56) (cid:49)(cid:68) (cid:27)(cid:62)(cid:52) (cid:63)(cid:54) (cid:47)(cid:53)(cid:49)(cid:66)(cid:6)(cid:13)(cid:7)
(cid:3)
_____________
(1) Balance at December (cid:16)1, 2(cid:13)1(cid:21) includes (cid:3)(cid:16) associated with discontinued operations.
The accompanying notes are an integral part of these (cid:27)onsolidated (cid:30)inancial (cid:43)tatements.
Xerox 2020 Annual Report 77
Xerox 2020 Annual Report (cid:22)(cid:22)
Table of Contents
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:63)(cid:54) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)(cid:56)(cid:63)(cid:60)(cid:52)(cid:53)(cid:66)(cid:67)(cid:5) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73)
(in millions)
Common
Stoc(cid:65)
Additional
(cid:43)aid-in
Capital
Treasury
Stoc(cid:65)
Retained
Earnings
AOCL(1)
Xerox
Holdings
Shareholders(cid:85)
Equity
Non-
controlling
Interests
Total
Equity
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:19)
(cid:3)
255 (cid:3)
3,893 (cid:3)
(cid:84) (cid:3) 4,856 (cid:3) (3,(cid:22)48) (cid:3)
5,256 (cid:3)
3(cid:22) (cid:3) 5,293
Cumulative effect of change in
accounting principles(2)
Comprehensive income, net
Cash dividends declared-common(3)
Cash dividends declared - preferred(4)
Stoc(cid:65) option and incentive plans, net
(cid:43)ayments to acquire treasury stoc(cid:65),
including fees
Cancellation of treasury stoc(cid:65)
Distributions to noncontrolling interests
(cid:84)
(cid:84)
(cid:84)
(cid:84)
1
(cid:84)
(24)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
49
(cid:84)
(621)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
((cid:22)00)
645
(cid:84)
120
361
(251)
(14)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
183
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
120
544
(251)
(14)
50
((cid:22)00)
(cid:84)
(cid:84)
(cid:84)
13
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(16)
120
55(cid:22)
(251)
(14)
50
((cid:22)00)
(cid:84)
(16)
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:20)
(cid:3)
232 (cid:3)
3,321 (cid:3)
(55) (cid:3) 5,0(cid:22)2 (cid:3) (3,565) (cid:3)
5,005 (cid:3)
34 (cid:3) 5,039
Cumulative effect of change in
accounting principle(5)
Comprehensive income, net
Cash dividends declared-common(3)
Cash dividends declared - preferred(4)
Stoc(cid:65) option and incentive plans, net
(cid:43)ayments to acquire treasury stoc(cid:65),
including fees
Cancellation of treasury stoc(cid:65)
Distributions to noncontrolling interests
Divestiture(6)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
1
(cid:84)
(18)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
22
(cid:84)
(561)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(600)
5(cid:22)9
(cid:84)
(cid:84)
12(cid:22)
(12(cid:22))
1,353
(226)
(14)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
46
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
1,399
(226)
(14)
23
(600)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
8
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(3)
(32)
(cid:84)
1,40(cid:22)
(226)
(14)
23
(600)
(cid:84)
(3)
(32)
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:21)
(cid:3)
215 (cid:3)
2,(cid:22)82 (cid:3)
((cid:22)6) (cid:3) 6,312 (cid:3) (3,646) (cid:3)
5,58(cid:22) (cid:3)
(cid:22) (cid:3) 5,594
Comprehensive income, net
Cash dividends declared-common(3)
Cash dividends declared - preferred(4)
Stoc(cid:65) option and incentive plans, net
(cid:43)ayments to acquire treasury stoc(cid:65),
including fees
Cancellation of treasury stoc(cid:65)
Distributions to noncontrolling interests
(cid:84)
(cid:84)
(cid:84)
1
(cid:84)
(18)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
21
(cid:84)
(358)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(300)
3(cid:22)6
(cid:84)
192
(209)
(14)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
314
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
506
(209)
(14)
22
(300)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(3)
506
(209)
(14)
22
(300)
(cid:84)
(3)
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:14)(cid:12)
(cid:3)
198 (cid:3)
2,445 (cid:3)
(cid:84) (cid:3) 6,281 (cid:3) (3,332) (cid:3)
5,592 (cid:3)
4 (cid:3) 5,596
_____________
(1) (cid:25)O(cid:27)(cid:36) - (cid:25)ccumulated other comprehensive loss.
(2)
Includes (cid:3)11(cid:20) related to the adoption of the Revenue Recognition (cid:43)tandard (cid:25)(cid:43)(cid:45) 2(cid:13)1(cid:17)-(cid:13)(cid:22) - Revenue from (cid:27)ontracts with (cid:27)ustomers ((cid:25)(cid:43)(cid:27)
Topic (cid:19)(cid:13)(cid:19)), see (cid:38)ote 1 - Basis of (cid:40)resentation and (cid:43)ummary of (cid:43)ignificant (cid:25)ccounting (cid:40)olicies, and (cid:3)(cid:16) related to our share of (cid:30)uji (cid:48)erox(cid:6)s
adoption of (cid:25)(cid:43)(cid:45) 2(cid:13)1(cid:19)-(cid:13)1 - (cid:30)inancial Instruments - (cid:27)lassification and (cid:37)easurement.
((cid:16)) (cid:27)ash dividends declared on common stoc(cid:61) for 2(cid:13)2(cid:13), 2(cid:13)1(cid:22) and 2(cid:13)1(cid:21) were (cid:3)(cid:13).2(cid:18) per share on a (cid:67)uarterly basis and (cid:3)1.(cid:13)(cid:13) per share on an
annual basis.
((cid:17)) (cid:27)ash dividends declared on preferred stoc(cid:61) for 2(cid:13)2(cid:13), 2(cid:13)1(cid:22) and 2(cid:13)1(cid:21) were (cid:3)2(cid:13) per share on a (cid:67)uarterly basis and (cid:3)(cid:21)(cid:13) per share on an
annual basis.
((cid:18)) Refer to (cid:38)ote 1 - Basis of (cid:40)resentation and (cid:43)ummary of (cid:43)ignificant (cid:25)ccounting (cid:40)olicies - Income Taxes for additional information related to
the adoption of (cid:25)(cid:43)(cid:45) 2(cid:13)1(cid:21)-(cid:13)2.
((cid:19)) Refer to (cid:38)ote 1 - Basis of (cid:40)resentation and (cid:43)ummary of (cid:43)ignificant (cid:25)ccounting (cid:40)olicies and (cid:38)ote (cid:19) - Divestitures for additional information
regarding divestitures.
The accompanying notes are an integral part of these (cid:27)onsolidated (cid:30)inancial (cid:43)tatements.
78
Xerox 2020 Annual Report (cid:22)8
Table of Contents
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:63)(cid:54) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
(in millions)
(cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)(cid:67)
Sales
Services, maintenance and rentals
Financing
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)(cid:67)
(cid:25)(cid:63)(cid:67)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:27)(cid:72)(cid:64)(cid:53)(cid:62)(cid:67)(cid:53)(cid:67)
Cost of sales
Cost of services, maintenance and rentals
Cost of financing
Research, development and engineering expenses
Selling, administrative and general expenses
Restructuring and related costs, net
Amorti(cid:80)ation of intangible assets
Transaction and related costs, net
Other expenses, net
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:25)(cid:63)(cid:67)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:27)(cid:72)(cid:64)(cid:53)(cid:62)(cid:67)(cid:53)(cid:67)
(cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:50)(cid:53)(cid:54)(cid:63)(cid:66)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:42)(cid:49)(cid:72)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
Income tax expense
Equity in net income of unconsolidated affiliates
(cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:54)(cid:66)(cid:63)(cid:61) (cid:25)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:69)(cid:57)(cid:62)(cid:55) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Income from discontinued operations, net of tax
(cid:36)(cid:53)(cid:68) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
Less: Income from continuing operations attributable to noncontrolling
interests
Less: Income from discontinued operations attributable to noncontrolling
interests
(cid:36)(cid:53)(cid:68) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:23)(cid:68)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:49)(cid:50)(cid:60)(cid:53) (cid:68)(cid:63) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72)
(cid:23)(cid:61)(cid:63)(cid:69)(cid:62)(cid:68)(cid:67) (cid:49)(cid:68)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:49)(cid:50)(cid:60)(cid:53) (cid:68)(cid:63) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72)(cid:22)
Income from continuing operations
Income from discontinued operations
(cid:36)(cid:53)(cid:68) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:23)(cid:68)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:49)(cid:50)(cid:60)(cid:53) (cid:68)(cid:63) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72)
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:3)
2,449 (cid:3)
3,22(cid:22) (cid:3)
4,34(cid:22)
226
(cid:22),022
1,(cid:22)42
2,533
121
311
1,850
93
56
18
45
6,(cid:22)69
253
64
4
193
(cid:84)
193
(cid:84)
(cid:84)
5,595
244
9,066
2,09(cid:22)
3,188
131
3(cid:22)3
2,085
229
45
12
84
8,244
822
1(cid:22)9
8
651
(cid:22)10
1,361
3
5
(cid:3)
(cid:3)
(cid:3)
193 (cid:3)
1,353 (cid:3)
193 (cid:3)
(cid:84)
193 (cid:3)
648 (cid:3)
(cid:22)05
1,353 (cid:3)
3,454
5,940
268
9,662
2,188
3,4(cid:22)3
132
39(cid:22)
2,3(cid:22)9
15(cid:22)
48
68
2(cid:22)1
9,113
549
24(cid:22)
8
310
64
3(cid:22)4
4
9
361
306
55
361
The accompanying notes are an integral part of these (cid:27)onsolidated (cid:30)inancial (cid:43)tatements.
Xerox 2020 Annual Report 79
Xerox 2020 Annual Report (cid:22)9
Table of Contents
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:63)(cid:54) (cid:25)(cid:63)(cid:61)(cid:64)(cid:66)(cid:53)(cid:56)(cid:53)(cid:62)(cid:67)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
(in millions)
(cid:36)(cid:53)(cid:68) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
Less: Income from continuing operations attributable to noncontrolling
interests
Less: Income from discontinued operations attributable to
noncontrolling interests
(cid:36)(cid:53)(cid:68) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:23)(cid:68)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:49)(cid:50)(cid:60)(cid:53) (cid:68)(cid:63) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72)
(cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:25)(cid:63)(cid:61)(cid:64)(cid:66)(cid:53)(cid:56)(cid:53)(cid:62)(cid:67)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:7)(cid:8) (cid:36)(cid:53)(cid:68)(cid:6)(cid:13)(cid:7)
Translation ad(cid:64)ustments, net
Unreali(cid:80)ed gains (losses), net
Changes in defined benefit plans, net
(cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:25)(cid:63)(cid:61)(cid:64)(cid:66)(cid:53)(cid:56)(cid:53)(cid:62)(cid:67)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)(cid:8) (cid:36)(cid:53)(cid:68) (cid:23)(cid:68)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:49)(cid:50)(cid:60)(cid:53) (cid:68)(cid:63) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72)
(cid:25)(cid:63)(cid:61)(cid:64)(cid:66)(cid:53)(cid:56)(cid:53)(cid:62)(cid:67)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)(cid:8) (cid:36)(cid:53)(cid:68)
Less: Comprehensive income, net from continuing operations
attributable to noncontrolling interests
Less: Comprehensive income, net from discontinued operations
attributable to noncontrolling interests
(cid:25)(cid:63)(cid:61)(cid:64)(cid:66)(cid:53)(cid:56)(cid:53)(cid:62)(cid:67)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)(cid:8) (cid:36)(cid:53)(cid:68) (cid:23)(cid:68)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:49)(cid:50)(cid:60)(cid:53) (cid:68)(cid:63) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72)
_____________
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:52)ear Ended December 31,
2020
2019
2018
193 (cid:3)
1,361 (cid:3)
(cid:84)
(cid:84)
3
5
193 (cid:3)
1,353 (cid:3)
241 (cid:3)
4
69
314 (cid:3)
62 (cid:3)
(6)
(10)
46 (cid:3)
50(cid:22) (cid:3)
1,40(cid:22) (cid:3)
(cid:84)
(cid:84)
3
5
50(cid:22) (cid:3)
1,399 (cid:3)
3(cid:22)4
4
9
361
(242)
16
409
183
55(cid:22)
4
9
544
(1) Refer to (cid:38)ote 2(cid:18) - Other (cid:27)omprehensive Income ((cid:36)oss) for gross components of Other (cid:27)omprehensive Income, reclassification
adjustments out of (cid:25)ccumulated Other (cid:27)omprehensive (cid:36)oss and related tax effects.
The accompanying notes are an integral part of these (cid:27)onsolidated (cid:30)inancial (cid:43)tatements.
80
Xerox 2020 Annual Report 80
Table of Contents
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:41)(cid:56)(cid:53)(cid:53)(cid:68)(cid:67)
(in millions)
(cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
Cash and cash equivalents
Accounts receivable (net of allowance of (cid:3)69 and (cid:3)55, respectively)(1)
Billed portion of finance receivables (net of allowance of (cid:3)4 and (cid:3)3, respectively)(1)
Finance receivables, net
Inventories
Other current assets
Total current assets
Finance receivables due after one year (net of allowance of (cid:3)129 and (cid:3)86, respectively)(1)
Equipment on operating leases, net
Land, buildings and equipment, net
Intangible assets, net
(cid:34)oodwill
Deferred tax assets
Other long-term assets
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
(cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73)
Short-term debt and current portion of long-term debt
Accounts payable
Accrued compensation and benefits costs
Accrued expenses and other current liabilities
Total current liabilities
Long-term debt
(cid:43)ension and other benefit liabilities
(cid:43)ost-retirement medical benefits
Other long-term liabilities
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
(cid:25)(cid:63)(cid:61)(cid:61)(cid:57)(cid:68)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:25)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55)(cid:53)(cid:62)(cid:51)(cid:57)(cid:53)(cid:67) (cid:6)(cid:41)(cid:53)(cid:53) (cid:36)(cid:63)(cid:68)(cid:53) (cid:14)(cid:13)(cid:7)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Xerox shareholder's equity
Noncontrolling interests
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73)
_____________
December 31,
2020
2019
(cid:3)
2,625 (cid:3)
883
99
1,082
843
251
5,(cid:22)83
1,984
296
40(cid:22)
229
4,068
508
1,455
(cid:3)
(cid:3)
14,(cid:22)30 (cid:3)
394 (cid:3)
983
261
(cid:22)50
2,388
2,55(cid:22)
1,566
340
494
(cid:22),345
4,8(cid:22)9
5,834
(3,332)
(cid:22),381
4
(cid:22),385
(cid:3)
14,(cid:22)30 (cid:3)
2,(cid:22)40
1,236
111
1,158
694
201
6,140
2,082
364
426
199
3,900
598
1,338
15,04(cid:22)
1,049
1,053
349
918
3,369
3,233
1,(cid:22)0(cid:22)
352
512
9,1(cid:22)3
3,266
6,24(cid:22)
(3,646)
5,86(cid:22)
(cid:22)
5,8(cid:22)4
15,04(cid:22)
(1) (cid:25)llowances at December (cid:16)1, 2(cid:13)2(cid:13) determined in accordance with (cid:25)(cid:43)(cid:45) 2(cid:13)1(cid:19)-1(cid:16) adopted effective (cid:34)anuary 1, 2(cid:13)2(cid:13). Refer to (cid:38)otes 1, (cid:20) and
(cid:21) for additional information.
The accompanying notes are an integral part of these (cid:27)onsolidated (cid:30)inancial (cid:43)tatements.
Xerox 2020 Annual Report 81
Xerox 2020 Annual Report 81
Table of Contents
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:63)(cid:54) (cid:25)(cid:49)(cid:67)(cid:56) (cid:28)(cid:60)(cid:63)(cid:71)(cid:67)
(in millions)
(cid:25)(cid:49)(cid:67)(cid:56) (cid:28)(cid:60)(cid:63)(cid:71)(cid:67) (cid:54)(cid:66)(cid:63)(cid:61) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:62)(cid:55) (cid:23)(cid:51)(cid:68)(cid:57)(cid:70)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
Net income
Income from discontinued operations, net of tax
Income from continuing operations
Ad(cid:64)ustments required to reconcile Net income to Cash flows from operating
activities
Depreciation and amorti(cid:80)ation
(cid:43)rovisions
Deferred tax expense
Net gain on sales of businesses and assets
Stoc(cid:65)-based compensation
Restructuring and asset impairment charges
(cid:43)ayments for restructurings
Defined benefit pension cost
Contributions to defined benefit pension plans
Decrease in accounts receivable and billed portion of finance receivables
(Increase) decrease in inventories
Increase in equipment on operating leases
Decrease in finance receivables
Decrease (increase) in other current and long-term assets
(Decrease) increase in accounts payable
Decrease in accrued compensation
(Decrease) increase in other current and long-term liabilities
Net change in income tax assets and liabilities
Net change in derivative assets and liabilities
Other operating, net
Net cash provided by operating activities of continuing operations
Net cash provided by operating activities of discontinued operations
Net cash provided by operating activities
(cid:25)(cid:49)(cid:67)(cid:56) (cid:28)(cid:60)(cid:63)(cid:71)(cid:67) (cid:54)(cid:66)(cid:63)(cid:61) (cid:31)(cid:62)(cid:70)(cid:53)(cid:67)(cid:68)(cid:57)(cid:62)(cid:55) (cid:23)(cid:51)(cid:68)(cid:57)(cid:70)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
Cost of additions to land, buildings, equipment and software
(cid:43)roceeds from sales of businesses and assets
Acquisitions, net of cash acquired
Other investing, net
Net cash used in investing activities of continuing operations
Net cash provided by investing activities of discontinued operations
Net cash (used in) provided by investing activities
(cid:25)(cid:49)(cid:67)(cid:56) (cid:28)(cid:60)(cid:63)(cid:71)(cid:67) (cid:54)(cid:66)(cid:63)(cid:61) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:62)(cid:55) (cid:23)(cid:51)(cid:68)(cid:57)(cid:70)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
Net payments on short-term debt
(cid:43)roceeds from issuance of long-term debt
(cid:43)ayments on long-term debt
Dividends
(cid:43)ayments to acquire treasury stoc(cid:65), including fees
Contributions from parent
Distributions to parent
Other financing, net
Net cash used in financing activities
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:3)
193 (cid:3)
(cid:84)
193
368
14(cid:22)
34
(30)
42
8(cid:22)
(81)
58
(139)
369
(134)
(118)
183
8
(123)
(189)
(166)
(2)
1
40
548
(cid:84)
548
((cid:22)4)
30
(194)
1
(23(cid:22))
(cid:84)
(23(cid:22))
(cid:84)
852
(2,213)
(cid:84)
(cid:84)
1,494
(558)
(cid:84)
(425)
10
(104)
2,(cid:22)95
2,691 (cid:3)
1,361 (cid:3)
((cid:22)10)
651
430
(cid:22)3
124
(21)
50
12(cid:22)
(93)
109
(141)
10
109
(153)
101
(14)
(4(cid:22))
(94)
40
(34)
11
6
1,244
89
1,333
(65)
21
(42)
1
(85)
2,233
2,148
(cid:84)
10
(960)
(181)
(300)
(cid:84)
(3(cid:22)3)
(30)
(1,834)
(cid:84)
1,64(cid:22)
1,148
2,(cid:22)95 (cid:3)
3(cid:22)4
(64)
310
526
(cid:22)0
135
(35)
5(cid:22)
156
(169)
1(cid:22)5
(144)
31
1(cid:22)
(248)
166
29
1
(111)
52
41
(14)
3(cid:22)
1,082
58
1,140
(90)
59
(cid:84)
2
(29)
(cid:84)
(29)
(5)
9
(311)
(269)
((cid:22)00)
(cid:84)
(cid:84)
(25)
(1,301)
(30)
(220)
1,368
1,148
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(Decrease) increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
(cid:25)(cid:49)(cid:67)(cid:56)(cid:8) (cid:25)(cid:49)(cid:67)(cid:56) (cid:27)(cid:65)(cid:69)(cid:57)(cid:70)(cid:49)(cid:60)(cid:53)(cid:62)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:40)(cid:53)(cid:67)(cid:68)(cid:66)(cid:57)(cid:51)(cid:68)(cid:53)(cid:52) (cid:25)(cid:49)(cid:67)(cid:56) (cid:49)(cid:68) (cid:27)(cid:62)(cid:52) (cid:63)(cid:54) (cid:47)(cid:53)(cid:49)(cid:66)(cid:6)(cid:13)(cid:7)
(cid:3)
_____________
(1) Balance at December (cid:16)1, 2(cid:13)1(cid:21) includes (cid:3)(cid:16) associated with discontinued operations.
The accompanying notes are an integral part of these (cid:27)onsolidated (cid:30)inancial (cid:43)tatements.
82
Xerox 2020 Annual Report 82
Table of Contents
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:63)(cid:54) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)(cid:56)(cid:63)(cid:60)(cid:52)(cid:53)(cid:66)(cid:67)(cid:5) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73)
(in millions)
Common
Stoc(cid:65)
Additional
(cid:43)aid-in
Capital
Treasury
Stoc(cid:65)
Retained
Earnings
AOCL(1)
Xerox
Shareholders(cid:85)
Equity
Non-
controlling
Interests
Total
Equity
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:19)
(cid:3)
255 (cid:3)
3,893 (cid:3)
(cid:84) (cid:3) 4,856 (cid:3) (3,(cid:22)48) (cid:3)
5,256 (cid:3)
3(cid:22) (cid:3) 5,293
Cumulative effect of change in
accounting principles(2)
Comprehensive income, net
Cash dividends declared-common
Cash dividends declared-preferred
Stoc(cid:65) option and incentive plans, net
(cid:43)ayments to acquire treasury stoc(cid:65),
including fees
Cancellation of treasury stoc(cid:65)
Distributions to noncontrolling interests
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:20)
Cumulative effect of change in
accounting principle(3)
Comprehensive income, net
Cash dividends declared-common
Cash dividends declared-preferred
Dividends declared to parent
Transfers to parent
Stoc(cid:65) option and incentive plans, net
(cid:43)ayments to acquire treasury stoc(cid:65),
including fees
Cancellation of treasury stoc(cid:65)
Distributions to noncontrolling interests
Reorgani(cid:80)ation
Divestiture(4)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
1
(cid:84)
(24)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
49
(cid:84)
(621)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
((cid:22)00)
645
(cid:84)
120
361
(251)
(14)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
183
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
120
544
(251)
(14)
50
((cid:22)00)
(cid:84)
(cid:84)
(cid:84)
13
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(16)
120
55(cid:22)
(251)
(14)
50
((cid:22)00)
(cid:84)
(16)
(cid:3)
232 (cid:3)
3,321 (cid:3)
(55) (cid:3) 5,0(cid:22)2 (cid:3) (3,565) (cid:3)
5,005 (cid:3)
34 (cid:3) 5,039
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(11)
(cid:84)
(221)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(1(cid:22)5)
18
(cid:84)
(344)
(cid:84)
446
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(300)
355
(cid:84)
(cid:84)
(cid:84)
12(cid:22)
(12(cid:22))
1,353
(115)
((cid:22))
(183)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
46
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
1,399
(115)
((cid:22))
(183)
(1(cid:22)5)
18
(300)
(cid:84)
(cid:84)
225
(cid:84)
(cid:84)
8
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(3)
(cid:84)
(32)
(cid:84)
1,40(cid:22)
(115)
((cid:22))
(183)
(1(cid:22)5)
18
(300)
(cid:84)
(3)
225
(32)
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:21)
(cid:3)
(cid:84) (cid:3)
3,266 (cid:3)
(cid:84) (cid:3) 6,24(cid:22) (cid:3) (3,646) (cid:3)
5,86(cid:22) (cid:3)
(cid:22) (cid:3) 5,8(cid:22)4
Comprehensive income, net
Dividends declared to parent
Capital contributions from parent(5)
Transfers from parent
Distributions to noncontrolling interests
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
1,494
119
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
193
(606)
(cid:84)
(cid:84)
(cid:84)
314
(cid:84)
(cid:84)
(cid:84)
(cid:84)
50(cid:22)
(606)
1,494
119
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(3)
50(cid:22)
(606)
1,494
119
(3)
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:14)(cid:12)
(cid:3)
(cid:84) (cid:3)
4,8(cid:22)9 (cid:3)
(cid:84) (cid:3) 5,834 (cid:3) (3,332) (cid:3)
(cid:22),381 (cid:3)
4 (cid:3) (cid:22),385
_____________
(1) (cid:25)O(cid:27)(cid:36) - (cid:25)ccumulated other comprehensive loss.
(2)
Includes (cid:3)11(cid:20) related to the adoption of the Revenue Recognition (cid:43)tandard (cid:25)(cid:43)(cid:45) 2(cid:13)1(cid:17)-(cid:13)(cid:22) - Revenue from (cid:27)ontracts with (cid:27)ustomers ((cid:25)(cid:43)(cid:27)
Topic (cid:19)(cid:13)(cid:19)), see (cid:38)ote 1 - Basis of (cid:40)resentation and (cid:43)ummary of (cid:43)ignificant (cid:25)ccounting (cid:40)olicies, and (cid:3)(cid:16) related to our share of (cid:30)uji (cid:48)erox(cid:6)s
adoption of (cid:25)(cid:43)(cid:45) 2(cid:13)1(cid:19)-(cid:13)1 - (cid:30)inancial Instruments - (cid:27)lassification and (cid:37)easurement.
((cid:16)) Refer to (cid:38)ote 1 - Basis of (cid:40)resentation and (cid:43)ummary of (cid:43)ignificant (cid:25)ccounting (cid:40)olicies - Income Taxes for additional information related to
the adoption of (cid:25)(cid:43)(cid:45) 2(cid:13)1(cid:21)-(cid:13)2.
((cid:17)) Refer to (cid:38)ote 1 - Basis of (cid:40)resentation and (cid:43)ummary of (cid:43)ignificant (cid:25)ccounting (cid:40)olicies and (cid:38)ote (cid:19) - Divestitures for additional information
regarding divestitures.
((cid:18)) (cid:40)rimarily represents the contribution by (cid:48)erox (cid:32)oldings (cid:27)orporation of aggregate net debt proceeds received from its (cid:43)enior (cid:38)otes offerings
in the third (cid:67)uarter of 2(cid:13)2(cid:13) to (cid:48)erox (cid:27)orporation. Refer to (cid:38)ote 1(cid:19) - Debt for additional information regarding the (cid:43)enior (cid:38)otes offerings.
The accompanying notes are an integral part of these (cid:27)onsolidated (cid:30)inancial (cid:43)tatements.
Xerox 2020 Annual Report 83
Xerox 2020 Annual Report 83
Table of Contents
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:36)(cid:63)(cid:68)(cid:53)(cid:67) (cid:68)(cid:63) (cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)
(cid:6)(cid:57)(cid:62) (cid:61)(cid:57)(cid:60)(cid:60)(cid:57)(cid:63)(cid:62)(cid:67)(cid:8) (cid:53)(cid:72)(cid:51)(cid:53)(cid:64)(cid:68) (cid:64)(cid:53)(cid:66)(cid:9)(cid:67)(cid:56)(cid:49)(cid:66)(cid:53) (cid:52)(cid:49)(cid:68)(cid:49) (cid:49)(cid:62)(cid:52) (cid:71)(cid:56)(cid:53)(cid:66)(cid:53) (cid:63)(cid:68)(cid:56)(cid:53)(cid:66)(cid:71)(cid:57)(cid:67)(cid:53) (cid:62)(cid:63)(cid:68)(cid:53)(cid:52)(cid:7)
(cid:36)(cid:63)(cid:68)(cid:53) (cid:13) (cid:75) (cid:24)(cid:49)(cid:67)(cid:57)(cid:67) (cid:63)(cid:54) (cid:38)(cid:66)(cid:53)(cid:67)(cid:53)(cid:62)(cid:68)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:49)(cid:62)(cid:52) (cid:41)(cid:69)(cid:61)(cid:61)(cid:49)(cid:66)(cid:73) (cid:63)(cid:54) (cid:41)(cid:57)(cid:55)(cid:62)(cid:57)(cid:54)(cid:57)(cid:51)(cid:49)(cid:62)(cid:68) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55) (cid:38)(cid:63)(cid:60)(cid:57)(cid:51)(cid:57)(cid:53)(cid:67)
References to (cid:86)Xerox Holdings(cid:87) refer to Xerox Holdings Corporation and its consolidated subsidiaries while
references to (cid:86)Xerox(cid:87) refer to Xerox Corporation and its consolidated subsidiaries. References herein to (cid:86)we,(cid:87) (cid:86)us,(cid:87)
(cid:86)our,(cid:87) the (cid:86)Company(cid:87) refer collectively to both Xerox Holdings and Xerox unless the context suggests otherwise.
References to (cid:86)Xerox Holdings Corporation(cid:87) refer to the stand-alone parent company and do not include its
subsidiaries. References to (cid:86)Xerox Corporation(cid:87) refer to the stand-alone company and do not include subsidiaries.
The accompanying Consolidated Financial Statements and footnotes represent the respective consolidated results
and financial results of Xerox Holdings and Xerox and all respective subsidiaries that each registrant directly or
indirectly controls, either through ma(cid:64)ority 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 ((cid:34)AA(cid:43)).
Notes to the Consolidated Financial Statements reflect the activity for both Xerox Holdings and Xerox for all periods
presented, unless otherwise noted.
(cid:26)(cid:53)(cid:67)(cid:51)(cid:66)(cid:57)(cid:64)(cid:68)(cid:57)(cid:63)(cid:62) (cid:63)(cid:54) (cid:24)(cid:69)(cid:67)(cid:57)(cid:62)(cid:53)(cid:67)(cid:67)
Currently, Xerox Holdings' primary direct operating subsidiary is Xerox and Xerox represents nearly all of Xerox
Holdings' operations. Xerox is a global enterprise for document management solutions. (cid:50)e provide advanced
document technology, services, software and genuine Xerox supplies for a range of customers including small and
mid-si(cid:80)e businesses, large enterprises, governments and graphic communications providers, and for our partners
who serve them. (cid:50)e operate in approximately 160 countries worldwide.
Xerox Holdings' other direct operating subsidiary is CareAR, a small SaaS solutions provider, which was acquired
for (cid:3)9 in 2020.
(cid:24)(cid:49)(cid:67)(cid:57)(cid:67) (cid:63)(cid:54) (cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
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(cid:4) to 50(cid:4) ownership) are accounted for using the equity method of accounting. Operating
results of acquired businesses are included in the Consolidated Statements of Income from the date of acquisition.
(cid:50)e 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 from the date such determination is made.
For convenience and ease of reference, we refer to the financial statement caption (cid:86)Income before Income Taxes
and Equity Income(cid:87) as (cid:86)pre-tax income(cid:87) throughout the Notes to the Consolidated Financial Statements.
(cid:26)(cid:57)(cid:67)(cid:51)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:69)(cid:53)(cid:52) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
In November 2019, Xerox Holdings completed a series of transactions to restructure its relationship with FU(cid:37)IFIL(cid:40)
Holdings Corporation (FH), including the sale of its indirect 25(cid:4) equity interest in Fu(cid:64)i Xerox (FX) as well as the sale
of its indirect 51(cid:4) partnership interest in Xerox International (cid:43)artners (XI(cid:43)) (collectively the Sales). As a result of the
Sales of FX and XI(cid:43) and the related strategic shift in our business the historical financial results of our equity
method investment in FX and our XI(cid:43) business (which was consolidated) for the periods prior to the Sales are
reflected as a discontinued operation and as such, their impact is excluded from continuing operations for all
periods presented. The accompanying Notes to the Consolidated Financial Statements have all been revised to
reflect the effect of the Sales and all prior year balances have been revised accordingly to reflect continuing
operations only. The historical statements of Comprehensive Income and Shareholders' Equity have not been
revised to reflect the Sales and instead reflect the Sales as an ad(cid:64)ustment to the balances at December 31, 2019.
Refer to Note 6 - Divestitures for additional information regarding discontinued operations.
84
Xerox 2020 Annual Report 84
Table of Contents
(cid:38)(cid:66)(cid:57)(cid:63)(cid:66) (cid:38)(cid:53)(cid:66)(cid:57)(cid:63)(cid:52) (cid:23)(cid:52)(cid:58)(cid:69)(cid:67)(cid:68)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)
In 2018, we determined that the (cid:43)ro(cid:64)ected Benefit Obligation ((cid:43)BO) for our U.K. funded pension plan at December
31, 201(cid:22) was overstated by approximately (cid:34)B(cid:43) 40 million (approximately USD (cid:3)53 or (cid:3)43 after-tax). The error was
the result of the plan administrator under-reporting benefit payments. The correction of the (cid:43)BO was recorded as an
out-of-period ad(cid:64)ustment in 2018 with the offset to the balance sheet recorded as a credit to Changes in defined
benefit plans, net in Other comprehensive income for the period. (cid:50)e assessed the impact of this error and
concluded that it was not material to the financial statements previously issued for any interim or annual period and
the correction was not material to the annual financial statements for 2018.
(cid:43)(cid:67)(cid:53) (cid:63)(cid:54) (cid:27)(cid:67)(cid:68)(cid:57)(cid:61)(cid:49)(cid:68)(cid:53)(cid:67)
The preparation of our Consolidated Financial Statements requires that we ma(cid:65)e 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(cid:26) accordingly, our accounting estimates
require the exercise of (cid:64)udgment. 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 underta(cid:65)e 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 ma(cid:65)e 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 (cid:40)anagement's Discussion and Analysis of Financial Condition and Results of Operations.
As of December 31, 2020, the impact of the CO(cid:49)ID-19 pandemic continues to unfold. As a result, many of our
estimates and assumptions have required increased (cid:64)udgment and carry a higher degree of variability and volatility.
As events continue to evolve and additional information becomes available, our estimates may change materially in
the future.
(cid:36)(cid:53)(cid:71) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55) (cid:41)(cid:68)(cid:49)(cid:62)(cid:52)(cid:49)(cid:66)(cid:52)(cid:67) (cid:49)(cid:62)(cid:52) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55) (cid:25)(cid:56)(cid:49)(cid:62)(cid:55)(cid:53)(cid:67)
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.
(cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55) (cid:41)(cid:68)(cid:49)(cid:62)(cid:52)(cid:49)(cid:66)(cid:52) (cid:43)(cid:64)(cid:52)(cid:49)(cid:68)(cid:53)(cid:67) (cid:68)(cid:63) (cid:50)(cid:53) (cid:23)(cid:52)(cid:63)(cid:64)(cid:68)(cid:53)(cid:52)(cid:22)
(cid:26)(cid:53)(cid:50)(cid:68)
In August 2020, the FASB issued (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:14)(cid:12)(cid:9)(cid:12)(cid:18), Debt - Debt with (cid:27)onversion and Other Options ((cid:43)ubtopic (cid:17)(cid:20)(cid:13)-2(cid:13))
and Derivatives and (cid:32)edging - (cid:27)ontracts in (cid:29)ntity(cid:6)s Own (cid:29)(cid:67)uity ((cid:43)ubtopic (cid:21)1(cid:18)-(cid:17)(cid:13)). This update simplifies the
accounting for convertible instruments by reducing the number of accounting models available for convertible debt
instruments and convertible preferred stoc(cid:65). This update also amends the guidance for the derivatives scope
exception for contracts in an entity's own equity to reduce form-over-substance-based accounting conclusions and
requires the application of the if-converted method for calculating diluted earnings per share. This update is effective
for our fiscal year beginning (cid:37)anuary 1, 2022. (cid:50)e are currently evaluating the impact of the adoption of this
standard on the Consolidated Financial Statements and related disclosures.
(cid:40)(cid:53)(cid:54)(cid:53)(cid:66)(cid:53)(cid:62)(cid:51)(cid:53) (cid:40)(cid:49)(cid:68)(cid:53) (cid:40)(cid:53)(cid:54)(cid:63)(cid:66)(cid:61)
In (cid:40)arch 2020, the FASB issued (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:14)(cid:12)(cid:9)(cid:12)(cid:16), Reference Rate Reform (Topic (cid:21)(cid:17)(cid:21)), which provides optional
expedients and exceptions for applying U.S. (cid:34)AA(cid:43) to contracts, hedging relationships, and other transactions
affected by the discontinuation of the London Interban(cid:65) Offered Rate ((cid:86)LIBOR(cid:87)) or by another reference rate
expected to be discontinued. The amendments are effective for all entities as of (cid:40)arch 12, 2020 through December
31, 2022. There has been no impact to date as a result of ASU 2020-04 and subsequent amendments 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.
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(cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:42)(cid:49)(cid:72)(cid:53)(cid:67)
In December 2019, the FASB issued (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:13)(cid:21)(cid:9)(cid:13)(cid:14), Income Taxes (Topic (cid:20)(cid:17)(cid:13))(cid:23) (cid:43)implifying the (cid:25)ccounting 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 (cid:22)40 and also clarifies and amends existing guidance to
improve consistent application. This update is effective for our fiscal year beginning (cid:37)anuary 1, 2021. Although we
continue to evaluate the effects of this update on our Consolidated Financial Statements, at this stage we do not
expect the adoption to have a material impact on our results of operations, financial position, cash flows or
disclosures.
(cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55) (cid:41)(cid:68)(cid:49)(cid:62)(cid:52)(cid:49)(cid:66)(cid:52) (cid:43)(cid:64)(cid:52)(cid:49)(cid:68)(cid:53)(cid:67) (cid:40)(cid:53)(cid:51)(cid:53)(cid:62)(cid:68)(cid:60)(cid:73) (cid:23)(cid:52)(cid:63)(cid:64)(cid:68)(cid:53)(cid:52)(cid:22)
(cid:34)(cid:53)(cid:49)(cid:67)(cid:53)(cid:67)
In April 2020, the FASB staff issued a question and answer ((cid:44)(cid:5)A) document on the application of lease accounting
guidance related to lease concessions provided as a result of the economic disruption caused by the CO(cid:49)ID-19
pandemic (Topic 842 (cid:44)(cid:5)A). Topic 842 (cid:44)(cid:5)A provides interpretive guidance allowing companies the option to account
for lease concessions related to the CO(cid:49)ID-19 pandemic consistent with how those concessions would be
accounted for under ASU 2016-02, Leases (Topic 842), discussed below, as though enforceable rights and
obligations for those concessions existed at the beginning of the contract (regardless of whether those enforceable
rights and obligations for the concessions explicitly exist in the contract). This interpretive guidance was issued in
order to reduce the costs and complexities of applying lease modification accounting under Topic 842 to leases
impacted by the effects of the CO(cid:49)ID-19 pandemic. This election is available for concessions related to the effects
of the CO(cid:49)ID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of
the lessee. (cid:50)e have elected to apply the interpretive guidance provided in Topic 842 (cid:44)(cid:5)A to rent concessions
related to the CO(cid:49)ID-19 pandemic provided as a Lessor to our customers and as received as a Lessee.
Through September 30, 2020 we provided rent deferrals as a Lessor that were primarily offered to customers with
sales type lease receivables. This special program was discontinued in the fourth quarter. (cid:50)e elected to account for
the deferrals in the timing of lease payments as if there were no changes in the lease contracts. Under this
approach, assuming that collectibility of future lease payments is still probable, the classification of the leases is not
updated and we retain the balance of the deferral as a receivable and will settle that receivable at the revised
payment date or dates. Through September 30, 2020, we approved payment deferrals of up to 3 months for
approximately (cid:3)33 or approximately 1(cid:4) of our total finance receivable portfolio. Rent abatements to the extent
provided were not material and were accounted for as write-offs as part of our normal bad debt reserve
assessment.
(cid:50)ith respect to rent deferrals and abatements received as a Lessee, we elected to account for the deferrals and
abatements as a resolution of a contingency within the lease. Under this approach, we follow the resolution of a
contingency model in ASC 842 without reclassifying the lease or updating the discount rate. (cid:50)e remeasure the
remaining consideration in the contract, reallocate it to the lease and non-lease components as applicable, and
remeasure the lease liability with an ad(cid:64)ustment to the right-of-use asset for the same amount. If the total lease
payments remain exactly the same, the lease cost remains unchanged. The impact of this election was not material
to our financial condition, results of operations or cash flows, as no rent concessions provided to Xerox in 2020
were material, individually or in the aggregate.
On (cid:37)anuary 1, 2019, we adopted (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:13)(cid:18)(cid:9)(cid:12)(cid:14), (cid:36)eases ((cid:25)(cid:43)(cid:27) Topic (cid:21)(cid:17)2). This update, as well as additional
amendments and targeted improvements issued in 2018 and early 2019, supersedes existing lease accounting
guidance found under ASC 840, Leases (ASC 840) and requires the recognition of right-to-use assets and lease
obligations by lessees for those leases originally classified as operating leases under prior lease guidance. Effective
with the adoption, leases are classified as either finance or operating, with classification affecting the pattern of
expense recognition. Short-term leases with a term of 12 months or less are not required to be recogni(cid:80)ed. The
update also requires qualitative and quantitative disclosure of (cid:65)ey information regarding the amount, timing and
uncertainty of cash flows arising from leasing arrangements to increase transparency and comparability among
companies. The accounting for lessors does not fundamentally change with this update except for changes to
conform and align guidance to the lessee guidance, as well as to the revenue recognition guidance in ASU 2014-09.
Some of these conforming changes, such as those related to the definition of lease term and minimum lease
payments, resulted in certain lease arrangements, that would have been previously accounted for as operating
leases, to be classified and accounted for as sales-type leases with a corresponding up-front recognition of
equipment sales revenue.
Upon adoption, we applied the transition option, whereby prior comparative periods are not retrospectively
presented in the Consolidated Financial Statements. (cid:50)e also elected the pac(cid:65)age of practical expedients not to
86
Xerox 2020 Annual Report 86
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reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs and the
lessee practical expedient to combine lease and non-lease components for certain asset classes (real estate lease
arrangements for offices and warehouses). Additionally, we made a policy election to not recogni(cid:80)e right-of-use
assets and lease liabilities for short-term leases for all asset classes. (cid:50)e elected the pac(cid:65)age of practical
expedients from both the Lessee and Lessor prospective, to the extent applicable.
Lessee accounting - the adoption of this update resulted in an increase to assets and related liabilities of
approximately (cid:3)385 (approximately (cid:3)440 undiscounted) primarily related to leases of facilities. Refer to Note 11 -
Lessee for additional information related to our lessee accounting.
Lessor accounting - the adoption of this update resulted in an increase to equipment sales by approximately (cid:3)30 in
2019 as compared to 2018. Refer to Note 4 - Lessor for additional information related to our lessor accounting.
(cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:31)(cid:62)(cid:67)(cid:68)(cid:66)(cid:69)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:9) (cid:25)(cid:66)(cid:53)(cid:52)(cid:57)(cid:68) (cid:34)(cid:63)(cid:67)(cid:67)(cid:53)(cid:67)
On (cid:37)anuary 1, 2020, we adopted (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:13)(cid:18)(cid:9)(cid:13)(cid:15), (cid:30)inancial Instruments (cid:27)redit (cid:36)osses - (cid:37)easurement of (cid:27)redit
(cid:36)osses on (cid:30)inancial Instruments. This update was issued by the FASB in (cid:37)une 2016, with additional updates and
amendments being issued in 2018, 2019 and 2020 and requires measurement and recognition of expected credit
losses for financial assets on an expected loss model rather than an incurred loss model. The update impacted
financial assets including net investment in leases that are not accounted for at fair value through Net Income. The
adoption of ASU 2016-13 primarily impacted the estimation of our Allowance for doubtful accounts for Accounts
Receivable and Finance Receivables. The impact recorded on our initial adoption of ASU 2016-13 was not material
as our previous methodology for assessing the adequacy of our Allowance for doubtful accounts for Finance
Receivables, the larger component of our receivable reserves, incorporated an expected loss model and the
methodology for both allowances included an assessment of current economic conditions. However, as previously
disclosed, the future impact from this update is highly dependent on future economic conditions. Refer to Note (cid:22) -
Accounts Receivable, Net and Note 8 - Finance Receivables, Net for additional discussion regarding the impacts
from the adoption of this update during the first quarter 2020.
(cid:31)(cid:62)(cid:68)(cid:49)(cid:62)(cid:55)(cid:57)(cid:50)(cid:60)(cid:53)(cid:67) (cid:9) (cid:31)(cid:62)(cid:68)(cid:53)(cid:66)(cid:62)(cid:49)(cid:60)(cid:9)(cid:43)(cid:67)(cid:53) (cid:41)(cid:63)(cid:54)(cid:68)(cid:71)(cid:49)(cid:66)(cid:53)
On (cid:37)anuary 1, 2020, we adopted (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:13)(cid:20)(cid:9)(cid:13)(cid:17), Intangibles - (cid:31)oodwill and Other - Internal (cid:45)se (cid:43)oftware ((cid:43)ubtopic
(cid:16)(cid:18)(cid:13)-(cid:17)(cid:13)), (cid:27)ustomer(cid:6)s (cid:25)ccounting for Implementation (cid:27)osts Incurred in a (cid:27)loud (cid:27)omputing (cid:25)rrangement That is a
(cid:43)ervice (cid:27)ontract. This update was issued by the FASB in August 2018 and aligns the requirements for capitali(cid:80)ing
implementation costs incurred in a hosting arrangement that is a service contract with the requirements for
capitali(cid:80)ing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that
include an internal-use software license). The update provides criteria for determining which implementation costs
to capitali(cid:80)e as an asset related to the service contract and which costs to expense. The capitali(cid:80)ed implementation
costs are required to be expensed over the term of the hosting arrangement. The update also clarifies the
presentation requirements for reporting such costs in the entity(cid:85)s financial statements. The adoption of ASU 2018-15
did not have a material impact on our financial condition, results of operations or cash flows as we had previously
capitali(cid:80)ed these implementation costs and such amounts were not material.
(cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:42)(cid:49)(cid:72)(cid:53)(cid:67)
In February 2018, the FASB issued (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:13)(cid:20)(cid:9)(cid:12)(cid:14), Income (cid:43)tatement - Reporting (cid:27)omprehensive Income (Topic
22(cid:13))(cid:23) Reclassification of (cid:27)ertain Tax (cid:29)ffects from (cid:25)ccumulated Other (cid:27)omprehensive Income. (cid:50)e adopted ASU
2018-02 effective for our fiscal year beginning (cid:37)anuary 1, 2019 and upon adoption reclassified (cid:3)12(cid:22) from
Accumulated other comprehensive loss (AOCL) to Retained earnings related to the stranded tax effects resulting
from the Tax Cuts and (cid:37)obs Act (Tax Act) enacted in December 201(cid:22). The reclassification was primarily related to
the stranded tax effects associated with amounts in AOCL from our retirement-related benefit plans. Accordingly, the
adoption of this update eliminated the stranded tax effects resulting from the Tax Act. However, because the update
only relates to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires that
the effect of a change in tax laws or rates be included in Income from continuing operations is not affected.
(cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53) (cid:40)(cid:53)(cid:51)(cid:63)(cid:55)(cid:62)(cid:57)(cid:68)(cid:57)(cid:63)(cid:62)
On (cid:37)anuary 1, 2018, we adopted (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:13)(cid:16)(cid:9)(cid:12)(cid:21)(cid:8) Revenue from (cid:27)ontracts with (cid:27)ustomers ((cid:25)(cid:43)(cid:27) Topic (cid:19)(cid:13)(cid:19)), which
superseded nearly all existing revenue recognition guidance under U.S. (cid:34)AA(cid:43). The core principle of ASC Topic 606
is to recogni(cid:80)e revenue when promised goods or services are transferred to customers in an amount that reflects
the consideration that is expected to be received for those goods or services. ASC Topic 606 defines a five-step
process to recogni(cid:80)e revenue and requires more (cid:64)udgment and estimates within the revenue recognition process
than required under previous U.S. (cid:34)AA(cid:43), including identifying performance obligations in the contract, estimating
Xerox 2020 Annual Report 87
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the amount of variable consideration to include in the transaction price and allocating the transaction price to each
separate performance obligation.
(cid:50)e adopted this standard using the modified retrospective method of adoption and therefore we did not revise
periods prior to adoption (e.g. 201(cid:22)). Under ASC Topic 606, based on the nature of our contracts and consistent
with prior practice, we recogni(cid:80)e revenue upon invoicing the customer for the large ma(cid:64)ority of our revenue.
Additionally, the unit of accounting, that is, the identification of performance obligations, is consistent with prior
revenue recognition practice. Accordingly, the adoption of this standard did not have a material impact on the large
ma(cid:64)ority of our revenues. A significant portion of our Equipment sales are either recorded as sales-type leases or
through direct sales to distributors and resellers and these revenue streams are not impacted by the adoption of
ASC Topic 606. The only change of significance identified in our adoption involves a change in the classification of
certain revenues that were previously reported in Services revenues. These revenues relate to certain analyst
services performed in connection with the installation of equipment that are being considered part of the equipment
sale performance obligation effective beginning (cid:37)anuary 1, 2018. Accordingly, these revenues are now reported as
part of Sales.
Another change identified upon adoption was with respect to deferred contract costs, which include incremental
costs of obtaining a contract and costs to fulfill a contract. Deferred contract costs had been minimal under our prior
practices as most costs to obtain a contract and fulfill a contract were expensed as incurred. However, as a result of
the contract cost guidance included in ASC Topic 606 and ASC Topic 340-40 (cid:2)(cid:27)ontracts with (cid:27)ustomers(cid:2), upon
adoption on (cid:37)anuary 1, 2018, we recorded a transition asset of (cid:3)153, and a net of tax increase of (cid:3)11(cid:22) to Retained
earnings, related to the incremental cost to obtain contracts. Substantially all of this ad(cid:64)ustment is related to the
deferral of sales commissions paid to sales people and agents in connection with the placement of equipment with
post sale service arrangements. The impact to the Statement of Income from this change is not material.
(cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:43)(cid:64)(cid:52)(cid:49)(cid:68)(cid:53)(cid:67)
The FASB also issued the following Accounting Standards Updates, which have not had, and are not expected to
have, a material impact on our financial condition, results of operations or cash flows upon adoption. Those updates
are as follows:
(cid:59)
(cid:59)
(cid:59)
(cid:59)
(cid:59)
(cid:20)nvest(cid:45)ents: (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:14)(cid:12)(cid:9)(cid:12)(cid:13) , Investments(cid:78)(cid:29)(cid:67)uity (cid:43)ecurities (Topic (cid:16)21), Investments(cid:78)(cid:29)(cid:67)uity (cid:37)ethod and
(cid:34)oint (cid:46)entures (Topic (cid:16)2(cid:16)), and Derivatives and (cid:32)edging (Topic (cid:21)1(cid:18)). This update is effective for our fiscal year
beginning (cid:37)anuary 1, 2021.
(cid:14)o(cid:45)pensation (cid:5) (cid:28)toc(cid:43) (cid:14)o(cid:45)pensation an(cid:36) (cid:27)evenue fro(cid:45) (cid:14)ontracts (cid:55)it(cid:40) (cid:14)usto(cid:45)ers: (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:13)(cid:21)(cid:9)(cid:12)(cid:20), (Topic
(cid:20)1(cid:21)) and (Topic (cid:19)(cid:13)(cid:19)) (cid:27)odification Improvements - (cid:43)hare-Based (cid:27)onsideration (cid:40)ayable to a (cid:27)ustomer. This
update was effective for our fiscal year beginning (cid:37)anuary 1, 2020.
(cid:14)olla(cid:34)orative Arrange(cid:45)ents: (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:13)(cid:20)(cid:9)(cid:13)(cid:20), (Topic (cid:21)(cid:13)(cid:21)) (cid:27)larifying the Interaction between Topic (cid:21)(cid:13)(cid:21) and
Topic (cid:19)(cid:13)(cid:19). This update was effective for our fiscal year beginning (cid:37)anuary 1, 2020.
(cid:14)o(cid:45)pensation (cid:5) (cid:27)etire(cid:45)ent (cid:13)enefits (cid:5) Define(cid:36) (cid:13)enefit Plans (cid:5) (cid:18)eneral: (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:13)(cid:20)(cid:9)(cid:13)(cid:16), (Topic (cid:20)1(cid:18)-2(cid:13))
(cid:27)hanges to the Disclosure Re(cid:67)uirements for Defined Benefit (cid:40)lans. (cid:50)e elected to early adopt this update
effective for our fiscal year ended December 31, 2019. Refer to Note 19 - Employee Benefit (cid:43)lans for changes
in the disclosures for our Defined Benefit (cid:43)lans.
Fair (cid:31)alue (cid:24)easure(cid:45)ent: (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:13)(cid:20)(cid:9)(cid:13)(cid:15), (Topic (cid:21)2(cid:13)) Disclosure (cid:30)ramewor(cid:61). This update was effective for our
fiscal year beginning (cid:37)anuary 1, 2020.
(cid:41)(cid:69)(cid:61)(cid:61)(cid:49)(cid:66)(cid:73) (cid:63)(cid:54) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55) (cid:38)(cid:63)(cid:60)(cid:57)(cid:51)(cid:57)(cid:53)(cid:67)
(cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53) (cid:40)(cid:53)(cid:51)(cid:63)(cid:55)(cid:62)(cid:57)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:50)e generate revenue through the sale of equipment, supplies and maintenance and printing services. Revenue is
measured based on consideration specified in a contract with a customer and is recogni(cid:80)ed 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. (cid:50)ith 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 recogni(cid:80)e 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 (cid:64)udgments primarily include the identification of performance obligations in our Document management
services arrangements as well the pattern of delivery for those services.
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(cid:40)ore specifically, revenue related to our products and services is generally recogni(cid:80)ed as follows:
(cid:27)(cid:65)(cid:69)(cid:57)(cid:64)(cid:61)(cid:53)(cid:62)(cid:68)(cid:22) Revenues from the sale of equipment directly to end customers, including those from sales-type leases
(see below), are recogni(cid:80)ed 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 recogni(cid:80)ed when the equipment has been delivered and installed at the
customer location. Sales of customer installable products are recogni(cid:80)ed 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(cid:5)
(cid:35)(cid:49)(cid:57)(cid:62)(cid:68)(cid:53)(cid:62)(cid:49)(cid:62)(cid:51)(cid:53) (cid:67)(cid:53)(cid:66)(cid:70)(cid:57)(cid:51)(cid:53)(cid:67)(cid:22) (cid:50)e 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(cid:85)s estimated page volumes and are not
considered substantive. These agreements are sold as part of a bundled lease arrangement or through distributors
and resellers. (cid:50)e normally account for these maintenance agreements as a single performance obligation for
printing services being delivered in a series with delivery being measured by usage as billed to the customer.
Accordingly, revenue on these agreements are normally recogni(cid:80)ed 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.
(cid:26)(cid:63)(cid:51)(cid:69)(cid:61)(cid:53)(cid:62)(cid:68) (cid:61)(cid:49)(cid:62)(cid:49)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68) (cid:67)(cid:53)(cid:66)(cid:70)(cid:57)(cid:51)(cid:53)(cid:67)(cid:22) Revenues associated with our document management services are generally
recogni(cid:80)ed as printing services are rendered, which is generally on the basis of the number of images produced.
Revenues on unit-price contracts are recogni(cid:80)ed at the contractual selling prices as wor(cid:65) is completed by the
customer. (cid:50)e account for these arrangements as a single performance obligation for printing services being
delivered in a series with delivery being measured by usage as billed to the customer(cid:5)
Our services contracts may also include the sale or lease of equipment and software. In these instances, we follow
the policies noted for Equipment or Software Revenues and separately report the revenue associated with these
performance obligations. Certain document management services arrangements may also include an embedded
lease of equipment. In these instances, the revenues associated with the lease are recogni(cid:80)ed in accordance with
the requirements for lease accounting.
(cid:41)(cid:49)(cid:60)(cid:53)(cid:67) (cid:68)(cid:63) (cid:52)(cid:57)(cid:67)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:63)(cid:66)(cid:67) (cid:49)(cid:62)(cid:52) (cid:66)(cid:53)(cid:67)(cid:53)(cid:60)(cid:60)(cid:53)(cid:66)(cid:67)(cid:22) (cid:50)e utili(cid:80)e distributors and resellers to sell our equipment, supplies and
maintenance services to end-user customers. (cid:50)e refer to our distributor and reseller networ(cid:65) as our two-tier
distribution model. Revenues on sales to distributors and resellers are generally recogni(cid:80)ed when products are
shipped to such distributors and resellers. However, revenue is only recogni(cid:80)ed 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 customers are
recogni(cid:80)ed in a consistent manner for maintenance services. Revenue that may be sub(cid:64)ect 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 mar(cid:65)eting and other programs.
(cid:50)e estimate the variable consideration associated with these programs and record those amounts as a reduction to
revenue when the sales occur. Similarly, we account for our estimates of sales returns and other allowances when
the 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. (cid:50)e 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.
(cid:41)(cid:63)(cid:54)(cid:68)(cid:71)(cid:49)(cid:66)(cid:53)(cid:22) (cid:40)ost 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. Revenue from software is not a significant component of our Total revenues.
(cid:41)(cid:69)(cid:64)(cid:64)(cid:60)(cid:57)(cid:53)(cid:67)(cid:22) Supplies revenue is recogni(cid:80)ed upon transfer of control to the customer, generally upon utili(cid:80)ation or
shipment to the customer in accordance with the sales contract terms.
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(cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:62)(cid:55)(cid:22) Finance income attributable to sales-type leases, direct financing leases and installment loans is
recogni(cid:80)ed on the accrual basis using the effective interest method.
(cid:24)(cid:69)(cid:62)(cid:52)(cid:60)(cid:53)(cid:52) (cid:34)(cid:53)(cid:49)(cid:67)(cid:53) (cid:23)(cid:66)(cid:66)(cid:49)(cid:62)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)(cid:22) A significant portion of our direct sales of equipment to end customers are made
through bundled lease arrangements that typically include equipment, maintenance and financing components for
which 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 contractual page volume minimums, which are often expressed in terms of price-per-page. The fixed
minimum monthly payments are multiplied by the number of months in the contract term to arrive at the total fixed
minimum payments that the customer is obligated to ma(cid:65)e (fixed payments) over the lease term. In applying our
lease accounting methodology, we only consider the fixed payments for purposes of allocating to the relative fair
value elements of the contract.
Revenues under bundled arrangements are allocated considering the relative standalone selling prices of the lease
and non-lease deliverables included in the bundled arrangement. Lease deliverables include the equipment,
financing, maintenance and other executory costs, while non-lease deliverables generally consist of the supplies
and non-maintenance services. The allocation for the lease deliverables begins by allocating revenues to the
maintenance and other executory costs plus a profit thereon. These elements are generally recogni(cid:80)ed over the
term of the lease as service revenue. The remaining amounts are allocated to the equipment and financing
elements, which are sub(cid:64)ected to the accounting estimates noted below under (cid:86)Leases(cid:87).
(cid:34)(cid:53)(cid:49)(cid:67)(cid:53)(cid:67)(cid:22) The two primary lease accounting provisions we assess for the classification of transactions as sales-type
or operating leases are: (1) a review of the lease term to determine if it is equal to or greater than (cid:22)5(cid:4) of the
economic life of the equipment and (2) a review of the present value of the minimum lease payments to determine if
they are equal to or greater than 90(cid:4) of the fair mar(cid:65)et value of the equipment at the inception of the lease.
Equipment placements included in arrangements meeting these conditions are accounted for as sales-type leases
and revenue is recogni(cid:80)ed as noted above for Equipment. Equipment placements included in arrangements that do
not meet these conditions are accounted for as operating leases and revenue is recogni(cid:80)ed over the term of the
lease.
(cid:50)e 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-mar(cid:65)et for our used equipment. (cid:50)e 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. Residual values are not significant.
(cid:50)ith respect to fair value, we perform an analysis of equipment fair value based on cash selling prices during the
applicable period. The cash selling prices are compared to the range of values determined for our leases. The range
of cash selling prices must be reasonably consistent with the lease selling prices in order for us to determine that
such lease prices are indicative of fair value.
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 mar(cid:65)etplace and the customer(cid:85)s
credit history, industry and credit class. (cid:50)e reassess our pricing interest rates quarterly based on changes in the
local prevailing rates in the mar(cid:65)etplace. These interest rates have generally been ad(cid:64)usted if the rates vary by 25
basis points or more, cumulatively, from the rate last in effect. The pricing interest rates generally equal the implicit
rates within the leases, as corroborated by our comparisons of cash to lease selling prices.
(cid:36)(cid:63)(cid:68)(cid:53)(cid:22) The above two revenue recognition policies apply to 2018 only and were updated as a result of our
adoption of ASC Topic 842 effective (cid:37)anuary 1, 2019. Refer to Note 4 - Lessor for the updated policies.
(cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53) (cid:40)(cid:53)(cid:51)(cid:63)(cid:55)(cid:62)(cid:57)(cid:68)(cid:57)(cid:63)(cid:62) (cid:38)(cid:63)(cid:60)(cid:57)(cid:51)(cid:57)(cid:53)(cid:67)
(cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)(cid:9)(cid:50)(cid:49)(cid:67)(cid:53)(cid:52) (cid:42)(cid:49)(cid:72)(cid:53)(cid:67)(cid:22) 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 ((cid:49)AT).
(cid:41)(cid:56)(cid:57)(cid:64)(cid:64)(cid:57)(cid:62)(cid:55) (cid:49)(cid:62)(cid:52) (cid:30)(cid:49)(cid:62)(cid:52)(cid:60)(cid:57)(cid:62)(cid:55)(cid:22) Shipping and handling costs are accounted for as a fulfillment cost and are included in
Cost of sales in the Consolidated Statements of Income.
Refer to Note 2 - Revenue for additional information regarding revenue recognition policies with respect to contract
assets and liabilities as well as contract costs.
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(cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:41)(cid:57)(cid:55)(cid:62)(cid:57)(cid:54)(cid:57)(cid:51)(cid:49)(cid:62)(cid:68) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55) (cid:38)(cid:63)(cid:60)(cid:57)(cid:51)(cid:57)(cid:53)(cid:67)
(cid:25)(cid:49)(cid:67)(cid:56) (cid:49)(cid:62)(cid:52) (cid:25)(cid:49)(cid:67)(cid:56) (cid:27)(cid:65)(cid:69)(cid:57)(cid:70)(cid:49)(cid:60)(cid:53)(cid:62)(cid:68)(cid:67)
Cash and cash equivalents consist of cash on hand, including money mar(cid:65)et funds, and investments with original
maturities of three months or less.
(cid:40)(cid:53)(cid:51)(cid:53)(cid:57)(cid:70)(cid:49)(cid:50)(cid:60)(cid:53) (cid:41)(cid:49)(cid:60)(cid:53)(cid:67)
(cid:50)e transfer certain portions of our receivable portfolios and normally account for those transfers as sales based on
meeting the criteria for derecognition in accordance with ASC Topic 860 (cid:2)Transfer and Servicing(cid:2) of Financial
Assets. (cid:34)ains or losses on the sale of receivables depend, in part, on both (a) the cash proceeds and (b) the net
non-cash proceeds received or paid. (cid:50)hen we sell receivables, we normally receive beneficial interests in the
transferred receivables from the purchasers as part of the proceeds. (cid:50)e may refer to these beneficial interests as a
deferred purchase price. The beneficial interests obtained are initially measured at their fair value. (cid:50)e generally
estimate fair value based on the present value of expected future cash flows, which are calculated using
management(cid:2)s best estimates of the (cid:65)ey assumptions including credit losses, prepayment rate and discount rates
commensurate with the ris(cid:65)s involved. Refer to Note (cid:22) - Accounts Receivable, Net for additional information on our
receivable sales(cid:5)
(cid:31)(cid:62)(cid:70)(cid:53)(cid:62)(cid:68)(cid:63)(cid:66)(cid:57)(cid:53)(cid:67)
Inventories are carried at the lower of average cost or net reali(cid:80)able 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 boo(cid:65) value or
salvage value, which is normally not significant. (cid:50)e regularly review inventory quantities and record a provision for
excess and(cid:14)or obsolete inventory based primarily on our estimated forecast of product demand, production
requirements and servicing commitments. Several factors may influence the reali(cid:80)ability of our inventories, including
our decision to exit a product line, technological changes and new product development. The provision for excess
and(cid:14)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(cid:14)or obsolete service parts inventory is based primarily on pro(cid:64)ected servicing
requirements over the life of the related equipment populations. Refer to Note 9 - Inventories and Equipment on
Operating Leases, Net for further discussion.
(cid:34)(cid:49)(cid:62)(cid:52)(cid:8) (cid:24)(cid:69)(cid:57)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:49)(cid:62)(cid:52) (cid:27)(cid:65)(cid:69)(cid:57)(cid:64)(cid:61)(cid:53)(cid:62)(cid:68) (cid:63)(cid:62) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:62)(cid:55) (cid:34)(cid:53)(cid:49)(cid:67)(cid:53)(cid:67)
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 capitali(cid:80)ed 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.
(cid:34)(cid:53)(cid:49)(cid:67)(cid:53)(cid:52) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
(cid:50)e lease buildings and equipment, substantially all of which are accounted for as operating leases. Refer to Note
11- Lessee for accounting policies with respect to leased assets and the adoption of ASC Topic 842.
(cid:41)(cid:63)(cid:54)(cid:68)(cid:71)(cid:49)(cid:66)(cid:53) (cid:9) (cid:31)(cid:62)(cid:68)(cid:53)(cid:66)(cid:62)(cid:49)(cid:60) (cid:43)(cid:67)(cid:53) (cid:49)(cid:62)(cid:52) (cid:38)(cid:66)(cid:63)(cid:52)(cid:69)(cid:51)(cid:68)
(cid:50)e capitali(cid:80)e direct costs associated with developing, purchasing or otherwise acquiring software for internal use
and amorti(cid:80)e 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.
(cid:50)e also capitali(cid:80)e certain costs related to the development of software solutions to be sold to our customers upon
reaching technological feasibility ((cid:43)roduct Software). These costs are amorti(cid:80)ed on a straight-line basis over the
estimated economic life of the software. Amounts expended for (cid:43)roduct Software are included in Cash Flows from
Operations. (cid:50)e perform periodic reviews to ensure that unamorti(cid:80)ed (cid:43)roduct Software costs remain recoverable
from estimated future operating profits (net reali(cid:80)able value or NR(cid:49)). 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.
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(cid:29)(cid:63)(cid:63)(cid:52)(cid:71)(cid:57)(cid:60)(cid:60) (cid:49)(cid:62)(cid:52) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:31)(cid:62)(cid:68)(cid:49)(cid:62)(cid:55)(cid:57)(cid:50)(cid:60)(cid:53) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
(cid:34)oodwill 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
wor(cid:65)force, neither of which qualifies as an identifiable intangible asset. (cid:34)oodwill is not amorti(cid:80)ed, but rather is
tested for impairment annually, or more frequently whenever events or changes in circumstances indicate that the
carrying value of the asset may not be recoverable and an impairment loss may have been incurred.
(cid:50)e normally 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 one operating segment, we determined that there is one
reporting unit and tested goodwill for impairment at the entity level.
(cid:50)e perform an assessment of goodwill, utili(cid:80)ing either a qualitative or quantitative impairment test. The qualitative
impairment test assesses several factors to determine whether it is more li(cid:65)ely than not that the fair value of the
entity is less than its carrying amount. If we conclude it is more li(cid:65)ely 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 mar(cid:65)et 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 recogni(cid:80)e an impairment loss for the excess.
In the second quarter 2020, as a result of the continued negative financial impacts from the CO(cid:49)ID-19 pandemic on
our current and near-term future operations, the expected slower recovery during the latter half of 2020 as
businesses return to their respective offices, as well as a sustained mar(cid:65)et capitali(cid:80)ation below our boo(cid:65) value, we
determined there was a triggering event requiring an interim quantitative evaluation of (cid:34)oodwill. After completing
our interim impairment review, we concluded that (cid:34)oodwill was not impaired in the second quarter 2020. Although
business performance improved in the second half of 2020, the CO(cid:49)ID-19 pandemic continued to have a significant
impact on the Company(cid:85)s revenues, expenses, cash flows and mar(cid:65)et capitali(cid:80)ation in 2020. As result of these
impacts as well as related macroeconomic and industry factors we elected to utili(cid:80)e a quantitative model for the
assessment of the recoverability of our goodwill balance for our annual fourth quarter 2020 impairment test. After
completing our annual quantitative impairment review in the fourth quarter 2020, we concluded that (cid:34)oodwill was
not impaired.
Other intangible assets primarily consist of assets obtained in connection with business acquisitions, including
installed customer base and distribution networ(cid:65) relationships, existing technology, trademar(cid:65)s and non-compete
agreements. (cid:50)e 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 amorti(cid:80)ed on a
straight-line basis over their estimated economic lives. (cid:50)e believe that the straight-line method of amorti(cid:80)ation
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 13 - (cid:34)oodwill and Intangible Assets, Net for
further information.
(cid:31)(cid:61)(cid:64)(cid:49)(cid:57)(cid:66)(cid:61)(cid:53)(cid:62)(cid:68) (cid:63)(cid:54) (cid:34)(cid:63)(cid:62)(cid:55)(cid:9)(cid:34)(cid:57)(cid:70)(cid:53)(cid:52) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
(cid:50)e 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 recogni(cid:80)ed 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 asset ceases to be used).
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(cid:38)(cid:53)(cid:62)(cid:67)(cid:57)(cid:63)(cid:62) (cid:49)(cid:62)(cid:52) (cid:38)(cid:63)(cid:67)(cid:68)(cid:9)(cid:40)(cid:53)(cid:68)(cid:57)(cid:66)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68) (cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68) (cid:37)(cid:50)(cid:60)(cid:57)(cid:55)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
(cid:50)e sponsor various forms of defined benefit pension plans in several countries covering employees who meet
eligibility requirements. Retiree health benefit plans cover U.S. and Canadian employees for retiree medical costs.
(cid:50)e 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 recogni(cid:80)ed not as they occur, but systematically and gradually over subsequent periods. All changes are
ultimately recogni(cid:80)ed 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 recogni(cid:80)ed as
components of net periodic benefit cost are recogni(cid:80)ed 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 ma(cid:65)e about the 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 recogni(cid:80)ed 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 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 utili(cid:80)e a mar(cid:65)et-related value approach in
determining the value of the pension plan assets, rather than a fair mar(cid:65)et 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
mar(cid:65)et-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 mar(cid:65)et-related value approach reduces the volatility in net
periodic pension cost that would result from using the fair mar(cid:65)et 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 ad(cid:64)usted 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 recogni(cid:80)ed in Accumulated other comprehensive loss. (cid:50)e amorti(cid:80)e 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 recogni(cid:80)ed in mar(cid:65)et-related value) exceeds 10(cid:4) of the greater
of the pro(cid:64)ected benefit obligation or the mar(cid:65)et-related value of plan assets (the corridor method). This
determination is made on a plan-by-plan basis. If amorti(cid:80)ation is required for a particular plan, we amorti(cid:80)e the
applicable net gain or loss in excess of the 10(cid:4) 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 amorti(cid:80)ation 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(cid:2)s vested benefit is considered fully settled upon payment of the lump sum. (cid:50)e
have elected to apply settlement accounting and therefore we recogni(cid:80)e the losses associated with settlements in
this plan immediately upon the settlement of the vested benefits. Settlement accounting requires us to recogni(cid:80)e a
pro rata portion of the aggregate unamorti(cid:80)ed net actuarial losses upon settlement. The pro rata factor is computed
as the percentage reduction in the pro(cid:64)ected benefit obligation due to the settlement of the participant(cid:2)s vested
benefit. Refer to Note 19 - Employee Benefit (cid:43)lans for further information regarding our (cid:43)ension and (cid:43)ost-
Retirement Benefit Obligations(cid:5)
(cid:40)(cid:53)(cid:67)(cid:53)(cid:49)(cid:66)(cid:51)(cid:56)(cid:8) (cid:26)(cid:53)(cid:70)(cid:53)(cid:60)(cid:63)(cid:64)(cid:61)(cid:53)(cid:62)(cid:68) (cid:49)(cid:62)(cid:52) (cid:27)(cid:62)(cid:55)(cid:57)(cid:62)(cid:53)(cid:53)(cid:66)(cid:57)(cid:62)(cid:55) (cid:6)(cid:40)(cid:26)(cid:4)(cid:27)(cid:7)
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 (cid:3)54, (cid:3)62 and (cid:3)(cid:22)2 in for the years ended December 31, 2020, 2019 and 2018, respectively.
Xerox 2020 Annual Report 93
Xerox 2020 Annual Report 93
Table of Contents
(cid:29)(cid:63)(cid:70)(cid:53)(cid:66)(cid:62)(cid:61)(cid:53)(cid:62)(cid:68) (cid:29)(cid:66)(cid:49)(cid:62)(cid:68)(cid:67)(cid:11)(cid:23)(cid:67)(cid:67)(cid:57)(cid:67)(cid:68)(cid:49)(cid:62)(cid:51)(cid:53)
(cid:34)overnment grants related to income are recogni(cid:80)ed as a reduction of related expenses in the Consolidated
Statements of Income when there is a reasonable assurance that the entity will comply with the conditions attached
to the grant and that the grants will be received. The timing and pattern of recognition of government grants is made
on a systematic basis over the periods in which the Company recogni(cid:80)es the related expenses or losses that the
grants are intended to compensate.
(cid:28)(cid:63)(cid:66)(cid:53)(cid:57)(cid:55)(cid:62) (cid:25)(cid:69)(cid:66)(cid:66)(cid:53)(cid:62)(cid:51)(cid:73) (cid:42)(cid:66)(cid:49)(cid:62)(cid:67)(cid:60)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:49)(cid:62)(cid:52) (cid:40)(cid:53)(cid:61)(cid:53)(cid:49)(cid:67)(cid:69)(cid:66)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)
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 ad(cid:64)ustments 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.
(cid:36)(cid:63)(cid:68)(cid:53) (cid:14) (cid:75) (cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)
Revenues disaggregated by primary geographic mar(cid:65)ets, ma(cid:64)or product lines, and sales channels are as follows:
(cid:38)(cid:66)(cid:57)(cid:61)(cid:49)(cid:66)(cid:73) (cid:55)(cid:53)(cid:63)(cid:55)(cid:66)(cid:49)(cid:64)(cid:56)(cid:57)(cid:51)(cid:49)(cid:60) (cid:61)(cid:49)(cid:66)(cid:59)(cid:53)(cid:68)(cid:67)(cid:6)(cid:13)(cid:7)
United States
Europe
Canada
Other
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)(cid:67)
(cid:35)(cid:49)(cid:58)(cid:63)(cid:66) (cid:64)(cid:66)(cid:63)(cid:52)(cid:69)(cid:51)(cid:68) (cid:49)(cid:62)(cid:52) (cid:67)(cid:53)(cid:66)(cid:70)(cid:57)(cid:51)(cid:53)(cid:67) (cid:60)(cid:57)(cid:62)(cid:53)(cid:67)
Equipment
Supplies, paper and other sales
(cid:40)aintenance agreements(2)
Service arrangements(3)
Rental and other
Financing
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)(cid:67)
(cid:41)(cid:49)(cid:60)(cid:53)(cid:67) (cid:51)(cid:56)(cid:49)(cid:62)(cid:62)(cid:53)(cid:60)(cid:67)(cid:22)
Direct equipment lease(4)
Distributors (cid:5) resellers(5)
Customer direct
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:41)(cid:49)(cid:60)(cid:53)(cid:67)
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
4,186 (cid:3)
5,429 (cid:3)
1,883
393
560
2,326
518
(cid:22)93
(cid:22),022 (cid:3)
9,066 (cid:3)
1,564 (cid:3)
2,062 (cid:3)
885
1,803
2,014
530
226
1,165
2,3(cid:22)2
2,51(cid:22)
(cid:22)06
244
(cid:22),022 (cid:3)
9,066 (cid:3)
5(cid:22)3 (cid:3)
910
966
6(cid:22)2 (cid:3)
1,343
1,212
2,449 (cid:3)
3,22(cid:22) (cid:3)
5,610
2,625
569
858
9,662
2,1(cid:22)8
1,2(cid:22)6
2,603
2,6(cid:22)4
663
268
9,662
699
1,445
1,310
3,454
_____________
(1) (cid:31)eographic area data is based upon the location of the subsidiary reporting the revenue.
(2)
Includes revenues from maintenance agreements on sold e(cid:67)uipment as well as revenues associated with service agreements sold through
our channel partners as (cid:48)erox (cid:40)artner (cid:40)rint (cid:43)ervices ((cid:48)(cid:40)(cid:40)(cid:43)).
((cid:16)) (cid:40)rimarily includes revenues from our (cid:37)anaged (cid:43)ervices offerings (formerly our (cid:37)anaged Documents (cid:43)ervices arrangements). (cid:25)lso
includes revenues from embedded operating leases, which were not significant.
((cid:17)) (cid:40)rimarily reflects sales through bundled lease arrangements.
((cid:18)) (cid:40)rimarily reflects sales through our two-tier distribution channels.
(cid:25)(cid:63)(cid:62)(cid:68)(cid:66)(cid:49)(cid:51)(cid:68) (cid:49)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:60)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)(cid:22) (cid:50)e 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 recogni(cid:80)ed, are primarily related to advanced billings for maintenance and other
services to be performed and were approximately (cid:3)130 and (cid:3)13(cid:22) at December 31, 2020 and 2019, respectively.
The ma(cid:64)ority of the balance at December 31, 2020 will be amorti(cid:80)ed to revenue over approximately the next 30
months.
94
Xerox 2020 Annual Report 94
Table of Contents
Table of Contents
(cid:29)(cid:63)(cid:70)(cid:53)(cid:66)(cid:62)(cid:61)(cid:53)(cid:62)(cid:68) (cid:29)(cid:66)(cid:49)(cid:62)(cid:68)(cid:67)(cid:11)(cid:23)(cid:67)(cid:67)(cid:57)(cid:67)(cid:68)(cid:49)(cid:62)(cid:51)(cid:53)
(cid:34)overnment grants related to income are recogni(cid:80)ed as a reduction of related expenses in the Consolidated
Statements of Income when there is a reasonable assurance that the entity will comply with the conditions attached
to the grant and that the grants will be received. The timing and pattern of recognition of government grants is made
on a systematic basis over the periods in which the Company recogni(cid:80)es the related expenses or losses that the
(cid:25)(cid:63)(cid:62)(cid:68)(cid:66)(cid:49)(cid:51)(cid:68) (cid:25)(cid:63)(cid:67)(cid:68)(cid:67)(cid:22) Incremental direct costs of obtaining a contract primarily include sales commissions paid to sales
people and agents in connection with the placement of equipment with associated post sale services arrangements.
These costs are deferred and amorti(cid:80)ed on the straight-line basis over the estimated contract term(cid:3) which is
currently estimated to be approximately four years. (cid:50)e pay commensurate sales commissions upon customer
renewals, therefore our amorti(cid:80)ation period is aligned to our initial contract term.
grants are intended to compensate.
(cid:28)(cid:63)(cid:66)(cid:53)(cid:57)(cid:55)(cid:62) (cid:25)(cid:69)(cid:66)(cid:66)(cid:53)(cid:62)(cid:51)(cid:73) (cid:42)(cid:66)(cid:49)(cid:62)(cid:67)(cid:60)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:49)(cid:62)(cid:52) (cid:40)(cid:53)(cid:61)(cid:53)(cid:49)(cid:67)(cid:69)(cid:66)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)
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 ad(cid:64)ustments 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.
Revenues disaggregated by primary geographic mar(cid:65)ets, ma(cid:64)or product lines, and sales channels are as follows:
(cid:36)(cid:63)(cid:68)(cid:53) (cid:14) (cid:75) (cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)
(cid:38)(cid:66)(cid:57)(cid:61)(cid:49)(cid:66)(cid:73) (cid:55)(cid:53)(cid:63)(cid:55)(cid:66)(cid:49)(cid:64)(cid:56)(cid:57)(cid:51)(cid:49)(cid:60) (cid:61)(cid:49)(cid:66)(cid:59)(cid:53)(cid:68)(cid:67)(cid:6)(cid:13)(cid:7)
United States
Europe
Canada
Other
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)(cid:67)
(cid:35)(cid:49)(cid:58)(cid:63)(cid:66) (cid:64)(cid:66)(cid:63)(cid:52)(cid:69)(cid:51)(cid:68) (cid:49)(cid:62)(cid:52) (cid:67)(cid:53)(cid:66)(cid:70)(cid:57)(cid:51)(cid:53)(cid:67) (cid:60)(cid:57)(cid:62)(cid:53)(cid:67)
Equipment
Supplies, paper and other sales
(cid:40)aintenance agreements(2)
Service arrangements(3)
Rental and other
Financing
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)(cid:67)
(cid:41)(cid:49)(cid:60)(cid:53)(cid:67) (cid:51)(cid:56)(cid:49)(cid:62)(cid:62)(cid:53)(cid:60)(cid:67)(cid:22)
Direct equipment lease(4)
Distributors (cid:5) resellers(5)
Customer direct
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:41)(cid:49)(cid:60)(cid:53)(cid:67)
_____________
(cid:52)ear Ended December 31,
2020
2019
2018
4,186 (cid:3)
5,429 (cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
1,883
393
560
885
1,803
2,014
530
226
2,326
518
(cid:22)93
1,165
2,3(cid:22)2
2,51(cid:22)
(cid:22)06
244
(cid:22),022 (cid:3)
9,066 (cid:3)
1,564 (cid:3)
2,062 (cid:3)
(cid:22),022 (cid:3)
9,066 (cid:3)
5(cid:22)3 (cid:3)
910
966
6(cid:22)2 (cid:3)
1,343
1,212
2,449 (cid:3)
3,22(cid:22) (cid:3)
5,610
2,625
569
858
9,662
2,1(cid:22)8
1,2(cid:22)6
2,603
2,6(cid:22)4
663
268
9,662
699
1,445
1,310
3,454
(1) (cid:31)eographic area data is based upon the location of the subsidiary reporting the revenue.
(2)
Includes revenues from maintenance agreements on sold e(cid:67)uipment as well as revenues associated with service agreements sold through
our channel partners as (cid:48)erox (cid:40)artner (cid:40)rint (cid:43)ervices ((cid:48)(cid:40)(cid:40)(cid:43)).
((cid:16)) (cid:40)rimarily includes revenues from our (cid:37)anaged (cid:43)ervices offerings (formerly our (cid:37)anaged Documents (cid:43)ervices arrangements). (cid:25)lso
includes revenues from embedded operating leases, which were not significant.
((cid:17)) (cid:40)rimarily reflects sales through bundled lease arrangements.
((cid:18)) (cid:40)rimarily reflects sales through our two-tier distribution channels.
(cid:25)(cid:63)(cid:62)(cid:68)(cid:66)(cid:49)(cid:51)(cid:68) (cid:49)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:60)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)(cid:22) (cid:50)e 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 recogni(cid:80)ed, are primarily related to advanced billings for maintenance and other
services to be performed and were approximately (cid:3)130 and (cid:3)13(cid:22) at December 31, 2020 and 2019, respectively.
The ma(cid:64)ority of the balance at December 31, 2020 will be amorti(cid:80)ed to revenue over approximately the next 30
months.
Incremental direct costs of obtaining a contract
Amorti(cid:80)ation of incremental direct costs
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:3)
62 (cid:3)
81
(cid:22)8 (cid:3)
88
84
95
The balance of deferred incremental direct costs net of accumulated amorti(cid:80)ation at December 31, 2020 and 2019
was (cid:3)145 and (cid:3)163, respectively. This amount is expected to be amorti(cid:80)ed over its estimated period of benefit,
which we currently estimate to be approximately four years.
(cid:50)e may also incur costs associated with our services arrangements to generate or enhance resources and assets
that will be used to satisfy our future performance obligations included in these arrangements. These costs are
considered contract fulfillment costs and are amorti(cid:80)ed over the contractual service period of the arrangement to
cost of services. In addition, we also provide inducements to certain customers in various forms, including
contractual credits, which are capitali(cid:80)ed and amorti(cid:80)ed as a reduction of revenue over the term of the contract.
Amounts deferred associated with contract fulfillment costs and inducements were (cid:3)13 and (cid:3)13 at December 31,
2020 and 2019, respectively, and related amorti(cid:80)ation was (cid:3)4, (cid:3)5 and (cid:3)5 for the three years ended December 31,
2020, 2019 and 2018, respectively.
Equipment and software used in the fulfillment of service arrangements and where the Company retains control are
capitali(cid:80)ed and depreciated over the shorter of their useful life or the term of the contract if an asset is contract
specific.
(cid:36)(cid:63)(cid:68)(cid:53) (cid:15) (cid:75) (cid:41)(cid:53)(cid:55)(cid:61)(cid:53)(cid:62)(cid:68) (cid:49)(cid:62)(cid:52) (cid:29)(cid:53)(cid:63)(cid:55)(cid:66)(cid:49)(cid:64)(cid:56)(cid:57)(cid:51) (cid:23)(cid:66)(cid:53)(cid:49) (cid:40)(cid:53)(cid:64)(cid:63)(cid:66)(cid:68)(cid:57)(cid:62)(cid:55)
(cid:41)(cid:53)(cid:55)(cid:61)(cid:53)(cid:62)(cid:68) (cid:26)(cid:57)(cid:67)(cid:51)(cid:69)(cid:67)(cid:67)(cid:57)(cid:63)(cid:62)
(cid:50)e manage our operations on a geographic basis and are primarily organi(cid:80)ed from a sales perspective on the basis
of (cid:86)go-to-mar(cid:65)et(cid:87) sales channels. These sales channels are structured to serve a range of customers for our
products and services. As a result of this structure, we concluded that we have one operating and reportable
segment - the design, development and sale of document management systems and solutions. Our chief executive
officer was identified as the chief operating decision ma(cid:65)er (COD(cid:40)). All of the company(cid:85)s activities are interrelated,
and each activity is dependent upon and supportive of the other, including product development, supply chain and
bac(cid:65)-office support services. In addition, all significant operating decisions made by management and the Board,
are largely based upon the analysis of Xerox Holdings and Xerox on a total company basis, including assessments
related to our incentive compensation plans.
(cid:29)(cid:53)(cid:63)(cid:55)(cid:66)(cid:49)(cid:64)(cid:56)(cid:57)(cid:51) (cid:23)(cid:66)(cid:53)(cid:49) (cid:26)(cid:49)(cid:68)(cid:49)
(cid:34)eographic area data is based upon the location of the subsidiary reporting the revenue or long-lived assets and is
as follows:
Revenues
(cid:52)ear Ended December 31,
Long-Lived Assets (1)
As of December 31,
2020
2019
2018
2020
2019
4,186 (cid:3)
5,429 (cid:3)
5,610 (cid:3)
692 (cid:3)
1,883
393
560
2,326
518
(cid:22)93
2,625
569
858
312
84
43
(cid:22)69
305
98
59
(cid:22),022 (cid:3)
9,066 (cid:3)
9,662 (cid:3)
1,131 (cid:3)
1,231
(cid:3)
(cid:3)
United States
Europe
Canada
Other areas
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
_____________
(1) (cid:36)ong-lived assets are comprised of (i) (cid:36)and, buildings and e(cid:67)uipment, net, (ii) (cid:29)(cid:67)uipment on operating leases, net, (iii) (cid:36)eased right-of-use
(RO(cid:45)) assets, net, and (iv) Internal use software, net.
Xerox 2020 Annual Report 94
Xerox 2020 Annual Report 95
Xerox 2020 Annual Report 95
Table of Contents
(cid:36)(cid:63)(cid:68)(cid:53) (cid:16) (cid:75) (cid:34)(cid:53)(cid:67)(cid:67)(cid:63)(cid:66)
Refer to Note 1 - Basis of (cid:43)resentation and Summary of Significant Accounting (cid:43)olicies - New Accounting
Standards and Accounting Changes for additional information related to the adoption of (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:13)(cid:18)(cid:9)(cid:12)(cid:14), (cid:36)eases ((cid:25)(cid:43)(cid:27)
Topic (cid:21)(cid:17)2).
(cid:34)(cid:53)(cid:67)(cid:67)(cid:63)(cid:66) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55) (cid:38)(cid:63)(cid:60)(cid:57)(cid:51)(cid:57)(cid:53)(cid:67)(cid:22) The following represent the updated disclosures to our Revenue Recognition policies
as a result of the adoption of ASC Topic 842 effective (cid:37)anuary 1, 2019:
(cid:24)(cid:69)(cid:62)(cid:52)(cid:60)(cid:53)(cid:52) (cid:34)(cid:53)(cid:49)(cid:67)(cid:53) (cid:23)(cid:66)(cid:66)(cid:49)(cid:62)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)(cid:22) A portion of our direct sales of equipment to end 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. Revenues under these bundled lease arrangements are allocated considering the
relative standalone selling prices of the lease and non-lease deliverables included in the bundled arrangement.
Lease deliverables include the equipment and financing, while the non-lease deliverables generally consist of the
services, which include supplies. Consistent with the guidance in ASC 842 and ASC 606, regarding the allocation of
fixed and variable consideration, we only consider the fixed payments for purposes of allocation to the lease
elements of the contract. The fixed minimum monthly payments are multiplied by the number of months in the
contract term to arrive at the total fixed lease payments that the customer is obligated to ma(cid:65)e over the lease term.
Amounts allocated to the equipment and financing elements are then sub(cid:64)ected to the accounting estimates noted
below under (cid:34)(cid:53)(cid:49)(cid:67)(cid:53)(cid:67) to ensure the values reflect standalone selling prices.
The remainder of any fixed payments, as well as the variable payments, are allocated to non-lease elements
because the variable consideration for incremental page volume or usage is considered attributable to the delivery
of those elements. The consideration for the non-lease elements is not dependent on the consideration for
equipment and vice versa and the consideration for the equipment and services is priced at the appropriate
standalone values(cid:26) therefore, the relative standalone selling price allocation method is not necessary. The revenue
associated with the non-lease elements are normally accounted for as a single performance obligation being
delivered in a series with delivery being measured as the usage billed to the customer. Accordingly, revenue from
these agreements is recogni(cid:80)ed in a manner consistent with the guidance for (cid:40)aintenance and Services
agreements. Refer to Note 1 - Basis of (cid:43)resentation and Summary of Significant Accounting (cid:43)olicies.
(cid:34)(cid:53)(cid:49)(cid:67)(cid:53)(cid:67)(cid:22) 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 ma(cid:64)or part of the economic life of the underlying
equipment (defined as greater than (cid:22)5(cid:4))(cid:26) 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 mar(cid:65)et value of the equipment at the inception of the
lease (defined as greater than 90(cid:4)). Equipment placements included in arrangements meeting these conditions are
accounted for as sales-type leases and revenue is recogni(cid:80)ed in a manner consistent with Equipment. Equipment
placements included in arrangements that do not meet these conditions are accounted for as operating leases and
revenue is recogni(cid:80)ed over the term of the lease.
(cid:50)e 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-mar(cid:65)et for our used equipment. (cid:50)e 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.
(cid:50)e perform an analysis of the stand-alone selling price of equipment based on cash selling prices during the
applicable period. The cash selling prices are compared to the range of values determined for our leases. The range
of cash selling prices must be reasonably consistent with the lease selling prices in order for us to determine that
such lease prices reflects stand-alone value.
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 mar(cid:65)etplace and the customer(cid:85)s
credit history, industry and credit class. (cid:50)e reassess our pricing interest rates quarterly based on changes in the
local prevailing rates in the mar(cid:65)etplace. The pricing interest rates generally equal the implicit rates within the
leases, as corroborated by our comparisons of cash to lease selling prices noted above.
(cid:23)(cid:52)(cid:52)(cid:57)(cid:68)(cid:57)(cid:63)(cid:62)(cid:49)(cid:60) (cid:34)(cid:53)(cid:49)(cid:67)(cid:53) (cid:38)(cid:49)(cid:73)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)(cid:22) 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,
96
Xerox 2020 Annual Report 96
Table of Contents
respectively. Amounts related to property taxes and insurance are not material. (cid:50)e 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.
(cid:38)(cid:66)(cid:53)(cid:67)(cid:53)(cid:62)(cid:68)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:22) Revenue from sales-type leases is presented on a gross basis when the company enters into a
lease to reali(cid:80)e 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
2020
2019
2018
(cid:52)ear Ended December 31,
Revenue from sales type leases
Sales
Interest income on lease receivables Financing
Lease income - operating leases
Services, maintenance and rentals
(cid:49)ariable lease income
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:34)(cid:53)(cid:49)(cid:67)(cid:53) (cid:57)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
Services, maintenance and rentals
(cid:3)
(cid:3)
5(cid:22)3 (cid:3)
6(cid:22)2 (cid:3)
226
313
66
244
396
10(cid:22)
699
268
438
120
1,1(cid:22)8 (cid:3)
1,419 (cid:3)
1,525
(cid:43)rofit at lease commencement on sales type leases was estimated to be approximately (cid:3)20(cid:22), (cid:3)2(cid:22)6 and (cid:3)302 for
the three years ended December 31, 2020, 2019 and 2018, respectively.
(cid:36)(cid:63)(cid:68)(cid:53) (cid:17) (cid:75) (cid:23)(cid:51)(cid:65)(cid:69)(cid:57)(cid:67)(cid:57)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
(cid:14)(cid:12)(cid:14)(cid:12) (cid:23)(cid:51)(cid:65)(cid:69)(cid:57)(cid:67)(cid:57)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Xerox continues to focus on further penetrating the small-to-medium si(cid:80)ed business (S(cid:40)B) mar(cid:65)et through organic
and inorganic growth, which includes acquisitions of local area resellers and partners (including multi-brand
dealers). During 2020, business acquisitions associated with this initiative totaled (cid:3)194, net of cash acquired, and
included three acquisitions in the U.K. for (cid:3)1(cid:22)2 ((cid:34)B(cid:43) 133 million) - Arena (cid:34)roup, Altodigital Networ(cid:65)s and ITEC
Connect, as well as an acquisition in Canada for approximately (cid:3)22 (CAD 29 million). These acquisitions are
expected to expand our presence in the S(cid:40)B mar(cid:65)et in both (cid:50)estern Europe and Canada.
2020 also included the acquisition of CareAR directly by Xerox Holdings for (cid:3)9.
(cid:14)(cid:12)(cid:14)(cid:12) (cid:41)(cid:69)(cid:61)(cid:61)(cid:49)(cid:66)(cid:73)
All of our 2020 acquisitions resulted in 100(cid:4) ownership of the acquired companies. The operating results of these
acquisitions are not material to our financial statements and are included within our results from the respective
acquisition dates. The purchase prices were all cash and were primarily allocated to Intangible assets, net and
(cid:34)oodwill, of which, none is expected to be deductible for tax purposes. Our 2020 acquisitions contributed aggregate
revenues of approximately (cid:3)99 to our 2020 total revenues from their respective acquisition dates.
The following table summari(cid:80)es the purchase price allocations for our 2020 acquisitions as of the acquisition dates:
Accounts(cid:14)finance receivables
Intangible assets:
Customer relationships
Trademar(cid:65)s
Technology
(cid:34)oodwill
Other assets
Total Assets acquired
Liabilities assumed
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:38)(cid:69)(cid:66)(cid:51)(cid:56)(cid:49)(cid:67)(cid:53) (cid:38)(cid:66)(cid:57)(cid:51)(cid:53)
(cid:50)eighted-Average
Life
Total 2020
Acquisitions
9 years
9 years
3 years
(cid:3)
(cid:3)
20
69
9
9
111
44
262
(59)
203
Xerox 2020 Annual Report 97
Xerox 2020 Annual Report 9(cid:22)
Table of Contents
(cid:14)(cid:12)(cid:13)(cid:21) (cid:23)(cid:51)(cid:65)(cid:69)(cid:57)(cid:67)(cid:57)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Business acquisitions in 2019 totaled (cid:3)38 and included Rabbit Office Automation (ROA), a San Francisco Bay area
dealer, and Heritage Business Systems, Inc. (HBS), a Delaware (cid:49)alley dealer. The acquisition of these dealers in
2019 expanded our distribution capabilities of office technology sales, services and supplies to S(cid:40)B customers in
these mar(cid:65)ets. 2019 acquisitions also include (cid:3)4 related to an acquisition of assets.
(cid:14)(cid:12)(cid:13)(cid:21) (cid:41)(cid:69)(cid:61)(cid:61)(cid:49)(cid:66)(cid:73)
All of our 2019 acquisitions resulted in 100(cid:4) ownership of the acquired companies. The operating results of the
2019 acquisitions are not material to our financial statements and were included within our results from the
respective acquisition dates. The purchase prices for these acquisitions were all cash and were primarily allocated
to Intangible assets, net and (cid:34)oodwill. Our 2019 acquisitions contributed aggregate revenues of approximately (cid:3)21
and (cid:3)18 to our 2020 and 2019 total revenues from their respective acquisition dates.
(cid:14)(cid:12)(cid:13)(cid:20) (cid:23)(cid:51)(cid:65)(cid:69)(cid:57)(cid:67)(cid:57)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
There were no business acquisitions in 2018.
(cid:42)(cid:53)(cid:66)(cid:61)(cid:57)(cid:62)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:63)(cid:54) (cid:38)(cid:66)(cid:63)(cid:64)(cid:63)(cid:67)(cid:53)(cid:52) (cid:42)(cid:66)(cid:49)(cid:62)(cid:67)(cid:49)(cid:51)(cid:68)(cid:57)(cid:63)(cid:62) (cid:71)(cid:57)(cid:68)(cid:56) (cid:30)(cid:38) (cid:31)(cid:62)(cid:51)(cid:10)
In November 2019, Xerox Holdings commenced a proposed business combination transaction with H(cid:43) Inc. (H(cid:43)).
H(cid:43) re(cid:64)ected our initial and subsequent proposals and refused to engage in mutual due diligence or negotiations. In
(cid:37)anuary 2020, Xerox Holdings nominated a slate of directors to H(cid:43)(cid:85)s board to be voted on at H(cid:43)(cid:85)s 2020 annual
meeting of stoc(cid:65)holders and shortly thereafter, it launched a tender offer to acquire all outstanding shares of H(cid:43), as
it intended to continue to pursue the proposed business combination transaction. However, the CO(cid:49)ID-19 pandemic
and resulting macroeconomic and mar(cid:65)et turmoil created an environment that the Company determined was not
conducive to Xerox Holdings continuing an acquisition of H(cid:43). Accordingly, on (cid:40)arch 31, 2020 Xerox Holdings
withdrew its tender offer to acquire H(cid:43) and terminated its proxy solicitation to nominate a slate of candidates to H(cid:43)(cid:85)s
board of directors.
In 2020, Xerox Holdings had obtained (cid:3)24 billion in financing commitments from several ban(cid:65)s to support the cash
portion of the proposed business combination transaction with H(cid:43). On (cid:40)arch 31, 2020, following the withdrawal of
Xerox Holdings' tender offer to acquire H(cid:43), notice was provided to the ban(cid:65)s of the immediate termination of the
financing commitment. No termination penalties were paid as a result of termination.
(cid:36)(cid:63)(cid:68)(cid:53) (cid:18) (cid:75) (cid:26)(cid:57)(cid:70)(cid:53)(cid:67)(cid:68)(cid:57)(cid:68)(cid:69)(cid:66)(cid:53)(cid:67)
(cid:26)(cid:57)(cid:67)(cid:51)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:69)(cid:53)(cid:52) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
(cid:41)(cid:49)(cid:60)(cid:53)(cid:67) (cid:63)(cid:54) (cid:37)(cid:71)(cid:62)(cid:53)(cid:66)(cid:67)(cid:56)(cid:57)(cid:64) (cid:31)(cid:62)(cid:68)(cid:53)(cid:66)(cid:53)(cid:67)(cid:68)(cid:67) (cid:57)(cid:62) (cid:28)(cid:69)(cid:58)(cid:57) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:10)(cid:8) (cid:34)(cid:68)(cid:52)(cid:10) (cid:49)(cid:62)(cid:52) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:31)(cid:62)(cid:68)(cid:53)(cid:66)(cid:62)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:49)(cid:60) (cid:38)(cid:49)(cid:66)(cid:68)(cid:62)(cid:53)(cid:66)(cid:67)
In November 2019, Xerox Holdings completed a series of transactions to restructure its relationship with FU(cid:37)IFIL(cid:40)
Holdings Corporation (FH), including the sale of its indirect 25(cid:4) equity interest in Fu(cid:64)i Xerox (FX) for approximately
(cid:3)2.2 billion as well as the sale of its indirect 51(cid:4) partnership interest in Xerox International (cid:43)artners (XI(cid:43)) for
approximately (cid:3)23 (collectively the Sales).
As a result of the Sales and the related strategic shift in our business, the historical financial results of our equity
method investment in FX and our XI(cid:43) business (which was consolidated) for the periods prior to the Sales are
reflected as a discontinued operation and as such, their impact is excluded from continuing operations for all
periods presented.
The Sales resulted in a pre-tax gain of (cid:3)629 ((cid:3)539 after-tax), and included a reclassification from Accumulated other
comprehensive loss of (cid:3)165 (Refer to Note 25 - Other Comprehensive Income (Loss)) as well as approximately (cid:3)9
of transaction costs and (cid:3)9 of allocated goodwill associated with our XI(cid:43) business (Refer to Note 13 - (cid:34)oodwill and
Intangible Assets, Net). The XI(cid:43) allocated goodwill was based on the relative fair value of our XI(cid:43) business, as
evidenced by the sales price, as compared to the total estimated fair value of Xerox. No (cid:34)oodwill was allocated for
our investment in FX based on consideration of the guidance in ASC 350-20-40-2 and the fact that an equity
investment is not considered a business in accordance with ASC 805-10-55, as it was not controlled by Xerox.
The transactions with FH also included an OE(cid:40) license agreement by and between FX and Xerox, granting FX the
right to use specific Xerox Intellectual (cid:43)roperty (I(cid:43)) in providing certain named original equipment manufacturers
(OE(cid:40)(cid:85)s) with products (such as printer engines) in exchange for a one-time upfront license fee of (cid:3)(cid:22)(cid:22). The license
fee is recorded within Rental and other revenues for 2019. In addition, arrangements with FX whereby we purchase
98
Xerox 2020 Annual Report 98
Table of Contents
inventory from and sell inventory to FX, will continue after the Sales and, as a result of our Technology Agreement
with Fu(cid:64)i Xerox which remains in effect through (cid:40)arch 2021, we will continue to receive royalty payments for FX(cid:85)s
use of our Xerox brand trademar(cid:65), as well as rights to access our patent portfolio in exchange for access to their
patent portfolio.
Refer to Note 12 - Investment in Affiliates, at Equity, for additional information on transactions with FX as well as
FX's intention to terminate the Technology Agreement effective (cid:40)arch 31, 2021.
Summari(cid:80)ed financial information for our Discontinued Operations is as follows:
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:22)9 (cid:3)
168
(cid:40)(cid:53)(cid:70)(cid:53)(cid:62)(cid:69)(cid:53)
Income from operations
(cid:34)ain on disposal
(cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:50)(cid:53)(cid:54)(cid:63)(cid:66)(cid:53) (cid:57)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:68)(cid:49)(cid:72)(cid:53)(cid:67)
Income tax expense
(cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:54)(cid:66)(cid:63)(cid:61) (cid:52)(cid:57)(cid:67)(cid:51)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:69)(cid:53)(cid:52) (cid:63)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)(cid:8) (cid:62)(cid:53)(cid:68) (cid:63)(cid:54) (cid:68)(cid:49)(cid:72)
Income from discontinued operations attributable to noncontrolling
interests, net of tax
(cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:54)(cid:66)(cid:63)(cid:61) (cid:52)(cid:57)(cid:67)(cid:51)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:69)(cid:53)(cid:52) (cid:63)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)(cid:8) (cid:49)(cid:68)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:49)(cid:50)(cid:60)(cid:53) (cid:68)(cid:63) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72)(cid:8) (cid:62)(cid:53)(cid:68) (cid:63)(cid:54)
(cid:68)(cid:49)(cid:72)
(cid:3)
(cid:3)
(cid:84) (cid:3)
(cid:84) (cid:3)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
1(cid:22)6 (cid:3)
629
805
95
(cid:22)10
5
(cid:3)
(cid:84) (cid:3)
(cid:22)05 (cid:3)
The following is a summary of selected financial information for our Discontinued Operations:
Cost and Expenses:
Cost of revenues
Other expenses
Total Costs and Expenses
Selected amounts included in Costs and Expenses:
Depreciation and amorti(cid:80)ation
Restructuring and related costs, net
Other:
Equity in net income of FX
Net income attributable to noncontrolling interest - XI(cid:43)
Capital expenditures
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:84) (cid:3)
(cid:84)
(cid:84) (cid:3)
(cid:84) (cid:3)
(cid:84)
(cid:84) (cid:3)
(cid:84)
(cid:84)
44 (cid:3)
6
50 (cid:3)
(cid:84) (cid:3)
(cid:84)
14(cid:22) (cid:3)
5
(cid:84)
Refer to Note 12 - Investments in Affiliates, at Equity for additional information regarding FX, including summari(cid:80)ed
financial information of FX.
Xerox 2020 Annual Report 99
Xerox 2020 Annual Report 99
(cid:22)4
(cid:84)
(cid:22)4
10
64
9
55
110
9
119
(cid:84)
1
25
9
(cid:84)
Table of Contents
(cid:36)(cid:63)(cid:68)(cid:53) (cid:19) (cid:75) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:67) (cid:40)(cid:53)(cid:51)(cid:53)(cid:57)(cid:70)(cid:49)(cid:50)(cid:60)(cid:53)(cid:8) (cid:36)(cid:53)(cid:68)
Accounts receivable, net were as follows:
Invoiced
Accrued (1)
Allowance for doubtful accounts
(cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:67) (cid:66)(cid:53)(cid:51)(cid:53)(cid:57)(cid:70)(cid:49)(cid:50)(cid:60)(cid:53)(cid:8) (cid:62)(cid:53)(cid:68)
December 31,
2020
2019
(cid:3)
(cid:3)
(cid:22)35 (cid:3)
21(cid:22)
(69)
883 (cid:3)
980
311
(55)
1,236
____________
(1) (cid:25)ccrued receivables includes amounts to be invoiced in the subse(cid:67)uent (cid:67)uarter for current services provided.
The allowance for doubtful accounts was as follows:
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:20)
(cid:43)rovision
Charge-offs
Recoveries and other(1)
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:21)
(cid:43)rovision
Charge-offs
Recoveries and other(1)
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:14)(cid:12)
(cid:3)
(cid:3)
(cid:3)
56
18
(19)
(cid:84)
55
35
(22)
1
69
(cid:50)(cid:50)(cid:50)(cid:50)(cid:50)(cid:50)(cid:50)(cid:50)(cid:50)(cid:50)(cid:50)(cid:50)(cid:50)
(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.
(cid:50)e perform ongoing credit evaluations of our customers and ad(cid:64)ust credit limits based upon customer payment
history and current creditworthiness. Consistent with our adoption of ASU 2016-13 effective (cid:37)anuary 1, 2020 (refer
to Note 1 - Basis of (cid:43)resentation and Summary of Significant Accounting (cid:43)olicies), 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, and primarily as a result of the macroeconomic and mar(cid:65)et disruption caused by the CO(cid:49)ID-19
pandemic, the allowance for doubtful accounts as a percentage of gross receivables increased to (cid:22).2(cid:4) at
December 31, 2020 from 4.3(cid:4) at December 31, 2019.
(cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:67) (cid:40)(cid:53)(cid:51)(cid:53)(cid:57)(cid:70)(cid:49)(cid:50)(cid:60)(cid:53) (cid:41)(cid:49)(cid:60)(cid:53)(cid:67) (cid:23)(cid:66)(cid:66)(cid:49)(cid:62)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)
Accounts receivable sales arrangements are utili(cid:80)ed in the normal course of business as part of our cash and
liquidity management. The accounts receivable sold are generally short-term trade receivables with payment due
dates of less than 60 days. (cid:50)e have one facility in Europe that enables us to sell accounts receivable associated
with our distributor networ(cid:65) 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 bac(cid:65) or deferred by the
purchaser.
Of the accounts receivable sold and derecogni(cid:80)ed from our balance sheet, (cid:3)136 and (cid:3)165 remained uncollected as
of December 31, 2020 and 2019, respectively. Accounts receivable sales activity was as follows:
Accounts receivable sales(1)
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:3)
333 (cid:3)
393 (cid:3)
405
_____________
(1) (cid:36)osses on sales were not material. (cid:27)ustomers may also enter into structured-payable arrangements that re(cid:67)uire us to sell our receivables
from that customer to a third-party financial institution, which then ma(cid:61)es payments to us to settle the customer(cid:6)s receivable. In these
instances, we ensure the sale of the receivables are ban(cid:61)ruptcy-remote and the payment made to us is without recourse. The activity
associated with these arrangements is not reflected in this disclosure, as payments under these arrangements have not been material and
these are customer directed arrangements.
100
Xerox 2020 Annual Report 100
Table of Contents
(cid:36)(cid:63)(cid:68)(cid:53) (cid:20) (cid:75) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:53) (cid:40)(cid:53)(cid:51)(cid:53)(cid:57)(cid:70)(cid:49)(cid:50)(cid:60)(cid:53)(cid:67)(cid:8) (cid:36)(cid:53)(cid:68)
Finance receivables include sales-type leases and installment loans arising from the mar(cid:65)eting of our equipment.
These receivables are typically collaterali(cid:80)ed by a security interest in the underlying equipment.
Finance receivables, net were as follows:
(cid:34)ross receivables
Unearned income
Subtotal
Residual values
Allowance for doubtful accounts
(cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:53) (cid:40)(cid:53)(cid:51)(cid:53)(cid:57)(cid:70)(cid:49)(cid:50)(cid:60)(cid:53)(cid:67)(cid:8) (cid:36)(cid:53)(cid:68)
Less: Billed portion of finance receivables, net
Less: Current portion of finance receivables not billed, net
(cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:53) (cid:40)(cid:53)(cid:51)(cid:53)(cid:57)(cid:70)(cid:49)(cid:50)(cid:60)(cid:53)(cid:67) (cid:26)(cid:69)(cid:53) (cid:23)(cid:54)(cid:68)(cid:53)(cid:66) (cid:37)(cid:62)(cid:53) (cid:47)(cid:53)(cid:49)(cid:66)(cid:8) (cid:36)(cid:53)(cid:68)
December 31,
2020
2019
(cid:3)
3,691 (cid:3)
(393)
3,298
(cid:84)
(133)
3,165
99
1,082
(cid:3)
1,984 (cid:3)
3,865
(425)
3,440
(cid:84)
(89)
3,351
111
1,158
2,082
A summary of our gross finance receivables' future contractual maturities, including those previously billed, is as
follows:
12 (cid:40)onths
24 (cid:40)onths
36 (cid:40)onths
48 (cid:40)onths
60 (cid:40)onths
Thereafter
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
December 31,
2020
2019
(cid:3)
1,426 (cid:3)
1,006
69(cid:22)
395
152
15
1,490
1,052
(cid:22)28
422
158
15
(cid:3)
3,691 (cid:3)
3,865
(cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:53) (cid:40)(cid:53)(cid:51)(cid:53)(cid:57)(cid:70)(cid:49)(cid:50)(cid:60)(cid:53)(cid:67) (cid:9) (cid:23)(cid:60)(cid:60)(cid:63)(cid:71)(cid:49)(cid:62)(cid:51)(cid:53) (cid:54)(cid:63)(cid:66) (cid:25)(cid:66)(cid:53)(cid:52)(cid:57)(cid:68) (cid:34)(cid:63)(cid:67)(cid:67)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:25)(cid:66)(cid:53)(cid:52)(cid:57)(cid:68) (cid:39)(cid:69)(cid:49)(cid:60)(cid:57)(cid:68)(cid:73)
Our finance receivable portfolios are primarily in the U.S., Canada and E(cid:40)EA. (cid:50)e 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 ad(cid:64)ust that limit accordingly based upon
ongoing credit assessments of the customer, including payment history and changes in credit quality.
Consistent with our adoption of ASU 2016-13 effective (cid:37)anuary 1, 2020 (refer to Note 1 - Basis of (cid:43)resentation and
Summary of Significant Accounting (cid:43)olicies), the allowance for credit losses is determined principally 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. Based on that assessment, and primarily as a
result of the macroeconomic and mar(cid:65)et turmoil caused by the CO(cid:49)ID-19 pandemic, the allowance for doubtful
credit losses was increased to 4.0(cid:4) of gross finance receivables (net of unearned income) at December 31, 2020
from 2.6(cid:4) at December 31, 2019. In determining the level of reserve required as of December 31, 2020, we
critically assessed current and forecasted economic conditions in light of the CO(cid:49)ID-19 pandemic to ensure we
ob(cid:64)ectively included those expected impacts in the determination of our reserve. Our assessment also included
current portfolio credit metrics and the level of reserves and write-offs we recorded on our receivables portfolio
during the credit crisis in 2008(cid:14)09 as additional reference points to ob(cid:64)ectively determine the adequacy of our
allowance.
The allowance for doubtful accounts and provision for credit losses represents an estimate of the losses expected to
be incurred by the Company from its finance receivable portfolio. The level of the allowance is determined on a
collective basis by applying pro(cid:64)ected 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 pro(cid:64)ected loss rates are primarily based upon historical loss experience ad(cid:64)usted for (cid:64)udgments
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 doubtful 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. (cid:50)e consider all available
Xerox 2020 Annual Report 101
Xerox 2020 Annual Report 101
Table of Contents
information in our quarterly assessments of the adequacy of the allowance for doubtful accounts. (cid:50)e believe our
estimates, including any qualitative ad(cid:64)ustments, 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. Our policy and methodology used to establish our allowance for doubtful
accounts has been consistently applied over all periods presented, with the exception of the updates required as
part of our adoption of ASU 2016-13 effective (cid:37)anuary 1, 2020.
Our allowance for doubtful finance receivables is effectively determined by geography, so the ris(cid:65) characteristics in
our finance receivable portfolio segments will generally be consistent with the ris(cid:65) factors associated with the
economies of the countries(cid:14)regions included in those geographies. Since E(cid:40)EA is comprised of various countries
and regional economies, the ris(cid:65) profile within that portfolio segment is somewhat more diversified due to the
varying economic conditions among and within the countries.
The increase in charge-offs in 2020 as compared to 2019 was primarily in the U.S. and reflected the impacts from
the CO(cid:49)ID-19 pandemic and the lower level of government subsidy and support to U.S. based customers as
compared to support provided to Europe based customers. However, as reflected in our allowance for doubtful
receivables, charge-offs are expected to increase into 2021 as a result of the follow-on economic disruption related
to the CO(cid:49)ID-19 pandemic and as the level of government subsidies and support decreases in 2021.
Amounts disclosed below for the year ended December 31, 2020 reflect the adoption of ASU 2016-13 in (cid:37)anuary
2020. Amounts disclosed below for comparable periods in 2019 reflect superseded guidance. The allowance for
doubtful accounts as well as the related investment in finance receivables were as follows:
(cid:23)(cid:60)(cid:60)(cid:63)(cid:71)(cid:49)(cid:62)(cid:51)(cid:53) (cid:54)(cid:63)(cid:66) (cid:25)(cid:66)(cid:53)(cid:52)(cid:57)(cid:68) (cid:34)(cid:63)(cid:67)(cid:67)(cid:53)(cid:67)(cid:22)
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:20)
(cid:43)rovision
Charge-offs
Recoveries and other(3)
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:21)
(cid:43)rovision
Charge-offs
Recoveries and other(3)
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:14)(cid:12)
(cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:53) (cid:40)(cid:53)(cid:51)(cid:53)(cid:57)(cid:70)(cid:49)(cid:50)(cid:60)(cid:53)(cid:67) (cid:25)(cid:63)(cid:60)(cid:60)(cid:53)(cid:51)(cid:68)(cid:57)(cid:70)(cid:53)(cid:60)(cid:73) (cid:27)(cid:70)(cid:49)(cid:60)(cid:69)(cid:49)(cid:68)(cid:53)(cid:52) (cid:54)(cid:63)(cid:66) (cid:31)(cid:61)(cid:64)(cid:49)(cid:57)(cid:66)(cid:61)(cid:53)(cid:62)(cid:68)(cid:22)
December 31, 2019(4)
December 31, 2020(4)
United States
Canada(1)
Europe(1)(2)
Total
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
53 (cid:3)
12 (cid:3)
2(cid:22) (cid:3)
20
(15)
1
1
(5)
2
(cid:22)
(14)
(cid:84)
59 (cid:3)
10 (cid:3)
20 (cid:3)
41
(23)
(cid:84)
8
(5)
2
32
(14)
3
(cid:22)(cid:22) (cid:3)
15 (cid:3)
41 (cid:3)
92
28
(34)
3
89
81
(42)
5
133
1,922 (cid:3)
1,823 (cid:3)
326 (cid:3)
29(cid:22) (cid:3)
1,192 (cid:3)
1,1(cid:22)8 (cid:3)
3,440
3,298
(cid:1)_____________
(1) (cid:40)rior year amounts have been recast to include the Other geographic region, which was previously disclosed as a separate grouping,
(2)
((cid:16))
conforming to the current year(cid:6)s presentation(cid:2)
Includes developing mar(cid:61)et countries.
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.
((cid:17)) Total (cid:30)inance receivables exclude the allowance for credit losses of (cid:3)1(cid:16)(cid:16) and (cid:3)(cid:21)(cid:22) at December (cid:16)1, 2(cid:13)2(cid:13) and 2(cid:13)1(cid:22), 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 customers through bundled lease
arrangements, and indirect, which includes lease financing to end-user customers who purchased equipment we
sold to distributors or resellers. Indirect also includes leases originated through our XBS sales channel, which
utili(cid:80)es a combination of internal and third party leasing in its lease arrangements with end customers.
(cid:50)e evaluate our customers within the various classes based on the following credit quality indicators:
(cid:77)
(cid:34)(cid:63)(cid:71) (cid:25)(cid:66)(cid:53)(cid:52)(cid:57)(cid:68) (cid:40)(cid:57)(cid:67)(cid:59)(cid:22) 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. The rating generally equates to a Standard (cid:5) (cid:43)oor's (S(cid:5)(cid:43))
rating of BBB- or better. Loss rates in this category in the normal course are generally less than 1(cid:4).
102
Xerox 2020 Annual Report 102
Table of Contents
(cid:77)
(cid:77)
(cid:23)(cid:70)(cid:53)(cid:66)(cid:49)(cid:55)(cid:53) (cid:25)(cid:66)(cid:53)(cid:52)(cid:57)(cid:68) (cid:40)(cid:57)(cid:67)(cid:59)(cid:22) This rating includes accounts with average credit ris(cid:65) that are more susceptible to loss in
the event of adverse business or economic conditions. This rating generally equates to a BB S(cid:5)(cid:43) rating.
Although we experience higher loss rates associated with this customer class, we believe the ris(cid:65) 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(cid:4) to 5(cid:4).
(cid:30)(cid:57)(cid:55)(cid:56) (cid:25)(cid:66)(cid:53)(cid:52)(cid:57)(cid:68) (cid:40)(cid:57)(cid:67)(cid:59)(cid:22) This rating includes accounts that have marginal credit ris(cid:65) such that the customer(cid:85)s ability to
ma(cid:65)e repayment is impaired or may li(cid:65)ely become impaired. (cid:50)e use numerous strategies to mitigate ris(cid:65)
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 ris(cid:65) 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 (cid:22)(cid:4) to 10(cid:4).
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.
Details about our finance receivables portfolio based on geography, origination year and credit quality indicators are
as follows:
December 31, 2020
2020
2019
2018
201(cid:22)
2016
(cid:43)rior
December 31,
2019
Total
Finance
Receivables
Total
Finance
Receivables
(cid:3)
164 (cid:3)
151 (cid:3)
128 (cid:3)
(cid:22)1 (cid:3)
32 (cid:3)
4 (cid:3)
550 (cid:3)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:43)(cid:62)(cid:57)(cid:68)(cid:53)(cid:52) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:67) (cid:6)(cid:26)(cid:57)(cid:66)(cid:53)(cid:51)(cid:68)(cid:7)(cid:22)
Low Credit Ris(cid:65)
Average Credit Ris(cid:65)
High Credit Ris(cid:65)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:43)(cid:62)(cid:57)(cid:68)(cid:53)(cid:52) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:67) (cid:6)(cid:31)(cid:62)(cid:52)(cid:57)(cid:66)(cid:53)(cid:51)(cid:68)(cid:7)(cid:22)
Low Credit Ris(cid:65)
Average Credit Ris(cid:65)
High Credit Ris(cid:65)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
(cid:25)(cid:49)(cid:62)(cid:49)(cid:52)(cid:49)(cid:6)(cid:13)(cid:7)
Low Credit Ris(cid:65)
Average Credit Ris(cid:65)
High Credit Ris(cid:65)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
(cid:27)(cid:35)(cid:27)(cid:23)(cid:6)(cid:13)(cid:7)(cid:6)(cid:14)(cid:7)
Low Credit Ris(cid:65)
Average Credit Ris(cid:65)
High Credit Ris(cid:65)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:53) (cid:40)(cid:53)(cid:51)(cid:53)(cid:57)(cid:70)(cid:49)(cid:50)(cid:60)(cid:53)(cid:67)
Low Credit Ris(cid:65)
Average Credit Ris(cid:65)
High Credit Ris(cid:65)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
_____________
54
90
308
193
129
19
341
3(cid:22)
46
18
101
19(cid:22)
1(cid:22)0
23
390
591
399
150
95
42
288
140
124
9
2(cid:22)3
34
39
10
83
1(cid:22)(cid:22)
160
24
361
502
418
85
52
2(cid:22)
20(cid:22)
(cid:22)9
(cid:22)1
9
159
24
26
10
60
131
108
15
254
362
25(cid:22)
61
26
13
110
33
31
3
6(cid:22)
10
1(cid:22)
10
3(cid:22)
62
51
10
123
1(cid:22)6
125
36
8
5
45
(cid:22)
8
1
16
5
6
3
14
20
1(cid:22)
4
41
64
39
13
2
3
9
(cid:84)
(cid:84)
(cid:84)
(cid:84)
1
1
(cid:84)
2
4
4
1
9
9
(cid:22)
4
23(cid:22)
180
96(cid:22)
452
363
41
856
111
135
51
29(cid:22)
591
510
(cid:22)(cid:22)
1,1(cid:22)8
1,(cid:22)04
1,245
349
640
331
132
1,103
258
445
116
819
163
9(cid:22)
66
326
655
4(cid:22)9
58
1,192
1,(cid:22)16
1,352
3(cid:22)2
3,440
(cid:3)
1,140 (cid:3)
1,005 (cid:3)
680 (cid:3)
33(cid:22) (cid:3)
116 (cid:3)
20 (cid:3)
3,298 (cid:3)
(1) (cid:40)rior year amounts have been recast to include the Other geographic region, which was previously disclosed as a separate grouping,
conforming to the current year(cid:6)s presentation.
Includes developing mar(cid:61)et countries.
(2)
Xerox 2020 Annual Report 103
Xerox 2020 Annual Report 103
Table of Contents
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.
(cid:50)e 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 recogni(cid:80)ed if
collectability is deemed reasonably assured.
The aging of our billed finance receivables is as follows:
December 31, 2020
Current
31-90
Days
(cid:43)ast Due
(cid:27)90 Days
(cid:43)ast Due
Total Billed
Unbilled
Total
Finance
Receivables
(cid:27)90 Days
and
Accruing
(cid:3)
33 (cid:3)
6 (cid:3)
9 (cid:3)
48 (cid:3)
919 (cid:3)
96(cid:22) (cid:3)
21
54
8
12
4
10
2
3
3
12
(cid:84)
2
28
(cid:22)6
10
1(cid:22)
828
1,(cid:22)4(cid:22)
28(cid:22)
1,161
856
1,823
29(cid:22)
1,1(cid:22)8
(cid:22)4
(cid:84)
(cid:22)4
12
23
(cid:3)
(cid:22)4 (cid:3)
15 (cid:3)
14 (cid:3)
103 (cid:3)
3,195 (cid:3)
3,298 (cid:3)
109
December 31, 2019
Current
31-90
Days
(cid:43)ast Due
(cid:27)90 Days
(cid:43)ast Due
Total Billed
Unbilled
Total
Finance
Receivables
(cid:27)90 Days
and
Accruing
(cid:3)
3(cid:22) (cid:3)
11 (cid:3)
8 (cid:3)
56 (cid:3)
1,04(cid:22) (cid:3)
1,103 (cid:3)
25
62
8
12
5
16
2
1
3
11
1
2
33
89
11
15
(cid:22)86
1,833
315
1,1(cid:22)(cid:22)
819
1,922
326
1,192
5(cid:22)
(cid:84)
5(cid:22)
1(cid:22)
32
(cid:3)
82 (cid:3)
19 (cid:3)
14 (cid:3)
115 (cid:3)
3,325 (cid:3)
3,440 (cid:3)
106
Direct
Indirect
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:43)(cid:62)(cid:57)(cid:68)(cid:53)(cid:52) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:67)
Canada
E(cid:40)EA (1)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
Direct
Indirect
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:43)(cid:62)(cid:57)(cid:68)(cid:53)(cid:52) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:67)
Canada(1)
E(cid:40)EA(1)(2)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
_____________
(1) (cid:40)rior year amounts have been recasted to include the Other geographic region, which was previously disclosed as a separate grouping,
conforming to the current year(cid:6)s presentation
Includes developing mar(cid:61)et countries..
(2)
(cid:41)(cid:53)(cid:51)(cid:69)(cid:66)(cid:53)(cid:52) (cid:24)(cid:63)(cid:66)(cid:66)(cid:63)(cid:71)(cid:57)(cid:62)(cid:55)(cid:67) (cid:49)(cid:62)(cid:52) (cid:25)(cid:63)(cid:60)(cid:60)(cid:49)(cid:68)(cid:53)(cid:66)(cid:49)(cid:60)
In (cid:37)uly 2020, we sold (cid:3)355 of U.S. based finance receivables to a consolidated special purpose entity (S(cid:43)E), which
funded the purchase through a secured loan agreement with a financial institution. As of December 31, 2020 the
S(cid:43)E held (cid:3)286 of total Finance receivables, net, which are included in our Consolidated Balance Sheet as collateral
for the secured loan agreement.
In December 2020, we sold (cid:3)610 of U.S. based finance receivables to a consolidated S(cid:43)E, which funded the
purchase through a secured loan agreement with a financial institution. As of December 31, 2020 the S(cid:43)E held
(cid:3)602 of total Finance receivables, net, which are included in our Consolidated Balance Sheet as collateral for the
secured loan agreement.
Refer to Note 16 - Debt, for additional information related to these arrangements including the related secured loan
agreement.
104
Xerox 2020 Annual Report 104
Table of Contents
(cid:36)(cid:63)(cid:68)(cid:53) (cid:21) (cid:75) (cid:31)(cid:62)(cid:70)(cid:53)(cid:62)(cid:68)(cid:63)(cid:66)(cid:57)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:27)(cid:65)(cid:69)(cid:57)(cid:64)(cid:61)(cid:53)(cid:62)(cid:68) (cid:63)(cid:62) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:62)(cid:55) (cid:34)(cid:53)(cid:49)(cid:67)(cid:53)(cid:67)(cid:8) (cid:36)(cid:53)(cid:68)
The following is a summary of Inventories by ma(cid:64)or category:
Finished goods
(cid:50)or(cid:65)-in-process
Raw materials
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:31)(cid:62)(cid:70)(cid:53)(cid:62)(cid:68)(cid:63)(cid:66)(cid:57)(cid:53)(cid:67)
December 31,
2020
2019
(cid:3)
(cid:3)
(cid:22)0(cid:22) (cid:3)
43
93
843 (cid:3)
5(cid:22)6
4(cid:22)
(cid:22)1
694
The transfer of equipment from our inventories to equipment sub(cid:64)ect to an operating lease is presented in our
Consolidated Statements of Cash Flows in the operating activities section. Equipment on operating leases and
similar arrangements consists of our equipment rented to customers and depreciated to estimated salvage value at
the end of the lease term.
Equipment on operating leases and the related accumulated depreciation were as follows:
Equipment on operating leases
Accumulated depreciation
(cid:27)(cid:65)(cid:69)(cid:57)(cid:64)(cid:61)(cid:53)(cid:62)(cid:68) (cid:63)(cid:62) (cid:63)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:62)(cid:55) (cid:60)(cid:53)(cid:49)(cid:67)(cid:53)(cid:67)(cid:8) (cid:62)(cid:53)(cid:68)
December 31,
2020
2019
(cid:3)
(cid:3)
1,3(cid:22)6 (cid:3)
(1,080)
296 (cid:3)
1,443
(1,0(cid:22)9)
364
Depreciable lives generally vary from three to five years consistent with our planned and historical usage of the
equipment sub(cid:64)ect to operating leases. Estimated minimum future revenues associated with Equipment on
operating leases are as follows:
12 months
24 months
36 months
48 months
60 months
Thereafter
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
December 31,
2020
2019
(cid:3)
215 (cid:3)
129
(cid:22)4
32
12
1
(cid:3)
463 (cid:3)
226
139
84
39
12
2
502
Total contingent rentals on operating leases, consisting principally of usage charges in excess of minimum
contracted amounts, for the years ended December 31, 2020, 2019 and 2018 amounted to (cid:3)66, (cid:3)10(cid:22) and (cid:3)120,
respectively. The decrease in contingent rentals for the year ended December 31, 2020 is primarily the result of
lower equipment usage during 2020 as a result of business closures from the CO(cid:49)ID-19 pandemic. The amount
disclosed for the year ended December 31, 2018 was accounted for under ASC 840, Leases, which was
superseded by ASC 842, Leases, adopted on (cid:37)anuary 1, 2019. Differences upon adoption were not material. Refer
to Note 1 - Basis of (cid:43)resentation and Summary of Significant Accounting (cid:43)olicies, Recent Accounting
(cid:43)ronouncements for additional information.
(cid:41)(cid:53)(cid:51)(cid:69)(cid:66)(cid:53)(cid:52) (cid:24)(cid:63)(cid:66)(cid:66)(cid:63)(cid:71)(cid:57)(cid:62)(cid:55)(cid:67) (cid:49)(cid:62)(cid:52) (cid:25)(cid:63)(cid:60)(cid:60)(cid:49)(cid:68)(cid:53)(cid:66)(cid:49)(cid:60)
In (cid:37)uly 2020, we sold the rights to payments under operating leases with an equipment net boo(cid:65) value of (cid:3)10 to a
consolidated S(cid:43)E, which funded the purchase through a secured loan agreement with a financial institution. As of
December 31, 2020 the S(cid:43)E holds (cid:3)8 of Equipment on operating leases, net, which are included in our
Consolidated Balance Sheet as collateral for the secured loan agreement.
Refer to Note 16 - Debt, for additional information related to this arrangement including the related secured loan
agreement.
Xerox 2020 Annual Report 105
Xerox 2020 Annual Report 105
Table of Contents
(cid:36)(cid:63)(cid:68)(cid:53) (cid:13)(cid:12) (cid:9) (cid:34)(cid:49)(cid:62)(cid:52)(cid:8) (cid:24)(cid:69)(cid:57)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67)(cid:8) (cid:27)(cid:65)(cid:69)(cid:57)(cid:64)(cid:61)(cid:53)(cid:62)(cid:68) (cid:49)(cid:62)(cid:52) (cid:41)(cid:63)(cid:54)(cid:68)(cid:71)(cid:49)(cid:66)(cid:53)(cid:8) (cid:36)(cid:53)(cid:68)
Land, buildings and equipment, net were as follows:
Land
Building and building equipment
Leasehold improvements
(cid:43)lant machinery
Office furniture and equipment
Other
Construction in progress
Subtotal
Accumulated depreciation
December 31,
Estimated
Useful Lives ((cid:52)ears)
2020
2019
(cid:3)
13 (cid:3)
25 to 50
(cid:49)aries
5 to 12
3 to 15
4 to 20
814
124
1,149
4(cid:22)6
45
1(cid:22)
2,638
(2,231)
(cid:34)(cid:49)(cid:62)(cid:52)(cid:8) (cid:50)(cid:69)(cid:57)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:49)(cid:62)(cid:52) (cid:53)(cid:65)(cid:69)(cid:57)(cid:64)(cid:61)(cid:53)(cid:62)(cid:68)(cid:8) (cid:62)(cid:53)(cid:68)
(cid:3)
40(cid:22) (cid:3)
12
(cid:22)94
135
1,124
565
45
23
2,698
(2,2(cid:22)2)
426
Depreciation expense was (cid:3)8(cid:22), (cid:3)101 and (cid:3)148 for the three years ended December 31, 2020, 2019 and 2018,
respectively.
(cid:50)e lease buildings and equipment, substantially all of which are accounted for as operating leases. Finance leased
assets were (cid:3)10 and (cid:3)(cid:22) at December 31, 2020 and 2019, respectively. Refer to Note 11 - Lessee for additional
information regarding leased assets.
(cid:31)(cid:62)(cid:68)(cid:53)(cid:66)(cid:62)(cid:49)(cid:60) (cid:43)(cid:67)(cid:53) (cid:41)(cid:63)(cid:54)(cid:68)(cid:71)(cid:49)(cid:66)(cid:53)
As of December 31, 2020 and 2019, capitali(cid:80)ed costs related to internal use software, net of accumulated
amorti(cid:80)ation, were (cid:3)118 and (cid:3)122, respectively. Useful lives of our internal use software generally vary from three to
seven years.
106
Xerox 2020 Annual Report 106
Table of Contents
(cid:36)(cid:63)(cid:68)(cid:53) (cid:13)(cid:13) (cid:75) (cid:34)(cid:53)(cid:67)(cid:67)(cid:53)(cid:53)
Refer to Note 1 - Basis of (cid:43)resentation and Summary of Significant Accounting (cid:43)olicies - New Accounting
Standards and Accounting Changes for additional information related to the adoption of (cid:23)(cid:41)(cid:43) (cid:14)(cid:12)(cid:13)(cid:18)(cid:9)(cid:12)(cid:14), (cid:36)eases ((cid:25)(cid:43)(cid:27)
Topic (cid:21)(cid:17)2).
(cid:34)(cid:53)(cid:67)(cid:67)(cid:53)(cid:53) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55) (cid:38)(cid:63)(cid:60)(cid:57)(cid:51)(cid:57)(cid:53)(cid:67)(cid:22)
(cid:50)e determine at inception whether an arrangement is a lease. Our leases do not include assets of a speciali(cid:80)ed
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 or finance leases are: (i) a review of the lease term to
determine if it is equal to or greater than (cid:22)5(cid:4) of the economic life of the asset, and (ii) a review of the present value
of the minimum lease payments to determine if they are equal to or greater than 90(cid:4) of the fair mar(cid:65)et 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 ma(cid:65)e lease payments arising from the lease. (cid:50)e 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 recogni(cid:80)ed 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 collaterali(cid:80)ed 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. (cid:50)e generally consider the economic life of our operating lease ROU assets to be comparable to the
useful life of similar owned assets. (cid:50)e 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 recogni(cid:80)ed on a straight-line basis over the lease term. (cid:50)e have lease agreements with lease
and non-lease components. These components are accounted for separately for vehicle and equipment leases. (cid:50)e
account for the lease and non-lease components as a single lease component for real estate leases of offices and
warehouses.
(cid:50)e review the impairment of our ROU assets consistent with the approach applied for our other long-lived assets.
(cid:50)e 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. (cid:50)e 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.
(cid:34)(cid:53)(cid:67)(cid:67)(cid:53)(cid:53) (cid:41)(cid:69)(cid:61)(cid:61)(cid:49)(cid:66)(cid:73)(cid:22)
(cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:62)(cid:55) (cid:34)(cid:53)(cid:49)(cid:67)(cid:53)(cid:67)
(cid:50)e 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 twelve years and a variety of renewal and(cid:14)or termination options.
Xerox 2020 Annual Report 107
Xerox 2020 Annual Report 10(cid:22)
Table of Contents
The components of lease expense are as follows:
Operating lease expense
Short-term lease expense
(cid:49)ariable lease expense(1)
Sublease income
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:34)(cid:53)(cid:49)(cid:67)(cid:53) (cid:53)(cid:72)(cid:64)(cid:53)(cid:62)(cid:67)(cid:53)
(cid:52)ear Ended December 31,
2020
2019
(cid:3)
(cid:3)
113 (cid:3)
20
4(cid:22)
(2)
1(cid:22)8 (cid:3)
125
21
48
(1)
193
_____________
(1) (cid:46)ariable 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, 2020, we had no additional operating leases that had not yet commenced.
Operating leases ROU assets, net and operating lease liabilities were reported in the Consolidated Balance Sheets
as follows:
Other long-term assets
Accrued expenses and other current liabilities
Other long-term liabilities
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:62)(cid:55) (cid:60)(cid:53)(cid:49)(cid:67)(cid:53) (cid:60)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
Supplemental information related to operating leases is as follows:
Cash paid for amounts included in the measurement of lease liabilities - Operating cash flows
Right-of-use assets obtained in exchange for new lease liabilities (1)
(cid:50)eighted-average remaining lease term
(cid:50)eighted-average discount rate
(cid:3)
(cid:3)
(cid:3)
(cid:3)
December 31,
2020
2019
310 (cid:3)
83 (cid:3)
250
333 (cid:3)
319
8(cid:22)
260
34(cid:22)
(cid:52)ear Ended December 31,
2020
2019
(cid:3)
119
(cid:22)6
5 years
5.03 (cid:4)
126
(cid:22)5
4 years
5.4(cid:22) (cid:4)
_____________
(1)
Includes the impact of new leases as well as remeasurements and modifications to existing leases.
(cid:40)aturities and additional information related to operating lease liabilities are as follows:
12 months
24 months
36 months
48 months
60 months
Thereafter
Total Lease payments
Less: Imputed interest
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:62)(cid:55) (cid:60)(cid:53)(cid:49)(cid:67)(cid:53) (cid:60)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
(cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:53) (cid:34)(cid:53)(cid:49)(cid:67)(cid:53)(cid:67)
December 31,
2020
2019
(cid:3)
104 (cid:3)
88
68
3(cid:22)
25
52
3(cid:22)4
41
(cid:3)
333 (cid:3)
109
8(cid:22)
(cid:22)3
56
24
45
394
4(cid:22)
34(cid:22)
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 varying maturities up to six years with a maximum
expiration date through December 2026. As of December 31, 2020 and 2019, the remaining lease obligation for all
finance leases is (cid:3)9 and (cid:3)(cid:22), respectively, based on discount rates of 4.34(cid:4) and 4.0(cid:22)(cid:4), respectively. The ROU
asset balances associated with these finance leases at December 31, 2020 and 2019 of (cid:3)10 and (cid:3)(cid:22), respectively
are included in Land, buildings and equipment, net in the Consolidated Balance Sheets.
(cid:38)(cid:66)(cid:57)(cid:63)(cid:66) (cid:38)(cid:53)(cid:66)(cid:57)(cid:63)(cid:52) (cid:26)(cid:57)(cid:67)(cid:51)(cid:60)(cid:63)(cid:67)(cid:69)(cid:66)(cid:53)(cid:67) (cid:69)(cid:62)(cid:52)(cid:53)(cid:66) (cid:23)(cid:41)(cid:25) (cid:20)(cid:16)(cid:12)
For the year ended December 31, 2018, operating lease expense, net of sublease income, was (cid:3)14(cid:22).
108
Xerox 2020 Annual Report 108
Table of Contents
(cid:36)(cid:63)(cid:68)(cid:53) (cid:13)(cid:14) (cid:75) (cid:31)(cid:62)(cid:70)(cid:53)(cid:67)(cid:68)(cid:61)(cid:53)(cid:62)(cid:68) (cid:57)(cid:62) (cid:23)(cid:54)(cid:54)(cid:57)(cid:60)(cid:57)(cid:49)(cid:68)(cid:53)(cid:67)(cid:8) (cid:49)(cid:68) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73)
As disclosed in Note 6 - Divestitures, in November 2019 Xerox Holdings sold its remaining indirect 25(cid:4) equity
interest in Fu(cid:64)i Xerox, which had been previously accounted for as an equity method investment. Accordingly, our
remaining Investment in Affiliates, at Equity largely consists of several minor investments in entities in the (cid:40)iddle
East region. Investments in corporate (cid:64)oint ventures and other companies in which we generally have a 20(cid:4) to 50(cid:4)
ownership interest were (cid:3)4(cid:22) and (cid:3)46 at December 31, 2020 and 2019, respectively
Our equity in net income of our unconsolidated affiliates was as follows:
Fu(cid:64)i Xerox(1)
Other
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73) (cid:57)(cid:62) (cid:62)(cid:53)(cid:68) (cid:57)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:63)(cid:54) (cid:69)(cid:62)(cid:51)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:49)(cid:54)(cid:54)(cid:57)(cid:60)(cid:57)(cid:49)(cid:68)(cid:53)(cid:67)
_____________
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:3)
(cid:3)
(cid:84) (cid:3)
4
4 (cid:3)
14(cid:22) (cid:3)
8
155 (cid:3)
25
8
33
(1) (cid:29)(cid:67)uity in net income for (cid:30)uji (cid:48)erox is reported in Income from discontinued operations, net of tax for 2(cid:13)1(cid:22) and 2(cid:13)1(cid:21). The e(cid:67)uity in net
income for (cid:30)uji (cid:48)erox in 2(cid:13)1(cid:22) is through the date of sale.
(cid:28)(cid:69)(cid:58)(cid:57) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72)
Fu(cid:64)i Xerox is headquartered in To(cid:65)yo and operates in (cid:37)apan, China, Australia, New (cid:53)ealand, (cid:49)ietnam and other
areas of the (cid:43)acific Rim. Equity in net income of Fu(cid:64)i Xerox was affected by certain ad(cid:64)ustments to reflect the
deferral of profit associated with intercompany sales. These ad(cid:64)ustments resulted in recorded equity income that
may have been different from that implied by our (former) 25(cid:4) ownership interest. In addition, the Equity in net
income of Fu(cid:64)i Xerox for the years ended December 31, 2019 and 2018, includes after-tax restructuring and other
charges of (cid:3)20 and (cid:3)95, respectively.
(cid:50)e also received dividends from Fu(cid:64)i Xerox for the years ended December 31, 2019 and 2018, which were reflected
as a reduction in our investment upon receipt, of (cid:3)69 and (cid:3)23, respectively.
Summari(cid:80)ed financial information for Fu(cid:64)i Xerox is as follows:
Through Date
of Sale
(cid:52)ear Ended
December 31, 2018
(cid:41)(cid:69)(cid:61)(cid:61)(cid:49)(cid:66)(cid:73) (cid:63)(cid:54) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Revenues
Costs and expenses
Income before income taxes
Income tax expense
(cid:36)(cid:53)(cid:68) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
Less: Net income - noncontrolling interests
(cid:36)(cid:53)(cid:68) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:9) (cid:28)(cid:69)(cid:58)(cid:57) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72)
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:41)(cid:56)(cid:53)(cid:53)(cid:68)
Assets
Current assets
Long-term assets
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
Liabilities and Equity
Short-term debt
Other current liabilities
Long-term debt
Other long-term liabilities
Noncontrolling interests
Fu(cid:64)i Xerox shareholders' equity
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:22),66(cid:22) (cid:3)
6,814
853
258
595
3
592 (cid:3)
9,161
8,880
281
160
121
2
119
At Date of Sale
December 31, 2018
4,8(cid:22)6 (cid:3)
3,964
8,840 (cid:3)
49 (cid:3)
1,932
16
514
18
6,311
8,840 (cid:3)
4,1(cid:22)9
4,034
8,213
130
1,82(cid:22)
24
395
30
5,80(cid:22)
8,213
Xerox 2020 Annual Report 109
Xerox 2020 Annual Report 109
Table of Contents
(cid:52)en(cid:14)U.S. Dollar exchange rates used to translate are as follows:
Financial Statement
Summary of Operations
Balance Sheet
(cid:42)(cid:66)(cid:49)(cid:62)(cid:67)(cid:49)(cid:51)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67) (cid:71)(cid:57)(cid:68)(cid:56) (cid:28)(cid:69)(cid:58)(cid:57) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72)
Exchange Basis
(cid:50)eighted average rate
(cid:52)ear-end rate
2019
2018
109.03
108.83
110.28
110.26
(cid:50)e have a Technology Agreement (TA) with Fu(cid:64)i Xerox whereby we receive royalty payments for their use of our
Xerox brand trademar(cid:65), as well as rights to access our patent portfolio in exchange for access to their patent
portfolio. These payments are included in Services, maintenance and rentals revenues in the Consolidated
Statements of Income.
In (cid:37)anuary 2020, Fu(cid:64)i Xerox notified Xerox of its intention to terminate the TA on the agreement(cid:85)s expiration date of
(cid:40)arch 31, 2021. The series of transactions entered into between Xerox and FH in November 2019, as disclosed in
Note 6 - Divestitures, included an amendment to the TA that would allow Fu(cid:64)i Xerox continued use of the Xerox
brand trademar(cid:65) for two years after the date of termination of the TA as it transitions to a new brand in exchange for
an upfront prepaid fixed royalty of (cid:3)100. At this time, we expect Fu(cid:64)i Xerox to continue to use the Xerox brand
trademar(cid:65) over the next two years subsequent to termination of the TA and, therefore, to ma(cid:65)e the upfront payment
due under the amended agreement. Accordingly, we expect any potential entry by Xerox into the Fu(cid:64)i Xerox territory
under the Xerox brand to be deferred to at least April 1, 2023.
The product supply agreements with Fu(cid:64)i Xerox will continue to be effective despite the termination of the TA, and
Fu(cid:64)i Xerox and Xerox will continue to operate as each other(cid:85)s product supplier under existing purchase(cid:14)supply
agreements. (cid:43)rior to the sale of our investment in Fu(cid:64)i Xerox, pricing of the transactions under these arrangements
were based on terms the Company believed to be negotiated at arm's length. Our purchase commitments with Fu(cid:64)i
Xerox are in the normal course of business and typically have a lead time of three months. In addition, we pay Fu(cid:64)i
Xerox and they pay us for unique research and development costs. As disclosed in Note 6 - Divestitures, these
agreements continue to be in effect after the sale of our Investment in Fu(cid:64)i Xerox.
Transactions with Fu(cid:64)i Xerox were as follows:
Royalty revenue earned
Inventory purchases from Fu(cid:64)i Xerox
Inventory sales to Fu(cid:64)i Xerox
R(cid:5)D payments received from Fu(cid:64)i Xerox
R(cid:5)D payments paid to Fu(cid:64)i Xerox
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:3)
88 (cid:3)
1,0(cid:22)(cid:22)
99 (cid:3)
1,33(cid:22)
25
1
5
33
(cid:84)
4
96
1,501
43
1
8
As of December 31, 2020 and 2019, net amounts due to Fu(cid:64)i Xerox were (cid:3)102 and (cid:3)353, respectively.
110
Xerox 2020 Annual Report 110
Table of Contents
(cid:36)(cid:63)(cid:68)(cid:53) (cid:13)(cid:15) (cid:9) (cid:29)(cid:63)(cid:63)(cid:52)(cid:71)(cid:57)(cid:60)(cid:60) (cid:49)(cid:62)(cid:52) (cid:31)(cid:62)(cid:68)(cid:49)(cid:62)(cid:55)(cid:57)(cid:50)(cid:60)(cid:53) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)(cid:8) (cid:36)(cid:53)(cid:68)
(cid:29)(cid:63)(cid:63)(cid:52)(cid:71)(cid:57)(cid:60)(cid:60)
The following table presents the changes in the carrying amount of goodwill:
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:19)
Foreign currency translation
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:20)
Foreign currency translation
Acquisitions
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:21)
Foreign currency translation
Acquisitions:
U.K. Acquisitions
Canada Acquisition
Other
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:14)(cid:12)(cid:6)(cid:13)(cid:7)
_____________
Total
(cid:3)
(cid:3)
(cid:3)
3,921
(63)
3,858
28
14
3,900
60
98
10
3
(cid:3)
4,0(cid:22)1
(1) Balance at December (cid:16)1, 2(cid:13)2(cid:13) includes (cid:3)(cid:16) of (cid:31)oodwill recorded by (cid:48)erox (cid:32)oldings.
(cid:31)(cid:62)(cid:68)(cid:49)(cid:62)(cid:55)(cid:57)(cid:50)(cid:60)(cid:53) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)(cid:8) (cid:36)(cid:53)(cid:68)
Intangible assets, net were (cid:3)23(cid:22) at December 31, 2020. Intangible assets were comprised of the following:
(cid:50)eighted
Average
Amorti(cid:80)ation
10 years
25 years
19 years
9 years
December 31, 2020
December 31, 2019
(cid:34)ross
Carrying
Amount
Accumulated
Amorti(cid:80)ation
Net
Amount(1)
(cid:34)ross
Carrying
Amount
Accumulated
Amorti(cid:80)ation
Net
Amount
(cid:3)
185 (cid:3)
(cid:22)4 (cid:3)
111 (cid:3)
140 (cid:3)
86 (cid:3)
123
235
29
103
138
20
20
9(cid:22)
9
123
258
18
99
146
9
(cid:3)
5(cid:22)2 (cid:3)
335 (cid:3)
23(cid:22) (cid:3)
539 (cid:3)
340 (cid:3)
54
24
112
9
199
Customer relationships
Distribution networ(cid:65)
Trademar(cid:65)s
Technology and non-
compete
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:31)(cid:62)(cid:68)(cid:49)(cid:62)(cid:55)(cid:57)(cid:50)(cid:60)(cid:53) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
_____________
(1) Balance at December (cid:16)1, 2(cid:13)2(cid:13) includes (cid:3)(cid:21) of Intangible assets, net, related to existing technology, recorded by (cid:48)erox (cid:32)oldings.
Amorti(cid:80)ation expense related to intangible assets was (cid:3)56, (cid:3)45 and (cid:3)48 for the three years ended December 31,
2020, 2019 and 2018, respectively. Amorti(cid:80)ation expense in 2020 includes (cid:3)11 related to write-offs of certain XBS
trade names that were discontinued. Excluding the impact of future acquisitions, amorti(cid:80)ation expense is expected
to approximate (cid:3)39 in 2021, 2022 and 2023, (cid:3)36 in 2024 and (cid:3)31 in 2025. The decrease from 2024 to 2025 is
related to the distribution networ(cid:65), which is expected to be fully amorti(cid:80)ed by 2025.
Xerox 2020 Annual Report 111
Xerox 2020 Annual Report 111
Table of Contents
(cid:36)(cid:63)(cid:68)(cid:53) (cid:13)(cid:16) (cid:75) (cid:40)(cid:53)(cid:67)(cid:68)(cid:66)(cid:69)(cid:51)(cid:68)(cid:69)(cid:66)(cid:57)(cid:62)(cid:55) (cid:38)(cid:66)(cid:63)(cid:55)(cid:66)(cid:49)(cid:61)(cid:67)
(cid:50)e engage in restructuring actions, including (cid:43)ro(cid:64)ect Own It, as well as other transformation efforts in order to
reduce our cost structure and realign it to the changing nature of our business. As part of our efforts to reduce costs,
our restructuring actions may also include the off-shoring or outsourcing of certain operations, services and other
functions, as well as reducing our real estate footprint.
Restructuring costs include employee severance and related costs, other contractual termination costs and
asset impairments that may result from employee reductions, migration of facilities from higher-cost to lower-cost
countries, and the consolidation of facilities within countries. 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 recogni(cid:80)e employee severance and related costs when they are both probable and
reasonably estimable. In the event employees are required to perform future service beyond their minimum
retention period, we record severance charges ratably over the remaining service period of those employees.
Severance payments made under a one-time benefit arrangement are recorded upon communication to the affected
employees. Contractual termination costs, including facility exit costs, are generally recogni(cid:80)ed when it has been
determined that a liability has been incurred. Restructuring activities may include the disposal or abandonment of
assets, including leased right-of-use assets, that require an acceleration of depreciation or an impairment charge
reflecting the excess of an asset's boo(cid:65) value over fair value or other recoveries.
The recognition of restructuring costs requires that we ma(cid:65)e certain (cid:64)udgments and estimates regarding the nature,
timing and amount of costs associated with the planned initiative. 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 recogni(cid:80)ed. At the end of each reporting period,
we evaluate the remaining accrued balances to ensure they are properly stated and the utili(cid:80)ation of the reserves
are for their intended purpose in accordance with developed exit plans.
A summary of our restructuring program activity for the three years ended December 31, 2020, 2019 and 2018 is as
follows:
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:19)
Restructuring provision
Reversals of prior charges
(cid:36)(cid:53)(cid:68) (cid:25)(cid:69)(cid:66)(cid:66)(cid:53)(cid:62)(cid:68) (cid:38)(cid:53)(cid:66)(cid:57)(cid:63)(cid:52) (cid:25)(cid:56)(cid:49)(cid:66)(cid:55)(cid:53)(cid:67)(cid:6)(cid:13)(cid:7)
Charges against reserve and currency
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:20)
Restructuring provision
Reversals of prior charges
(cid:36)(cid:53)(cid:68) (cid:25)(cid:69)(cid:66)(cid:66)(cid:53)(cid:62)(cid:68) (cid:38)(cid:53)(cid:66)(cid:57)(cid:63)(cid:52) (cid:25)(cid:56)(cid:49)(cid:66)(cid:55)(cid:53)(cid:67)(cid:6)(cid:13)(cid:7)
Charges against reserve and currency
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:21)
Restructuring provision
Reversals of prior charges
(cid:36)(cid:53)(cid:68) (cid:25)(cid:69)(cid:66)(cid:66)(cid:53)(cid:62)(cid:68) (cid:38)(cid:53)(cid:66)(cid:57)(cid:63)(cid:52) (cid:25)(cid:56)(cid:49)(cid:66)(cid:55)(cid:53)(cid:67)(cid:6)(cid:13)(cid:7)
Charges against reserve and currency
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:14)(cid:12)
_____________
(cid:3)
(cid:3)
(cid:3)
(cid:3)
Severance and
Related Costs
Other Contractual
Termination Costs(2)
Asset
Impairments(3)(4)
Total
108 (cid:3)
1 (cid:3)
(cid:84) (cid:3)
1(cid:22)5
(33)
142
(156)
14
(cid:84)
14
(14)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
94 (cid:3)
1 (cid:3)
(cid:84) (cid:3)
81
(24)
5(cid:22)
(85)
19
(5)
14
(11)
61
(5)
56
(56)
66 (cid:3)
4 (cid:3)
(cid:84) (cid:3)
10(cid:22)
(21)
86
((cid:22)4)
3
(2)
1
(1)
6
(6)
(cid:84)
(cid:84)
(cid:22)8 (cid:3)
4 (cid:3)
(cid:84) (cid:3)
109
189
(33)
156
(1(cid:22)0)
95
161
(34)
12(cid:22)
(152)
(cid:22)0
116
(29)
8(cid:22)
((cid:22)5)
82
(1) Represents net amount recogni(cid:76)ed within the (cid:27)onsolidated (cid:43)tatements of Income for the years shown for restructuring and asset
impairment charges.
(2) (cid:40)rimarily includes additional costs incurred upon the exit from our facilities including decommissioning costs and associated contractual
termination costs.
((cid:16)) (cid:27)harges associated with asset impairments represent the write-down of the related assets to their new cost basis and are recorded
concurrently with the recognition of the provision.
((cid:17)) (cid:25)mounts primarily relate to the exit and abandonment of leased and owned facilities. (cid:30)or the year ended December (cid:16)1, 2(cid:13)2(cid:13) and 2(cid:13)1(cid:22), the
charge includes the accelerated write-off of (cid:3)(cid:17) and (cid:3)(cid:16)(cid:22), respectively, for leased right-of-use assets and (cid:3)2 and (cid:3)22, respectively, for owned
assets and are net of any potential sublease income or other recovery amounts(cid:2)
112
Xerox 2020 Annual Report 112
Table of Contents
The following table summari(cid:80)es the reconciliation to the Consolidated Statements of Cash Flows:
Charges against reserve and currency
Asset impairments
Effects of foreign currency and other non-cash items
(cid:40)(cid:53)(cid:67)(cid:68)(cid:66)(cid:69)(cid:51)(cid:68)(cid:69)(cid:66)(cid:57)(cid:62)(cid:55) (cid:25)(cid:49)(cid:67)(cid:56) (cid:38)(cid:49)(cid:73)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)
(cid:52)ear Ended December 31,
2020
2019
2018
((cid:22)5) (cid:3)
(152) (cid:3)
(cid:84)
(6)
(81) (cid:3)
56
3
(93) (cid:3)
(cid:3)
(cid:3)
In connection with our restructuring programs, we also incurred certain related costs as follows:
Retention related severance(cid:14)bonuses(1)
Contractual severance costs(2)
Consulting and other costs(3)
_____________
(cid:52)ear Ended December 31,
2020
2019
(cid:3)
(cid:3)
4 (cid:3)
(2)
4
6 (cid:3)
(1(cid:22)0)
(cid:84)
1
(169)
39
43
20
102
(1)
Includes retention related severance and bonuses for employees expected to continue wor(cid:61)ing beyond their minimum retention period
before termination.
(2) 2(cid:13)1(cid:22) costs include approximately (cid:3)(cid:16)(cid:21) for estimated severance and other related costs we were contractually re(cid:67)uired to pay in connection
with employees transferred (approximately 2,2(cid:13)(cid:13)) as part of the shared service arrangement entered into with (cid:32)(cid:27)(cid:36) Technologies.
((cid:16)) Represents professional support services associated with our business transformation initiatives.
Cash payments for restructuring related costs were approximately (cid:3)26 and (cid:3)65 in 2020 and 2019, respectively,
while the reserve was (cid:3)21 and (cid:3)3(cid:22) at December 31, 2020 and 2019, respectively. The balance at December 31,
2020 is expected to be paid over the next twelve months.
Xerox 2020 Annual Report 113
Xerox 2020 Annual Report 113
Table of Contents
(cid:36)(cid:63)(cid:68)(cid:53) (cid:13)(cid:17) (cid:9) (cid:41)(cid:69)(cid:64)(cid:64)(cid:60)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:49)(cid:66)(cid:73) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:31)(cid:62)(cid:54)(cid:63)(cid:66)(cid:61)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
The components of Other assets and liabilities were as follows:
December 31,
2020
2019
(cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:25)(cid:69)(cid:66)(cid:66)(cid:53)(cid:62)(cid:68) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
Income taxes receivable
Royalties, license fees and software maintenance
Restricted cash
(cid:43)repaid expenses
Advances and deposits
Other
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:25)(cid:69)(cid:66)(cid:66)(cid:53)(cid:62)(cid:68) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
(cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:34)(cid:63)(cid:62)(cid:55)(cid:9)(cid:68)(cid:53)(cid:66)(cid:61) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
Income taxes receivable
(cid:43)repaid pension costs
Internal use software, net
Restricted cash
Customer contract costs, net
Operating lease right-of-use asset
Deferred compensation plan investments
Investments in affiliates, at equity(1)
Other
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:34)(cid:63)(cid:62)(cid:55)(cid:9)(cid:68)(cid:53)(cid:66)(cid:61) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
(cid:23)(cid:51)(cid:51)(cid:66)(cid:69)(cid:53)(cid:52) (cid:27)(cid:72)(cid:64)(cid:53)(cid:62)(cid:67)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:25)(cid:69)(cid:66)(cid:66)(cid:53)(cid:62)(cid:68) (cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
Income taxes payable
Other taxes payable
Operating lease obligation
Financing lease obligation
Interest payable
Restructuring reserves
Restructuring related costs
(cid:43)roduct warranties
Dividends payable(2)
Distributor and reseller rebates(cid:14)commissions
Unearned income and other revenue deferrals
Administration and overhead
Other
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:23)(cid:51)(cid:51)(cid:66)(cid:69)(cid:53)(cid:52) (cid:27)(cid:72)(cid:64)(cid:53)(cid:62)(cid:67)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:25)(cid:69)(cid:66)(cid:66)(cid:53)(cid:62)(cid:68) (cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)(cid:6)(cid:15)(cid:7)
(cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:34)(cid:63)(cid:62)(cid:55)(cid:9)(cid:68)(cid:53)(cid:66)(cid:61) (cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
Deferred taxes
Income taxes payable
Operating lease obligation
Finance lease obligation
Environmental reserves
Restructuring reserves
Other
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:34)(cid:63)(cid:62)(cid:55)(cid:9)(cid:68)(cid:53)(cid:66)(cid:61) (cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
29 (cid:3)
21
23
31
34
113
251 (cid:3)
(cid:22) (cid:3)
61(cid:22)
118
43
158
310
18
4(cid:22)
13(cid:22)
1,455 (cid:3)
(cid:22) (cid:3)
68
83
2
56
82
21
5
59
123
140
52
142
840 (cid:3)
35 (cid:3)
5(cid:22)
250
(cid:22)
9
2
13(cid:22)
49(cid:22) (cid:3)
2(cid:22)
25
(cid:84)
29
30
90
201
9
451
122
55
1(cid:22)6
319
19
46
141
1,338
(cid:22)
(cid:22)9
8(cid:22)
2
38
(cid:22)0
3(cid:22)
6
66
16(cid:22)
158
86
181
984
3(cid:22)
64
260
5
9
(cid:84)
13(cid:22)
512
_____________
(1) Refer to (cid:38)ote 12 - Investments in (cid:25)ffiliates, at (cid:29)(cid:67)uity for additional information.
(2) Represents dividends payable by (cid:48)erox (cid:32)oldings (cid:27)orporation on (cid:27)ommon and (cid:40)referred (cid:43)toc(cid:61).
((cid:16)) (cid:48)erox(cid:6)s balance of (cid:3)(cid:20)(cid:18)(cid:13) at December (cid:16)1, 2(cid:13)2(cid:13) excludes Interest (cid:40)ayable of (cid:3)(cid:16)2 and Dividends (cid:40)ayable of (cid:3)(cid:18)(cid:22). (cid:48)erox(cid:6)s balance of (cid:3)(cid:22)1(cid:21) at
December (cid:16)1, 2(cid:13)1(cid:22) excludes Dividends (cid:40)ayable of (cid:3)(cid:19)(cid:19).
114
Xerox 2020 Annual Report 114
Table of Contents
(cid:25)(cid:49)(cid:67)(cid:56)(cid:8) (cid:25)(cid:49)(cid:67)(cid:56) (cid:27)(cid:65)(cid:69)(cid:57)(cid:70)(cid:49)(cid:60)(cid:53)(cid:62)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:40)(cid:53)(cid:67)(cid:68)(cid:66)(cid:57)(cid:51)(cid:68)(cid:53)(cid:52) (cid:25)(cid:49)(cid:67)(cid:56)
Restricted cash primarily relates to escrow cash deposits made in Bra(cid:80)il associated with ongoing litigation. As more
fully discussed in Note 21 - Contingencies and Litigation, various litigation matters in Bra(cid:80)il require us to ma(cid:65)e 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 (cid:64)udicially released.
Cash, cash equivalents and restricted cash amounts were as follows:
(cid:25)(cid:49)(cid:67)(cid:56) (cid:49)(cid:62)(cid:52) (cid:51)(cid:49)(cid:67)(cid:56) (cid:53)(cid:65)(cid:69)(cid:57)(cid:70)(cid:49)(cid:60)(cid:53)(cid:62)(cid:68)(cid:67)
(cid:40)(cid:53)(cid:67)(cid:68)(cid:66)(cid:57)(cid:51)(cid:68)(cid:53)(cid:52) (cid:51)(cid:49)(cid:67)(cid:56)
Litigation deposits in Bra(cid:80)il
Escrow and cash collections related to finance receivable sales(1)
Other restricted cash
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:67)(cid:68)(cid:66)(cid:57)(cid:51)(cid:68)(cid:53)(cid:52) (cid:25)(cid:49)(cid:67)(cid:56)
(cid:25)(cid:49)(cid:67)(cid:56)(cid:8) (cid:51)(cid:49)(cid:67)(cid:56) (cid:53)(cid:65)(cid:69)(cid:57)(cid:70)(cid:49)(cid:60)(cid:53)(cid:62)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:66)(cid:53)(cid:67)(cid:68)(cid:66)(cid:57)(cid:51)(cid:68)(cid:53)(cid:52) (cid:51)(cid:49)(cid:67)(cid:56)
December 31,
2020
2019
(cid:3)
2,625 (cid:3)
2,(cid:22)40
42
22
2
66
55
(cid:84)
(cid:84)
55
(cid:3)
2,691 (cid:3)
2,(cid:22)95
(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)
(1) Represents collections on finance receivables pledged for secured borrowings that will be remitted to lenders in the following month.
Restricted cash was reported in the Consolidated Balance Sheets as follows:
Other current assets
Other long-term assets
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:67)(cid:68)(cid:66)(cid:57)(cid:51)(cid:68)(cid:53)(cid:52) (cid:51)(cid:49)(cid:67)(cid:56)
(cid:38)(cid:53)(cid:62)(cid:67)(cid:57)(cid:63)(cid:62) (cid:49)(cid:62)(cid:52) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68) (cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
(cid:43)ension liabilities(1)
Accrued compensation liabilities
Deferred compensation liabilities(2)
(cid:38)(cid:53)(cid:62)(cid:67)(cid:57)(cid:63)(cid:62) (cid:49)(cid:62)(cid:52) (cid:63)(cid:68)(cid:56)(cid:53)(cid:66) (cid:50)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68) (cid:60)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
December 31,
2020
2019
23 (cid:3)
43
66 (cid:3)
December 31,
2020
2019
1,4(cid:22)4 (cid:3)
(cid:22)0
22
1,566 (cid:3)
(cid:84)
55
55
1,616
69
22
1,(cid:22)0(cid:22)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)
(1) Refer to (cid:38)ote 1(cid:22) - (cid:29)mployee Benefit (cid:40)lans for additional information regarding pension liabilities.
(2) (cid:25)s of December (cid:16)1, 2(cid:13)2(cid:13) and 2(cid:13)1(cid:22), includes amounts measured at fair value on a recurring basis of (cid:3)1(cid:20) and (cid:3)1(cid:21), respectively. Refer to
(cid:38)ote 1(cid:21) - (cid:30)air (cid:46)alue of (cid:30)inancial (cid:25)ssets and (cid:36)iabilities for additional information regarding deferred compensation liabilities.
(cid:41)(cid:69)(cid:61)(cid:61)(cid:49)(cid:66)(cid:57)(cid:74)(cid:53)(cid:52) (cid:25)(cid:49)(cid:67)(cid:56) (cid:28)(cid:60)(cid:63)(cid:71) (cid:31)(cid:62)(cid:54)(cid:63)(cid:66)(cid:61)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
Summari(cid:80)ed cash flow information is as follows:
(cid:43)rovision for receivables
(cid:43)rovision for inventory
(cid:43)rovision for product warranty
Depreciation of buildings and equipment
Depreciation and obsolescence of equipment on operating leases
Amorti(cid:80)ation of internal use software
Amorti(cid:80)ation of acquired intangible assets
Amorti(cid:80)ation of customer contract costs(1)
Cost of additions to land, buildings and equipment
Cost of additions to internal use software
Common stoc(cid:65) dividends - Xerox Holdings
(cid:43)referred stoc(cid:65) dividends - Xerox Holdings
(cid:43)ayments to noncontrolling interests
Repurchases related to stoc(cid:65)-based compensation - Xerox Holdings
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:3)
116 (cid:3)
49 (cid:3)
31
8
8(cid:22)
183
42
56
85
44
30
216
14
3
19
24
12
101
225
59
45
93
41
24
229
14
14
28
40
30
14
148
249
81
48
100
55
35
255
14
1(cid:22)
9
(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)(cid:7)
(1) (cid:25)morti(cid:76)ation of customer contract costs is reported in Decrease (increase) in other current and long-term assets on the (cid:27)onsolidated
(cid:43)tatements of (cid:27)ash (cid:30)lows. Refer to (cid:38)ote 2 - Revenue - (cid:27)ontract (cid:27)osts for additional information.
Xerox 2020 Annual Report 115
Xerox 2020 Annual Report 115
Table of Contents
(cid:36)(cid:63)(cid:68)(cid:53) (cid:13)(cid:18) (cid:75) (cid:26)(cid:53)(cid:50)(cid:68)
Short-term borrowings were as follows:
(cid:41)(cid:56)(cid:63)(cid:66)(cid:68)(cid:9)(cid:68)(cid:53)(cid:66)(cid:61) (cid:52)(cid:53)(cid:50)(cid:68) (cid:49)(cid:62)(cid:52) (cid:51)(cid:69)(cid:66)(cid:66)(cid:53)(cid:62)(cid:68) (cid:64)(cid:63)(cid:66)(cid:68)(cid:57)(cid:63)(cid:62) (cid:63)(cid:54) (cid:60)(cid:63)(cid:62)(cid:55)(cid:9)(cid:68)(cid:53)(cid:66)(cid:61) (cid:52)(cid:53)(cid:50)(cid:68)
Xerox Holdings Corporation
Xerox Corporation
Xerox - Other Subsidiaries(1)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
_____________
(1) Represents subsidiaries of (cid:48)erox (cid:27)orporation.
December 31,
2020
2019
(cid:3)
(cid:3)
(cid:84) (cid:3)
(cid:84)
394
394 (cid:3)
(cid:84)
1,049
(cid:84)
1,049
(cid:50)e 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. (cid:50)e 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 amorti(cid:80)ed as interest
expense in our Consolidated Statements of Income.
Long-term debt was as follows:
Stated Rate
(cid:50)eighted Average
Interest Rates at
December 31, 2020(1)
December 31,
2020
2019
5.00 (cid:4)
5.50 (cid:4)
4.0(cid:22) (cid:4)
4.38 (cid:4)
3.80 (cid:4)
4.80 (cid:4)
6.(cid:22)5 (cid:4)
1.(cid:22)6 (cid:4)
1.(cid:22)4 (cid:4)
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
Senior Notes due 2025
Senior Notes due 2028
(cid:41)(cid:69)(cid:50)(cid:68)(cid:63)(cid:68)(cid:49)(cid:60) (cid:9) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
Senior Notes due 2020
Senior Notes due 2020
Senior Notes due 2020
Senior Notes due 2021
Senior Notes due 2022
Senior Notes due 2023(2)
Senior Notes due 2024
Senior Notes due 2035
Senior Notes due 2039
(cid:41)(cid:69)(cid:50)(cid:68)(cid:63)(cid:68)(cid:49)(cid:60) (cid:9) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:9) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:41)(cid:69)(cid:50)(cid:67)(cid:57)(cid:52)(cid:57)(cid:49)(cid:66)(cid:57)(cid:53)(cid:67)(3)
Secured Borrowing - (cid:37)uly 2020
Secured Borrowing - December 2020
(cid:41)(cid:69)(cid:50)(cid:68)(cid:63)(cid:68)(cid:49)(cid:60) (cid:9) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:9) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:41)(cid:69)(cid:50)(cid:67)(cid:57)(cid:52)(cid:57)(cid:49)(cid:66)(cid:57)(cid:53)(cid:67)
(cid:38)(cid:66)(cid:57)(cid:62)(cid:51)(cid:57)(cid:64)(cid:49)(cid:60) (cid:52)(cid:53)(cid:50)(cid:68) (cid:50)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53)
Xerox Holdings Corporation - Debt issuance costs
Xerox Corporation - Debt issuance costs
Xerox - Other subsidiaries - Debt issuance costs
(cid:41)(cid:69)(cid:50)(cid:68)(cid:63)(cid:68)(cid:49)(cid:60) (cid:9) (cid:26)(cid:53)(cid:50)(cid:68) (cid:57)(cid:67)(cid:67)(cid:69)(cid:49)(cid:62)(cid:51)(cid:53) (cid:51)(cid:63)(cid:67)(cid:68)(cid:67)
Unamorti(cid:80)ed premium (discount)
Fair value ad(cid:64)ustments(4)
Terminated swaps
Current swaps
Less: current maturities
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:34)(cid:63)(cid:62)(cid:55)(cid:9)(cid:68)(cid:53)(cid:66)(cid:61) (cid:26)(cid:53)(cid:50)(cid:68)
4.95 (cid:4) (cid:3)
5.40 (cid:4)
(cid:3)
(cid:3)
4.0(cid:22) (cid:4)
3.68 (cid:4)
3.84 (cid:4)
4.84 (cid:4)
6.(cid:22)8 (cid:4)
(cid:3)
1.(cid:22)3 (cid:4) (cid:3)
1.(cid:22)6 (cid:4)
(cid:3)
(cid:3)
(cid:3)
(cid:22)50 (cid:3)
(cid:22)50
1,500 (cid:3)
(cid:84) (cid:3)
(cid:84)
(cid:84)
(cid:84)
300
1,000
300
250
350
2,200 (cid:3)
26(cid:22) (cid:3)
500
(cid:22)6(cid:22) (cid:3)
4,46(cid:22) (cid:3)
(13)
(11)
(3)
(2(cid:22))
3
1
(cid:84)
(394)
4,050 (cid:3)
(cid:84)
(cid:84)
(cid:84)
313
362
3(cid:22)6
1,062
300
1,000
300
250
350
4,313
(cid:84)
(cid:84)
(cid:84)
4,313
(cid:84)
(1(cid:22))
(cid:84)
(1(cid:22))
(16)
1
1
(1,049)
3,233
_____________
(1) Represents the weighted average effective interest rate, which includes the effect of discounts and premiums on issued debt.
(2) (cid:25)s a result of the downgrade of our debt ratings in December 2(cid:13)1(cid:21), the original coupon rate of (cid:16).(cid:19)2(cid:18)(cid:4) increased by (cid:13).(cid:18)(cid:13)(cid:4) to (cid:17).12(cid:18)(cid:4)
effective (cid:37)arch 1(cid:18), 2(cid:13)1(cid:22). (cid:25)s a result of the downgrade of our debt ratings in (cid:25)ugust 2(cid:13)2(cid:13), the coupon rate of (cid:17).12(cid:18)(cid:4) increased by (cid:13).2(cid:18)(cid:4)
to (cid:17).(cid:16)(cid:20)(cid:18)(cid:4) effective (cid:43)eptember 1(cid:18), 2(cid:13)2(cid:13).
((cid:16)) The rates disclosed for Other (cid:43)ubsidiaries of (cid:48)erox (cid:27)orporation are variable interest rates. Refer to the (cid:43)ecured Borrowings and (cid:27)ollateral
section below for additional information.
((cid:17)) (cid:30)air value adjustments include the following(cid:23) (i) fair value adjustments to debt associated with terminated interest rate swaps, which are
being amorti(cid:76)ed to interest expense over the remaining term of the related notes(cid:24) and (ii) changes in fair value of hedged debt obligations
attributable to movements in benchmar(cid:61) interest rates. (cid:32)edge accounting re(cid:67)uires hedged debt instruments to be reported inclusive of any
fair value adjustment.
116
Xerox 2020 Annual Report 116
Table of Contents
Scheduled principal payments due on our long-term debt for the next five years and thereafter are as follows:
2021(1)
2022
2023
2024
2025
Thereafter
Total
Xerox Holdings Corporation
(cid:3)
(cid:84) (cid:3)
(cid:84) (cid:3)
(cid:84) (cid:3)
(cid:84) (cid:3)
(cid:22)50 (cid:3)
(cid:22)50 (cid:3)
Xerox Corporation
Xerox - Other Subsidiaries(2)
(cid:84)
395
300
291
1,000
81
300
(cid:84)
(cid:84)
(cid:84)
600
(cid:84)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
(cid:3)
395 (cid:3)
591 (cid:3)
1,081 (cid:3)
300 (cid:3)
(cid:22)50 (cid:3)
1,350 (cid:3)
1,500
2,200
(cid:22)6(cid:22)
4,46(cid:22)
_____________
(1) (cid:27)urrent portion of long-term debt maturities for 2(cid:13)21 are (cid:3)(cid:22)(cid:19), (cid:3)1(cid:13)(cid:20), (cid:3)1(cid:13)(cid:13) and (cid:3)(cid:22)2 for the first, second, third and fourth (cid:67)uarters,
respectively.
(2) Represents subsidiaries of (cid:48)erox (cid:27)orporation.
(cid:41)(cid:53)(cid:62)(cid:57)(cid:63)(cid:66) (cid:36)(cid:63)(cid:68)(cid:53)(cid:67)
In August 2020, Xerox Holdings Corporation issued (cid:3)550 of 5.00(cid:4) Senior Notes due August 2025 (the (cid:2)2025 Senior
Notes(cid:2)) at par and (cid:3)550 of 5.50(cid:4) Senior Notes due August 2028 (the (cid:2)2028 Senior Notes(cid:2)) at par resulting in
aggregate net proceeds (after fees and expenses) of approximately (cid:3)1,089. On August 24, 2020, Xerox Holdings
Corporation issued an additional (cid:3)200 of the 2025 Senior Notes at 100.(cid:22)5(cid:4) of par and an additional (cid:3)200 of the
2028 Senior Notes at 102.50(cid:4) of par resulting in additional aggregate net proceeds (after premium, fees and
expenses) of approximately (cid:3)405 for total aggregate net proceeds from both issuances of approximately (cid:3)1,494.
The Notes are fully and unconditionally guaranteed by Xerox Corporation. In addition, the notes and the related
guarantees were issued in a private placement only to qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933, as amended, and have not been registered for sale under the Securities Act or any state
securities laws. Interest on the 2025 and 2028 Senior Notes is payable semi-annually.
Debt issuance costs of approximately (cid:3)13 were paid and deferred in connection with the issuance of the 2025 and
2028 Senior Notes and will be amorti(cid:80)ed over the term of the Senior Notes. The net debt proceeds were contributed
by Xerox Holdings Corporation to Xerox Corporation and used to repay (cid:3)362 aggregate principal amount of 3.50(cid:4)
Senior Notes of Xerox Corporation and (cid:3)3(cid:22)6 aggregate principal amount of 2.(cid:22)5(cid:4) Senior Notes of Xerox
Corporation, which were both due to mature in third quarter 2020. Xerox Corporation also used the balance of the
net proceeds to repay in October 2020 (cid:3)(cid:22)50 of the 4.50(cid:4) Senior Notes due in (cid:40)ay 2021. (Refer to the section
(cid:27)(cid:49)(cid:66)(cid:60)(cid:73) (cid:27)(cid:72)(cid:68)(cid:57)(cid:62)(cid:55)(cid:69)(cid:57)(cid:67)(cid:56)(cid:61)(cid:53)(cid:62)(cid:68) (cid:63)(cid:54) (cid:41)(cid:53)(cid:62)(cid:57)(cid:63)(cid:66) (cid:36)(cid:63)(cid:68)(cid:53)(cid:67) below for additional information regarding the repayment of the Senior
Notes due (cid:40)ay 2021, as well as the (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68) (cid:63)(cid:54) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)(cid:56)(cid:63)(cid:60)(cid:52)(cid:53)(cid:66)(cid:5)(cid:67) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73) for additional information regarding
the contribution received from Xerox Holdings Corporation).
(cid:27)(cid:49)(cid:66)(cid:60)(cid:73) (cid:27)(cid:72)(cid:68)(cid:57)(cid:62)(cid:55)(cid:69)(cid:57)(cid:67)(cid:56)(cid:61)(cid:53)(cid:62)(cid:68) (cid:63)(cid:54) (cid:41)(cid:53)(cid:62)(cid:57)(cid:63)(cid:66) (cid:36)(cid:63)(cid:68)(cid:53)(cid:67)
In October 2020, we completed the early redemption of (cid:3)(cid:22)50 of the (cid:3)1,062 of Xerox Corporation 4.50(cid:4) Senior
Notes due (cid:40)ay 2021, for (cid:3)(cid:22)69 in cash consideration, which included a redemption premium of (cid:3)19. The early
redemption resulted in a net loss of (cid:3)18 (which included the write-off of debt carrying value ad(cid:64)ustments).
In December 2020, we completed the early redemption of the remaining (cid:3)312 of Xerox Corporation 4.50(cid:4) Senior
Notes due (cid:40)ay 2021, for (cid:3)31(cid:22) in cash consideration, which included a redemption premium of (cid:3)5. The early
redemption resulted in a net loss of (cid:3)8 (which included the write-off of debt carrying value ad(cid:64)ustments).
(cid:25)(cid:66)(cid:53)(cid:52)(cid:57)(cid:68) (cid:28)(cid:49)(cid:51)(cid:57)(cid:60)(cid:57)(cid:68)(cid:73)
(cid:50)e have a (cid:3)1.8 billion unsecured revolving Credit Facility with a group of lenders, which matures in August 2022.
The Credit Facility includes a (cid:3)250 letter of credit sub-facility as well as an accordion feature that allows us to
increase (from time to time, with willing lenders) the overall si(cid:80)e of the facility by (cid:3)(cid:22)50. (cid:50)e also have the right to
request a one year extension on any anniversary of the restated amendment date.
(cid:43)roceeds from any borrowings under the Credit Facility can be used to provide wor(cid:65)ing capital for the Company and
its subsidiaries and for general corporate purposes. The Credit Facility is available, without sublimit, to certain of our
qualifying subsidiaries. Our obligations under the Credit Facility are unsecured and are not currently guaranteed by
any of our subsidiaries. Any borrowings under the Credit Facility by Xerox Corporation will be guaranteed by Xerox
Holdings Corporation. Any domestic subsidiary that guarantees more than (cid:3)100 of Xerox Corporation debt must
also guaranty our obligations under the Credit Facility. In the event that any of our subsidiaries borrows under the
Credit Facility, its borrowings thereunder would be guaranteed by us. At December 31, 2020 and 2019, we had no
outstanding borrowings or letters of credit under the amended and restated Credit Facility.
On (cid:37)uly 31, 2020, Xerox and Xerox Holdings entered into (cid:23)(cid:61)(cid:53)(cid:62)(cid:52)(cid:61)(cid:53)(cid:62)(cid:68) (cid:36)(cid:63)(cid:10) (cid:15) to the Credit Facility, which modified
the financial covenants to require that, during a specified covenant modification period (which begins on the
effective date of the Amendment and ends on the earlier of (1) December 31, 2021 and (2) the date on which Xerox
Xerox 2020 Annual Report 117
Xerox 2020 Annual Report 11(cid:22)
Table of Contents
delivers a written notice to the Administrative Agent electing to end such period (the Covenant (cid:40)odification (cid:43)eriod),
Xerox must maintain unrestricted cash (as defined in the Amendment) in an amount not less than (cid:3)1.0 billion.
Further, the Amendment relaxed the financial maintenance leverage covenant in the Credit Agreement by requiring
that, during the Covenant (cid:40)odification (cid:43)eriod, Xerox maintain a ratio of net debt for borrowed money to
consolidated EBITDA of not greater than 4.25x (with a cap on cash netting of (cid:3)1.(cid:22)5 billion), in lieu of the 4.25x total
debt for borrowed money to consolidated EBITDA ratio requirement applicable prior to the Amendment.
Borrowings under the Credit Facility bear interest at our choice, at either (a) a Base Rate as defined in the Credit
Facility agreement, plus a spread that varies between 0.000(cid:4) and 0.(cid:22)00(cid:4) depending on our credit rating at the
time of borrowing, or (b) LIBOR plus an all-in spread that varies between 1.000(cid:4) and 1.(cid:22)00(cid:4) depending on our
credit rating at the time of borrowing. Based on our credit rating as of December 31, 2020, the applicable all-in
spreads for the Base Rate and LIBOR borrowing were 0.3(cid:22)5(cid:4) and 1.3(cid:22)5(cid:4), respectively.
An annual facility fee is payable to each lender in the Credit Facility at a rate that varies between 0.125(cid:4) and
0.300(cid:4) depending on our credit rating. Based on our credit rating as of December 31, 2020 the applicable rate is
0.25(cid:4).
The Credit Facility contains various conditions to borrowing and affirmative, negative and financial maintenance
covenants. Certain of the more significant covenants are summari(cid:80)ed below:
(a) (cid:40)inimum Unrestricted Cash during the Covenant (cid:40)odification (cid:43)eriod, at all times, maintain Unrestricted Cash
(as defined in the amended and restated Credit Facility) in an amount not less than (cid:3)1,000.
(b) (cid:40)aximum leverage ratio during the Covenant (cid:40)odification (cid:43)eriod (a quarterly test that is calculated as net debt
for borrowed money divided by consolidated EBITDA, both as defined in the amended and restated Credit
Facility - with a cap on cash netting of (cid:3)1.(cid:22)5 billion) of 4.25x. This temporarily replaces the maximum leverage
ratio (a quarterly test that is calculated as debt for borrowed money divided by consolidated EBITDA, both as
defined in the amended and restated Credit Facility) of 4.25x.
(c) (cid:40)inimum interest coverage ratio (a quarterly test that is calculated as consolidated EBITDA divided by
consolidated interest expense, both as defined in the amended and restated Credit Facility) may not be less
than 3.00x.
(d) Limitations on (i) liens securing debt, (ii) mergers, consolidations and liquidations, (iii) limitations on debt
incurred by certain subsidiaries, (iv) sale of all or substantially all our assets, (v) payment restrictions affecting
subsidiaries, (vi) non-arm's length transactions with affiliates, (vii) change in nature of business, (viii) actions
that may violate OFAC and anti-corruption laws.
The Credit Facility contains various events of default, the occurrence of which could result in termination of the
lenders' commitments to lend and the acceleration of all our obligations under the amended and restated Credit
Facility. These events of default include, without limitation: (i) payment defaults, (ii) breaches of covenants under the
amended and restated Credit Facility (certain of which breaches do not have any grace period), (iii) cross-defaults
and acceleration to certain of our other obligations and (iv) a change of control of Xerox Holdings.
(cid:41)(cid:53)(cid:51)(cid:69)(cid:66)(cid:53)(cid:52) (cid:24)(cid:63)(cid:66)(cid:66)(cid:63)(cid:71)(cid:57)(cid:62)(cid:55)(cid:67) (cid:49)(cid:62)(cid:52) (cid:25)(cid:63)(cid:60)(cid:60)(cid:49)(cid:68)(cid:53)(cid:66)(cid:49)(cid:60)
In (cid:37)uly 2020, we entered into a secured loan agreement with a financial institution where we sold (cid:3)355 of U.S.
based finance receivables and the rights to payments under operating leases with an equipment net boo(cid:65) value of
(cid:3)10 to a special purpose entity (S(cid:43)E). The purchase by the S(cid:43)E was funded through an amorti(cid:80)ing secured loan to
the S(cid:43)E from the financial institution of (cid:3)340. The debt has a variable interest rate based on LIBOR plus a spread
and an expected life of less than three years with half pro(cid:64)ected to be repaid within the first year based on
collections of the underlying portfolio of receivables. (cid:50)e also entered into an interest rate hedge agreement to cap
LIBOR over the life of the loan. The proceeds from this debt replenished the cash used in (cid:40)ay 2020 to repay the
(cid:3)313 aggregate principal amount of 2.80(cid:4) Senior Notes due 2020 of Xerox Corporation.
In December 2020, we entered into a second secured loan agreement with a financial institution where we sold
(cid:3)610 of U.S. based finance receivables to an S(cid:43)E. The purchase by the S(cid:43)E was funded through an amorti(cid:80)ing
secured loan to the S(cid:43)E from the financial institution of (cid:3)500. The debt has a variable interest rate based on the
financial institution's cost of funds plus a spread and an expected life of approximately 2.5 years with half pro(cid:64)ected
to be repaid within the first year based on collections of the underlying portfolio of receivables. A portion of the
proceeds from this debt was used to repay the remaining (cid:3)312 principal amount of 4.50(cid:4) Senior Notes due (cid:40)ay
2021 of Xerox Corporation (see (cid:27)(cid:49)(cid:66)(cid:60)(cid:73) (cid:27)(cid:72)(cid:68)(cid:57)(cid:62)(cid:55)(cid:69)(cid:57)(cid:67)(cid:56)(cid:61)(cid:53)(cid:62)(cid:68) (cid:63)(cid:54) (cid:41)(cid:53)(cid:62)(cid:57)(cid:63)(cid:66) (cid:36)(cid:63)(cid:68)(cid:53)(cid:67) above for additional information).
The sales of the receivables to the S(cid:43)Es were structured as (cid:2)true sales at law,(cid:2) and we have received opinions to
that effect from outside legal counsel. However, the transactions were accounted for as secured borrowings as we
consolidate the S(cid:43)Es since we have both the power to direct the activities that most significantly impact the S(cid:43)Es'
118
Xerox 2020 Annual Report 118
Table of Contents
economic performance through our role as servicer of all the receivables held by the S(cid:43)Es, and the obligation
through variable interests in the S(cid:43)Es to absorb losses or receive benefits that could potentially be significant to the
S(cid:43)Es. As a result, the assets of the S(cid:43)Es are not available to satisfy any of our other obligations. Conversely, the
credit holders of these S(cid:43)Es do not have legal recourse to the Company(cid:85)s general credit.
Below are the assets and liabilities held by the consolidated S(cid:43)Es, which are included in our Consolidated Balance
Sheet:
(cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67) (cid:56)(cid:53)(cid:60)(cid:52) (cid:50)(cid:73) (cid:41)(cid:38)(cid:27)(cid:67)
Billed portion of finance receivables, net
Finance receivables, net
Finance receivables due after one year, net
Equipment on operating leases, net
Restricted cash(1)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
(cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67) (cid:56)(cid:53)(cid:60)(cid:52) (cid:50)(cid:73) (cid:41)(cid:38)(cid:27)(cid:67)
Current portion of long-term debt, net(2)
Long term debt, net(3)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
December 31,
2020
(cid:3)
(cid:3)
(cid:3)
(cid:3)
28
350
510
8
22
918
394
3(cid:22)0
(cid:22)64
(cid:50)(cid:50)(cid:50)(cid:50)(cid:50)(cid:50)(cid:50)(cid:50)(cid:50)(cid:50)(cid:50)(cid:50)(cid:54)
(1) Restricted cash is included in Other current assets in our (cid:27)onsolidated Balance (cid:43)heet.
(2) (cid:25)mounts net of unamorti(cid:76)ed debt issuance costs of (cid:3)1.
((cid:16)) (cid:25)mounts net of unamorti(cid:76)ed debt issuance costs of (cid:3)2.
(cid:31)(cid:62)(cid:68)(cid:53)(cid:66)(cid:53)(cid:67)(cid:68)
Interest paid on our short-term and long-term debt amounted to (cid:3)181, (cid:3)221 and (cid:3)231 for the years ended
December 31, 2020, 2019 and 2018, respectively.
Interest expense and interest income was as follows:
Interest expense(1) (2)
Interest income(3)
_____________
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:3)
215 (cid:3)
240
236 (cid:3)
260
244
283
(1)
Includes (cid:29)(cid:67)uipment financing interest expense, as well as non-financing interest expense included in Other expenses, net in the
(cid:27)onsolidated (cid:43)tatements of Income.
(2) 2(cid:13)2(cid:13) Interest expense for (cid:48)erox (cid:27)orporation includes (cid:3)(cid:16)2 of interest paid to (cid:48)erox (cid:32)oldings (cid:27)orporation as reimbursement for the interest
expense incurred on the (cid:48)erox (cid:32)oldings (cid:27)orporation (cid:43)enior (cid:38)otes as the net proceeds from those notes were contributed in full to (cid:48)erox
(cid:27)orporation and used to repay existing debt of (cid:48)erox.
Includes (cid:30)inance income, as well as other interest income that is included in Other expenses, net in the (cid:27)onsolidated (cid:43)tatements of
Income.
((cid:16))
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 (cid:22) to 1 leverage ratio of debt(cid:14)equity as compared to our average finance
receivable balance during the applicable period.
Xerox 2020 Annual Report 119
Xerox 2020 Annual Report 119
Table of Contents
(cid:36)(cid:63)(cid:68)(cid:53) (cid:13)(cid:19) (cid:75) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:31)(cid:62)(cid:67)(cid:68)(cid:66)(cid:69)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)
(cid:50)e are exposed to mar(cid:65)et ris(cid:65) from changes in foreign currency exchange rates and interest rates, which could
affect operating results, financial position and cash flows. (cid:50)e manage our exposure to these mar(cid:65)et ris(cid:65)s through
our regular operating and financing activities and, when appropriate, through the use of derivative financial
instruments. These derivative financial instruments are utili(cid:80)ed to hedge economic exposures, as well as to reduce
earnings and cash flow volatility resulting from shifts in mar(cid:65)et rates. (cid:50)e 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 mar(cid:65)et exposures include the (cid:37)apanese (cid:52)en, Euro and U.K. (cid:43)ound Sterling. The fair
mar(cid:65)et values of all our derivative contracts change with fluctuations in interest rates and(cid:14)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 ris(cid:65) 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.
(cid:50)e do not believe there is significant ris(cid:65) 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 ma(cid:64)or financial
institutions. Further, our policy is to deal only with counterparties having a minimum investment grade or better
credit rating. Credit ris(cid:65) is managed through the continuous monitoring of exposures to such counterparties.
(cid:31)(cid:62)(cid:68)(cid:53)(cid:66)(cid:53)(cid:67)(cid:68) (cid:40)(cid:49)(cid:68)(cid:53) (cid:40)(cid:57)(cid:67)(cid:59) (cid:35)(cid:49)(cid:62)(cid:49)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)
(cid:50)e 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 (cid:54)(cid:49)(cid:57)(cid:66) (cid:70)(cid:49)(cid:60)(cid:69)(cid:53) (cid:56)(cid:53)(cid:52)(cid:55)(cid:53)(cid:67) or
(cid:51)(cid:49)(cid:67)(cid:56) (cid:54)(cid:60)(cid:63)(cid:71) (cid:56)(cid:53)(cid:52)(cid:55)(cid:53)(cid:67) depending on the nature of the ris(cid:65) being hedged.
Fair (cid:31)alue (cid:19)e(cid:36)ges
In 2020 we terminated our remaining pay variable(cid:14)receive fixed interest rate swaps with the notional amount of (cid:3)200
and net asset fair value of (cid:3)4 prior to termination. In 2019, we terminated an interest rate swap with a notional
amount of (cid:3)100 and an immaterial net asset fair value. In both instances, the swaps had been designated and
accounted for as fair value hedges prior to termination. The swaps were structured to hedge the fair value of related
debt by converting them from fixed rate instruments to variable rate instruments. (cid:43)rior to termination no ineffective
portion was recorded to earnings for the years ended December 31, 2020, 2019 and 2018. The corresponding net
fair value ad(cid:64)ustment to the hedged debt of (cid:3)(4) will be recogni(cid:80)ed in earnings concurrently with the remaining term
of the related debt, which may include early extinguishment. During the period from 2004 to 2011, we also early
terminated several interest rate swaps that were designated as fair value hedges of certain debt instruments. The
associated net fair value ad(cid:64)ustments to the debt instruments for these terminated swaps were li(cid:65)ewise recogni(cid:80)ed
in earnings concurrently with the remaining term of the related debt, which may include early extinguishment.
The remaining unamorti(cid:80)ed debt fair value ad(cid:64)ustment associated with all terminated swaps was (cid:3)1 and (cid:3)1 at
December 31, 2020 and 2019, respectively. In 2020, 2019 and 2018, the amorti(cid:80)ation of these fair value
ad(cid:64)ustments reduced interest expense by (cid:3)2, (cid:3)1 and (cid:3)3, respectively, and the loss on early extinguishment of debt
in 2020 by (cid:3)2.
(cid:28)(cid:63)(cid:66)(cid:53)(cid:57)(cid:55)(cid:62) (cid:27)(cid:72)(cid:51)(cid:56)(cid:49)(cid:62)(cid:55)(cid:53) (cid:40)(cid:57)(cid:67)(cid:59) (cid:35)(cid:49)(cid:62)(cid:49)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)
(cid:50)e 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 ris(cid:65) 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:
(cid:77)
(cid:77)
Foreign currency-denominated assets and liabilities
Forecasted purchases, and sales in foreign currency
At December 31, 2020, we had outstanding forward exchange and purchased option contracts with gross notional
values of (cid:3)1,161, with terms of less than 12 months. At December 31, 2020, approximately 81(cid:4) of these contracts
mature within three months, 9(cid:4) in three to six months and 10(cid:4) in six to twelve months. The associated exposures
being hedged at December 31, 2020 were higher by 6.4(cid:4), as compared to December 31, 2019. There has not
been any material changes in our hedging strategy during 2020.
120
Xerox 2020 Annual Report 120
Table of Contents
The following is a summary of the primary hedging positions and corresponding fair values as of December 31,
2020:
Currencies Hedged (Buy(cid:14)Sell)
(cid:37)apanese (cid:52)en(cid:14)U.S. Dollar
Euro(cid:14)U.K. (cid:43)ound Sterling
(cid:37)apanese (cid:52)en(cid:14)Euro
U.S. Dollar(cid:14)Euro
U.S. Dollar(cid:14)Canadian Dollar
Euro(cid:14)U.S. Dollar
U.K. (cid:43)ound Sterling(cid:14)Euro
U.S. Dollar(cid:14)(cid:37)apanese (cid:52)en
Euro(cid:14)Danish Krone
U.S. Dollar(cid:14)Russian Ruble
U.S. Dollar(cid:14)Israeli She(cid:65)el
U.S. Dollar(cid:14)Bra(cid:80)ilian Real
Euro(cid:14)Norwegian Kroner
All Other
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:28)(cid:63)(cid:66)(cid:53)(cid:57)(cid:55)(cid:62) (cid:53)(cid:72)(cid:51)(cid:56)(cid:49)(cid:62)(cid:55)(cid:53) (cid:56)(cid:53)(cid:52)(cid:55)(cid:57)(cid:62)(cid:55)
____________
(cid:34)ross
Notional
(cid:49)alue
(cid:3)
Fair (cid:49)alue
Asset(1)
398 (cid:3)
23(cid:22)
186
90
46
46
3(cid:22)
31
21
15
9
9
4
32
(cid:3)
1,161 (cid:3)
6
(cid:84)
(2)
(1)
(1)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
2
(1) Represents the net receivable (payable) amount included in the (cid:27)onsolidated Balance (cid:43)heet at December (cid:16)1, 2(cid:13)2(cid:13).
Foreign (cid:14)urrenc(cid:57) (cid:14)as(cid:40) Flo(cid:55) (cid:19)e(cid:36)ges
(cid:50)e designate a portion of our foreign currency derivative contracts as cash flow hedges of our foreign currency-
denominated inventory purchases, sales and expenses. No amount of ineffectiveness was recorded in the
Consolidated Statements of Income for these designated cash flow hedges and all components of each derivative(cid:85)s
gain or loss were included in the assessment of hedge effectiveness. The net asset (liability) fair value of these
contracts were (cid:3)2 and (cid:3)(4) as of December 31, 2020 and 2019, respectively.
(cid:41)(cid:69)(cid:61)(cid:61)(cid:49)(cid:66)(cid:73) (cid:63)(cid:54) (cid:26)(cid:53)(cid:66)(cid:57)(cid:70)(cid:49)(cid:68)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:67)(cid:68)(cid:66)(cid:69)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:28)(cid:49)(cid:57)(cid:66) (cid:44)(cid:49)(cid:60)(cid:69)(cid:53)
The following table provides a summary of the fair value amounts of our derivative instruments:
Designation of Derivatives
Balance Sheet Location
(cid:26)(cid:53)(cid:66)(cid:57)(cid:70)(cid:49)(cid:68)(cid:57)(cid:70)(cid:53)(cid:67) (cid:26)(cid:53)(cid:67)(cid:57)(cid:55)(cid:62)(cid:49)(cid:68)(cid:53)(cid:52) (cid:49)(cid:67) (cid:30)(cid:53)(cid:52)(cid:55)(cid:57)(cid:62)(cid:55) (cid:31)(cid:62)(cid:67)(cid:68)(cid:66)(cid:69)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)
Foreign exchange contracts (cid:83) forwards
Other current assets
Foreign currency options
Interest rate swaps
Other current assets
Other long-term assets
(cid:36)(cid:53)(cid:68) (cid:26)(cid:53)(cid:67)(cid:57)(cid:55)(cid:62)(cid:49)(cid:68)(cid:53)(cid:52) (cid:26)(cid:53)(cid:66)(cid:57)(cid:70)(cid:49)(cid:68)(cid:57)(cid:70)(cid:53) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68) (cid:6)(cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:73)(cid:7)
Accrued expenses and other current liabilities
(cid:26)(cid:53)(cid:66)(cid:57)(cid:70)(cid:49)(cid:68)(cid:57)(cid:70)(cid:53)(cid:67) (cid:36)(cid:37)(cid:42) (cid:26)(cid:53)(cid:67)(cid:57)(cid:55)(cid:62)(cid:49)(cid:68)(cid:53)(cid:52) (cid:49)(cid:67) (cid:30)(cid:53)(cid:52)(cid:55)(cid:57)(cid:62)(cid:55) (cid:31)(cid:62)(cid:67)(cid:68)(cid:66)(cid:69)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)
Foreign exchange contracts (cid:83) forwards
Other current assets
(cid:41)(cid:69)(cid:61)(cid:61)(cid:49)(cid:66)(cid:73) (cid:63)(cid:54) (cid:26)(cid:53)(cid:66)(cid:57)(cid:70)(cid:49)(cid:68)(cid:57)(cid:70)(cid:53)(cid:67)
Accrued expenses and other current liabilities
(cid:36)(cid:53)(cid:68) (cid:43)(cid:62)(cid:52)(cid:53)(cid:67)(cid:57)(cid:55)(cid:62)(cid:49)(cid:68)(cid:53)(cid:52) (cid:26)(cid:53)(cid:66)(cid:57)(cid:70)(cid:49)(cid:68)(cid:57)(cid:70)(cid:53) (cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:73)
Total Derivative Assets
Total Derivative Liabilities
(cid:36)(cid:53)(cid:68) (cid:26)(cid:53)(cid:66)(cid:57)(cid:70)(cid:49)(cid:68)(cid:57)(cid:70)(cid:53) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68) (cid:6)(cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:73)(cid:7)
December 31,
2020
2019
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
3 (cid:3)
(2)
1
(cid:84)
2 (cid:3)
3 (cid:3)
(3)
(cid:84) (cid:3)
(cid:22) (cid:3)
(5)
2 (cid:3)
1
(5)
(cid:84)
1
(3)
1
(3)
(2)
3
(8)
(5)
Xerox 2020 Annual Report 121
Xerox 2020 Annual Report 121
Table of Contents
(cid:41)(cid:69)(cid:61)(cid:61)(cid:49)(cid:66)(cid:73) (cid:63)(cid:54) (cid:26)(cid:53)(cid:66)(cid:57)(cid:70)(cid:49)(cid:68)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:67)(cid:68)(cid:66)(cid:69)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:29)(cid:49)(cid:57)(cid:62)(cid:67) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:53)(cid:67)(cid:7)
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).
(cid:26)(cid:53)(cid:67)(cid:57)(cid:55)(cid:62)(cid:49)(cid:68)(cid:53)(cid:52) (cid:26)(cid:53)(cid:66)(cid:57)(cid:70)(cid:49)(cid:68)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:67)(cid:68)(cid:66)(cid:69)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:29)(cid:49)(cid:57)(cid:62)(cid:67) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:53)(cid:67)(cid:7)
The following tables provide a summary of gains (losses) on derivative instruments:
Derivatives in Fair (cid:49)alue
Relationships
Location of (cid:34)ain (Loss)
Recogni(cid:80)ed in Income
(cid:52)ear Ended December 31,
Derivative (Loss) (cid:34)ain
Recogni(cid:80)ed in Income
Hedged Item
(cid:34)ain (Loss) Recogni(cid:80)ed in Income
2020
2019
2018
2020
2019
2018
Interest rate contracts
Interest expense
(cid:3)
(1) (cid:3)
4 (cid:3)
(3) (cid:3)
1 (cid:3)
(4) (cid:3)
3
Derivatives in Cash Flow
Hedging Relationships
Foreign exchange contracts (cid:83)
forwards(cid:14)options
(cid:3)
Derivative (cid:34)ain Recogni(cid:80)ed in OCI
(Effective (cid:43)ortion)
2020
2019
2018
(cid:52)ear Ended December 31,
Location of Derivative
(cid:34)ain (Loss) Reclassified
from AOCI into Income
(Effective (cid:43)ortion)
(Loss) (cid:34)ain Reclassified from AOCI to
Income (Effective (cid:43)ortion)
2020
2019
2018
4 (cid:3)
2 (cid:3)
9 Cost of sales
(cid:3)
(1) (cid:3)
9 (cid:3)
(14)
For the three years ended December 31, 2020, 2019 and 2018 no amount of ineffectiveness was recorded in the
Consolidated Statements of Income for these designated cash flow hedges. All components of each derivative(cid:85)s
gain or (loss) were included in the assessment of hedge effectiveness. In addition, no amount was recorded for an
underlying exposure that did not occur or was not expected to occur.
At December 31, 2020, a net after-tax gain of (cid:3)2 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.
(cid:36)(cid:63)(cid:62)(cid:9)(cid:26)(cid:53)(cid:67)(cid:57)(cid:55)(cid:62)(cid:49)(cid:68)(cid:53)(cid:52) (cid:26)(cid:53)(cid:66)(cid:57)(cid:70)(cid:49)(cid:68)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:67)(cid:68)(cid:66)(cid:69)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:29)(cid:49)(cid:57)(cid:62)(cid:67) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:53)(cid:67)(cid:7)
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 following table provides a summary of gains (losses) on non-designated derivative instruments:
Derivatives NOT Designated as
Hedging Instruments
Location of Derivative (cid:34)ain (Loss)
2020
2019
2018
Foreign exchange contracts (cid:83)
forwards
Other expense (cid:83) Currency gains
(losses), net
(cid:3)
14 (cid:3)
(6) (cid:3)
21
For the three years ended December 31, 2020, 2019 and 2018, we recorded Currency losses, net of (cid:3)3, (cid:3)(cid:22) and (cid:3)5,
respectively. Net currency gains and losses include the mar(cid:65)-to-mar(cid:65)et ad(cid:64)ustments 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.
(cid:52)ear Ended December 31,
122
Xerox 2020 Annual Report 122
Table of Contents
(cid:36)(cid:63)(cid:68)(cid:53) (cid:13)(cid:20) (cid:75) (cid:28)(cid:49)(cid:57)(cid:66) (cid:44)(cid:49)(cid:60)(cid:69)(cid:53) (cid:63)(cid:54) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
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 (cid:83) Significant Other Observable Inputs.
(cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
Foreign exchange contracts - forwards
Foreign currency options
Interest rate swaps
Deferred compensation investments in mutual funds
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
(cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
Foreign exchange contracts - forwards
Deferred compensation plan liabilities
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
As of December 31,
2020
2019
(cid:3)
(cid:3)
(cid:3)
(cid:3)
6 (cid:3)
1
(cid:84)
18
25 (cid:3)
5 (cid:3)
1(cid:22)
22 (cid:3)
2
(cid:84)
1
19
22
8
18
26
(cid:50)e utili(cid:80)e the income approach to measure the fair value for our derivative assets and liabilities. The income
approach uses pricing models that rely on mar(cid:65)et 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 mar(cid:65)et prices for
those funds. Fair value for deferred compensation plan liabilities is based on the fair value of investments
corresponding to employees(cid:85) investment selections.
(cid:41)(cid:69)(cid:61)(cid:61)(cid:49)(cid:66)(cid:73) (cid:63)(cid:54) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
The estimated fair values of our other financial assets and liabilities were as follows:
Cash and cash equivalents
Accounts receivable, net
Short-term debt and current portion of long-term debt
(cid:34)(cid:63)(cid:62)(cid:55)(cid:9)(cid:68)(cid:53)(cid:66)(cid:61) (cid:52)(cid:53)(cid:50)(cid:68)
Xerox Holdings Corporation
Xerox Corporation
Xerox - Other Subsidiaries(1)
Total Long-term debt
_____________
(1) Represents subsidiaries of (cid:48)erox (cid:27)orporation.
December 31, 2020
December 31, 2019
Carrying
Amount
Fair
(cid:49)alue
Carrying
Amount
Fair
(cid:49)alue
(cid:3)
(cid:3)
(cid:3)
2,625 (cid:3)
2,625 (cid:3)
2,(cid:22)40 (cid:3)
883
394
883
396
1,236
1,049
1,493 (cid:3)
1,596 (cid:3)
(cid:84) (cid:3)
2,18(cid:22)
3(cid:22)0
2,298
3(cid:22)2
3,233
(cid:84)
4,050 (cid:3)
4,266 (cid:3)
3,233 (cid:3)
2,(cid:22)40
1,236
1,054
(cid:84)
3,331
(cid:84)
3,331
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 2020 Annual Report 123
Xerox 2020 Annual Report 123
Table of Contents
(cid:36)(cid:63)(cid:68)(cid:53) (cid:13)(cid:21) (cid:75) (cid:27)(cid:61)(cid:64)(cid:60)(cid:63)(cid:73)(cid:53)(cid:53) (cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68) (cid:38)(cid:60)(cid:49)(cid:62)(cid:67)
(cid:50)e 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.
(cid:50)here legally possible, we have amended our ma(cid:64)or defined benefit pension plans to free(cid:80)e current benefits and
eliminate benefit accruals for future service, including our primary U.S. defined benefit plan for salaried employees,
the Canadian Salary (cid:43)ension (cid:43)lan and the U.K. Final Salary (cid:43)ension (cid:43)lan. 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. Our pension plan in the Netherlands was changed to a Collective Defined Contribution (CDC) plan. From a
Company ris(cid:65) perspective, this plan operates (cid:64)ust li(cid:65)e a defined contribution plan as the company is only
responsible for a contribution for annual benefit accruals under 5-year agreements. Although the Company's ris(cid:65)
has been mitigated, under U.S. (cid:34)AA(cid:43) this plan doesn(cid:85)t meet the definition of a defined contribution plan and
therefore is accounted for as a defined benefit plan.
(cid:43)rior to the free(cid:80)e of current benefits, most of our defined benefit pension plans generally provided employees a
benefit, depending on eligibility, calculated under a highest average pay and years of service formula. Our primary
domestic defined benefit pension plans provided a benefit at the greater of (i) the highest average pay and years of
service formula, (ii) the benefit calculated under a formula that provides for the accumulation of salary and interest
credits during an employee's wor(cid:65) life or (iii) the individual account balance from the Company's prior defined
contribution plan (Transitional Retirement Account or TRA). (cid:43)ension plan assets consist of both defined benefit plan
assets and assets legally restricted to the TRA accounts.
The combined investment results for our primary domestic plans, along with the results for our other defined benefit
plans, are shown below in the (cid:86)actual return on plan assets(cid:87) caption. To the extent that investment results relate to
TRA assets, such results are charged directly to these accounts as a component of interest cost.
124
Xerox 2020 Annual Report 124
Table of Contents
(cid:25)(cid:56)(cid:49)(cid:62)(cid:55)(cid:53) (cid:57)(cid:62) (cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68) (cid:37)(cid:50)(cid:60)(cid:57)(cid:55)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:22)
Benefit obligation, (cid:37)anuary 1
Service cost
Interest cost
(cid:43)lan participants' contributions
Actuarial loss
Currency exchange rate changes
(cid:43)lan Amendments(cid:14)Curtailments
Benefits paid(cid:14)settlements
Other
(cid:25)(cid:56)(cid:49)(cid:62)(cid:55)(cid:53) (cid:57)(cid:62) (cid:38)(cid:60)(cid:49)(cid:62) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)(cid:22)
Fair value of plan assets, (cid:37)anuary 1
Actual return on plan assets
Employer contributions
(cid:43)lan participants' contributions
Currency exchange rate changes
Benefits paid(cid:14)settlements
Other
(cid:43)ension Benefits
U.S. (cid:43)lans
Non-U.S. (cid:43)lans
Retiree Health
2020
2019
2020
2019
2020
2019
(cid:3)
3,598 (cid:3)
3,234 (cid:3)
6,492 (cid:3)
6,00(cid:22) (cid:3)
385 (cid:3)
385
2
196
(cid:84)
240
(cid:84)
(cid:84)
(289)
(cid:84)
2
218
(cid:84)
564
(cid:84)
(cid:84)
(420)
(cid:84)
20
113
3
439
3(cid:22)4
2
(284)
(cid:84)
22
153
3
4(cid:22)2
114
(2)
(2(cid:22)0)
((cid:22))
2
12
10
4
3
(11)
(35)
(cid:84)
(cid:3)
2,493 (cid:3)
2,358 (cid:3)
6,385 (cid:3)
5,(cid:22)29 (cid:3)
(cid:84) (cid:3)
563
35
(cid:84)
(cid:84)
(289)
(cid:84)
529
26
(cid:84)
(cid:84)
(420)
(cid:84)
63(cid:22)
104
3
354
(284)
(cid:84)
680
115
3
135
(2(cid:22)0)
((cid:22))
(cid:84)
25
10
(cid:84)
(35)
(cid:84)
2,802 (cid:3)
2,493 (cid:3)
(cid:22),199 (cid:3)
6,385 (cid:3)
(cid:84) (cid:3)
2
15
10
8
5
(cid:84)
(40)
(cid:84)
385
(cid:84)
(cid:84)
30
10
(cid:84)
(40)
(cid:84)
(cid:84)
(cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68) (cid:37)(cid:50)(cid:60)(cid:57)(cid:55)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:8) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)
(cid:3)
3,(cid:22)4(cid:22) (cid:3)
3,598 (cid:3)
(cid:22),159 (cid:3)
6,492 (cid:3)
3(cid:22)0 (cid:3)
(cid:28)(cid:49)(cid:57)(cid:66) (cid:44)(cid:49)(cid:60)(cid:69)(cid:53) (cid:63)(cid:54) (cid:38)(cid:60)(cid:49)(cid:62) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)(cid:8) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)
(cid:36)(cid:53)(cid:68) (cid:28)(cid:69)(cid:62)(cid:52)(cid:53)(cid:52) (cid:41)(cid:68)(cid:49)(cid:68)(cid:69)(cid:67) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:6)(cid:13)(cid:7)
(cid:3)
(cid:3)
(945) (cid:3)
(1,105) (cid:3)
40 (cid:3)
(10(cid:22)) (cid:3)
(3(cid:22)0) (cid:3)
(385)
(cid:23)(cid:61)(cid:63)(cid:69)(cid:62)(cid:68)(cid:67) (cid:40)(cid:53)(cid:51)(cid:63)(cid:55)(cid:62)(cid:57)(cid:74)(cid:53)(cid:52) (cid:57)(cid:62) (cid:68)(cid:56)(cid:53) (cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52)
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:41)(cid:56)(cid:53)(cid:53)(cid:68)(cid:67)(cid:22)
Other long-term assets
Accrued compensation and benefit costs
(cid:43)ension and other benefit liabilities
(cid:43)ost-retirement medical benefits
(cid:36)(cid:53)(cid:68) (cid:23)(cid:61)(cid:63)(cid:69)(cid:62)(cid:68)(cid:67) (cid:40)(cid:53)(cid:51)(cid:63)(cid:55)(cid:62)(cid:57)(cid:74)(cid:53)(cid:52)
(cid:23)(cid:51)(cid:51)(cid:69)(cid:61)(cid:69)(cid:60)(cid:49)(cid:68)(cid:53)(cid:52) (cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68) (cid:37)(cid:50)(cid:60)(cid:57)(cid:55)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
_____________
(1)
Includes under-funded and unfunded plans.
(cid:3)
(cid:84) (cid:3)
(cid:84) (cid:3)
61(cid:22) (cid:3)
451 (cid:3)
(cid:84) (cid:3)
(24)
(921)
(cid:84)
(25)
(1,080)
(cid:84)
(24)
(553)
(cid:84)
(22)
(536)
(cid:84)
(30)
(cid:84)
(340)
(945) (cid:3)
(1,105) (cid:3)
40 (cid:3)
(10(cid:22)) (cid:3)
(3(cid:22)0) (cid:3)
3,(cid:22)4(cid:22) (cid:3)
3,598 (cid:3)
(cid:22),018 (cid:3)
6,326
(cid:3)
(cid:3)
(cid:84)
(33)
(cid:84)
(352)
(385)
Benefit plans pre-tax amounts recogni(cid:80)ed in AOCL at December 31:
Net actuarial loss (gain)
(cid:43)rior service (credit) cost
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:38)(cid:66)(cid:53)(cid:9)(cid:68)(cid:49)(cid:72) (cid:60)(cid:63)(cid:67)(cid:67) (cid:6)(cid:55)(cid:49)(cid:57)(cid:62)(cid:7)
(cid:43)ension Benefits
U.S. (cid:43)lans
Non-U.S. (cid:43)lans
Retiree Health
2020
2019
2020
2019
2020
2019
(cid:3)
(cid:3)
8(cid:22)4 (cid:3)
1,059 (cid:3)
1,4(cid:22)1 (cid:3)
1,462 (cid:3)
(23) (cid:3)
(1)
(3)
2(cid:22)
22
(99)
8(cid:22)3 (cid:3)
1,056 (cid:3)
1,498 (cid:3)
1,484 (cid:3)
(122) (cid:3)
(29)
(164)
(193)
Xerox 2020 Annual Report 125
Xerox 2020 Annual Report 125
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.
(cid:43)(cid:62)(cid:52)(cid:53)(cid:66)(cid:54)(cid:69)(cid:62)(cid:52)(cid:53)(cid:52) (cid:38)(cid:60)(cid:49)(cid:62)(cid:67)(cid:22)
U.S.
Non U.S.
(cid:43)(cid:62)(cid:54)(cid:69)(cid:62)(cid:52)(cid:53)(cid:52) (cid:38)(cid:60)(cid:49)(cid:62)(cid:67)(cid:22)
U.S.
Non U.S.
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:43)(cid:62)(cid:52)(cid:53)(cid:66)(cid:54)(cid:69)(cid:62)(cid:52)(cid:53)(cid:52) (cid:49)(cid:62)(cid:52) (cid:43)(cid:62)(cid:54)(cid:69)(cid:62)(cid:52)(cid:53)(cid:52) (cid:38)(cid:60)(cid:49)(cid:62)(cid:67)(cid:22)
U.S.
Non U.S.
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
December 31, 2020
December 31, 2019
Accumulated
Benefit Obligation
Fair (cid:49)alue of
(cid:43)lan Assets
Accumulated
Benefit Obligation
Fair (cid:49)alue of
(cid:43)lan Assets
(cid:3)
(cid:3)
(cid:3)
(cid:3)
3,408 (cid:3)
921
2,802 (cid:3)
8(cid:22)3
3,261 (cid:3)
(cid:22)6(cid:22)
339 (cid:3)
502
(cid:84) (cid:3)
(cid:84)
33(cid:22) (cid:3)
469
3,(cid:22)4(cid:22) (cid:3)
1,423
5,1(cid:22)0 (cid:3)
2,802 (cid:3)
8(cid:22)3
3,6(cid:22)5 (cid:3)
3,598 (cid:3)
1,236
4,834 (cid:3)
2,493
69(cid:22)
(cid:84)
(cid:84)
2,493
69(cid:22)
3,190
Aggregate information for pension plans with a benefit obligation in excess of plan assets is presented below:
(cid:43)(cid:62)(cid:52)(cid:53)(cid:66)(cid:54)(cid:69)(cid:62)(cid:52)(cid:53)(cid:52) (cid:38)(cid:60)(cid:49)(cid:62)(cid:67)(cid:22)
U.S.
Non U.S.
(cid:43)(cid:62)(cid:54)(cid:69)(cid:62)(cid:52)(cid:53)(cid:52) (cid:38)(cid:60)(cid:49)(cid:62)(cid:67)(cid:22)
U.S.
Non U.S.
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:43)(cid:62)(cid:52)(cid:53)(cid:66)(cid:54)(cid:69)(cid:62)(cid:52)(cid:53)(cid:52) (cid:49)(cid:62)(cid:52) (cid:43)(cid:62)(cid:54)(cid:69)(cid:62)(cid:52)(cid:53)(cid:52) (cid:38)(cid:60)(cid:49)(cid:62)(cid:67)(cid:22)
U.S.
Non U.S.
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
December 31, 2020
December 31, 2019
Benefit Obligation
Fair (cid:49)alue of
(cid:43)lan Assets
Benefit Obligation
Fair (cid:49)alue of
(cid:43)lan Assets
(cid:3)
(cid:3)
(cid:3)
(cid:3)
3,408 (cid:3)
942
2,802 (cid:3)
8(cid:22)3
3,261 (cid:3)
(cid:22)80
339 (cid:3)
512
(cid:84) (cid:3)
(cid:84)
33(cid:22) (cid:3)
4(cid:22)9
3,(cid:22)4(cid:22) (cid:3)
1,454
5,201 (cid:3)
2,802 (cid:3)
8(cid:22)3
3,6(cid:22)5 (cid:3)
3,598 (cid:3)
1,259
4,85(cid:22) (cid:3)
2,493
69(cid:22)
(cid:84)
(cid:84)
2,493
69(cid:22)
3,190
Our pension plan assets and benefit obligations at December 31, 2020 were as follows:
U.S. funded
U.S. unfunded
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:43)(cid:10)(cid:41)(cid:10)
U.K.
Netherlands
Canada
(cid:34)ermany
Other
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
126
Fair (cid:49)alue of
(cid:43)ension (cid:43)lan
Assets
(cid:43)ension Benefit
Obligations
Net Funded Status
(cid:3)
2,802 (cid:3)
3,408 (cid:3)
(cid:84)
2,802
4,(cid:22)0(cid:22)
1,266
(cid:22)94
(cid:84)
432
339
3,(cid:22)4(cid:22)
4,218
1,226
(cid:22)9(cid:22)
395
523
(cid:3)
10,001 (cid:3)
10,906 (cid:3)
(606)
(339)
(945)
489
40
(3)
(395)
(91)
(905)
Xerox 2020 Annual Report 126
Table of Contents
The components of Net periodic benefit cost and other changes in plan assets and benefit obligations were as
follows:
(cid:52)ear Ended December 31,
(cid:43)ension Benefits
U.S. (cid:43)lans
Non-U.S. (cid:43)lans
Retiree Health
2020
2019
2018
2020
2019
2018
2020
2019
2018
(cid:25)(cid:63)(cid:61)(cid:64)(cid:63)(cid:62)(cid:53)(cid:62)(cid:68)(cid:67) (cid:63)(cid:54) (cid:36)(cid:53)(cid:68) (cid:38)(cid:53)(cid:66)(cid:57)(cid:63)(cid:52)(cid:57)(cid:51)
(cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68) (cid:25)(cid:63)(cid:67)(cid:68)(cid:67)(cid:22)
Service cost
Interest cost(1)
Expected return on plan assets(2)
Recogni(cid:80)ed net actuarial loss (gain)
Amorti(cid:80)ation of prior service credit
Recogni(cid:80)ed settlement loss
Recogni(cid:80)ed curtailment gain
Defined Benefit (cid:43)lans
Defined contribution plans
(cid:36)(cid:53)(cid:68) (cid:38)(cid:53)(cid:66)(cid:57)(cid:63)(cid:52)(cid:57)(cid:51) (cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68) (cid:25)(cid:63)(cid:67)(cid:68) (cid:6)(cid:25)(cid:66)(cid:53)(cid:52)(cid:57)(cid:68)(cid:7)
(cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:51)(cid:56)(cid:49)(cid:62)(cid:55)(cid:53)(cid:67) (cid:57)(cid:62) (cid:64)(cid:60)(cid:49)(cid:62) (cid:49)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52)
(cid:50)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68) (cid:63)(cid:50)(cid:60)(cid:57)(cid:55)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67) (cid:66)(cid:53)(cid:51)(cid:63)(cid:55)(cid:62)(cid:57)(cid:74)(cid:53)(cid:52) (cid:57)(cid:62)
(cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:25)(cid:63)(cid:61)(cid:64)(cid:66)(cid:53)(cid:56)(cid:53)(cid:62)(cid:67)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
(cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:7)(cid:22)
Net actuarial (gain) loss(3)
(cid:43)rior service cost (credit)
Amorti(cid:80)ation of net actuarial (loss)
gain
Amorti(cid:80)ation of net prior service
credit
Curtailment gain
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:51)(cid:63)(cid:55)(cid:62)(cid:57)(cid:74)(cid:53)(cid:52) (cid:57)(cid:62) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66)
(cid:25)(cid:63)(cid:61)(cid:64)(cid:66)(cid:53)(cid:56)(cid:53)(cid:62)(cid:67)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:7)(cid:6)(cid:16)(cid:7)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:40)(cid:53)(cid:51)(cid:63)(cid:55)(cid:62)(cid:57)(cid:74)(cid:53)(cid:52) (cid:57)(cid:62) (cid:36)(cid:53)(cid:68) (cid:38)(cid:53)(cid:66)(cid:57)(cid:63)(cid:52)(cid:57)(cid:51)
(cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68) (cid:25)(cid:63)(cid:67)(cid:68) (cid:49)(cid:62)(cid:52) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66)
(cid:25)(cid:63)(cid:61)(cid:64)(cid:66)(cid:53)(cid:56)(cid:53)(cid:62)(cid:67)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:7)
(cid:3)
2 (cid:3)
2 (cid:3)
2 (cid:3)
20 (cid:3)
22 (cid:3)
2(cid:22) (cid:3)
2 (cid:3)
2 (cid:3)
196
(21(cid:22))
2(cid:22)
(2)
53
(cid:84)
59
1
60
218
(210)
24
(2)
93
(cid:84)
125
26
151
63
(6(cid:22))
22
(2)
1(cid:22)3
(cid:84)
191
3(cid:22)
228
113
(191)
153
(233)
149
(244)
58
(1)
1
(1)
(1)
18
1(cid:22)
43
(2)
1
(cid:84)
(16)
23
(cid:22)
56
(4)
1
(1)
(16)
29
13
(105)
(cid:84)
243
(cid:84)
(50)
(cid:84)
(9)
4
24
(cid:84)
33
41
(80)
(11(cid:22))
(195)
(59)
(44)
(5(cid:22))
2
(cid:84)
2
(cid:84)
2
(cid:84)
1
1
2
(cid:84)
(183)
128
(243)
(62)
(18)
4
1
22
12
(cid:84)
(1)
((cid:22)6)
(cid:84)
(cid:84)
(63)
n(cid:14)a
(63)
4
(11)
1
(cid:22)6
(cid:84)
(cid:22)0
15
(cid:84)
(5)
((cid:22)(cid:22))
(cid:84)
(cid:84)
(65)
n(cid:14)a
(65)
8
(cid:84)
5
(cid:22)(cid:22)
(cid:84)
90
4
23
(cid:84)
(cid:84)
(19)
(cid:84)
(cid:84)
8
n(cid:14)a
8
(63)
(234)
(cid:84)
19
(cid:84)
(2(cid:22)8)
(cid:3)
(123) (cid:3)
2(cid:22)9 (cid:3)
(15) (cid:3)
(45) (cid:3)
(11) (cid:3)
35 (cid:3)
(cid:22) (cid:3)
25 (cid:3)
(2(cid:22)0)
_____________
(1)
Interest cost for (cid:40)ension Benefits includes interest expense on non-TR(cid:25) obligations of (cid:3)1(cid:21)(cid:17), (cid:3)2(cid:17)(cid:16) and (cid:3)2(cid:18)(cid:21) and interest expense (income)
directly allocated to TR(cid:25) participant accounts of (cid:3)12(cid:18), (cid:3)12(cid:21) and (cid:3)((cid:17)(cid:19)) for the years ended December (cid:16)1, 2(cid:13)2(cid:13), 2(cid:13)1(cid:22) and 2(cid:13)1(cid:21),
respectively.
(2) (cid:29)xpected return on plan assets includes expected investment income on non-TR(cid:25) assets of (cid:3)2(cid:21)(cid:16), (cid:3)(cid:16)1(cid:18) and (cid:3)(cid:16)(cid:18)(cid:20) and actual investment
income (loss) on TR(cid:25) assets of (cid:3)12(cid:18), (cid:3)12(cid:21) and (cid:3)((cid:17)(cid:19)) for the years ended December (cid:16)1, 2(cid:13)2(cid:13), 2(cid:13)1(cid:22) and 2(cid:13)1(cid:21), respectively.
((cid:16)) The non-(cid:45).(cid:43). plans (cid:38)et actuarial (gain) loss for 2(cid:13)1(cid:21) reflects an out-of-period adjustment in third (cid:67)uarter 2(cid:13)1(cid:21) of (cid:3)((cid:18)(cid:16)) to correct an
overstated benefit obligation for our (cid:45).(cid:35). (cid:30)inal (cid:43)alary (cid:40)ension (cid:40)lan at December (cid:16)1, 2(cid:13)1(cid:20). Refer to (cid:38)ote 1 - Basis of (cid:40)resentation and
(cid:43)ummary of (cid:43)ignificant (cid:25)ccounting (cid:40)olicies for additional information regarding this adjustment.
((cid:17)) (cid:25)mounts represent the pre-tax effect included in Other comprehensive income (loss). Refer to (cid:38)ote 2(cid:18) - Other (cid:27)omprehensive Income
((cid:36)oss) for the related tax effects and the net of tax amounts.
(cid:38)(cid:60)(cid:49)(cid:62) (cid:23)(cid:61)(cid:53)(cid:62)(cid:52)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)
(cid:38)(cid:53)(cid:62)(cid:67)(cid:57)(cid:63)(cid:62)(cid:22)
In October 2018, the High Court of (cid:37)ustice in the United Kingdom (the High Court) ruled that Lloyds Ban(cid:65) (cid:43)LC was
required to equali(cid:80)e 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 199(cid:22). The inequalities arose from statutory differences in the retirement ages and rates of accrual of
benefits for men and women related to (cid:34)uaranteed (cid:40)inimum (cid:43)ension ((cid:34)(cid:40)(cid:43)) benefits that are included in U.K.
defined benefit pension plans.
Based on the above ruling, we currently estimate the cost of equali(cid:80)ation under the minimum cost approach
permitted by the High Court(cid:85)s ruling to be approximately 1.2(cid:4) of our U.K. defined benefit plan obligation at
December 31, 2018 or approximately (cid:34)B(cid:43) 33 million (approximately USD (cid:3)42). This increase in the benefit
obligation was recorded as a plan amendment in 2018. In November 2020, the High Court made another ruling in
this matter related to benefit transfers out of the plan prior to the date of the 2018 ruling, which increased our
estimated cost of equali(cid:80)ation by a further (cid:34)B(cid:43) 3 million (approximately USD (cid:3)4). Consistent with our approach to
the estimate in 2018, the increase in the benefit obligation was recorded as a plan amendment in 2020 and together
with the 2018 ad(cid:64)ustment will be amorti(cid:80)ed to future net periodic benefit costs as a prior service cost (total
approximately USD (cid:3)2 per year covering both ad(cid:64)ustments).
Xerox 2020 Annual Report 127
Xerox 2020 Annual Report 12(cid:22)
Table of Contents
The aggregate amount recorded for this matter continues to reflect our best estimate of the impact from these
rulings. However, several significant uncertainties remain and therefore our estimate is sub(cid:64)ect to future change and
ad(cid:64)ustment. In particular, the cost is very sensitive to i) the method of (cid:34)(cid:40)(cid:43) equali(cid:80)ation(cid:26) ii) actuarial assumptions
and mar(cid:65)et conditions(cid:26) iii) the benefit structure of our plan and operational practices(cid:26) and iv) the demographic profile
of our plan. In addition, we are continuing to evaluate the acceptable methodologies that the High Court has
determined, and we still need to agree upon the appropriate methodology with our plan trustees.
(cid:40)(cid:53)(cid:68)(cid:57)(cid:66)(cid:53)(cid:53) (cid:30)(cid:53)(cid:49)(cid:60)(cid:68)(cid:56) (cid:38)(cid:60)(cid:49)(cid:62)(cid:67)(cid:22)
In October 2020, we reduced the level of Company cost sharing for retiree health care benefits provided to certain
existing non-union retirees. This change to our U.S. Retiree Health (cid:43)lan is effective (cid:37)anuary 1, 2021. The change in
cost sharing is considered a negative plan amendment resulting in a reduction in the postretirement benefit
obligation of (cid:3)11. The amount for the plan amendment will be amorti(cid:80)ed to future net periodic benefit costs as a
prior service credit.
In December 2018, we amended our Canadian Retiree Health (cid:43)lan to eliminate coverage for certain future and
existing retirees. This negative plan amendment resulted in a reduction in the postretirement benefit obligation of
(cid:3)19, which is being amorti(cid:80)ed to future net periodic benefit costs as a prior service credit.
In October 2018, we amended our U.S. Retiree Health (cid:43)lan effective (cid:37)anuary 1, 2019, to reduce certain benefits for
existing non-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 in the postretirement
benefit obligation of (cid:3)283, which consisted of (cid:3)216 for the plan amendment and an actuarial gain of (cid:3)6(cid:22) related to
the required plan remeasurement upon amendment. The amount for the plan amendment is being amorti(cid:80)ed to
future net periodic benefit costs as a prior service credit.
(cid:38)(cid:60)(cid:49)(cid:62) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
(cid:25)(cid:69)(cid:66)(cid:66)(cid:53)(cid:62)(cid:68) (cid:23)(cid:60)(cid:60)(cid:63)(cid:51)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
As of the 2020 and 2019 measurement dates, the global pension plan assets were (cid:3)10,001 and (cid:3)8,8(cid:22)8,
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.
U.S. (cid:43)lans
Non-U.S. (cid:43)lans
December 31, 2020
Asset Class
Cash and cash equivalents
Equity Securities:
U.S.
International
Fixed Income Securities:
U.S. treasury securities
Debt security issued by
government agency
Corporate bonds
Derivatives
Real estate
(cid:43)rivate equity(cid:14)venture
capital
(cid:34)uaranteed insurance
contracts
Other(2)(3)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:28)(cid:49)(cid:57)(cid:66) (cid:44)(cid:49)(cid:60)(cid:69)(cid:53) (cid:63)(cid:54) (cid:38)(cid:60)(cid:49)(cid:62)
(cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
_____________
Level 1
(cid:3)
1(cid:22) (cid:3)
Level 2
Level 3
(cid:84) (cid:3) (cid:84) (cid:3)
Assets
measured
at NA(cid:49)(1)
Total
Level 1
Level 2
Level 3
Assets
measured
at NA(cid:49)(1)
Total
(cid:84) (cid:3)
1(cid:22) (cid:3)
401 (cid:3) (cid:84) (cid:3)
(cid:84) (cid:3)
(cid:84) (cid:3) 401
224
243
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:22)
(cid:84)
(cid:84)
325
(cid:22)8
1,252
11
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
31
(cid:84)
(cid:84)
(cid:84)
39
204
(cid:84)
(cid:84)
(cid:84)
(cid:84)
10
263
44(cid:22)
325
(cid:22)8
1,252
11
41
209
209
(cid:84)
(cid:84)
152
159
1(cid:22)8
559
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
21
56
321
(cid:22)(cid:22)
2,026
921
488
(cid:84)
(cid:84)
(cid:84)
38
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
234
151
1,031
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:22)(cid:22)
2,026
921
488
316
208
108
3
86
(cid:84)
1,55(cid:22)
1,560
(cid:84)
(cid:84)
86
59
(cid:3)
491 (cid:3) 1,666 (cid:3)
31 (cid:3)
614 (cid:3) 2,802 (cid:3) 1,159 (cid:3) 3,92(cid:22) (cid:3)
29(cid:22) (cid:3)
1,816 (cid:3) (cid:22),199
(1) (cid:27)ertain assets that are measured at fair value using the (cid:38)(cid:25)(cid:46) per share (or its e(cid:67)uivalent) practical expedient have not been classified in the
fair value hierarchy.
(2) Other (cid:38)(cid:25)(cid:46) includes mutual funds of (cid:3)(cid:20)(cid:16) (measured at (cid:38)(cid:25)(cid:46)) which are invested approximately (cid:20)(cid:13)(cid:4) in fixed income securities and
approximately (cid:16)(cid:13)(cid:4) in e(cid:67)uity securities.
((cid:16)) Other (cid:36)evel 1 includes net non-financial assets of (cid:3)(cid:20) (cid:45).(cid:43). and (cid:3)21 (cid:38)on-(cid:45).(cid:43)., respectively, such as due to(cid:12)from bro(cid:61)er, interest receivables
and accrued expenses.
128
Xerox 2020 Annual Report 128
Table of Contents
U.S. (cid:43)lans
Non-U.S. (cid:43)lans
December 31, 2019
Asset Class
Level 1
Level 2
Level 3
Assets
measured
at NA(cid:49)(1)
Total
Level 1
Level 2
Level 3
Assets
measured
at NA(cid:49)(1)
Total
Cash and cash equivalents
(cid:3)
9 (cid:3)
(cid:84) (cid:3)
(cid:84) (cid:3)
(cid:84) (cid:3)
9 (cid:3)
421 (cid:3)
(cid:84) (cid:3)
(cid:84) (cid:3)
(cid:84) (cid:3) 421
Equity Securities:
U.S.
International
Fixed Income Securities:
U.S. treasury securities
Debt security issued by
government agency
Corporate bonds
Derivatives
Real estate
(cid:43)rivate equity(cid:14)venture
capital
(cid:34)uaranteed insurance
contracts
Other(2)(3)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:28)(cid:49)(cid:57)(cid:66) (cid:44)(cid:49)(cid:60)(cid:69)(cid:53) (cid:63)(cid:54) (cid:38)(cid:60)(cid:49)(cid:62)
(cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
_____________
182
193
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(36)
(cid:84)
(cid:84)
316
6(cid:22)
1,119
45
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
5
(cid:84)
(cid:84)
(cid:84)
39
191
(cid:84)
(cid:84)
(cid:84)
(cid:84)
10
221
384
316
6(cid:22)
1,119
45
15
199
199
(cid:84)
154
(cid:84)
118
132
462
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
11
52
302
4(cid:22)
1,825
841
186
(cid:84)
(cid:84)
(cid:84)
31
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
118
(cid:84)
(cid:84)
(cid:84)
(cid:84)
219
116
184
882
4(cid:22)
1,825
841
186
335
5
90
(cid:84)
1,52(cid:22)
1,532
(cid:84)
(cid:84)
90
42
(cid:3)
348 (cid:3) 1,54(cid:22) (cid:3)
5 (cid:3)
593 (cid:3) 2,493 (cid:3) 1,026 (cid:3) 3,284 (cid:3)
314 (cid:3)
1,(cid:22)61 (cid:3) 6,385
(1) (cid:27)ertain assets that are measured at fair value using the (cid:38)(cid:25)(cid:46) per share (or its e(cid:67)uivalent) practical expedient have not been classified in the
fair value hierarchy.
(2) Other (cid:38)(cid:25)(cid:46) includes mutual funds of (cid:3)(cid:20)(cid:19) (measured at (cid:38)(cid:25)(cid:46)) which are invested approximately (cid:20)(cid:18)(cid:4) in fixed income securities and
approximately 2(cid:18)(cid:4) in e(cid:67)uity securities.
((cid:16)) Other (cid:36)evel 1 includes net non-financial (liabilities) assets of (cid:3)((cid:16)(cid:19)) (cid:45).(cid:43). and (cid:3)11 (cid:38)on-(cid:45).(cid:43)., respectively, such as due to(cid:12)from bro(cid:61)er, interest
receivables and accrued expenses.
The following tables represents a roll-forward of the defined benefit plans assets measured at fair value using
significant unobservable inputs (Level 3 assets):
U.S.
Real Estate
Real Estate
Non-U.S.
(cid:43)rivate Equity(cid:14)
(cid:49)enture Capital
(cid:34)uaranteed
Insurance
Contracts
Total
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:20)
(cid:43)urchases
Sales
Unreali(cid:80)ed gains
Currency translation
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:21)
(cid:43)urchases
(cid:3)
(cid:3)
Sales
Unreali(cid:80)ed losses
Currency translation
(cid:84) (cid:3)
210 (cid:3)
6 (cid:3)
92 (cid:3)
5
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
9
(cid:84)
(cid:84)
(5)
4
(cid:84)
2
(4)
2
(2)
5 (cid:3)
219 (cid:3)
5 (cid:3)
90 (cid:3)
2(cid:22)
(cid:84)
(1)
(cid:84)
(cid:84)
(15)
(8)
12
3
(cid:84)
(4)
(1)
(cid:84)
(4)
(8)
8
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:14)(cid:12)
(cid:3)
31 (cid:3)
208 (cid:3)
3 (cid:3)
86 (cid:3)
308
2
(9)
15
(2)
314
3
(19)
(20)
19
29(cid:22)
Xerox 2020 Annual Report 129
Xerox 2020 Annual Report 129
Table of Contents
(cid:34)(cid:53)(cid:70)(cid:53)(cid:60) (cid:15) (cid:44)(cid:49)(cid:60)(cid:69)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:35)(cid:53)(cid:68)(cid:56)(cid:63)(cid:52)
Our primary Level 3 assets are Real Estate and (cid:43)rivate Equity(cid:14)(cid:49)enture Capital investments. The fair value of our
real estate investment funds is based on the Net Asset (cid:49)alue (NA(cid:49)) of our ownership interest in the funds. NA(cid:49)
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(cid:14)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. The valuation techniques and inputs for our Level 3
assets have been consistently applied for all periods presented.
(cid:31)(cid:62)(cid:70)(cid:53)(cid:67)(cid:68)(cid:61)(cid:53)(cid:62)(cid:68) (cid:41)(cid:68)(cid:66)(cid:49)(cid:68)(cid:53)(cid:55)(cid:73)
The target asset allocations for our worldwide defined benefit pension plans were:
Equity investments
Fixed income investments
Real estate
(cid:43)rivate equity(cid:14)venture capital
Other
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:31)(cid:62)(cid:70)(cid:53)(cid:67)(cid:68)(cid:61)(cid:53)(cid:62)(cid:68) (cid:41)(cid:68)(cid:66)(cid:49)(cid:68)(cid:53)(cid:55)(cid:73)
U.S.
23(cid:4)
61(cid:4)
6(cid:4)
8(cid:4)
2(cid:4)
100(cid:4)
2020
Non-U.S.
15(cid:4)
44(cid:4)
4(cid:4)
22(cid:4)
15(cid:4)
100(cid:4)
U.S.
23(cid:4)
61(cid:4)
6(cid:4)
8(cid:4)
2(cid:4)
100(cid:4)
2019
Non-U.S.
14(cid:4)
46(cid:4)
5(cid:4)
24(cid:4)
11(cid:4)
100(cid:4)
(cid:50)e employ a total return investment approach whereby a mix of equities and fixed income investments are used to
maximi(cid:80)e the long-term return of plan assets for a prudent level of ris(cid:65). The intent of this strategy is to minimi(cid:80)e plan
expenses by exceeding the interest growth in long-term plan liabilities. Ris(cid:65) 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 ris(cid:65). 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.
stoc(cid:65)s, as well as growth, value and small and large capitali(cid:80)ations. Other assets such as real estate, private equity,
and hedge funds are used to improve portfolio diversification. Derivatives may be used to hedge mar(cid:65)et exposure in
an efficient and timely manner(cid:26) however, derivatives may not be used to leverage the portfolio beyond the mar(cid:65)et
value of the underlying investments. Investment ris(cid:65)s and returns are measured and monitored on an ongoing basis
through annual liability measurements and quarterly investment portfolio reviews.
(cid:27)(cid:72)(cid:64)(cid:53)(cid:51)(cid:68)(cid:53)(cid:52) (cid:34)(cid:63)(cid:62)(cid:55)(cid:9)(cid:68)(cid:53)(cid:66)(cid:61) (cid:40)(cid:49)(cid:68)(cid:53) (cid:63)(cid:54) (cid:40)(cid:53)(cid:68)(cid:69)(cid:66)(cid:62)
(cid:50)e employ a (cid:86)building bloc(cid:65)(cid:87) approach in determining the long-term rate of return for plan assets. Historical mar(cid:65)ets
are studied and long-term relationships between equities and fixed income are assessed. Current mar(cid:65)et factors
such as inflation and interest rates are evaluated before long-term capital mar(cid:65)et assumptions are determined. The
long-term portfolio return is established giving consideration to investment diversification and rebalancing. (cid:43)eer data
and historical returns are reviewed periodically to assess reasonableness and appropriateness.
(cid:25)(cid:63)(cid:62)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
The following table summari(cid:80)es cash contributions to our defined benefit pension plans and retiree health benefit
plans.
U.S. (cid:43)lans
Non-U.S. (cid:43)lans
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
Retiree Health
(cid:52)ear Ended December 31,
2020
Estimated
2021
(cid:3)
(cid:3)
(cid:3)
35 (cid:3)
104
139 (cid:3)
25 (cid:3)
25
105
130
30
Contributions to our U.S. (cid:43)lans in 2020 include (cid:3)25 associated with our non-qualified plan and (cid:3)10 for one of our
tax-qualified defined benefit plans. Estimated contributions to our U.S. (cid:43)lans in 2021 are associated with our non-
qualified plan as no other amounts were required to meet the minimum funding requirements for our tax qualified
plans.
130
Xerox 2020 Annual Report 130
Table of Contents
(cid:27)(cid:67)(cid:68)(cid:57)(cid:61)(cid:49)(cid:68)(cid:53)(cid:52) (cid:28)(cid:69)(cid:68)(cid:69)(cid:66)(cid:53) (cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68) (cid:38)(cid:49)(cid:73)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid
during the following years:
2021
2022
2023
2024
2025
(cid:52)ears 2026-2030
(cid:23)(cid:67)(cid:67)(cid:69)(cid:61)(cid:64)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
(cid:43)ension Benefits
U.S.
Non-U.S.
Total
Retiree Health
(cid:3)
360 (cid:3)
289 (cid:3)
649 (cid:3)
288
285
280
2(cid:22)4
1,214
294
301
306
312
1,64(cid:22)
582
586
586
586
2,861
30
29
28
26
25
10(cid:22)
(cid:50)eighted-average assumptions used to determine benefit obligations at the plan measurement dates:
Discount rate
Rate of compensation increase
Interest crediting rate
Discount rate
2020
(cid:43)ension Benefits
2019
2018
U.S.
Non-U.S.
U.S.
Non-U.S.
U.S.
Non-U.S.
2.2 (cid:4)
0.1 (cid:4)
2.8 (cid:4)
1.3 (cid:4)
2.6 (cid:4)
1.5 (cid:4)
3.1 (cid:4)
0.2 (cid:4)
2.8 (cid:4)
1.8 (cid:4)
2.6 (cid:4)
1.5 (cid:4)
4.2 (cid:4)
0.2 (cid:4)
2.8 (cid:4)
2.6 (cid:4)
2.6 (cid:4)
1.5 (cid:4)
Retiree Health
2020
2019
2018
2.2 (cid:4)
3.0 (cid:4)
4.1 (cid:4)
(cid:50)eighted-average assumptions used to determine net periodic benefit cost for years ended December 31:
Discount rate
Expected return on plan assets
Rate of compensation increase
Interest crediting rate
Discount rate
_____________
(cid:43)ension Benefits
2021
2020
2019
2018
U.S.
Non-U.S.
U.S.
Non-U.S.
U.S.
Non-U.S.
U.S.
Non-U.S.
2.2 (cid:4)
5.9 (cid:4)
0.1 (cid:4)
2.8 (cid:4)
1.3 (cid:4)
3.1 (cid:4)
2.6 (cid:4)
1.5 (cid:4)
3.1 (cid:4)
6.0 (cid:4)
0.2 (cid:4)
2.8 (cid:4)
1.8 (cid:4)
3.3 (cid:4)
2.6 (cid:4)
1.5 (cid:4)
4.2 (cid:4)
6.0 (cid:4)
0.2 (cid:4)
2.8 (cid:4)
2.6 (cid:4)
4.0 (cid:4)
2.6 (cid:4)
1.5 (cid:4)
3.6 (cid:4)
5.8 (cid:4)
0.2 (cid:4)
2.8 (cid:4)
2.3 (cid:4)
3.8 (cid:4)
2.6 (cid:4)
1.5 (cid:4)
Retiree Health
2021
2020
2019
2018
2.2 (cid:4)
3.0 (cid:4)
4.1 (cid:4)
3.5 (cid:4)
(cid:38)ote(cid:23) (cid:29)xpected 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:
Health care cost trend rate assumed for next year
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
(cid:52)ear that the rate reaches the ultimate trend rate
(cid:26)(cid:53)(cid:54)(cid:57)(cid:62)(cid:53)(cid:52) (cid:25)(cid:63)(cid:62)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:57)(cid:63)(cid:62) (cid:38)(cid:60)(cid:49)(cid:62)(cid:67)
December 31,
2020
2019
5.(cid:22) (cid:4)
4.3 (cid:4)
2025
6.0 (cid:4)
4.3 (cid:4)
2026
(cid:50)e 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 free(cid:80)e 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. (cid:50)e recorded charges related to our defined contribution plans of (cid:3)19 in 2020,
(cid:3)49 in 2019 and (cid:3)66 in 2018.
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Table of Contents
(cid:36)(cid:63)(cid:68)(cid:53) (cid:14)(cid:12) (cid:9) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:49)(cid:62)(cid:52) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:42)(cid:49)(cid:72)(cid:53)(cid:67)
Income before income taxes and equity income (pre-tax income) from continuing operations was as follows:
Domestic income
Foreign (loss) income
(cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:50)(cid:53)(cid:54)(cid:63)(cid:66)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:42)(cid:49)(cid:72)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:3)
(cid:3)
353 (cid:3)
(101)
252 (cid:3)
6(cid:22)9 (cid:3)
143
822 (cid:3)
The components of Income tax expense from continuing operations were as follows:
(cid:28)(cid:53)(cid:52)(cid:53)(cid:66)(cid:49)(cid:60) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:42)(cid:49)(cid:72)(cid:53)(cid:67)
Current
Deferred
(cid:28)(cid:63)(cid:66)(cid:53)(cid:57)(cid:55)(cid:62) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:42)(cid:49)(cid:72)(cid:53)(cid:67)
Current
Deferred
(cid:41)(cid:68)(cid:49)(cid:68)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:42)(cid:49)(cid:72)(cid:53)(cid:67)
Current
Deferred
(cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:42)(cid:49)(cid:72) (cid:27)(cid:72)(cid:64)(cid:53)(cid:62)(cid:67)(cid:53)
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:3)
3 (cid:3)
58
19
(34)
8
10
(3) (cid:3)
98
43
5
15
21
(cid:3)
64 (cid:3)
1(cid:22)9 (cid:3)
331
218
549
3(cid:22)
83
46
5(cid:22)
29
(5)
24(cid:22)
A reconciliation of the U.S. federal statutory income tax rate to the consolidated effective income tax rate was as
follows:
U.S. federal statutory income tax rate
Nondeductible expenses
Effect of tax law changes
Change in valuation allowance for deferred tax assets
State taxes, net of federal benefit
Audit and other tax return ad(cid:64)ustments
Tax-exempt income, credits and incentives
Foreign rate differential ad(cid:64)usted for U.S. taxation of foreign profits(1)
Stoc(cid:65)-based compensation
Other
(cid:27)(cid:54)(cid:54)(cid:53)(cid:51)(cid:68)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:42)(cid:49)(cid:72) (cid:40)(cid:49)(cid:68)(cid:53)
(cid:52)ear Ended December 31,
2020
2019
2018
21.0 (cid:4)
4.1 (cid:4)
(10.5) (cid:4)
9.9 (cid:4)
5.5 (cid:4)
1.4 (cid:4)
(5.9) (cid:4)
(2.6) (cid:4)
2.3 (cid:4)
0.2 (cid:4)
25.4 (cid:4)
21.0 (cid:4)
1.3 (cid:4)
(4.6) (cid:4)
2.0 (cid:4)
3.5 (cid:4)
0.6 (cid:4)
(2.1) (cid:4)
0.1 (cid:4)
(0.3) (cid:4)
0.3 (cid:4)
21.8 (cid:4)
21.0 (cid:4)
3.(cid:22) (cid:4)
14.5 (cid:4)
0.6 (cid:4)
2.3 (cid:4)
(1.8) (cid:4)
(2.2) (cid:4)
4.8 (cid:4)
0.2 (cid:4)
1.9 (cid:4)
45.0 (cid:4)
_____________
(1) The (cid:80)(cid:45).(cid:43). taxation of foreign profits(cid:81) represents the (cid:45).(cid:43). tax, net of foreign tax credits, associated with actual and deemed repatriations of
earnings from our non-(cid:45).(cid:43). subsidiaries.
On a consolidated basis, including discontinued operations, we paid a total of (cid:3)32, (cid:3)94 and (cid:3)80 in income taxes to
federal, foreign and state (cid:64)urisdictions during the three years ended December 31, 2020, 2019 and 2018,
respectively.
Total income tax expense (benefit) was allocated to the following items:
(cid:43)re-tax income
Discontinued operations(1)
(cid:25)(cid:63)(cid:61)(cid:61)(cid:63)(cid:62) (cid:67)(cid:56)(cid:49)(cid:66)(cid:53)(cid:56)(cid:63)(cid:60)(cid:52)(cid:53)(cid:66)(cid:67)(cid:5) (cid:53)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73)(cid:22)
Changes in defined benefit plans
Cash flow hedges
Translation ad(cid:64)ustments
Retained Earnings
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:42)(cid:49)(cid:72) (cid:27)(cid:72)(cid:64)(cid:53)(cid:62)(cid:67)(cid:53)
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:3)
64 (cid:3)
(cid:84)
1(cid:22)9 (cid:3)
95
43
1
(3)
(cid:84)
(55)
(1)
8
(cid:84)
(cid:3)
105 (cid:3)
226 (cid:3)
24(cid:22)
10
131
5
(9)
36
420
_____________
(1) Refer to (cid:38)ote (cid:19) - Divestitures for additional information regarding discontinued operations.
132
Xerox 2020 Annual Report 132
Table of Contents
(cid:43)(cid:62)(cid:66)(cid:53)(cid:51)(cid:63)(cid:55)(cid:62)(cid:57)(cid:74)(cid:53)(cid:52) (cid:42)(cid:49)(cid:72) (cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:23)(cid:69)(cid:52)(cid:57)(cid:68) (cid:40)(cid:53)(cid:67)(cid:63)(cid:60)(cid:69)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
(cid:50)e recogni(cid:80)e 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 li(cid:65)ely of being reali(cid:80)ed upon settlement - the more-
li(cid:65)ely-than-not recognition threshold. (cid:50)here we have determined that our tax return filing position does not satisfy
the more li(cid:65)ely than not recognition threshold, we have recorded no tax benefits. These assessments require the
use of considerable estimates and (cid:64)udgments 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 (cid:64)urisdictions. (cid:50)e are also sub(cid:64)ect to ongoing tax examinations in numerous (cid:64)urisdictions
due to the extensive geographical scope of our operations. As a result, we have received, and may in the future
receive, proposed tax ad(cid:64)ustments and tax assessments in multiple (cid:64)urisdictions. (cid:50)e regularly assess the li(cid:65)elihood
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, 2020, we do not believe that there are any positions for
which it is reasonably possible that the total amount of unrecogni(cid:80)ed tax benefits will significantly increase or
decrease within the next 12 months.
A reconciliation of the beginning and ending amount of unrecogni(cid:80)ed tax benefits is as follows:
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:32)(cid:49)(cid:62)(cid:69)(cid:49)(cid:66)(cid:73) (cid:13)
Additions related to current year
Additions related to prior years positions
Reductions related to prior years positions
Settlements with taxing authorities(1)
Reductions related to lapse of statute of limitations
Currency
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)
_____________
(1) The majority of settlements did not result in the utili(cid:76)ation of cash.
2020
2019
2018
(cid:3)
12(cid:22) (cid:3)
108 (cid:3)
3
8
(10)
(8)
((cid:22))
2
42
1(cid:22)
(36)
(1)
(3)
(cid:84)
(cid:3)
115 (cid:3)
12(cid:22) (cid:3)
125
2
3
(13)
(6)
(3)
(cid:84)
108
Included in the balances at December 31, 2020, 2019 and 2018 are (cid:3)8, (cid:3)3 and (cid:3)8, respectively, of tax positions that
are highly certain of reali(cid:80)ability but for which there is uncertainty about the timing or that they may be reduced
through an indirect benefit from other taxing (cid:64)urisdictions. 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.
(cid:50)ithin income tax expense, we recogni(cid:80)e interest and penalties accrued on unrecogni(cid:80)ed tax benefits, as well as
interest received from favorable settlements. (cid:50)e had (cid:3)4, (cid:3)2 and (cid:3)2 accrued for the payment of interest and
penalties associated with unrecogni(cid:80)ed tax benefits at December 31, 2020, 2019 and 2018, respectively.
In the U.S., we are no longer sub(cid:64)ect to U.S. federal income tax examinations for years before 2015. (cid:50)ith respect to
our ma(cid:64)or foreign (cid:64)urisdictions, we are no longer sub(cid:64)ect to tax examinations by tax authorities for years before 2011.
(cid:26)(cid:53)(cid:54)(cid:53)(cid:66)(cid:66)(cid:53)(cid:52) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:42)(cid:49)(cid:72)(cid:53)(cid:67)
At December 31, 2020 we have not provided deferred taxes on our undistributed pre-198(cid:22) E(cid:5)(cid:43) of approximately
(cid:3)360, 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. The increase from the amount at December
31, 2019 of (cid:3)350 is due to foreign currency translation ad(cid:64)ustments. 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 unrecogni(cid:80)ed deferred
taxes related to these components is not practicable.
Xerox 2020 Annual Report 133
Xerox 2020 Annual Report 133
Table of Contents
The tax effects of temporary differences that give rise to significant portions of the deferred taxes were as follows:
(cid:26)(cid:53)(cid:54)(cid:53)(cid:66)(cid:66)(cid:53)(cid:52) (cid:42)(cid:49)(cid:72) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68)(cid:67)
Research and development
(cid:43)ost-retirement medical benefits
Net operating losses
Operating reserves, accruals and deferrals
Tax credit carryforwards
Deferred and share-based compensation
(cid:43)ension
Depreciation
Operating lease liabilities
Other
(cid:41)(cid:69)(cid:50)(cid:68)(cid:63)(cid:68)(cid:49)(cid:60)
(cid:49)aluation allowance
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
(cid:26)(cid:53)(cid:54)(cid:53)(cid:66)(cid:66)(cid:53)(cid:52) (cid:42)(cid:49)(cid:72) (cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
Finance lease and installment sales
Intangibles and goodwill
Unremitted earnings of foreign subsidiaries
Operating lease ROU assets
Other
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:26)(cid:53)(cid:54)(cid:53)(cid:66)(cid:66)(cid:53)(cid:52) (cid:42)(cid:49)(cid:72)(cid:53)(cid:67)(cid:8) (cid:36)(cid:53)(cid:68)
(cid:40)(cid:53)(cid:51)(cid:63)(cid:62)(cid:51)(cid:57)(cid:60)(cid:57)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:68)(cid:63) (cid:68)(cid:56)(cid:53) (cid:25)(cid:63)(cid:62)(cid:67)(cid:63)(cid:60)(cid:57)(cid:52)(cid:49)(cid:68)(cid:53)(cid:52) (cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:41)(cid:56)(cid:53)(cid:53)(cid:68)(cid:67)
Deferred tax assets
Deferred tax liabilities(1)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:26)(cid:53)(cid:54)(cid:53)(cid:66)(cid:66)(cid:53)(cid:52) (cid:42)(cid:49)(cid:72)(cid:53)(cid:67)(cid:8) (cid:36)(cid:53)(cid:68)
December 31,
2020
2019(2)
(cid:3)
150 (cid:3)
94
3(cid:22)(cid:22)
124
249
13
211
35
82
44
1,3(cid:22)9
(396)
983 (cid:3)
24(cid:22) (cid:3)
140
31
(cid:22)6
16
510 (cid:3)
4(cid:22)3 (cid:3)
508 (cid:3)
(35)
4(cid:22)3 (cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
143
98
389
115
231
26
298
16
84
63
1,463
(399)
1,064
240
128
39
(cid:22)8
18
503
561
598
(3(cid:22))
561
_____________
(1) Represents the deferred tax liabilities recorded in Other long-term liabilities - refer to (cid:38)ote 1(cid:18) - (cid:43)upplementary (cid:30)inancial Information.
(2) The deferred tax assets and liabilities disclosure at December (cid:16)1, 2(cid:13)1(cid:22) has been adjusted to primarily reflect the tax effect of the gross
deferred tax Operating (cid:36)ease (RO(cid:45)) (cid:25)ssets and the tax effect of the related gross deferred tax Operating lease liabilities recogni(cid:76)ed in
accordance with (cid:25)(cid:43)(cid:27) (cid:21)(cid:17)2. There was no impact on Total Deferred Taxes, (cid:38)et from this adjustment.
(cid:50)e 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 reali(cid:80)ability and, where applicable, a valuation allowance is recorded to reduce the total deferred tax
asset to an amount that will, more-li(cid:65)ely-than-not, be reali(cid:80)ed in the future. (cid:50)e apply (cid:64)udgment in assessing the
reali(cid:80)ability of these deferred tax assets and the need for any valuation allowances. In determining the amount of
deferred tax assets that are more-li(cid:65)ely-than-not to be reali(cid:80)ed, we considered historical profitability, pro(cid:64)ected future
taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies.
The deferred tax assets requiring significant (cid:64)udgment are U.S. tax credit carryforwards with a limited life.
The net change in the total valuation allowance for the years ended December 31, 2020, 2019 and 2018 was a
decrease of (cid:3)3, an increase of (cid:3)2 and a decrease of (cid:3)38, 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-li(cid:65)ely-than-not that these items will not be reali(cid:80)ed in the ordinary course of operations.
Although reali(cid:80)ation is not assured, we have concluded that it is more-li(cid:65)ely-than-not that the deferred tax assets,
for which a valuation allowance was determined to be unnecessary, will be reali(cid:80)ed in the ordinary course of
operations based on the available positive and negative evidence, including scheduling of deferred tax liabilities and
pro(cid:64)ected income from operating activities. The amount of the net deferred tax assets considered reali(cid:80)able,
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.
134
Xerox 2020 Annual Report 134
Table of Contents
At December 31, 2020, we had tax credit carryforwards of (cid:3)249 available to offset future income taxes, of which (cid:3)2
are available to carryforward indefinitely while the remaining (cid:3)24(cid:22) will expire 2021 through 2041 if not utili(cid:80)ed. (cid:50)e
also had net operating loss carryforwards for income tax purposes of (cid:3)600 that will expire 2021 through 2041, if not
utili(cid:80)ed, and (cid:3)1.(cid:22) billion available to offset future taxable income indefinitely.
(cid:36)(cid:63)(cid:68)(cid:53) (cid:14)(cid:13) (cid:75) (cid:25)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55)(cid:53)(cid:62)(cid:51)(cid:57)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:34)(cid:57)(cid:68)(cid:57)(cid:55)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
As more fully discussed below, we are involved in a variety of claims, lawsuits, investigations and proceedings
concerning: securities law(cid:26) governmental entity contracting, servicing and procurement law(cid:26) intellectual property law(cid:26)
environmental law(cid:26) employment law(cid:26) the Employee Retirement Income Security Act (ERISA)(cid:26) and other laws and
regulations. (cid:50)e determine whether an estimated loss from a contingency should be accrued by assessing whether
a loss is deemed probable and can be reasonably estimated. (cid:50)e assess our potential liability by analy(cid:80)ing our
litigation and regulatory matters using available information. (cid:50)e 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 recogni(cid:80)e a
material accrual, or should any of these matters result in a final adverse (cid:64)udgment 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, (cid:64)udgment or settlement occurs.
Additionally, guarantees, indemnifications and claims 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 underta(cid:65)es 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 sub(cid:64)ect 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 recogni(cid:80)ed,
management does not anticipate they will have a material adverse effect on the Company's consolidated financial
position or liquidity. As of December 31, 2020, we have accrued our estimate of liability incurred under our
indemnification arrangements and guarantees.
(cid:24)(cid:66)(cid:49)(cid:74)(cid:57)(cid:60) (cid:25)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55)(cid:53)(cid:62)(cid:51)(cid:57)(cid:53)(cid:67)
Our Bra(cid:80)ilian operations have received or been the sub(cid:64)ect 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. (cid:50)e 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 Bra(cid:80)ilian tax contingencies:
Tax contingency - unreserved
Escrow cash deposits
Surety bonds
Letters of credit
Liens on Bra(cid:80)ilian assets
December 31,
2020
December 31,
2019
(cid:3)
355 (cid:3)
39
112
(cid:22)8
(cid:84)
442
51
135
91
(cid:84)
The decrease in the unreserved portion of the tax contingency, inclusive of any related interest, was primarily
related to closed cases. (cid:50)ith respect to the unreserved tax contingency, the ma(cid:64)ority has been assessed by
management as being remote as to the li(cid:65)elihood of ultimately resulting in a loss to the Company. In connection with
the above proceedings, customary local regulations may require us to ma(cid:65)e 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. (cid:34)enerally, any escrowed amounts would be refundable and any liens on assets
would be removed to the extent the matters are resolved in our favor. (cid:50)e 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, 2020. (cid:50)e routinely assess all these matters as to probability of ultimately incurring a liability against
our Bra(cid:80)ilian operations and record our best estimate of the ultimate loss in situations where we assess the
li(cid:65)elihood of an ultimate loss as probable.
Xerox 2020 Annual Report 135
Xerox 2020 Annual Report 135
Table of Contents
(cid:34)(cid:57)(cid:68)(cid:57)(cid:55)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:23)(cid:55)(cid:49)(cid:57)(cid:62)(cid:67)(cid:68) (cid:68)(cid:56)(cid:53) (cid:25)(cid:63)(cid:61)(cid:64)(cid:49)(cid:62)(cid:73)
Pen(cid:36)ing (cid:23)itigation (cid:27)elating to t(cid:40)e Fu(cid:42)i (cid:29)ransaction:
(cid:8)(cid:6) (cid:27)i(cid:34)(cid:34)e v(cid:6) (cid:21)aco(cid:34)son(cid:4) et al(cid:6):
On April 11, 2019, Carmen Ribbe filed a putative derivative and class action stoc(cid:65)holder complaint in the Supreme
Court of the State of New (cid:52)or(cid:65) for New (cid:52)or(cid:65) County, naming as defendants Xerox, current Board members (cid:37)oseph
(cid:37). Echevarria, Cheryl (cid:34)ordon Krongard, Keith Co(cid:80)(cid:80)a, (cid:34)iovanni (cid:34). (cid:49)isentin, (cid:37)onathan Christodoro, Nicholas
(cid:34)ra(cid:80)iano, and A. Scott Letier, and former Board members (cid:37)effrey (cid:37)acobson, (cid:50)illiam Curt Hunter, Robert (cid:37). Keegan,
Charles (cid:43)rince, Ann N. Reese, Stephen H. Rusc(cid:65)ows(cid:65)i, (cid:34)regory (cid:44). Brown, and Sara (cid:40)artine(cid:80) Tuc(cid:65)er. (cid:43)laintiff
previously filed a putative shareholder derivative lawsuit on (cid:40)ay 24, 2018 against certain of these defendants, as
well as others, in the same court(cid:26) that lawsuit was dismissed without pre(cid:64)udice on December 6, 2018. The new
complaint included putative derivative claims on behalf of Xerox for breach of fiduciary duty against the then
members of the Xerox Board who approved Xerox(cid:85)s entry into agreements to settle shareholder actions filed in
2018 in the same court against Xerox, its then directors, and FU(cid:37)IFIL(cid:40) Holdings Corporation ((cid:86)Fu(cid:64)ifilm(cid:87)) in
connection with a proposed transaction announced in (cid:37)anuary 2018 to combine Xerox and Fu(cid:64)i Xerox (the (cid:86)Fu(cid:64)i
Transaction(cid:87)), including a consolidated putative class action, In re Xerox Corporation Consolidated Shareholder
Litigation ((cid:86)XCCSL(cid:87)), and actions filed by Darwin Deason, Deason v. Fu(cid:64)ifilm Holdings Corp., et al. and Deason v.
Xerox Corporation, et al., against the same defendants as well as, in the first Deason action, former Xerox Chief
Executive Officer Ursula (cid:40). Burns (the (cid:2)Fu(cid:64)i Transaction Shareholder Lawsuits(cid:2)). (cid:43)laintiff alleged that the
settlements ceded control of the Board and the Company to Darwin Deason and Carl C. Icahn without a vote by, or
compensation to, other Xerox stoc(cid:65)holders(cid:26) improperly provided certain benefits and releases to the resigning and
continuing directors(cid:26) and sub(cid:64)ected Xerox to potential breach of contract damages in an action by Fu(cid:64)i relating to
Xerox(cid:85)s termination of the proposed Fu(cid:64)i Transaction. (cid:43)laintiff also alleged that the current Board members
breached their fiduciary duties by allegedly re(cid:64)ecting plaintiff(cid:85)s (cid:37)anuary 14, 2019 shareholder demand on the Board
to remedy harms arising from entry into the Deason and XCCSL settlements. The new complaint further included
direct claims for breach of fiduciary duty on behalf of a putative class of current Xerox stoc(cid:65)holders other than (cid:40)r.
Deason, (cid:40)r. Icahn, and their affiliated entities (the (cid:86)Ribbe Class(cid:87)) against the defendants for causing Xerox to enter
into the Deason and XCCSL settlements, which plaintiff alleged perpetuated control of Xerox by (cid:40)r. Icahn and (cid:40)r.
Deason and denied the voting franchise of Xerox shareholders. Among other things, plaintiff sought damages in an
unspecified amount for the alleged fiduciary breaches in favor of Xerox against defendants (cid:64)ointly and severally(cid:26)
rescission or reformation of the Deason and XCCSL settlements(cid:26) restitution of funds paid to the resigning directors
under the Deason settlement(cid:26) an in(cid:64)unction against defendants(cid:85) engaging in the alleged wrongful practices and
equitable relief affording the putative Ribbe Class the ability to determine the composition of the Board(cid:26) costs and
attorneys(cid:85) fees(cid:26) and other further relief as the Court may deem proper.
Defendants accepted service of the complaint as of (cid:40)ay 16, 2019. On (cid:37)une 4, 2019, the Court entered an order
setting a briefing schedule for defendants(cid:85) motions to dismiss the complaint. On (cid:37)uly 12, 2019, plaintiff filed a motion
to preclude defendants from referencing in their motions to dismiss the formation of, or wor(cid:65) by, the committee of
the Board established to investigate plaintiff(cid:85)s shareholder demand. On (cid:37)uly 18, 2019, the Court denied plaintiff(cid:85)s
motion and ad(cid:64)ourned sine die the deadline by which defendants must file any motions to dismiss the complaint.
On (cid:37)anuary 6, 2020, plaintiff filed his first amended complaint ((cid:86)FAC(cid:87)). The FAC included many of plaintiff(cid:85)s original
allegations regarding the 2018 shareholder litigation and settlements, as well as additional allegations, including,
among others, that the members of the Special Committee of the Board that investigated plaintiff(cid:85)s demand lac(cid:65)ed
independence and wrongfully refused to pursue the claims in the demand(cid:26) allegations that an agreement
announced in November 2019 for, among other things, the sale by Xerox of its interest in Fu(cid:64)i Xerox to Fu(cid:64)ifilm and
dismissal of Fu(cid:64)ifilm(cid:85)s breach of contract lawsuit against Xerox (the (cid:86)FX Sale Transaction(cid:87)), was unfavorable to
Xerox(cid:26) and allegations about a potential acquisition by Xerox of H(cid:43) similar to those in the (cid:40)iami Firefighters
derivative action described below. In addition to the claims in the April 11, 2019 complaint, the FAC added as
defendants Carl C. Icahn, Icahn Capital L(cid:43), and High River Limited (cid:43)artnership (the (cid:86)Icahn defendants(cid:87)) and
asserted claims against those defendants and the Board similar to those in (cid:40)iami Firefighters relating to the Icahn
defendants(cid:85) purchases of H(cid:43) stoc(cid:65) allegedly with (cid:65)nowledge of material nonpublic information concerning Xerox(cid:85)s
potential acquisition of H(cid:43). In addition to the relief sought in Ribbe(cid:85)s prior complaint, the FAC sought relief similar to
that sought in (cid:40)iami Firefighters relating to the Icahn defendants(cid:85) alleged purchases of H(cid:43) stoc(cid:65).
On (cid:37)anuary 21, 2020, plaintiff in the (cid:40)iami Firefighters action filed a motion see(cid:65)ing to intervene in Ribbe and to
have stayed, or alternatively, severed and consolidated with the (cid:40)iami Firefighters action, any claims first filed in
(cid:40)iami Firefighters and later asserted by Ribbe. At a conference held on February 25, 2020, the Court denied the
motion to intervene without pre(cid:64)udice. On (cid:40)arch 6, 2020, plaintiff in the (cid:40)iami Firefighters action renewed its
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motion. On (cid:37)uly 23, 2020, after hearing oral argument, the Court issued an order denying the motion and setting
certain case deadlines.
Discovery commenced. On August (cid:22), 2020, Xerox, the director defendants, and the Icahn defendants filed separate
motions to dismiss. On October 1, 2020, plaintiff filed a cross-motion see(cid:65)ing, among other relief, (cid:64)oinder of Xerox
Holdings Corporation as a nominal defendant. Briefing on the motions to dismiss and plaintiff(cid:85)s cross-motion was
completed on October 16, 2020. On December 14, 2020, following oral argument, the Court issued a decision and
order denying plaintiff(cid:85)s cross-motion and granting defendants(cid:85) motions, dismissing the action in its entirety as to all
defendants. Dismissal as to the Icahn defendants was conditioned on the filing of an affidavit, which the Icahn
defendants filed on December 16, 2020, indicating whether defendant Icahn gained a profit or incurred a loss on
purchases of H(cid:43) stoc(cid:65) during the relevant time period.
On (cid:37)anuary 13, 2021, plaintiff filed a notice of appeal of the December 14, 2020 dismissal order to the Appellate
Division, First Department.
Xerox will vigorously defend against this matter. At this time, it is premature to ma(cid:65)e any conclusion regarding the
probability of incurring material losses in this litigation. Should developments cause a change in our determination
as to an unfavorable outcome, or result in a final adverse (cid:64)udgment or settlement, there could be a material adverse
effect on our results of operations, cash flows and financial position in the period in which such change in
determination, (cid:64)udgment, or settlement occurs.
(cid:9)(cid:6) (cid:24)ia(cid:45)i Firefig(cid:40)ters(cid:58) (cid:27)elief (cid:2) Pension Fun(cid:36) v(cid:6) (cid:20)ca(cid:40)n(cid:4) et al(cid:6):
On December 13, 2019, alleged shareholder (cid:40)iami Firefighters(cid:85) Relief (cid:5) (cid:43)ension Fund ((cid:86)(cid:40)iami Firefighters(cid:87)) filed a
purported derivative complaint in New (cid:52)or(cid:65) State Supreme Court, New (cid:52)or(cid:65) County on behalf of Xerox Holdings
Corporation ((cid:2)Xerox Holdings(cid:2)) (as nominal defendant) against Carl Icahn and his affiliated entities High River
Limited (cid:43)artnership and Icahn Capital L(cid:43) (the (cid:2)Icahn defendants(cid:2)), Xerox Holdings, and all current Xerox Holdings
directors (the (cid:2)Directors(cid:2)). (cid:43)laintiff made no demand on the Board before bringing the action, but instead alleged
that doing so would be futile because the Directors lac(cid:65) independence due to alleged direct or indirect relationships
with Icahn. Among other things, the complaint alleged that Icahn controlled and dominated Xerox Holdings and
therefore owed a fiduciary duty of loyalty to Xerox Holdings, which he breached by acquiring H(cid:43) stoc(cid:65) at a time
when he (cid:65)new that Xerox Holdings was considering an offer to acquire H(cid:43) or had (cid:65)nowledge of the (cid:2)obvious merits(cid:2)
of such potential acquisition, and that the Icahn defendants(cid:85) holdings of H(cid:43) common stoc(cid:65) had risen in mar(cid:65)et value
by approximately (cid:3)128 since disclosure of the offer. The complaint included four causes of action: breach of
fiduciary duty of loyalty against the Icahn defendants(cid:26) breach of contract against the Icahn defendants (for
purchasing H(cid:43) stoc(cid:65) in violation of Icahn(cid:85)s confidentiality agreement with Xerox Holdings)(cid:26) un(cid:64)ust enrichment
against the Icahn defendants(cid:26) and breach of fiduciary duty of loyalty against the Directors (for any consent to the
Icahn defendants(cid:85) purchases of H(cid:43) common stoc(cid:65) while Xerox Holdings was considering acquiring H(cid:43)). The
complaint sought a (cid:64)udgment of breach of fiduciary duties against the Icahn defendants and the Directors(cid:26) a
declaration that Icahn breached his confidentiality agreement with Xerox Holdings(cid:26) a constructive trust on Icahn
Capital and High River's investments in H(cid:43) securities(cid:26) disgorgement to Xerox Holdings of profits Icahn Capital and
High River earned from trading in H(cid:43) stoc(cid:65)(cid:26) payment of unspecified damages by the Directors for breaching
fiduciary duties(cid:26) and attorneys' fees, costs, and other relief the Court deems (cid:64)ust and proper. On (cid:37)anuary 15, 2020,
the Court entered an order granting plaintiff(cid:85)s unopposed motion to consolidate with (cid:40)iami Firefighters a similar
action filed on December 26, 2019 by alleged shareholder Steven (cid:37). Reynolds against the same parties in the same
court, and designating (cid:40)iami Firefighters(cid:85) counsel as lead counsel in the consolidated action. On (cid:37)anuary 21, 2020,
plaintiff filed a motion see(cid:65)ing to intervene in Ribbe v. (cid:37)acobson, et al., described above, and to have stayed, or
alternatively, severed and consolidated with this action, any claims first filed in this action and later asserted by
Ribbe. At a conference held on February 25, 2020, the Court denied the motion to intervene without pre(cid:64)udice. On
(cid:40)arch 6, 2020, plaintiff in the (cid:40)iami Firefighters action renewed its motion. On (cid:37)uly 23, 2020, after hearing oral
argument, the Court issued an order denying the motion and setting certain case deadlines.
Discovery commenced. On August 10, 2020, the Xerox defendants and the Icahn defendants filed separate motions
to dismiss. Briefing on the motions was completed on October 21, 2020. On December 14, 2020, following oral
argument, the Court issued a decision and order granting defendants(cid:85) motions and dismissing the action in its
entirety as to all defendants. Dismissal as to the Icahn defendants was conditioned on the filing of an affidavit,
which the Icahn defendants filed on December 16, 2020, indicating whether defendant Icahn gained a profit or
incurred a loss on purchases of H(cid:43) stoc(cid:65) during the relevant time period.
On December 23, 2020, plaintiff filed a motion see(cid:65)ing discovery related to the Icahn defendants(cid:85) losses resulting
from their investment in H(cid:43). The motion was fully briefed on (cid:37)anuary (cid:22), 2021. On (cid:37)anuary 15, 2021, the Court
issued a decision and order denying the motion.
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Also on (cid:37)anuary 15, 2021, plaintiff filed a notice of appeal of the December 14, 2020 dismissal order to the
Appellate Division, First Department. On (cid:37)anuary 20, 2021, plaintiff filed a notice of appeal of the (cid:37)anuary 15, 2021
order denying its motion for discovery to the Appellate Division, First Department.
Xerox Holdings will vigorously defend against this matter. At this time, it is premature to ma(cid:65)e any conclusion
regarding the probability of incurring material losses in this litigation. Should developments cause a change in our
determination as to an unfavorable outcome, or result in a final adverse (cid:64)udgment or settlement, there could be a
material adverse effect on our results of operations, cash flows and financial position in the period in which such
change in determination, (cid:64)udgment, or settlement occurs.
(cid:29)(cid:69)(cid:49)(cid:66)(cid:49)(cid:62)(cid:68)(cid:53)(cid:53)(cid:67)(cid:8) (cid:31)(cid:62)(cid:52)(cid:53)(cid:61)(cid:62)(cid:57)(cid:54)(cid:57)(cid:51)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67) (cid:49)(cid:62)(cid:52) (cid:45)(cid:49)(cid:66)(cid:66)(cid:49)(cid:62)(cid:68)(cid:73) (cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
(cid:31)(cid:62)(cid:52)(cid:53)(cid:61)(cid:62)(cid:57)(cid:54)(cid:57)(cid:51)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67) (cid:38)(cid:66)(cid:63)(cid:70)(cid:57)(cid:52)(cid:53)(cid:52) (cid:49)(cid:67) (cid:38)(cid:49)(cid:66)(cid:68) (cid:63)(cid:54) (cid:25)(cid:63)(cid:62)(cid:68)(cid:66)(cid:49)(cid:51)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:23)(cid:55)(cid:66)(cid:53)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)
Ac(cid:49)uisitions(cid:7)Divestitures:
(cid:50)e have indemnified, sub(cid:64)ect 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. (cid:50)here 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(cid:14)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. (cid:50)e have recogni(cid:80)ed
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.
Ot(cid:40)er Agree(cid:45)ents:
(cid:50)e 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:
(cid:77) (cid:34)uarantees 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.
(cid:77) Agreements to indemnify various service providers, trustees and ban(cid:65) 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.
(cid:77) (cid:34)uarantees 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 ma(cid:65)ing 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(cid:14)or amount, and in some
instances, we may have recourse against third parties for certain payments we made.
(cid:38)(cid:49)(cid:68)(cid:53)(cid:62)(cid:68) (cid:31)(cid:62)(cid:52)(cid:53)(cid:61)(cid:62)(cid:57)(cid:54)(cid:57)(cid:51)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
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.
(cid:31)(cid:62)(cid:52)(cid:53)(cid:61)(cid:62)(cid:57)(cid:54)(cid:57)(cid:51)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:63)(cid:54) (cid:37)(cid:54)(cid:54)(cid:57)(cid:51)(cid:53)(cid:66)(cid:67) (cid:49)(cid:62)(cid:52) (cid:26)(cid:57)(cid:66)(cid:53)(cid:51)(cid:68)(cid:63)(cid:66)(cid:67)
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 (cid:64)udgments, fines, penalties and amounts paid in settlement, including legal fees and
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Xerox 2020 Annual Report 138
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all appeals, incurred in connection with civil or criminal action or proceedings, as it relates to their services to Xerox
Holdings Corporation and(cid:14)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 (cid:2)clawbac(cid:65)(cid:2) 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(cid:14)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(cid:14)or
indemnification agreements and(cid:14)or applicable state law.
(cid:38)(cid:66)(cid:63)(cid:52)(cid:69)(cid:51)(cid:68) (cid:45)(cid:49)(cid:66)(cid:66)(cid:49)(cid:62)(cid:68)(cid:73) (cid:34)(cid:57)(cid:49)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:57)(cid:53)(cid:67)
In connection with our normal sales of equipment, including those under sales-type leases, we generally do not
issue product warranties. Our arrangements typically involve a separate full service maintenance agreement with
the customer. The agreements generally extend over a period equivalent to the lease term or the expected useful
life of the equipment under a cash sale. The service agreements involve the payment of fees in return for our
performance of repairs and maintenance. As a consequence, we do not have any significant product warranty
obligations, including any obligations under customer satisfaction programs. In a few circumstances, particularly in
certain cash sales, we may issue a limited product warranty if negotiated by the customer. (cid:50)e also issue warranties
for certain of our entry level products, where full service maintenance agreements are not available. In these
instances, we record warranty obligations at the time of the sale. Aggregate product warranty liability expenses for
the three years ended December 31, 2020, 2019 and 2018 were (cid:3)8, (cid:3)12 and (cid:3)14, respectively. Total product
warranty liabilities as of December 31, 2020 and 2019 were (cid:3)6 and (cid:3)(cid:22), respectively.
(cid:29)(cid:69)(cid:49)(cid:66)(cid:49)(cid:62)(cid:68)(cid:53)(cid:53)(cid:67)
(cid:50)e have issued or provided approximately (cid:3)303 of guarantees as of December 31, 2020 in the form of letters of
credit or surety bonds issued to i) support certain insurance programs(cid:26) ii) support our obligations related to the
Bra(cid:80)il tax and labor contingencies (see (cid:24)(cid:66)(cid:49)(cid:74)(cid:57)(cid:60) (cid:25)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55)(cid:53)(cid:62)(cid:51)(cid:57)(cid:53)(cid:67))(cid:26) and iii) 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 defaulted in performing our
obligations under each contract(cid:26) the probability of which we believe is remote. (cid:50)e believe that our capacity in the
surety mar(cid:65)ets 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.
(cid:36)(cid:63)(cid:68)(cid:53) (cid:14)(cid:14) (cid:9) (cid:38)(cid:66)(cid:53)(cid:54)(cid:53)(cid:66)(cid:66)(cid:53)(cid:52) (cid:41)(cid:68)(cid:63)(cid:51)(cid:59)
(cid:41)(cid:53)(cid:66)(cid:57)(cid:53)(cid:67) (cid:23) (cid:25)(cid:63)(cid:62)(cid:70)(cid:53)(cid:66)(cid:68)(cid:57)(cid:50)(cid:60)(cid:53) (cid:38)(cid:53)(cid:66)(cid:64)(cid:53)(cid:68)(cid:69)(cid:49)(cid:60) (cid:44)(cid:63)(cid:68)(cid:57)(cid:62)(cid:55) (cid:38)(cid:66)(cid:53)(cid:54)(cid:53)(cid:66)(cid:66)(cid:53)(cid:52) (cid:41)(cid:68)(cid:63)(cid:51)(cid:59)
As of December 31, 2020, Xerox Holdings Corporation had one class of preferred stoc(cid:65) outstanding. Xerox
Holdings Corporation has issued 180,000 shares of Series A (cid:43)referred Stoc(cid:65) that have an aggregate liquidation
value of (cid:3)180 and a carrying value of (cid:3)214. The Series A (cid:43)referred Stoc(cid:65) pays quarterly cash dividends at a rate of
8(cid:4) per year ((cid:3)14 per year), on a cumulative basis. Each share of Series A (cid:43)referred Stoc(cid:65) is convertible at any
time, at the option of the holder, into 3(cid:22).4532 shares of common stoc(cid:65) of Xerox Holdings Corporation for a total of
6,(cid:22)42 thousand shares (reflecting an initial conversion price of approximately (cid:3)26.(cid:22)0 per share of common stoc(cid:65)),
sub(cid:64)ect to customary anti-dilution ad(cid:64)ustments.
If the closing price of Xerox Holdings Corporation common stoc(cid:65) exceeds (cid:3)39.00 or 146.1(cid:4) of the initial conversion
price of (cid:3)26.(cid:22)0 per share of common stoc(cid:65) for 20 out of 30 consecutive trading days, Xerox Holdings Corporation
will have the right to cause any or all of the Series A (cid:43)referred Stoc(cid:65) to be converted into shares of common stoc(cid:65)
at the then applicable conversion rate. The Series A (cid:43)referred Stoc(cid:65) 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 stoc(cid:65) 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 stoc(cid:65), the holder of the Series A (cid:43)referred Stoc(cid:65) has the right to require Xerox Holdings Corporation to
redeem any or all of the preferred stoc(cid:65) 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 (cid:43)referred Stoc(cid:65)
is classified as temporary equity (i.e., apart from permanent equity) as a result of the contingent redemption feature.
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(cid:41)(cid:53)(cid:66)(cid:57)(cid:53)(cid:67) (cid:23) (cid:38)(cid:66)(cid:53)(cid:54)(cid:53)(cid:66)(cid:66)(cid:53)(cid:52) (cid:41)(cid:68)(cid:63)(cid:51)(cid:59) (cid:44)(cid:63)(cid:68)(cid:57)(cid:62)(cid:55) (cid:40)(cid:57)(cid:55)(cid:56)(cid:68)(cid:67)
The Xerox Holdings Corporation Series A (cid:43)referred Stoc(cid:65) will vote together with the Xerox Holdings Corporation
common stoc(cid:65), as a single class, on all matters submitted to the shareholders of Xerox Holdings Corporation, but
the Xerox Holdings Corporation Series A (cid:49)oting (cid:43)referred Stoc(cid:65) will only be entitled to one vote for every ten shares
of Xerox Holdings Corporation common stoc(cid:65) into which the Xerox Holdings Corporation Series A (cid:43)referred Stoc(cid:65) is
convertible (6(cid:22)4,15(cid:22) votes at December 31, 2020).
(cid:36)(cid:63)(cid:68)(cid:53) (cid:14)(cid:15) (cid:75) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)(cid:56)(cid:63)(cid:60)(cid:52)(cid:53)(cid:66)(cid:67)(cid:76) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73)
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67)
(cid:38)(cid:66)(cid:53)(cid:54)(cid:53)(cid:66)(cid:66)(cid:53)(cid:52) (cid:41)(cid:68)(cid:63)(cid:51)(cid:59)
Xerox Holdings Corporation is authori(cid:80)ed to issue approximately 22 million shares of cumulative preferred stoc(cid:65),
(cid:3)1.00 par value per share. Refer to Note 22 - (cid:43)referred Stoc(cid:65) for additional information.
(cid:25)(cid:63)(cid:61)(cid:61)(cid:63)(cid:62) (cid:41)(cid:68)(cid:63)(cid:51)(cid:59)
Xerox Holdings Corporation is authori(cid:80)ed to issue 43(cid:22).5 million shares of common stoc(cid:65), (cid:3)1.00 par value per share.
At December 31, 2020, 26 million shares were reserved for issuance under our incentive compensation plans and (cid:22)
million shares were reserved for conversion of the Series A Convertible (cid:43)erpetual (cid:43)referred (cid:49)oting Stoc(cid:65).
(cid:42)(cid:66)(cid:53)(cid:49)(cid:67)(cid:69)(cid:66)(cid:73) (cid:41)(cid:68)(cid:63)(cid:51)(cid:59)
Xerox Holdings accounts for the repurchased common stoc(cid:65) under the cost method and includes such treasury
stoc(cid:65) as a component of our common shareholders' equity. Retirement of treasury stoc(cid:65) is recorded as a reduction
of Common stoc(cid:65) and Additional paid-in capital at the time such retirement is approved by our Board of Directors.
The following provides cumulative information relating to Xerox Holdings' share repurchase program from its
inception through December 31, 2020 (shares in thousands):
Authori(cid:80)ed share repurchase program
Share repurchase cost
Share repurchase fees
Number of shares repurchased
(cid:3)
(cid:3)
(cid:3)
1,000
600
(cid:84)
24,691
Of the (cid:3)1.0 billion of share repurchase granted in 2019 by Xerox Holdings Corporation's Board of Directors,
approximately (cid:3)400 of that authority remained available at December 31, 2020. In (cid:37)anuary 2021, Xerox Holdings
Corporation's Board of Directors authori(cid:80)ed an additional (cid:3)100 of share repurchase authority increasing the
remaining authori(cid:80)ation to (cid:3)500.
The following table reflects the changes in Common and Treasury stoc(cid:65) shares (shares in thousands). The Treasury
stoc(cid:65) repurchases in the table below include the repurchases under both the prior Xerox Corporation authori(cid:80)ed
share repurchase program and the current Xerox Holdings Corporation authori(cid:80)ed share repurchase program.
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:19)
Stoc(cid:65) based compensation plans, net
Acquisition of Treasury stoc(cid:65)
Cancellation of Treasury stoc(cid:65)
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:20)
Stoc(cid:65) based compensation plans, net
Acquisition of Treasury stoc(cid:65)
Cancellation of Treasury stoc(cid:65)
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:21)
Stoc(cid:65) based compensation plans, net
Acquisition of Treasury stoc(cid:65)
Cancellation of Treasury stoc(cid:65)
(cid:24)(cid:49)(cid:60)(cid:49)(cid:62)(cid:51)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:14)(cid:12)
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72)
Common Stoc(cid:65)
Shares
Treasury Stoc(cid:65)
Shares
254,613
1,103
(cid:84)
(24,026)
231,690
1,310
(cid:84)
(18,3(cid:22)9)
214,621
1,390
(cid:84)
(1(cid:22),625)
198,386
(cid:84)
(cid:84)
26,093
(24,026)
2,06(cid:22)
(cid:84)
18,343
(18,3(cid:22)9)
2,031
(cid:84)
15,594
(1(cid:22),625)
(cid:84)
At December 31, 2020, Xerox Corporation has 1,000 authori(cid:80)ed shares of common stoc(cid:65), (cid:3)1.00 par value per
share, of which 100 shares are issued and outstanding and held by Xerox Holdings Corporation.
140
Xerox 2020 Annual Report 140
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(cid:36)(cid:63)(cid:68)(cid:53) (cid:14)(cid:16) (cid:75) (cid:41)(cid:68)(cid:63)(cid:51)(cid:59)(cid:9)(cid:24)(cid:49)(cid:67)(cid:53)(cid:52) (cid:25)(cid:63)(cid:61)(cid:64)(cid:53)(cid:62)(cid:67)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:6)(cid:67)(cid:56)(cid:49)(cid:66)(cid:53)(cid:67) (cid:57)(cid:62) (cid:68)(cid:56)(cid:63)(cid:69)(cid:67)(cid:49)(cid:62)(cid:52)(cid:67)(cid:7)
(cid:50)e have a long-term incentive plan whereby eligible employees may be granted restricted stoc(cid:65) units (RSUs),
performance share units ((cid:43)SUs) and stoc(cid:65) options (SOs). (cid:50)e grant stoc(cid:65)-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 sub(cid:64)ect to settlement with newly issued shares of Xerox Holdings
Corporation's common stoc(cid:65). At December 31, 2020 and 2019, 11 million and 13 million shares, respectively, were
available for grant of awards.
Stoc(cid:65)-based compensation expense was as follows:
Stoc(cid:65)-based compensation expense, pre-tax
Income tax benefit recogni(cid:80)ed in earnings
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:3)
42 (cid:3)
11
50 (cid:3)
13
5(cid:22)
14
In 2019, the timing of our annual grant of awards was changed from April to (cid:37)anuary to more closely align the grant
date with the underlying performance period related to (cid:43)SUs. Stoc(cid:65) options were not awarded under the 2020 or
2019 grants.
(cid:40)(cid:53)(cid:67)(cid:68)(cid:66)(cid:57)(cid:51)(cid:68)(cid:53)(cid:52) (cid:41)(cid:68)(cid:63)(cid:51)(cid:59) (cid:43)(cid:62)(cid:57)(cid:68)(cid:67)
Compensation expense for RSUs is based upon the grant-date mar(cid:65)et price and is recogni(cid:80)ed on a straight-line
basis over the vesting period, based on management's estimate of the number of shares expected to vest.
Beginning with the 2018 grant, RSU's vest on a graded schedule as follows: 25(cid:4) after one year of service, 25(cid:4)
after two years of service and 50(cid:4) after three years of service from the date of grant. (cid:43)rior to the 2018 grant, RSUs
vested on a three-year cliff basis from the date of grant.
(cid:38)(cid:53)(cid:66)(cid:54)(cid:63)(cid:66)(cid:61)(cid:49)(cid:62)(cid:51)(cid:53) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53) (cid:43)(cid:62)(cid:57)(cid:68)(cid:67)
(cid:43)SU awards granted in 2020 and 2019 were comprised of a performance-based component that included a
Revenue and Free Cash Flow metric and a mar(cid:65)et-based component that included an Absolute Share (cid:43)rice metric.
The metrics are weighted as follows: 25(cid:4) Revenue, 25(cid:4) Free Cash Flow and 50(cid:4) Absolute Share (cid:43)rice.
Accordingly, each (cid:43)SU grant was one-half performance-based (Revenue and Free Cash Flow) and one-half
mar(cid:65)et-based (Absolute Share (cid:43)rice). The measures are independent of each other and depending on the
achievement of these metrics, a recipient of a (cid:43)SU award is entitled to receive a number of shares equal to a
percentage, ranging from 0(cid:4) to 200(cid:4) of the (cid:43)SU award granted. The 2020 and 2019 (cid:43)SUs retained the three-year
cliff vesting from the date of grant.
In November 2020, the Xerox Holdings Corporation Board approved grants of RSUs to employees who had
received grants of (cid:43)SUs in 2019 and(cid:14)or 2020 that included performance and mar(cid:65)et metrics that have been
permanently adversely impacted by the CO(cid:49)ID-19 pandemic. These grants of RSUs were made in December 2020.
The grant-date value of the new RSUs for each recipient was approximately 50(cid:4) of the grant-date value of the
recipient(cid:85)s 2020 and(cid:14)or 2019 (cid:43)SUs. These RSU grants are not intended to ta(cid:65)e the place of the Company(cid:85)s 2021
regular annual equity incentive programs.
(cid:43)SU awards granted by the Xerox Holdings Corporation in 2018 were comprised of a performance-based
component that included Revenue (cid:34)rowth and Free Cash Flow metrics and a mar(cid:65)et-based component that
included a Total Shareholder Return (TSR) metric. The metrics were equally weighted(cid:26) accordingly, each (cid:43)SU grant
was two-thirds performance-based (Revenue (cid:34)rowth and Free Cash Flow) and one-third mar(cid:65)et-based (TSR). The
measures are independent of each other and depending on the achievement of these metrics, a recipient of a (cid:43)SU
award is entitled to receive a number of shares equal to a percentage, ranging from 0(cid:4) to 200(cid:4) of the (cid:43)SU award
granted. The 2018 (cid:43)SUs have a three-year cliff vesting from the date of grant.
In December 2018, the Xerox Holdings Corporation Board approved and modified the performance-based metrics
and the mar(cid:65)et-based metric of the 2018 (cid:43)SU grant to a one-year performance period (2018), and a two-year time-
based requirement (2019 and 2020).
(cid:43)SU awards granted in 201(cid:22) were exclusively performance based and included metrics for Revenue (cid:34)rowth,
Earnings per Share and Cash Flow from Operations that were measured over a three-year performance period. The
201(cid:22) (cid:43)SUs had a three-year cliff vesting from the date of grant.
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Perfor(cid:45)ance(cid:5)(cid:13)ase(cid:36) (cid:14)o(cid:45)ponent: (cid:43)SUs vest contingent upon meeting pre-determined cumulative performance
metrics. The fair value of our (cid:43)SUs is based upon the grant-date mar(cid:65)et price. Compensation expense is
recogni(cid:80)ed 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 stoc(cid:65) up to a
maximum over-achievement of 100(cid:4) of the original grant. If the stated targets are not met, any recogni(cid:80)ed
compensation cost would be reversed.
(cid:24)ar(cid:43)et(cid:5)(cid:13)ase(cid:36) (cid:14)o(cid:45)ponent: The Absolute Share (cid:43)rice metric included as the mar(cid:65)et-based component of the 2020
and 2019 (cid:43)SU 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. (cid:43)ayout for this portion of the (cid:43)SU will
be determined based on total return targets. Since the Absolute Share (cid:43)rice metric of the (cid:43)SU award represents a
mar(cid:65)et condition, a (cid:40)onte Carlo simulation was used to determine the grant-date fair value.
The TSR metric included as the mar(cid:65)et-based component of the 2018 (cid:43)SU grant was based on the percentage
change in Xerox Corporation stoc(cid:65) price plus dividends paid over the three-year measurement period. (cid:43)ayout for
this portion of the (cid:43)SU was to be determined based on Xerox Corporation percentage change compared to the
shareholder returns of the peer group of companies approved by the compensation committee of the Board (as
disclosed in the 2018 annual proxy statement). Since the TSR metric of the (cid:43)SU award represented a mar(cid:65)et
condition, a (cid:40)onte Carlo simulation was used to determine the grant-date fair value.
A summary of Xerox Holdings (cid:65)ey valuation input assumptions used in the (cid:40)onte Carlo simulation relative to the
2020, 2019 and 2018 (cid:43)SU awards granted were as follows:
Term
Ris(cid:65)-free interest rate(1)
Dividend yield(2)
(cid:49)olatility(3)
(cid:50)eighted average fair value(4)
____________
2020 Award
2019 Award
2018 Award
3 years
1.60 (cid:4)
2.80 (cid:4)
29.49 (cid:4)
3 years
2.51 (cid:4)
3.9(cid:22) (cid:4)
32.95 (cid:4)
(cid:3)
41.28
(cid:3)
16.2(cid:22)
(cid:3)
3 years
2.39 (cid:4)
3.24 (cid:4)
29.12 (cid:4)
32.01
(1) The ris(cid:61)-free interest rate was based on the (cid:76)ero-coupon (cid:45).(cid:43). Treasury yield curve on the valuation date, with a maturity matched to the
performance period.
(2) The dividend yield was calculated as the expected (cid:67)uarterly dividend divided by our three-month average stoc(cid:61) price as of the valuation
date, annuali(cid:76)ed and continuously compounded.
((cid:16)) (cid:46)olatility is derived from historical stoc(cid:61) prices as well as implied volatility when appropriate and available.
((cid:17)) The weighted-average of fair values used to record compensation expense as determined by the (cid:37)onte (cid:27)arlo simulation.
Our Absolute Share (cid:43)rice metric is compared against total return targets to determine the payout as follows:
(cid:43)ayout as a (cid:43)ercent of Target
200(cid:4)
100(cid:4)
50(cid:4)
0(cid:4)
2020 Total
Return Targets(1)
(cid:3)45.00 and above
2019 Total
Return Targets(1)
(cid:3)40.00 and above
(cid:3)40.00
(cid:3)3(cid:22).00
Below (cid:3)3(cid:22).00
(cid:3)35.00
(cid:3)30.00
Below (cid:3)30.00
Our 2018 TSR metric compared to the peer group TSR will determine the payout as follows:
(cid:43)ayout as a (cid:43)ercent of Target
200(cid:4)
100(cid:4)
35(cid:4)
0(cid:4)
____________
(cid:43)ercentile(1)
80th and above
50th
25th
Below 25th
(1) (cid:30)or performance between the levels described above, the degree of vesting is interpolated on a linear basis.
Compensation expense for the mar(cid:65)et-based component of the (cid:43)SU awards is recogni(cid:80)ed on a straight-line basis
over the vesting period based on the fair value determined by the (cid:40)onte Carlo simulation and, except in cases of
employee forfeiture, cannot be reversed regardless of performance. There was no impact to compensation expense
as a result of the Xerox Corporation Board(cid:85)s approval to modify the 2018 TSR metric to a one-year performance
period (2018) and a two-year time-based requirement (2019 and 2020).
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(cid:41)(cid:68)(cid:63)(cid:51)(cid:59) (cid:37)(cid:64)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
The Xerox Corporation Board approved the granting of SOs as part of the 2018 plan design. Compensation
expense associated with SOs is based upon the grant date fair value determined by utili(cid:80)ing the Blac(cid:65)-Scholes (BS)
option(cid:4)pricing model and is recogni(cid:80)ed on a straight-line basis over the vesting period, based on management's
estimate of the number of SOs expected to vest. The 2018 SOs have a contractual term of 10 years from the date of
grant and vest as follows: 25(cid:4) after one year of service, 25(cid:4) after two years of service, and 50(cid:4) after three years
of service from the date of grant.
Xerox Holdings weighted average assumptions used in the BS option-pricing model relative to SO awards were as
follows:
Expected term(1)
Expected volatility(2)
Expected dividend yield(3)
Ris(cid:65)-free interest rate(4)
(cid:50)eighted average fair value(5)
2018 Award
6.13 years
2(cid:22).25 (cid:4)
3.25 (cid:4)
2.63 (cid:4)
(cid:3)5.(cid:22)1
____________
(1) (cid:43)ince these (cid:43)O grants were effectively part of a new program, the expected term was calculated using the (cid:2)(cid:43)implified (cid:37)ethod(cid:81) under the
(cid:43)(cid:29)(cid:27) guidance based on the (cid:43)Os vesting schedule and contractual term. (cid:47)e did not have sufficient historical exercise data to provide a
reasonable basis to estimate an expected term.
(2) The expected volatility was calculated based on a combination of term-matched historical volatility and implied volatility from traded options.
((cid:16)) The dividend yield was calculated as the expected (cid:67)uarterly dividend divided by our three-month average stoc(cid:61) price as of the grant date.
((cid:17)) The ris(cid:61)-free interest rate was based on the (cid:76)ero-coupon (cid:45).(cid:43). Treasury yield curve with a maturity matched to the expected term of the
(cid:43)Os.
((cid:18)) The weighted average of fair values used to record compensation expense as determined by the B(cid:43) option-pricing model.
(cid:36)(cid:63)(cid:68)(cid:53)(cid:22) (cid:40)anagement(cid:85)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(cid:85)s
estimate, the activity will be reflected in a subsequent period. In addition, RSUs, (cid:43)SUs 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.
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(cid:41)(cid:69)(cid:61)(cid:61)(cid:49)(cid:66)(cid:73) (cid:63)(cid:54) (cid:41)(cid:68)(cid:63)(cid:51)(cid:59)(cid:9)(cid:50)(cid:49)(cid:67)(cid:53)(cid:52) (cid:25)(cid:63)(cid:61)(cid:64)(cid:53)(cid:62)(cid:67)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:23)(cid:51)(cid:68)(cid:57)(cid:70)(cid:57)(cid:68)(cid:73)
2020
(cid:50)eighted
Average (cid:34)rant
Date Fair (cid:49)alue(1)
2019
(cid:50)eighted
Average (cid:34)rant
Date Fair (cid:49)alue(1)
2018
(cid:50)eighted
Average (cid:34)rant
Date Fair (cid:49)alue(1)
Shares
Shares
Shares
2,845 (cid:3)
2,028
(1,4(cid:22)3)
(213)
3,18(cid:22)
2,830 (cid:3)
901
(993)
(313)
2,425
861 (cid:3)
(cid:84)
(60)
(2)
(cid:22)99
4(cid:22)0
26.8(cid:22)
2(cid:22).85
28.85
28.39
26.48
24.99
3(cid:22).59
31.94
26.22
26.6(cid:22)
2(cid:22).83
(cid:84)
2(cid:22).98
2(cid:22).98
2(cid:22).81
2(cid:22).84
3,559 (cid:3)
1,366
(1,666)
(414)
2,845
2,462 (cid:3)
1,433
(633)
(432)
2,830
1,022 (cid:3)
(cid:84)
(92)
(69)
861
233
29.51
23.22
29.28
2(cid:22).85
26.8(cid:22)
29.83
19.46
29.56
2(cid:22).50
24.99
2(cid:22).84
(cid:84)
2(cid:22).92
2(cid:22).98
2(cid:22).83
2(cid:22).83
2,856 (cid:3)
1,595
(214)
(6(cid:22)8)
3,559
3,11(cid:22) (cid:3)
1,060
(853)
(862)
2,462
(cid:84) (cid:3)
1,414
(392)
(cid:84)
1,022
39
30.65
2(cid:22).82
30.39
30.04
29.51
31.54
2(cid:22).36
32.59
30.26
29.83
(cid:84)
2(cid:22).88
2(cid:22).98
(cid:84)
2(cid:22).84
2(cid:22).98
(cid:40)(cid:53)(cid:67)(cid:68)(cid:66)(cid:57)(cid:51)(cid:68)(cid:53)(cid:52) (cid:41)(cid:68)(cid:63)(cid:51)(cid:59) (cid:43)(cid:62)(cid:57)(cid:68)(cid:67) (cid:6)(cid:14)(cid:7)
Outstanding at (cid:37)anuary 1
(cid:34)ranted
(cid:49)ested
Forfeited
(cid:37)(cid:69)(cid:68)(cid:67)(cid:68)(cid:49)(cid:62)(cid:52)(cid:57)(cid:62)(cid:55) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)
(cid:38)(cid:53)(cid:66)(cid:54)(cid:63)(cid:66)(cid:61)(cid:49)(cid:62)(cid:51)(cid:53) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)(cid:67)
Outstanding at (cid:37)anuary 1
(cid:34)ranted
(cid:49)ested
Forfeited(cid:14)Expired
(cid:37)(cid:69)(cid:68)(cid:67)(cid:68)(cid:49)(cid:62)(cid:52)(cid:57)(cid:62)(cid:55) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)
(cid:41)(cid:68)(cid:63)(cid:51)(cid:59) (cid:37)(cid:64)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Outstanding at (cid:37)anuary 1
(cid:34)ranted
Forfeited(cid:14)Expired
Exercised
(cid:37)(cid:69)(cid:68)(cid:67)(cid:68)(cid:49)(cid:62)(cid:52)(cid:57)(cid:62)(cid:55) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)
(cid:27)(cid:72)(cid:53)(cid:66)(cid:51)(cid:57)(cid:67)(cid:49)(cid:50)(cid:60)(cid:53) (cid:49)(cid:68) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)
____________
(1) (cid:47)eighted average exercise price for stoc(cid:61) options.
(2)
Includes a 2(cid:13)1(cid:21) Restricted (cid:43)toc(cid:61) (cid:25)ward (R(cid:43)(cid:25)) grant of (cid:16)(cid:18)1 shares with a corresponding grant date fair value of (cid:3)2(cid:21).(cid:18)1, which vested in
2(cid:13)1(cid:22).
Unrecogni(cid:80)ed compensation cost related to non-vested stoc(cid:65)-based awards at December 31, 2020 was as follows:
(cid:23)(cid:71)(cid:49)(cid:66)(cid:52)(cid:67)
Restricted Stoc(cid:65) Units
(cid:43)erformance Shares
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60)
Unrecogni(cid:80)ed Compensation
Remaining (cid:50)eighted-Average
(cid:49)esting (cid:43)eriod ((cid:52)ears)
(cid:3)
(cid:3)
51
13
64
1.0
1.1
(cid:22)4
56
(cid:84)
December 31, 2020
(cid:3)
The aggregate intrinsic value of outstanding stoc(cid:65)-based awards was as follows:
(cid:23)(cid:71)(cid:49)(cid:66)(cid:52)(cid:67)
Restricted Stoc(cid:65) Units
(cid:43)erformance Shares
Stoc(cid:65) Options(1)
____________
(1) (cid:43)tri(cid:61)e price greater than (cid:48)erox (cid:32)oldings (cid:27)orporation (cid:43)toc(cid:61) price at December (cid:16)1, 2(cid:13)2(cid:13), therefore, intrinsic value considered to be (cid:3)(cid:13).
The intrinsic value and actual tax benefit reali(cid:80)ed for all vested and exercised stoc(cid:65)-based awards was as follows:
(cid:23)(cid:71)(cid:49)(cid:66)(cid:52)(cid:67)
December 31, 2020
December 31, 2019
December 31, 2018
Total
Intrinsic
(cid:49)alue
Cash
Received
Tax
Benefit
Total
Intrinsic
(cid:49)alue(1)
Cash
Received
Tax
Benefit
Total
Intrinsic
(cid:49)alue
Cash
Received
Tax
Benefit
Restricted Stoc(cid:65) Units
(cid:3)
33 (cid:3)
(cid:84) (cid:3)
5 (cid:3)
55 (cid:3)
(cid:84) (cid:3)
11 (cid:3)
6 (cid:3)
(cid:84) (cid:3)
(cid:43)erformance Share Units
Stoc(cid:65) Options
____________
18
(cid:84)
(cid:84)
(cid:84)
4
(cid:84)
23
1
(cid:84)
2
6
(cid:84)
21
(cid:84)
(cid:84)
(cid:84)
2
4
(cid:84)
(1) R(cid:43)(cid:45)s include a R(cid:43)(cid:25) grant of (cid:16)(cid:18)1 shares, which vested in 2(cid:13)1(cid:22).
144
Xerox 2020 Annual Report 144
Table of Contents
(cid:36)(cid:63)(cid:68)(cid:53) (cid:14)(cid:17) (cid:75) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:25)(cid:63)(cid:61)(cid:64)(cid:66)(cid:53)(cid:56)(cid:53)(cid:62)(cid:67)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:7)
In 2019, as a result of the sale of our investment in Fu(cid:64)i Xerox, we reclassified out of Accumulated other
comprehensive loss and into earnings, (cid:3)165 of accumulated translation ad(cid:64)ustments and defined benefit plan losses
related to Fu(cid:64)i Xerox. The reclassified amounts are included in the gain recogni(cid:80)ed on the Sales. Refer to Note 6 -
Divestitures for additional information regarding these Sales and the associated gain recogni(cid:80)ed.
Other Comprehensive Income (Loss) is comprised of the following:
(cid:42)(cid:66)(cid:49)(cid:62)(cid:67)(cid:60)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:23)(cid:52)(cid:58)(cid:69)(cid:67)(cid:68)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:29)(cid:49)(cid:57)(cid:62)(cid:67) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:53)(cid:67)(cid:7)
Aggregate ad(cid:64)ustment in period
Divestiture - reclassification
(cid:36)(cid:53)(cid:68) (cid:42)(cid:66)(cid:49)(cid:62)(cid:67)(cid:60)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:23)(cid:52)(cid:58)(cid:69)(cid:67)(cid:68)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:29)(cid:49)(cid:57)(cid:62)(cid:67) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:53)(cid:67)(cid:7)
(cid:43)(cid:62)(cid:66)(cid:53)(cid:49)(cid:60)(cid:57)(cid:74)(cid:53)(cid:52) (cid:29)(cid:49)(cid:57)(cid:62)(cid:67) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:53)(cid:67)(cid:7)
Changes in fair value of cash flow hedges gains
Changes in cash flow hedges reclassed to
earnings(1)
Other losses
(cid:36)(cid:53)(cid:68) (cid:43)(cid:62)(cid:66)(cid:53)(cid:49)(cid:60)(cid:57)(cid:74)(cid:53)(cid:52) (cid:29)(cid:49)(cid:57)(cid:62)(cid:67) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:53)(cid:67)(cid:7)
(cid:26)(cid:53)(cid:54)(cid:57)(cid:62)(cid:53)(cid:52) (cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68) (cid:38)(cid:60)(cid:49)(cid:62)(cid:67) (cid:29)(cid:49)(cid:57)(cid:62)(cid:67) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:53)(cid:67)(cid:7)
Net actuarial(cid:14)prior service gains (losses)
(cid:43)rior service amorti(cid:80)ation(cid:14)curtailment(2)
Actuarial loss amorti(cid:80)ation(cid:14)settlement(2)
Fu(cid:64)i Xerox changes in defined benefit plans, net(3)
Other (losses) gains(4)
Divestiture - reclassification
(cid:25)(cid:56)(cid:49)(cid:62)(cid:55)(cid:53)(cid:67) (cid:57)(cid:62) (cid:26)(cid:53)(cid:54)(cid:57)(cid:62)(cid:53)(cid:52) (cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:68) (cid:38)(cid:60)(cid:49)(cid:62)(cid:67) (cid:29)(cid:49)(cid:57)(cid:62)(cid:67) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:53)(cid:67)(cid:7)
(cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:25)(cid:63)(cid:61)(cid:64)(cid:66)(cid:53)(cid:56)(cid:53)(cid:62)(cid:67)(cid:57)(cid:70)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:7) (cid:23)(cid:68)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:49)(cid:50)(cid:60)(cid:53)
(cid:68)(cid:63) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67)(cid:11)(cid:46)(cid:53)(cid:66)(cid:63)(cid:72)
(cid:52)ear Ended December 31,
2020
2019
2018
(cid:43)re-tax
Net of Tax
(cid:43)re-tax
Net of Tax
(cid:43)re-tax
Net of Tax
(cid:3)
238 (cid:3)
241 (cid:3)
53 (cid:3)
45 (cid:3)
(251) (cid:3)
(242)
(cid:84)
238
4
1
(cid:84)
5
11(cid:22)
(80)
138
(cid:84)
(63)
(cid:84)
112
(cid:84)
241
3
1
(cid:84)
4
86
(60)
104
(cid:84)
(61)
(cid:84)
69
1(cid:22)
(cid:22)0
2
(9)
(cid:84)
((cid:22))
(2(cid:22)5)
(81)
156
8
(21)
148
(65)
1(cid:22)
62
1
((cid:22))
(cid:84)
(6)
(202)
(61)
118
8
(21)
148
(10)
(cid:84)
(251)
(cid:84)
(242)
9
14
(2)
21
2(cid:22)3
(26)
252
(25)
66
(cid:84)
540
8
10
(2)
16
198
(20)
190
(25)
66
(cid:84)
409
(cid:3)
355 (cid:3)
314 (cid:3)
(2) (cid:3)
46 (cid:3)
310 (cid:3)
183
_____________
(1) Reclassified to (cid:27)ost of sales - refer to (cid:38)ote 1(cid:20) - (cid:30)inancial Instruments for additional information regarding our cash flow hedges.
(2) Reclassified to Total (cid:38)et (cid:40)eriodic Benefit (cid:27)ost - refer to (cid:38)ote 1(cid:22) - (cid:29)mployee Benefit (cid:40)lans for additional information.
((cid:16)) Represents our share of (cid:30)uji (cid:48)erox(cid:6)s benefit plan changes.
((cid:17)) (cid:40)rimarily represents currency impact on cumulative amount of benefit plan net actuarial losses and prior service credits in (cid:25)O(cid:27)(cid:36).
(cid:23)(cid:51)(cid:51)(cid:69)(cid:61)(cid:69)(cid:60)(cid:49)(cid:68)(cid:53)(cid:52) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:25)(cid:63)(cid:61)(cid:64)(cid:66)(cid:53)(cid:56)(cid:53)(cid:62)(cid:67)(cid:57)(cid:70)(cid:53) (cid:34)(cid:63)(cid:67)(cid:67) (cid:6)(cid:23)(cid:37)(cid:25)(cid:34)(cid:7)
AOCL is comprised of the following:
Cumulative translation ad(cid:64)ustments
Other unreali(cid:80)ed gains (losses), net
Benefit plans net actuarial losses and prior service credits(1)(2)
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:23)(cid:51)(cid:51)(cid:69)(cid:61)(cid:69)(cid:60)(cid:49)(cid:68)(cid:53)(cid:52) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:25)(cid:63)(cid:61)(cid:64)(cid:66)(cid:53)(cid:56)(cid:53)(cid:62)(cid:67)(cid:57)(cid:70)(cid:53) (cid:34)(cid:63)(cid:67)(cid:67) (cid:23)(cid:68)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:49)(cid:50)(cid:60)(cid:53) (cid:68)(cid:63) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72)
(cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67)(cid:11)(cid:46)(cid:53)(cid:66)(cid:63)(cid:72)
December 31,
2020
2019
2018
(1,(cid:22)20) (cid:3)
(1,961) (cid:3)
2
(1,614)
(2)
(1,683)
(2,023)
4
(1,546)
(3,332) (cid:3)
(3,646) (cid:3)
(3,565)
(cid:3)
(cid:3)
_____________
(1) (cid:25)mounts prior to 2(cid:13)1(cid:22) include our share of (cid:30)uji (cid:48)erox balances.
(2) The change from December (cid:16)1, 2(cid:13)1(cid:21) includes (cid:3)(12(cid:20)) related to the adoption of (cid:25)(cid:43)(cid:45) 2(cid:13)1(cid:21)-(cid:13)2 and the reclassification of stranded tax effects
resulting from the Tax (cid:25)ct - Refer to (cid:38)ote 1 - Basis of (cid:40)resentation and (cid:43)ummary of (cid:43)ignificant (cid:25)ccounting (cid:40)olicies for additional
information.
(cid:50)e utili(cid:80)e the aggregate portfolio approach for releasing disproportionate income tax effects from AOCL.
Xerox 2020 Annual Report 145
Xerox 2020 Annual Report 145
Table of Contents
(cid:36)(cid:63)(cid:68)(cid:53) (cid:14)(cid:18) (cid:75) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:64)(cid:53)(cid:66) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)
The following table sets forth the computation of basic and diluted earnings per share of Xerox Holdings
Corporation's common stoc(cid:65) (shares in thousands):
(cid:24)(cid:49)(cid:67)(cid:57)(cid:51) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:64)(cid:53)(cid:66) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)(cid:22)
Net Income from continuing operations attributable to Xerox Holdings
Accrued dividends on preferred stoc(cid:65)
Ad(cid:64)usted Net income from continuing operations available to common
shareholders
Income from discontinued operations attributable to Xerox Holdings, net of tax
Ad(cid:64)usted Net income available to common shareholders
(cid:50)eighted average common shares outstanding
(cid:24)(cid:49)(cid:67)(cid:57)(cid:51) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:64)(cid:53)(cid:66) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)(cid:22)
Continuing operations
Discontinued operations
(cid:24)(cid:49)(cid:67)(cid:57)(cid:51) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:64)(cid:53)(cid:66) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)
(cid:26)(cid:57)(cid:60)(cid:69)(cid:68)(cid:53)(cid:52) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:64)(cid:53)(cid:66) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)(cid:22)
Net Income from continuing operations attributable to Xerox Holdings
Accrued dividends on preferred stoc(cid:65)
Ad(cid:64)usted Net income from continuing operations available to common
shareholders
Income from discontinued operations attributable to Xerox Holdings, net of tax
Ad(cid:64)usted Net income available to common shareholders
(cid:50)eighted average common shares outstanding
Common shares issuable with respect to:
Stoc(cid:65) options
Restricted stoc(cid:65) and performance shares
Convertible preferred stoc(cid:65)
Ad(cid:64)usted (cid:50)eighted average common shares outstanding
(cid:26)(cid:57)(cid:60)(cid:69)(cid:68)(cid:53)(cid:52) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:64)(cid:53)(cid:66) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)(cid:22)
Continuing operations
Discontinued operations
(cid:26)(cid:57)(cid:60)(cid:69)(cid:68)(cid:53)(cid:52) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:64)(cid:53)(cid:66) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)
(cid:52)ear Ended December 31,
2020
2019
2018
192 (cid:3)
(14)
1(cid:22)8
(cid:84)
648 (cid:3)
(14)
634
(cid:22)05
1(cid:22)8 (cid:3)
1,339 (cid:3)
306
(14)
292
55
34(cid:22)
208,983
221,969
248,(cid:22)0(cid:22)
0.85 (cid:3)
(cid:84)
0.85 (cid:3)
192 (cid:3)
(14)
1(cid:22)8
(cid:84)
2.86 (cid:3)
3.1(cid:22)
6.03 (cid:3)
648 (cid:3)
(cid:84)
648
(cid:22)05
1(cid:22)8 (cid:3)
1,353 (cid:3)
1.1(cid:22)
0.23
1.40
306
(14)
292
55
34(cid:22)
208,983
221,969
248,(cid:22)0(cid:22)
15
2,439
(cid:84)
55
4,403
6,(cid:22)42
(cid:84)
2,953
(cid:84)
211,43(cid:22)
233,169
251,660
0.84 (cid:3)
(cid:84)
0.84 (cid:3)
2.(cid:22)8 (cid:3)
3.02
5.80 (cid:3)
1.16
0.22
1.38
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
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):
Stoc(cid:65) options
Restricted stoc(cid:65) and performance shares
Convertible preferred stoc(cid:65)
Total Anti-Dilutive Securities
(cid:22)84
3,1(cid:22)3
6,(cid:22)42
10,699
805
1,2(cid:22)2
(cid:84)
2,0(cid:22)(cid:22)
1,022
3,068
6,(cid:22)42
10,832
(cid:26)(cid:57)(cid:70)(cid:57)(cid:52)(cid:53)(cid:62)(cid:52)(cid:67) (cid:64)(cid:53)(cid:66) (cid:25)(cid:63)(cid:61)(cid:61)(cid:63)(cid:62) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)
(cid:3)
1.00 (cid:3)
1.00 (cid:3)
1.00
146
Xerox 2020 Annual Report 146
Table of Contents
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:39)(cid:69)(cid:49)(cid:66)(cid:68)(cid:53)(cid:66)(cid:60)(cid:73) (cid:40)(cid:53)(cid:67)(cid:69)(cid:60)(cid:68)(cid:67) (cid:63)(cid:54) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67) (cid:6)(cid:43)(cid:62)(cid:49)(cid:69)(cid:52)(cid:57)(cid:68)(cid:53)(cid:52)(cid:7)
(in millions, except per-share data)
(cid:14)(cid:12)(cid:14)(cid:12)
Total Revenues
Costs and Expenses
(cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:7) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:50)(cid:53)(cid:54)(cid:63)(cid:66)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:42)(cid:49)(cid:72)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
Income tax (benefit) expense
Equity in net income of unconsolidated affiliates
(cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:7) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:54)(cid:66)(cid:63)(cid:61) (cid:25)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:69)(cid:57)(cid:62)(cid:55) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Income from discontinued operations, net of tax
(cid:36)(cid:53)(cid:68) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:7) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:23)(cid:68)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:49)(cid:50)(cid:60)(cid:53) (cid:68)(cid:63) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67)
(cid:24)(cid:49)(cid:67)(cid:57)(cid:51) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:7) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:64)(cid:53)(cid:66) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)(cid:6)(cid:13)(cid:7)(cid:22)
Continuing operations
Discontinued operations
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:24)(cid:49)(cid:67)(cid:57)(cid:51) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:7) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:64)(cid:53)(cid:66) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)
(cid:26)(cid:57)(cid:60)(cid:69)(cid:68)(cid:53)(cid:52) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:7) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:64)(cid:53)(cid:66) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)(cid:6)(cid:13)(cid:7)(cid:22)
Continuing operations
Discontinued operations
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:26)(cid:57)(cid:60)(cid:69)(cid:68)(cid:53)(cid:52) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:7) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:64)(cid:53)(cid:66) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)
(cid:14)(cid:12)(cid:13)(cid:21)
Total Revenues
Costs and Expenses
(cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:50)(cid:53)(cid:54)(cid:63)(cid:66)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:42)(cid:49)(cid:72)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
Income tax (benefit) expense
Equity in net income of unconsolidated affiliates
(cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:54)(cid:66)(cid:63)(cid:61) (cid:25)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:69)(cid:57)(cid:62)(cid:55) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Income from discontinued operations, net of tax
(cid:36)(cid:53)(cid:68) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
Less: Income from continuing operations attributable to noncontrolling
interests
Less: Income from discontinued operations attributable to
noncontrolling interests
First
(cid:44)uarter
Second
(cid:44)uarter
Third
(cid:44)uarter
Fourth
(cid:44)uarter(2)(3)
Full
(cid:52)ear
(cid:3)
1,860 (cid:3)
1,465 (cid:3)
1,(cid:22)6(cid:22) (cid:3)
1,930 (cid:3)
1,865
1,430
(5)
(1)
2
(2)
(cid:84)
35
8
(cid:84)
2(cid:22)
(cid:84)
1,648
119
1,82(cid:22)
103
29
(cid:84)
90
(cid:84)
28
2
(cid:22)(cid:22)
(cid:84)
(2) (cid:3)
2(cid:22) (cid:3)
90 (cid:3)
(cid:22)(cid:22) (cid:3)
(0.03) (cid:3)
0.11 (cid:3)
0.41 (cid:3)
0.3(cid:22) (cid:3)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(0.03) (cid:3)
0.11 (cid:3)
0.41 (cid:3)
0.3(cid:22) (cid:3)
(0.03) (cid:3)
0.11 (cid:3)
0.41 (cid:3)
0.36 (cid:3)
(cid:84)
(cid:84)
(cid:84)
(cid:84)
(0.03) (cid:3)
0.11 (cid:3)
0.41 (cid:3)
0.36 (cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
2,180 (cid:3)
2,263 (cid:3)
2,1(cid:22)9 (cid:3)
2,444 (cid:3)
2,10(cid:22)
(cid:22)3
(10)
2
85
51
136
1
2
2,0(cid:22)3
190
1,956
223
2,108
336
50
2
142
42
184
1
2
66
1
158
64
222
1
(cid:84)
(cid:22)3
3
266
553
819
(cid:84)
1
(cid:22),022
6,(cid:22)(cid:22)0
252
64
4
192
(cid:84)
192
0.85
(cid:84)
0.85
0.84
(cid:84)
0.84
9,066
8,244
822
1(cid:22)9
8
651
(cid:22)10
1,361
3
5
(cid:36)(cid:53)(cid:68) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:23)(cid:68)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:49)(cid:50)(cid:60)(cid:53) (cid:68)(cid:63) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67)
(cid:3)
133 (cid:3)
181 (cid:3)
221 (cid:3)
818 (cid:3)
1,353
(cid:24)(cid:49)(cid:67)(cid:57)(cid:51) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:64)(cid:53)(cid:66) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)(cid:6)(cid:13)(cid:7)(cid:22)
Continuing operations
Discontinued operations
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:24)(cid:49)(cid:67)(cid:57)(cid:51) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:64)(cid:53)(cid:66) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)
(cid:26)(cid:57)(cid:60)(cid:69)(cid:68)(cid:53)(cid:52) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:64)(cid:53)(cid:66) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)(cid:6)(cid:13)(cid:7)(cid:22)
Continuing operations
Discontinued operations
(cid:42)(cid:63)(cid:68)(cid:49)(cid:60) (cid:26)(cid:57)(cid:60)(cid:69)(cid:68)(cid:53)(cid:52) (cid:27)(cid:49)(cid:66)(cid:62)(cid:57)(cid:62)(cid:55)(cid:67) (cid:64)(cid:53)(cid:66) (cid:41)(cid:56)(cid:49)(cid:66)(cid:53)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
0.35 (cid:3)
0.62 (cid:3)
0.(cid:22)0 (cid:3)
1.22 (cid:3)
0.22
0.1(cid:22)
0.29
2.56
0.5(cid:22) (cid:3)
0.(cid:22)9 (cid:3)
0.99 (cid:3)
3.(cid:22)8 (cid:3)
0.34 (cid:3)
0.60 (cid:3)
0.68 (cid:3)
1.1(cid:22) (cid:3)
0.21
0.1(cid:22)
0.28
2.44
0.55 (cid:3)
0.(cid:22)(cid:22) (cid:3)
0.96 (cid:3)
3.61 (cid:3)
2.86
3.1(cid:22)
6.03
2.(cid:22)8
3.02
5.80
_____________
(1) The sum of (cid:67)uarterly earnings per share may differ from the full-year amounts due to rounding, or in the case of diluted earnings per share,
because securities that are anti-dilutive in certain (cid:67)uarters may not be anti-dilutive on a full-year basis.
(2) (cid:30)ourth (cid:41)uarter 2(cid:13)1(cid:22) Revenues includes (cid:3)(cid:20)(cid:20) million related to an O(cid:29)(cid:37) license agreement by and between (cid:30)uji (cid:48)erox and (cid:48)erox and
(cid:30)ourth (cid:41)uarter 2(cid:13)1(cid:22) Income from discontinued operations, net of tax includes an after-tax gain of (cid:3)(cid:18)(cid:16)(cid:22) million on the sale of our
investments in (cid:30)uji (cid:48)erox and (cid:48)erox International (cid:40)artners. Refer to (cid:38)ote (cid:19) - Divestitures in the (cid:27)onsolidated (cid:30)inancial (cid:43)tatements for
additional information.
((cid:16)) (cid:30)ourth (cid:41)uarter 2(cid:13)2(cid:13) income tax expense includes a (cid:3)(cid:20) million benefit for a reduction in the deferred tax liability associated with
undistributed earnings that should have been recorded in (cid:30)ourth (cid:41)uarter 2(cid:13)1(cid:22).
Xerox 2020 Annual Report 147
Xerox 2020 Annual Report 14(cid:22)
Table of Contents
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:39)(cid:69)(cid:49)(cid:66)(cid:68)(cid:53)(cid:66)(cid:60)(cid:73) (cid:40)(cid:53)(cid:67)(cid:69)(cid:60)(cid:68)(cid:67) (cid:63)(cid:54) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67) (cid:6)(cid:43)(cid:62)(cid:49)(cid:69)(cid:52)(cid:57)(cid:68)(cid:53)(cid:52)(cid:7)
(in millions)
(cid:14)(cid:12)(cid:14)(cid:12)
Total Revenues
Costs and Expenses
(cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:7) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:50)(cid:53)(cid:54)(cid:63)(cid:66)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:42)(cid:49)(cid:72)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
Income tax (benefit) expense
Equity in net income of unconsolidated affiliates
(cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:7) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:54)(cid:66)(cid:63)(cid:61) (cid:25)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:69)(cid:57)(cid:62)(cid:55) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Income from discontinued operations, net of tax
First
(cid:44)uarter
Second
(cid:44)uarter
Third
(cid:44)uarter
Fourth
(cid:44)uarter(1)(2)
Full
(cid:52)ear
(cid:3)
1,860 (cid:3)
1,465 (cid:3)
1,(cid:22)6(cid:22) (cid:3)
1,930 (cid:3)
1,865
1,430
(5)
(1)
2
(2)
(cid:84)
35
8
(cid:84)
2(cid:22)
(cid:84)
1,63(cid:22)
130
29
(cid:84)
101
(cid:84)
1,83(cid:22)
93
28
2
6(cid:22)
(cid:84)
(cid:36)(cid:53)(cid:68) (cid:6)(cid:34)(cid:63)(cid:67)(cid:67)(cid:7) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:23)(cid:68)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:49)(cid:50)(cid:60)(cid:53) (cid:68)(cid:63) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67)
(cid:3)
(2) (cid:3)
2(cid:22) (cid:3)
101 (cid:3)
6(cid:22) (cid:3)
(cid:14)(cid:12)(cid:13)(cid:21)
Total Revenues
Costs and Expenses
(cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:50)(cid:53)(cid:54)(cid:63)(cid:66)(cid:53) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:42)(cid:49)(cid:72)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:27)(cid:65)(cid:69)(cid:57)(cid:68)(cid:73) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
Income tax (benefit) expense
Equity in net income of unconsolidated affiliates
(cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:54)(cid:66)(cid:63)(cid:61) (cid:25)(cid:63)(cid:62)(cid:68)(cid:57)(cid:62)(cid:69)(cid:57)(cid:62)(cid:55) (cid:37)(cid:64)(cid:53)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)
Income from discontinued operations, net of tax
(cid:36)(cid:53)(cid:68) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53)
Less: Income from continuing operations attributable to noncontrolling
interests
Less: Income from discontinued operations attributable to
noncontrolling interests
(cid:3)
2,180 (cid:3)
2,263 (cid:3)
2,1(cid:22)9 (cid:3)
2,444 (cid:3)
2,10(cid:22)
(cid:22)3
(10)
2
85
51
136
1
2
2,0(cid:22)3
190
1,956
223
2,108
336
50
2
142
42
184
1
2
66
1
158
64
222
1
(cid:84)
(cid:22)3
3
266
553
819
(cid:84)
1
(cid:22),022
6,(cid:22)69
253
64
4
193
(cid:84)
193
9,066
8,244
822
1(cid:22)9
8
651
(cid:22)10
1,361
3
5
(cid:36)(cid:53)(cid:68) (cid:31)(cid:62)(cid:51)(cid:63)(cid:61)(cid:53) (cid:23)(cid:68)(cid:68)(cid:66)(cid:57)(cid:50)(cid:69)(cid:68)(cid:49)(cid:50)(cid:60)(cid:53) (cid:68)(cid:63) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72)
(cid:3)
133 (cid:3)
181 (cid:3)
221 (cid:3)
818 (cid:3)
1,353
_____________
(1) (cid:30)ourth (cid:41)uarter 2(cid:13)1(cid:22) Revenues includes (cid:3)(cid:20)(cid:20) million related to an O(cid:29)(cid:37) license agreement by and between (cid:30)uji (cid:48)erox and (cid:48)erox and
(cid:30)ourth (cid:41)uarter 2(cid:13)1(cid:22) Income from discontinued operations, net of tax includes an after-tax gain of (cid:3)(cid:18)(cid:16)(cid:22) million on the sale of our
investments in (cid:30)uji (cid:48)erox and (cid:48)erox International (cid:40)artners. Refer to (cid:38)ote (cid:19) - Divestitures in the (cid:27)onsolidated (cid:30)inancial (cid:43)tatements for
additional information.
(2) (cid:30)ourth (cid:41)uarter 2(cid:13)2(cid:13) income tax expense includes a (cid:3)(cid:20) million benefit for a reduction in the deferred tax liability associated with
undistributed earnings that should have been recorded in (cid:30)ourth (cid:41)uarter 2(cid:13)1(cid:22).
148
Xerox 2020 Annual Report 148
Table of Contents
(cid:31)(cid:68)(cid:53)(cid:61) (cid:21)(cid:10) (cid:25)(cid:56)(cid:49)(cid:62)(cid:55)(cid:53)(cid:67) (cid:31)(cid:62) (cid:49)(cid:62)(cid:52) (cid:26)(cid:57)(cid:67)(cid:49)(cid:55)(cid:66)(cid:53)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:45)(cid:57)(cid:68)(cid:56) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:49)(cid:62)(cid:68)(cid:67) (cid:63)(cid:62) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55) (cid:49)(cid:62)(cid:52) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60)
(cid:26)(cid:57)(cid:67)(cid:51)(cid:60)(cid:63)(cid:67)(cid:69)(cid:66)(cid:53)
None.
(cid:31)(cid:68)(cid:53)(cid:61) (cid:21)(cid:23)(cid:10) (cid:25)(cid:63)(cid:62)(cid:68)(cid:66)(cid:63)(cid:60)(cid:67) (cid:49)(cid:62)(cid:52) (cid:38)(cid:66)(cid:63)(cid:51)(cid:53)(cid:52)(cid:69)(cid:66)(cid:53)(cid:67)
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:35)(cid:49)(cid:62)(cid:49)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:5)(cid:67) (cid:40)(cid:53)(cid:67)(cid:64)(cid:63)(cid:62)(cid:67)(cid:57)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:73) (cid:54)(cid:63)(cid:66) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)
The management of Xerox Holdings Corporation is responsible for the integrity and ob(cid:64)ectivity 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 (cid:64)udgments. (cid:40)anagement believes the Consolidated Financial Statements fairly
reflect the form and substance of transactions and that the financial statements fairly represent the financial position
and results of operations of Xerox Holdings Corporation.
The Audit Committee of the Board of Directors, which is composed solely of independent directors, meets regularly
with the independent auditors, (cid:43)ricewaterhouseCoopers LL(cid:43), 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 access to the Audit Committee.
(cid:27)(cid:70)(cid:49)(cid:60)(cid:69)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:63)(cid:54) (cid:26)(cid:57)(cid:67)(cid:51)(cid:60)(cid:63)(cid:67)(cid:69)(cid:66)(cid:53) (cid:25)(cid:63)(cid:62)(cid:68)(cid:66)(cid:63)(cid:60)(cid:67) (cid:49)(cid:62)(cid:52) (cid:38)(cid:66)(cid:63)(cid:51)(cid:53)(cid:52)(cid:69)(cid:66)(cid:53)(cid:67)
The management of Xerox Holdings Corporation evaluated, with the participation of our principal executive officer
and principal financial officer, or persons performing similar functions, the effectiveness of our disclosure controls
and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the
end of the period covered by this report. Based on this evaluation, our principal executive officer and principal
financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and
procedures were effective to ensure that information we are required to disclose in the reports that we file or submit
under the Securities Exchange Act of 1934, as amended, is recorded, processed, summari(cid:80)ed and reported within
the time periods specified in the Securities and Exchange Commission(cid:85)s rules and forms relating to Xerox Holdings
Corporation, including our consolidated subsidiaries, and was accumulated and communicated to Xerox Holdings
Corporation(cid:85)s management, including the principal executive officer and principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
(cid:35)(cid:49)(cid:62)(cid:49)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:5)(cid:67) (cid:40)(cid:53)(cid:64)(cid:63)(cid:66)(cid:68) (cid:63)(cid:62) (cid:31)(cid:62)(cid:68)(cid:53)(cid:66)(cid:62)(cid:49)(cid:60) (cid:25)(cid:63)(cid:62)(cid:68)(cid:66)(cid:63)(cid:60) (cid:63)(cid:70)(cid:53)(cid:66) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:40)(cid:53)(cid:64)(cid:63)(cid:66)(cid:68)(cid:57)(cid:62)(cid:55)
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 framewor(cid:65) in (cid:86)Internal Control - Integrated Framewor(cid:65) (2013)(cid:87) issued by the
Committee of Sponsoring Organi(cid:80)ations of the Treadway Commission.
Based on the above evaluation, management concluded that our internal control over financial reporting was
effective as of December 31, 2020.
The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by
(cid:43)ricewaterhouseCoopers LL(cid:43), an independent registered public accounting firm, as stated in their report which
appears in (cid:43)art II, Item 8 of this combined Form 10-K.
(cid:25)(cid:56)(cid:49)(cid:62)(cid:55)(cid:53)(cid:67) (cid:57)(cid:62) (cid:31)(cid:62)(cid:68)(cid:53)(cid:66)(cid:62)(cid:49)(cid:60) (cid:25)(cid:63)(cid:62)(cid:68)(cid:66)(cid:63)(cid:60) (cid:63)(cid:70)(cid:53)(cid:66) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:40)(cid:53)(cid:64)(cid:63)(cid:66)(cid:68)(cid:57)(cid:62)(cid:55)
In connection with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange Act, there was no
change identified in our internal control over financial reporting that occurred during the last fiscal quarter that has
materially affected, or is reasonably li(cid:65)ely to materially affect, our internal control over financial reporting.
Xerox 2020 Annual Report 149
Xerox 2020 Annual Report 149
Table of Contents
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:35)(cid:49)(cid:62)(cid:49)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:5)(cid:67) (cid:40)(cid:53)(cid:67)(cid:64)(cid:63)(cid:62)(cid:67)(cid:57)(cid:50)(cid:57)(cid:60)(cid:57)(cid:68)(cid:73) (cid:54)(cid:63)(cid:66) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67)
The management of Xerox Corporation is responsible for the integrity and ob(cid:64)ectivity 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 (cid:64)udgments. (cid:40)anagement believes the Consolidated Financial Statements fairly reflect the form and substance
of transactions and that the financial statements fairly represent the financial position and results of operations of
Xerox Corporation.
The Audit Committee of the Xerox Holdings Corporation Board of Directors, which is composed solely of
independent directors, meets regularly with the independent auditors, (cid:43)ricewaterhouseCoopers LL(cid:43), 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 access to the Audit Committee.
(cid:27)(cid:70)(cid:49)(cid:60)(cid:69)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:63)(cid:54) (cid:26)(cid:57)(cid:67)(cid:51)(cid:60)(cid:63)(cid:67)(cid:69)(cid:66)(cid:53) (cid:25)(cid:63)(cid:62)(cid:68)(cid:66)(cid:63)(cid:60)(cid:67) (cid:49)(cid:62)(cid:52) (cid:38)(cid:66)(cid:63)(cid:51)(cid:53)(cid:52)(cid:69)(cid:66)(cid:53)(cid:67)
The management of Xerox Corporation evaluated, with the participation of our principal executive officer and
principal financial officer, or persons performing similar functions, the effectiveness of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end
of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial
officer have concluded that, as of the end of the period covered by this report, our disclosure controls and
procedures were effective to ensure that information we are required to disclose in the reports that we file or submit
under the Securities Exchange Act of 1934, as amended, is recorded, processed, summari(cid:80)ed and reported within
the time periods specified in the Securities and Exchange Commission(cid:85)s rules and forms relating to Xerox
Corporation, including our consolidated subsidiaries, and was accumulated and communicated to Xerox
Corporation(cid:85)s management, including the principal executive officer and principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
(cid:35)(cid:49)(cid:62)(cid:49)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:5)(cid:67) (cid:40)(cid:53)(cid:64)(cid:63)(cid:66)(cid:68) (cid:63)(cid:62) (cid:31)(cid:62)(cid:68)(cid:53)(cid:66)(cid:62)(cid:49)(cid:60) (cid:25)(cid:63)(cid:62)(cid:68)(cid:66)(cid:63)(cid:60) (cid:63)(cid:70)(cid:53)(cid:66) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:40)(cid:53)(cid:64)(cid:63)(cid:66)(cid:68)(cid:57)(cid:62)(cid:55)
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 framewor(cid:65) in (cid:86)Internal Control - Integrated Framewor(cid:65) (2013)(cid:87) issued by the
Committee of Sponsoring Organi(cid:80)ations of the Treadway Commission.
Based on the above evaluation, management concluded that our internal control over financial reporting was
effective as of December 31, 2020.
The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by
(cid:43)ricewaterhouseCoopers LL(cid:43), an independent registered public accounting firm, as stated in their report which
appears in (cid:43)art II, Item 8 of this combined Form 10-K.
(cid:25)(cid:56)(cid:49)(cid:62)(cid:55)(cid:53)(cid:67) (cid:57)(cid:62) (cid:31)(cid:62)(cid:68)(cid:53)(cid:66)(cid:62)(cid:49)(cid:60) (cid:25)(cid:63)(cid:62)(cid:68)(cid:66)(cid:63)(cid:60) (cid:63)(cid:70)(cid:53)(cid:66) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:40)(cid:53)(cid:64)(cid:63)(cid:66)(cid:68)(cid:57)(cid:62)(cid:55)
In connection with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange Act, there was no
change identified in our internal control over financial reporting that occurred during the last fiscal quarter that has
materially affected, or is reasonably li(cid:65)ely to materially affect, our internal control over financial reporting.
(cid:31)(cid:68)(cid:53)(cid:61) (cid:21)(cid:24)(cid:10) (cid:37)(cid:68)(cid:56)(cid:53)(cid:66) (cid:31)(cid:62)(cid:54)(cid:63)(cid:66)(cid:61)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
None.
150
Xerox 2020 Annual Report 150
Table of Contents
(cid:38)(cid:49)(cid:66)(cid:68) (cid:31)(cid:31)(cid:31)
(cid:31)(cid:68)(cid:53)(cid:61) (cid:13)(cid:12)(cid:10) (cid:26)(cid:57)(cid:66)(cid:53)(cid:51)(cid:68)(cid:63)(cid:66)(cid:67)(cid:8) (cid:27)(cid:72)(cid:53)(cid:51)(cid:69)(cid:68)(cid:57)(cid:70)(cid:53) (cid:37)(cid:54)(cid:54)(cid:57)(cid:51)(cid:53)(cid:66)(cid:67) (cid:49)(cid:62)(cid:52) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:53) (cid:29)(cid:63)(cid:70)(cid:53)(cid:66)(cid:62)(cid:49)(cid:62)(cid:51)(cid:53)
The information regarding directors is incorporated herein by reference to the section entitled (cid:86)(cid:43)roposal 1 - Election
of Directors(cid:87) in our definitive (cid:43)roxy Statement (2021 (cid:43)roxy Statement) to be filed pursuant to Regulation 14A of the
Securities Exchange Act of 1934, as amended, in connection with our Annual (cid:40)eeting of Stoc(cid:65)holders. The (cid:43)roxy
Statement will be filed within 120 days after the end of our fiscal year ended December 31, 2020.
The information regarding the Audit Committee, its members and the Audit Committee financial experts is
incorporated by reference herein from the subsection entitled (cid:86)Committee Functions, (cid:40)embership and (cid:40)eetings(cid:87) in
the section entitled (cid:86)(cid:43)roposal 1 - Election of Directors(cid:87) in our 2021 (cid:43)roxy Statement.
(cid:50)e have adopted a code of ethics applicable to our principal executive officer, principal financial officer and principal
accounting officer. The Finance Code of Conduct can be found on our website at: www.xerox.com(cid:14)investor and then
clic(cid:65)ing on Corporate (cid:34)overnance. The content of our website is not incorporated by reference in this combined
Form 10-K unless expressly noted. Information concerning our Finance Code of Conduct can be found under
(cid:2)Corporate (cid:34)overnance(cid:2) in our 2021 definitive (cid:43)roxy Statement and is incorporated here by reference.
(cid:27)(cid:72)(cid:53)(cid:51)(cid:69)(cid:68)(cid:57)(cid:70)(cid:53) (cid:37)(cid:54)(cid:54)(cid:57)(cid:51)(cid:53)(cid:66)(cid:67) (cid:63)(cid:54) (cid:46)(cid:53)(cid:66)(cid:63)(cid:72)
The following is a list of the executive officers of Xerox, their current ages, their present positions and the year
appointed to their present positions. Each officer is elected to hold office until the meeting of the Board of Directors
held on the day of the next annual meeting of shareholders, sub(cid:64)ect to the provisions of the By-Laws.
Name
(cid:34)iovanni ((cid:37)ohn) (cid:49)isentin
Steven (cid:37). Bandrowc(cid:80)a(cid:65)
(cid:40)ichael Feldman
(cid:37)acques-Edouard (cid:34)ueden
Xavier Heiss
Su(cid:80)an (cid:40)orno-(cid:50)ade
(cid:43)resent (cid:43)osition
Age
58 (cid:49)ice Chairman and Chief Executive Officer
60 (cid:43)resident and Chief Operations Officer
54 Executive (cid:49)ice (cid:43)resident, (cid:43)resident Americas Operations
56 Executive (cid:49)ice (cid:43)resident, (cid:43)resident E(cid:40)EA Operations
5(cid:22) Executive (cid:49)ice (cid:43)resident, Chief Financial Officer
53 Executive (cid:49)ice (cid:43)resident, Chief Human Resources Officer
Louis (cid:37). (cid:43)astor
36
(cid:37)oanne Collins Smee
Naresh K. Shan(cid:65)er
(cid:37)oseph H. (cid:40)ancini, (cid:37)r.
Executive (cid:49)ice (cid:43)resident, Chief Corporate Development
Officer and Chief Legal Officer
Executive (cid:49)ice (cid:43)resident, Chief Commercial, S(cid:40)B and
Channels Officer
64
60 Senior (cid:49)ice (cid:43)resident, Chief Technology Officer
62 (cid:49)ice (cid:43)resident, Chief Accounting Officer
(cid:52)ear Appointed
to (cid:43)resent
(cid:43)osition
2018
2018
201(cid:22)
2021
2020
2018
Xerox Officer
Since
2018
2018
2013
2021
2015
2018
2021
2020
2019
2013
2018
2018
2019
2010
Of the officers named above, (cid:40)essrs. Feldman, (cid:34)ueden, Heiss and (cid:40)ancini, (cid:37)r., have been officers or executives of
Xerox, or its subsidiaries, for at least the past five years.
(cid:40)r. (cid:49)isentin (cid:64)oined Xerox as (cid:49)ice Chairman and CEO in (cid:40)ay 2018. (cid:43)rior to (cid:64)oining Xerox, (cid:40)r. (cid:49)isentin served as a
senior advisor to the chairman of Exela Technologies from August 201(cid:22) to (cid:40)ay 2018, an operating partner for
Advent International from September 201(cid:22) to (cid:40)ay 2018 and a consultant to Icahn Capital in connection with a proxy
contest at Xerox from (cid:40)arch 2018 to (cid:40)ay 2018. From 2013 to 201(cid:22), he served as the executive chairman and chief
executive officer of Novitex Enterprise Solutions and as an advisor with Apollo (cid:34)lobal (cid:40)anagement. (cid:40)r. (cid:49)isentin
was also a director and chairman of the board of (cid:43)residio, Inc. from 2015 to 201(cid:22). From 2011 to 2012, he served as
executive vice president and general manager of Hewlett (cid:43)ac(cid:65)ard Company(cid:85)s enterprise services business. From
200(cid:22) to 2011, (cid:40)r. (cid:49)isentin served as general manager of integrated technology services for IB(cid:40).
(cid:40)r. Bandrowc(cid:80)a(cid:65) (cid:64)oined Xerox in 2018 after 2 years at Alight Solutions, a spin-out of AON, where he was the chief
operating officer and chief information officer, responsible for the application portfolio and technical infrastructure of
the organi(cid:80)ation. (cid:43)rior
the president of
Telecommunication (cid:40)edia and Technology at Sutherland (cid:34)lobal Services for 6 months. He previously served as the
senior vice president for (cid:34)lobal Business Services at Hewlett-(cid:43)ac(cid:65)ard Enterprises for 4 years. He has also held
senior positions at Avaya, Nortel, Lenovo, DHL and Avnet.
to his experience at Alight Solutions, (cid:40)r. Bandrowc(cid:80)a(cid:65) was
(cid:40)s. (cid:40)orno-(cid:50)ade (cid:64)oined Xerox in 2016 after 11 years as vice president, compensation, benefits and HR information
systems at Hess Corporation. She has also held senior HR positions at (cid:44)uantum, (cid:40)itsubishi, (cid:34)eneral Electric and
(cid:44)ua(cid:65)er Oats.
Xerox 2020 Annual Report 151
Xerox 2020 Annual Report 151
Table of Contents
(cid:40)r. (cid:43)astor (cid:64)oined Xerox as Executive (cid:49)ice (cid:43)resident and (cid:34)eneral Counsel in 2018. In 2021, he was appointed
Executive (cid:49)ice (cid:43)resident, Chief Corporate Development Officer and Chief Legal Officer. (cid:43)rior to Xerox, (cid:40)r. (cid:43)astor
spent 5 years at Icahn Enterprises L.(cid:43)., where he was most recently the deputy general counsel, responsible for,
among other things, numerous long-term strategic initiatives, including the acquisitions and dispositions of various
operating companies, and investments in and engagements with various public and private companies. (cid:43)rior to
Icahn Enterprises, (cid:40)r. (cid:43)astor was an associate at Simpson, Thacher (cid:5) Bartlett LL(cid:43), where he advised public
companies on mergers and acquisitions, securities offerings, corporate governance and other general corporate
matters.
(cid:40)s. Collins Smee (cid:64)oined Xerox in 2018 from the U.S. Federal (cid:34)overnment where she was leading Technology
Transformation Services, overseeing technology and process design teams focused on transforming the way
federal government agencies build, buy and use technology. (cid:43)rior to that, (cid:40)s. Collins Smee spent more than 25
years at IB(cid:40) in a variety of global executive roles, including client sales, support and delivery of technical products
and services.
(cid:40)r. Shan(cid:65)er (cid:64)oined Xerox as chief digital officer and the executive committee in (cid:37)anuary 2019, and was appointed
senior vice president and chief technology officer in (cid:40)ay 2019. (cid:43)rior to (cid:64)oining Xerox, (cid:40)r. Shan(cid:65)er was chief digital
and information officer for a start-up company focusing on disruptive nano materials and clean energy solutions
where he continues to be a strategic advisor. (cid:43)reviously, (cid:40)r. Shan(cid:65)er was the CIO for Hewlett (cid:43)ac(cid:65)ard (H(cid:43)) and
(cid:43)alm, Inc.
(cid:31)(cid:68)(cid:53)(cid:61) (cid:13)(cid:13)(cid:10) (cid:27)(cid:72)(cid:53)(cid:51)(cid:69)(cid:68)(cid:57)(cid:70)(cid:53) (cid:25)(cid:63)(cid:61)(cid:64)(cid:53)(cid:62)(cid:67)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
The information included under the following captions under (cid:86)(cid:43)roposal 1-Election of Directors(cid:87) in our 2021 definitive
(cid:43)roxy Statement is incorporated herein by reference: (cid:86)Compensation Discussion and Analysis(cid:87), (cid:86)Summary
Compensation Table(cid:87), (cid:86)(cid:34)rants of (cid:43)lan-Based Awards in 2020(cid:87), (cid:86)Outstanding Equity Awards at 2020 Fiscal (cid:52)ear-
End(cid:87), (cid:86)Option Exercises and Stoc(cid:65) (cid:49)ested in 2020(cid:87), (cid:86)(cid:43)ension Benefits for the 2020 Fiscal (cid:52)ear(cid:87), (cid:86)Nonqualified
Deferred Compensation for the 2020 Fiscal (cid:52)ear(cid:87), (cid:86)(cid:43)otential (cid:43)ayments upon Termination or Change in Control(cid:87),
(cid:2)CEO (cid:43)ay Ratio(cid:2), (cid:86)Summary of Director Annual Compensation(cid:2), (cid:2)Compensation Committee Interloc(cid:65)s and Insider
(cid:43)articipation(cid:87) and (cid:86)Compensation Committee(cid:87). The information included under the heading (cid:86)Compensation
Committee Report(cid:87) in our 2021 definitive (cid:43)roxy Statement is incorporated herein by reference(cid:26) however, this
information shall not be deemed to be (cid:86)soliciting material(cid:87) or to be (cid:86)filed(cid:87) with the Commission or sub(cid:64)ect to
Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act of 1934, as amended.
(cid:31)(cid:68)(cid:53)(cid:61) (cid:13)(cid:14)(cid:10) (cid:41)(cid:53)(cid:51)(cid:69)(cid:66)(cid:57)(cid:68)(cid:73) (cid:37)(cid:71)(cid:62)(cid:53)(cid:66)(cid:67)(cid:56)(cid:57)(cid:64) (cid:63)(cid:54) (cid:25)(cid:53)(cid:66)(cid:68)(cid:49)(cid:57)(cid:62) (cid:24)(cid:53)(cid:62)(cid:53)(cid:54)(cid:57)(cid:51)(cid:57)(cid:49)(cid:60) (cid:37)(cid:71)(cid:62)(cid:53)(cid:66)(cid:67) (cid:49)(cid:62)(cid:52) (cid:35)(cid:49)(cid:62)(cid:49)(cid:55)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68) (cid:49)(cid:62)(cid:52) (cid:40)(cid:53)(cid:60)(cid:49)(cid:68)(cid:53)(cid:52)
(cid:41)(cid:68)(cid:63)(cid:51)(cid:59)(cid:56)(cid:63)(cid:60)(cid:52)(cid:53)(cid:66) (cid:35)(cid:49)(cid:68)(cid:68)(cid:53)(cid:66)(cid:67)
Information regarding security ownership of certain beneficial owners and management and securities authori(cid:80)ed
for issuance under equity compensation plans is incorporated herein by reference to the subsections entitled
(cid:86)Ownership of Company Securities,(cid:87) and (cid:86)Equity Compensation (cid:43)lan Information(cid:87) under (cid:86)(cid:43)roposal 1- Election of
Directors(cid:87) in our 2021 definitive (cid:43)roxy Statement.
(cid:31)(cid:68)(cid:53)(cid:61) (cid:13)(cid:15)(cid:10) (cid:25)(cid:53)(cid:66)(cid:68)(cid:49)(cid:57)(cid:62) (cid:40)(cid:53)(cid:60)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67)(cid:56)(cid:57)(cid:64)(cid:67)(cid:8) (cid:40)(cid:53)(cid:60)(cid:49)(cid:68)(cid:53)(cid:52) (cid:42)(cid:66)(cid:49)(cid:62)(cid:67)(cid:49)(cid:51)(cid:68)(cid:57)(cid:63)(cid:62)(cid:67) (cid:49)(cid:62)(cid:52) (cid:26)(cid:57)(cid:66)(cid:53)(cid:51)(cid:68)(cid:63)(cid:66) (cid:31)(cid:62)(cid:52)(cid:53)(cid:64)(cid:53)(cid:62)(cid:52)(cid:53)(cid:62)(cid:51)(cid:53)
Information regarding certain relationships and related transactions is incorporated herein by reference to the
subsection entitled (cid:86)Certain Relationships and Related (cid:43)erson Transactions(cid:87) under (cid:86)(cid:43)roposal 1- Election of
Directors(cid:87) in our 2021 definitive (cid:43)roxy Statement. The information regarding director independence is incorporated
herein by reference to the subsections entitled (cid:86)Corporate (cid:34)overnance(cid:87) and (cid:86)Director Independence(cid:87) in the section
entitled (cid:86)(cid:43)roposal 1 - Election of Directors(cid:87) in our 2021 definitive (cid:43)roxy Statement.
(cid:31)(cid:68)(cid:53)(cid:61) (cid:13)(cid:16)(cid:10) (cid:38)(cid:66)(cid:57)(cid:62)(cid:51)(cid:57)(cid:64)(cid:49)(cid:60) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:57)(cid:62)(cid:55) (cid:28)(cid:53)(cid:53)(cid:67) (cid:49)(cid:62)(cid:52) (cid:41)(cid:53)(cid:66)(cid:70)(cid:57)(cid:51)(cid:53)(cid:67)
The information regarding principal auditor fees and services is incorporated herein by reference to the section
entitled (cid:86)(cid:43)roposal 2 - Ratification of Election of Independent Registered (cid:43)ublic Accounting Firm(cid:87) in our 2021
definitive (cid:43)roxy Statement.
152
Xerox 2020 Annual Report 152
Table of Contents
(cid:38)(cid:49)(cid:66)(cid:68) (cid:31)(cid:44)
(cid:31)(cid:68)(cid:53)(cid:61) (cid:13)(cid:17)(cid:10) (cid:27)(cid:72)(cid:56)(cid:57)(cid:50)(cid:57)(cid:68)(cid:67) (cid:49)(cid:62)(cid:52) (cid:28)(cid:57)(cid:62)(cid:49)(cid:62)(cid:51)(cid:57)(cid:49)(cid:60) (cid:41)(cid:68)(cid:49)(cid:68)(cid:53)(cid:61)(cid:53)(cid:62)(cid:68)(cid:67) (cid:41)(cid:51)(cid:56)(cid:53)(cid:52)(cid:69)(cid:60)(cid:53)(cid:67)
(a)
(1) Index to Financial Statements filed as part of this report:
(cid:88) Xerox Holdings Corporation Report of Independent Registered (cid:43)ublic Accounting Firm(cid:6)
(cid:88) Xerox Corporation Report of Independent Registered (cid:43)ublic Accounting Firm(cid:26)
(cid:88) Xerox Holdings Corporation Consolidated Statements of Income for each of the years in the three-year
period ended December 31, 2020(cid:26)
(cid:88) Xerox Corporation Consolidated Statements of Income for each of the years in the three-year period
ended December 31, 2020(cid:26)
(cid:88) Xerox Holdings Corporation Consolidated Statements of Comprehensive Income for each of the three
years in the period ended December 31, 2020(cid:26)
(cid:88) Xerox Corporation Consolidated Statements of Comprehensive Income for each of the three years in
the period ended December 31, 2020(cid:26)
(cid:88) Xerox Holdings Corporation Consolidated Balance Sheets as of December 31, 2020 and 2019(cid:26)
(cid:88) Xerox Corporation Consolidated Balance Sheets as of December 31, 2020 and 2019(cid:26)
(cid:88) Xerox Holdings Corporation Consolidated Statements of Cash Flows for each of the three years in the
period ended December 31, 2020(cid:26)
(cid:88) Xerox Corporation Consolidated Statements of Cash Flows for each of the three years in the period
ended December 31, 2020(cid:26)
(cid:88) Xerox Holdings Corporation Consolidated Statements of Shareholders' Equity for each of the three
years in the period ended December 31, 2020(cid:26)
(cid:88) Xerox Corporation Consolidated Statements of Shareholders' Equity for each of the three years in the
period ended December 31, 2020(cid:26)
(cid:88) Notes to the Consolidated Financial Statements(cid:26) and
(cid:88) All other schedules are omitted as they are not applicable, or the information required is included in the
financial statements or notes thereto.
(2) Financial Statement Schedule:
(cid:8) Xerox Holdings Corporation Schedule II - (cid:49)aluation and (cid:44)ualifying Accounts for each of the three years
in the period ended December 31, 2020.
(cid:8) Xerox Corporation Schedule II - (cid:49)aluation and (cid:44)ualifying Accounts for each of the three years in the
period ended December 31, 2020.
(3) The exhibits filed herewith are set forth in the Index of Exhibits included herein.
(b)
The management contracts or compensatory plans or arrangements listed in the (cid:86)Index of Exhibits(cid:87) that
are applicable to the executive officers named in the Summary Compensation Table which appears in
Registrant's 2021 (cid:43)roxy Statement or to our directors are preceded by an asteris(cid:65) ((cid:9)).
(cid:31)(cid:68)(cid:53)(cid:61) (cid:13)(cid:18)(cid:10) (cid:28)(cid:63)(cid:66)(cid:61) (cid:13)(cid:12)(cid:9)(cid:33) (cid:41)(cid:69)(cid:61)(cid:61)(cid:49)(cid:66)(cid:73)
None
Xerox 2020 Annual Report 153
Xerox 2020 Annual Report 153
Table of Contents
Table of Contents
(cid:41)(cid:57)(cid:55)(cid:62)(cid:49)(cid:68)(cid:69)(cid:66)(cid:53)(cid:67)
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:43)ursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authori(cid:80)ed.
(cid:43)ursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authori(cid:80)ed.
(cid:46)(cid:27)(cid:40)(cid:37)(cid:46) (cid:30)(cid:37)(cid:34)(cid:26)(cid:31)(cid:36)(cid:29)(cid:41) (cid:25)(cid:37)(cid:40)(cid:38)(cid:37)(cid:40)(cid:23)(cid:42)(cid:31)(cid:37)(cid:36)
(cid:14)s(cid:14) (cid:34)IO(cid:49)ANNI (cid:49)ISENTIN
(cid:29)(cid:57)(cid:63)(cid:70)(cid:49)(cid:62)(cid:62)(cid:57) (cid:44)(cid:57)(cid:67)(cid:53)(cid:62)(cid:68)(cid:57)(cid:62)
(cid:44)(cid:57)(cid:51)(cid:53) (cid:25)(cid:56)(cid:49)(cid:57)(cid:66)(cid:61)(cid:49)(cid:62) (cid:49)(cid:62)(cid:52)
(cid:25)(cid:56)(cid:57)(cid:53)(cid:54) (cid:27)(cid:72)(cid:53)(cid:51)(cid:69)(cid:68)(cid:57)(cid:70)(cid:53) (cid:37)(cid:54)(cid:54)(cid:57)(cid:51)(cid:53)(cid:66)
(cid:28)(cid:53)(cid:50)(cid:66)(cid:69)(cid:49)(cid:66)(cid:73) (cid:14)(cid:17)(cid:8) (cid:14)(cid:12)(cid:14)(cid:13)
(cid:43)ursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the date indicated.
(cid:43)ursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the date indicated.
February 25, 2021
(cid:41)(cid:57)(cid:55)(cid:62)(cid:49)(cid:68)(cid:69)(cid:66)(cid:53)
Principal Executive Officer:
(cid:14)S(cid:14) (cid:34)IO(cid:49)ANNI (cid:49)ISENTIN
(cid:29)(cid:57)(cid:63)(cid:70)(cid:49)(cid:62)(cid:62)(cid:57) (cid:44)(cid:57)(cid:67)(cid:53)(cid:62)(cid:68)(cid:57)(cid:62)
Principal Financial Officer:
(cid:14)S(cid:14) XA(cid:49)IER HEISS
(cid:46)(cid:49)(cid:70)(cid:57)(cid:53)(cid:66) (cid:30)(cid:53)(cid:57)(cid:67)(cid:67)
Principal Accounting Officer:
(cid:14)S(cid:14) (cid:37)OSE(cid:43)H H. (cid:40)ANCINI, (cid:37)R.
(cid:32)(cid:63)(cid:67)(cid:53)(cid:64)(cid:56) (cid:30)(cid:10) (cid:35)(cid:49)(cid:62)(cid:51)(cid:57)(cid:62)(cid:57)(cid:8) (cid:32)(cid:66)(cid:10)
Directors:
(cid:14)S(cid:14) KEITH CO(cid:53)(cid:53)A
(cid:33)(cid:53)(cid:57)(cid:68)(cid:56) (cid:25)(cid:63)(cid:74)(cid:74)(cid:49)
(cid:14)S(cid:14) (cid:37)ONATHAN CHRISTODORO
(cid:32)(cid:63)(cid:62)(cid:49)(cid:68)(cid:56)(cid:49)(cid:62) (cid:25)(cid:56)(cid:66)(cid:57)(cid:67)(cid:68)(cid:63)(cid:52)(cid:63)(cid:66)(cid:63)
(cid:14)S(cid:14) (cid:37)OSE(cid:43)H (cid:37). ECHE(cid:49)ARRIA
(cid:32)(cid:63)(cid:67)(cid:53)(cid:64)(cid:56) (cid:32)(cid:10) (cid:27)(cid:51)(cid:56)(cid:53)(cid:70)(cid:49)(cid:66)(cid:66)(cid:57)(cid:49)
(cid:14)S(cid:14) NICHOLAS (cid:34)RA(cid:53)IANO
(cid:36)(cid:57)(cid:51)(cid:56)(cid:63)(cid:60)(cid:49)(cid:67) (cid:29)(cid:66)(cid:49)(cid:74)(cid:57)(cid:49)(cid:62)(cid:63)
(cid:14)S(cid:14) CHER(cid:52)L (cid:34)ORDON KRON(cid:34)ARD
(cid:25)(cid:56)(cid:53)(cid:66)(cid:73)(cid:60) (cid:29)(cid:63)(cid:66)(cid:52)(cid:63)(cid:62) (cid:33)(cid:66)(cid:63)(cid:62)(cid:55)(cid:49)(cid:66)(cid:52)
(cid:14)S(cid:14) A. SCOTT LETIER
(cid:23)(cid:10) (cid:41)(cid:51)(cid:63)(cid:68)(cid:68) (cid:34)(cid:53)(cid:68)(cid:57)(cid:53)(cid:66)
(cid:42)(cid:57)(cid:68)(cid:60)(cid:53)
(cid:42)(cid:57)(cid:68)(cid:60)(cid:53)
(cid:49)ice Chairman, Chief Executive Officer and Director
(cid:49)ice Chairman, Chief Executive Officer and Director
Executive (cid:49)ice (cid:43)resident and Chief Financial Officer
Executive (cid:49)ice (cid:43)resident and Chief Financial Officer
(cid:49)ice (cid:43)resident and Chief Accounting Officer
(cid:49)ice (cid:43)resident and Chief Accounting Officer
Chairman and Director
Chairman and Director
Director
Director
Director
Director
Director
(cid:41)(cid:57)(cid:55)(cid:62)(cid:49)(cid:68)(cid:69)(cid:66)(cid:53)(cid:67)
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:46)(cid:27)(cid:40)(cid:37)(cid:46) (cid:25)(cid:37)(cid:40)(cid:38)(cid:37)(cid:40)(cid:23)(cid:42)(cid:31)(cid:37)(cid:36)
(cid:14)s(cid:14) (cid:34)IO(cid:49)ANNI (cid:49)ISENTIN
(cid:29)(cid:57)(cid:63)(cid:70)(cid:49)(cid:62)(cid:62)(cid:57) (cid:44)(cid:57)(cid:67)(cid:53)(cid:62)(cid:68)(cid:57)(cid:62)
(cid:44)(cid:57)(cid:51)(cid:53) (cid:25)(cid:56)(cid:49)(cid:57)(cid:66)(cid:61)(cid:49)(cid:62) (cid:49)(cid:62)(cid:52)
(cid:25)(cid:56)(cid:57)(cid:53)(cid:54) (cid:27)(cid:72)(cid:53)(cid:51)(cid:69)(cid:68)(cid:57)(cid:70)(cid:53) (cid:37)(cid:54)(cid:54)(cid:57)(cid:51)(cid:53)(cid:66)
(cid:28)(cid:53)(cid:50)(cid:66)(cid:69)(cid:49)(cid:66)(cid:73) (cid:14)(cid:17)(cid:8) (cid:14)(cid:12)(cid:14)(cid:13)
February 25, 2021
(cid:41)(cid:57)(cid:55)(cid:62)(cid:49)(cid:68)(cid:69)(cid:66)(cid:53)
Principal Executive Officer:
(cid:14)S(cid:14) (cid:34)IO(cid:49)ANNI (cid:49)ISENTIN
(cid:29)(cid:57)(cid:63)(cid:70)(cid:49)(cid:62)(cid:62)(cid:57) (cid:44)(cid:57)(cid:67)(cid:53)(cid:62)(cid:68)(cid:57)(cid:62)
Principal Financial Officer:
(cid:14)S(cid:14) XA(cid:49)IER HEISS
(cid:46)(cid:49)(cid:70)(cid:57)(cid:53)(cid:66) (cid:30)(cid:53)(cid:57)(cid:67)(cid:67)
Principal Accounting Officer:
(cid:14)S(cid:14) (cid:37)OSE(cid:43)H H. (cid:40)ANCINI, (cid:37)R.
(cid:32)(cid:63)(cid:67)(cid:53)(cid:64)(cid:56) (cid:30)(cid:10) (cid:35)(cid:49)(cid:62)(cid:51)(cid:57)(cid:62)(cid:57)(cid:8) (cid:32)(cid:66)(cid:10)
Directors:
(cid:14)S(cid:14) KEITH CO(cid:53)(cid:53)A
(cid:33)(cid:53)(cid:57)(cid:68)(cid:56) (cid:25)(cid:63)(cid:74)(cid:74)(cid:49)
(cid:14)S(cid:14) (cid:37)ONATHAN CHRISTODORO
(cid:32)(cid:63)(cid:62)(cid:49)(cid:68)(cid:56)(cid:49)(cid:62) (cid:25)(cid:56)(cid:66)(cid:57)(cid:67)(cid:68)(cid:63)(cid:52)(cid:63)(cid:66)(cid:63)
(cid:14)S(cid:14) (cid:37)OSE(cid:43)H (cid:37). ECHE(cid:49)ARRIA
(cid:32)(cid:63)(cid:67)(cid:53)(cid:64)(cid:56) (cid:32)(cid:10) (cid:27)(cid:51)(cid:56)(cid:53)(cid:70)(cid:49)(cid:66)(cid:66)(cid:57)(cid:49)
(cid:14)S(cid:14) NICHOLAS (cid:34)RA(cid:53)IANO
(cid:36)(cid:57)(cid:51)(cid:56)(cid:63)(cid:60)(cid:49)(cid:67) (cid:29)(cid:66)(cid:49)(cid:74)(cid:57)(cid:49)(cid:62)(cid:63)
(cid:25)(cid:56)(cid:53)(cid:66)(cid:73)(cid:60) (cid:29)(cid:63)(cid:66)(cid:52)(cid:63)(cid:62) (cid:33)(cid:66)(cid:63)(cid:62)(cid:55)(cid:49)(cid:66)(cid:52)
(cid:14)S(cid:14) A. SCOTT LETIER
(cid:23)(cid:10) (cid:41)(cid:51)(cid:63)(cid:68)(cid:68) (cid:34)(cid:53)(cid:68)(cid:57)(cid:53)(cid:66)
(cid:14)S(cid:14) CHER(cid:52)L (cid:34)ORDON KRON(cid:34)ARD
Director
Director
Director
Director
Director
154
Xerox 2020 Annual Report 154
Xerox 2020 Annual Report 155
Table of Contents
(cid:41)(cid:57)(cid:55)(cid:62)(cid:49)(cid:68)(cid:69)(cid:66)(cid:53)(cid:67)
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:43)ursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authori(cid:80)ed.
(cid:46)(cid:27)(cid:40)(cid:37)(cid:46) (cid:25)(cid:37)(cid:40)(cid:38)(cid:37)(cid:40)(cid:23)(cid:42)(cid:31)(cid:37)(cid:36)
(cid:14)s(cid:14) (cid:34)IO(cid:49)ANNI (cid:49)ISENTIN
(cid:29)(cid:57)(cid:63)(cid:70)(cid:49)(cid:62)(cid:62)(cid:57) (cid:44)(cid:57)(cid:67)(cid:53)(cid:62)(cid:68)(cid:57)(cid:62)
(cid:44)(cid:57)(cid:51)(cid:53) (cid:25)(cid:56)(cid:49)(cid:57)(cid:66)(cid:61)(cid:49)(cid:62) (cid:49)(cid:62)(cid:52)
(cid:25)(cid:56)(cid:57)(cid:53)(cid:54) (cid:27)(cid:72)(cid:53)(cid:51)(cid:69)(cid:68)(cid:57)(cid:70)(cid:53) (cid:37)(cid:54)(cid:54)(cid:57)(cid:51)(cid:53)(cid:66)
(cid:28)(cid:53)(cid:50)(cid:66)(cid:69)(cid:49)(cid:66)(cid:73) (cid:14)(cid:17)(cid:8) (cid:14)(cid:12)(cid:14)(cid:13)
(cid:43)ursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the date indicated.
February 25, 2021
(cid:41)(cid:57)(cid:55)(cid:62)(cid:49)(cid:68)(cid:69)(cid:66)(cid:53)
Principal Executive Officer:
(cid:14)S(cid:14) (cid:34)IO(cid:49)ANNI (cid:49)ISENTIN
(cid:29)(cid:57)(cid:63)(cid:70)(cid:49)(cid:62)(cid:62)(cid:57) (cid:44)(cid:57)(cid:67)(cid:53)(cid:62)(cid:68)(cid:57)(cid:62)
Principal Financial Officer:
(cid:14)S(cid:14) XA(cid:49)IER HEISS
(cid:46)(cid:49)(cid:70)(cid:57)(cid:53)(cid:66) (cid:30)(cid:53)(cid:57)(cid:67)(cid:67)
Principal Accounting Officer:
(cid:14)S(cid:14) (cid:37)OSE(cid:43)H H. (cid:40)ANCINI, (cid:37)R.
(cid:32)(cid:63)(cid:67)(cid:53)(cid:64)(cid:56) (cid:30)(cid:10) (cid:35)(cid:49)(cid:62)(cid:51)(cid:57)(cid:62)(cid:57)(cid:8) (cid:32)(cid:66)(cid:10)
Directors:
(cid:14)S(cid:14) KEITH CO(cid:53)(cid:53)A
(cid:33)(cid:53)(cid:57)(cid:68)(cid:56) (cid:25)(cid:63)(cid:74)(cid:74)(cid:49)
(cid:14)S(cid:14) (cid:37)ONATHAN CHRISTODORO
(cid:32)(cid:63)(cid:62)(cid:49)(cid:68)(cid:56)(cid:49)(cid:62) (cid:25)(cid:56)(cid:66)(cid:57)(cid:67)(cid:68)(cid:63)(cid:52)(cid:63)(cid:66)(cid:63)
(cid:14)S(cid:14) (cid:37)OSE(cid:43)H (cid:37). ECHE(cid:49)ARRIA
(cid:32)(cid:63)(cid:67)(cid:53)(cid:64)(cid:56) (cid:32)(cid:10) (cid:27)(cid:51)(cid:56)(cid:53)(cid:70)(cid:49)(cid:66)(cid:66)(cid:57)(cid:49)
(cid:14)S(cid:14) NICHOLAS (cid:34)RA(cid:53)IANO
(cid:36)(cid:57)(cid:51)(cid:56)(cid:63)(cid:60)(cid:49)(cid:67) (cid:29)(cid:66)(cid:49)(cid:74)(cid:57)(cid:49)(cid:62)(cid:63)
(cid:14)S(cid:14) CHER(cid:52)L (cid:34)ORDON KRON(cid:34)ARD
(cid:25)(cid:56)(cid:53)(cid:66)(cid:73)(cid:60) (cid:29)(cid:63)(cid:66)(cid:52)(cid:63)(cid:62) (cid:33)(cid:66)(cid:63)(cid:62)(cid:55)(cid:49)(cid:66)(cid:52)
(cid:14)S(cid:14) A. SCOTT LETIER
(cid:23)(cid:10) (cid:41)(cid:51)(cid:63)(cid:68)(cid:68) (cid:34)(cid:53)(cid:68)(cid:57)(cid:53)(cid:66)
(cid:42)(cid:57)(cid:68)(cid:60)(cid:53)
(cid:49)ice Chairman, Chief Executive Officer and Director
Executive (cid:49)ice (cid:43)resident and Chief Financial Officer
(cid:49)ice (cid:43)resident and Chief Accounting Officer
Chairman and Director
Director
Director
Director
Director
Director
Xerox 2020 Annual Report 155
Xerox 2020 Annual Report 155
Table of Contents
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:41)(cid:51)(cid:56)(cid:53)(cid:52)(cid:69)(cid:60)(cid:53) (cid:31)(cid:31) (cid:44)(cid:49)(cid:60)(cid:69)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:49)(cid:62)(cid:52) (cid:39)(cid:69)(cid:49)(cid:60)(cid:57)(cid:54)(cid:73)(cid:57)(cid:62)(cid:55) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:67)
(cid:40)(cid:53)(cid:51)(cid:53)(cid:57)(cid:70)(cid:49)(cid:50)(cid:60)(cid:53)(cid:67) (cid:9) (cid:23)(cid:60)(cid:60)(cid:63)(cid:71)(cid:49)(cid:62)(cid:51)(cid:53) (cid:54)(cid:63)(cid:66) (cid:52)(cid:63)(cid:69)(cid:50)(cid:68)(cid:54)(cid:69)(cid:60) (cid:49)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:67)(cid:22)
(in millions)
(cid:47)(cid:53)(cid:49)(cid:66) (cid:27)(cid:62)(cid:52)(cid:53)(cid:52) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:14)(cid:12)
Accounts Receivable
Finance Receivables
(cid:47)(cid:53)(cid:49)(cid:66) (cid:27)(cid:62)(cid:52)(cid:53)(cid:52) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:21)
Accounts Receivable
Finance Receivables
(cid:47)(cid:53)(cid:49)(cid:66) (cid:27)(cid:62)(cid:52)(cid:53)(cid:52) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:20)
Accounts Receivable
Finance Receivables
_____________
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
Balance
at beginning
of period
Additions
charged to bad
debt provision (1)
Amounts
charged to
other income
statement
accounts (1)
Deductions
and other, net
of recoveries (2)
Balance
at end
of period
55 (cid:3)
89
144 (cid:3)
56 (cid:3)
92
148 (cid:3)
59 (cid:3)
108
16(cid:22) (cid:3)
35 (cid:3)
81
116 (cid:3)
18 (cid:3)
28
46 (cid:3)
12 (cid:3)
24
36 (cid:3)
(cid:84) (cid:3)
(cid:84)
(cid:84) (cid:3)
(cid:84) (cid:3)
3
3 (cid:3)
2 (cid:3)
2
4 (cid:3)
(21) (cid:3)
(3(cid:22))
(58) (cid:3)
(19) (cid:3)
(34)
(53) (cid:3)
(1(cid:22)) (cid:3)
(42)
(59) (cid:3)
69
133
202
55
89
144
56
92
148
(1) Bad debt provisions relate to estimated losses due to credit and similar collectibility issues. Other charges (credits) relate to adjustments to
reserves necessary to reflect events of non-payment such as customer accommodations and contract terminations.
(2) Deductions and other, net of recoveries primarily relates to receivable write-offs, but also includes the impact of foreign currency translation
adjustments and recoveries of previously written off receivables.
(cid:26)(cid:53)(cid:54)(cid:53)(cid:66)(cid:66)(cid:53)(cid:52) (cid:42)(cid:49)(cid:72) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68) (cid:44)(cid:49)(cid:60)(cid:69)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:23)(cid:60)(cid:60)(cid:63)(cid:71)(cid:49)(cid:62)(cid:51)(cid:53)(cid:67)(cid:22)
(in millions)
(cid:47)(cid:53)(cid:49)(cid:66) (cid:27)(cid:62)(cid:52)(cid:53)(cid:52) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:14)(cid:12)
(cid:47)(cid:53)(cid:49)(cid:66) (cid:27)(cid:62)(cid:52)(cid:53)(cid:52) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:21)
(cid:47)(cid:53)(cid:49)(cid:66) (cid:27)(cid:62)(cid:52)(cid:53)(cid:52) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:20)
_____________
Balance
at beginning
of period
Additions
charged to
income tax
expense
Amounts
credited to
other accounts (1)
Balance
at end
of period
(cid:3)
(cid:3)
(cid:3)
399
39(cid:22)
435
25
16
3
(28) (cid:3)
(14) (cid:3)
(41) (cid:3)
396
399
39(cid:22)
(1) Reflects other decreases to our valuation allowance, including the effects of currency. These did not affect Income tax expense in total as
there was a corresponding adjustment to Deferred tax assets or Other comprehensive income.
156
Xerox 2020 Annual Report 156
Table of Contents
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:41)(cid:51)(cid:56)(cid:53)(cid:52)(cid:69)(cid:60)(cid:53) (cid:31)(cid:31) (cid:44)(cid:49)(cid:60)(cid:69)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:49)(cid:62)(cid:52) (cid:39)(cid:69)(cid:49)(cid:60)(cid:57)(cid:54)(cid:73)(cid:57)(cid:62)(cid:55) (cid:23)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:67)
(cid:40)(cid:53)(cid:51)(cid:53)(cid:57)(cid:70)(cid:49)(cid:50)(cid:60)(cid:53)(cid:67) (cid:9) (cid:23)(cid:60)(cid:60)(cid:63)(cid:71)(cid:49)(cid:62)(cid:51)(cid:53) (cid:54)(cid:63)(cid:66) (cid:52)(cid:63)(cid:69)(cid:50)(cid:68)(cid:54)(cid:69)(cid:60) (cid:49)(cid:51)(cid:51)(cid:63)(cid:69)(cid:62)(cid:68)(cid:67)(cid:22)
(in millions)
(cid:47)(cid:53)(cid:49)(cid:66) (cid:27)(cid:62)(cid:52)(cid:53)(cid:52) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:14)(cid:12)
Accounts Receivable
Finance Receivables
(cid:47)(cid:53)(cid:49)(cid:66) (cid:27)(cid:62)(cid:52)(cid:53)(cid:52) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:21)
Accounts Receivable
Finance Receivables
(cid:47)(cid:53)(cid:49)(cid:66) (cid:27)(cid:62)(cid:52)(cid:53)(cid:52) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:20)
Accounts Receivable
Finance Receivables
_____________
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
Balance
at beginning
of period
Additions
charged to bad
debt provision (1)
Amounts
charged to
other income
statement
accounts (1)
Deductions
and other, net
of recoveries (2)
Balance
at end
of period
55 (cid:3)
89
144 (cid:3)
56 (cid:3)
92
148 (cid:3)
59 (cid:3)
108
16(cid:22) (cid:3)
35 (cid:3)
81
116 (cid:3)
18 (cid:3)
28
46 (cid:3)
12 (cid:3)
24
36 (cid:3)
(cid:84) (cid:3)
(cid:84)
(cid:84) (cid:3)
(cid:84) (cid:3)
3
3 (cid:3)
2 (cid:3)
2
4 (cid:3)
(21) (cid:3)
(3(cid:22))
(58) (cid:3)
(19) (cid:3)
(34)
(53) (cid:3)
(1(cid:22)) (cid:3)
(42)
(59) (cid:3)
69
133
202
55
89
144
56
92
148
(1) Bad debt provisions relate to estimated losses due to credit and similar collectibility issues. Other charges (credits) relate to adjustments to
reserves necessary to reflect events of non-payment such as customer accommodations and contract terminations.
(2) Deductions and other, net of recoveries primarily relates to receivable write-offs, but also includes the impact of foreign currency translation
adjustments and recoveries of previously written off receivables.
(cid:26)(cid:53)(cid:54)(cid:53)(cid:66)(cid:66)(cid:53)(cid:52) (cid:42)(cid:49)(cid:72) (cid:23)(cid:67)(cid:67)(cid:53)(cid:68) (cid:44)(cid:49)(cid:60)(cid:69)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62) (cid:23)(cid:60)(cid:60)(cid:63)(cid:71)(cid:49)(cid:62)(cid:51)(cid:53)(cid:67)(cid:22)
(in millions)
(cid:47)(cid:53)(cid:49)(cid:66) (cid:27)(cid:62)(cid:52)(cid:53)(cid:52) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:14)(cid:12)
(cid:47)(cid:53)(cid:49)(cid:66) (cid:27)(cid:62)(cid:52)(cid:53)(cid:52) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:21)
(cid:47)(cid:53)(cid:49)(cid:66) (cid:27)(cid:62)(cid:52)(cid:53)(cid:52) (cid:26)(cid:53)(cid:51)(cid:53)(cid:61)(cid:50)(cid:53)(cid:66) (cid:15)(cid:13)(cid:8) (cid:14)(cid:12)(cid:13)(cid:20)
Balance
at beginning
of period
Additions
charged to
income tax
expense
Amounts
credited to
other accounts (1)
Balance
at end
of period
(cid:3)
(cid:3)
(cid:3)
399
39(cid:22)
435
25
16
3
(28) (cid:3)
(14) (cid:3)
(41) (cid:3)
396
399
39(cid:22)
_____________
(1) Reflects other decreases increases to our valuation allowance, including the effects of currency. These did not affect Income tax expense in
total as there was a corresponding adjustment to Deferred tax assets or Other comprehensive income.
Xerox 2020 Annual Report 157
Xerox 2020 Annual Report 15(cid:22)
Table of Contents
(cid:31)(cid:62)(cid:52)(cid:53)(cid:72) (cid:63)(cid:54) (cid:27)(cid:72)(cid:56)(cid:57)(cid:50)(cid:57)(cid:68)(cid:67)
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:30)(cid:63)(cid:60)(cid:52)(cid:57)(cid:62)(cid:55)(cid:67) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:46)(cid:53)(cid:66)(cid:63)(cid:72) (cid:25)(cid:63)(cid:66)(cid:64)(cid:63)(cid:66)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
(cid:26)(cid:63)(cid:51)(cid:69)(cid:61)(cid:53)(cid:62)(cid:68) (cid:49)(cid:62)(cid:52) (cid:34)(cid:63)(cid:51)(cid:49)(cid:68)(cid:57)(cid:63)(cid:62)
2(a)
Agreement and (cid:43)lan of (cid:40)erger dated as of (cid:40)arch 15, 2019, by and among Xerox Corporation,
Xerox Holdings Corporation and Xerox (cid:40)erger Sub., Inc.
Incorporated by reference to Exhibit 2.1 to Xerox Corporation's Current Report on Form 8-K dated
(cid:40)arch 15, 2019. See SEC File Number 001-044(cid:22)1.
Separation and Distribution Agreement dated as of December 30, 2016 by and between Xerox
Corporation and Conduent Incorporated.
Incorporated by reference to Exhibit 2.1 to Xerox Corporation's Current Report on Form 8-K dated
December 30, 2016. See SEC File Number 001-044(cid:22)1.
Certificate of (cid:40)erger, dated (cid:37)uly 31, 2019, of Xerox (cid:40)erger Sub., Inc. into Xerox Corporation.
Incorporated by reference to Exhibit 3.1 to Xerox Corporation's Current Report on Form 8-K dated
(cid:37)uly 31, 2019. See SEC File Number 001-044(cid:22)1.
Restated Certificate of Incorporation of Xerox Corporation's filed with the Department of State of
New (cid:52)or(cid:65) on (cid:37)uly 31, 2019.
Incorporated by reference to Exhibit 3.2 to Xerox Corporation's Report on Form 8-K dated (cid:37)uly 31,
2019. See SEC File Number 001-044(cid:22)1.
Restated Certificate of Incorporation of Xerox Holdings Corporation filed with the Department of
State of New (cid:52)or(cid:65) on (cid:37)uly 31, 2019.
Incorporated by reference to Exhibit 3.2 to Xerox Holdings Corporation's Current Report on Form
on Form 8-K dated (cid:37)uly 31, 2019. See SEC File Number 001-39013.
Amended and Restated By-Laws of Xerox Corporation dated (cid:37)uly 31, 2019.
Incorporated by reference to Exhibit 3.3 to Xerox Corporation's Amended Current Report on Form
8-K dated (cid:37)uly 31, 2019 (filed August 16, 2019). See SEC File Number 001-044(cid:22)1.
Amended and Restated By-Laws of Xerox Holdings Corporation as amended through (cid:40)arch 6,
2020.
Incorporated by reference to Exhibit 3.1 to Xerox Holdings Corporation's Current Report on Form
8-K dated (cid:40)arch 6, 2020. See SEC File Number 001-39013.
Form of Amended and Restated Credit Agreement dated as of August 9, 201(cid:22) ((cid:2)Credit
Agreement(cid:2)) between Xerox Corporation and the Initial Lenders named therein, Citiban(cid:65), N.A., as
Administrative Agent, and Citigroup (cid:34)lobal (cid:40)ar(cid:65)ets Inc., (cid:37).(cid:43). (cid:40)organ Chase Ban(cid:65). N.A., (cid:40)errill
Lynch, (cid:43)ierce, Fenner (cid:5) Smith Incorporated, BN(cid:43) (cid:43)aribas Securities Corp., (cid:40)i(cid:80)uho Ban(cid:65), Ltd.
and The Ban(cid:65) of To(cid:65)yo-(cid:40)itsubishi UF(cid:37), Ltd., as (cid:37)oint Lead Arrangers and (cid:37)oint Boo(cid:65)runners.
Incorporated by reference to Exhibit 4(b) to Xerox Corporation's (cid:44)uarterly Report on Form 10-(cid:44)
for the quarter ended September 30, 201(cid:22). See SEC File Number 001-044(cid:22)1.
Amendment No. 1 to Credit Agreement, dated as of February 15, 2018, among Xerox
Corporation, certain Lenders signatory thereto, and Citiban(cid:65), N.A., as administrative agent.
Incorporated by reference to Exhibit 10.1 to Xerox Corporation(cid:85)s Current Report on Form 8-K
dated February 20, 2018. See SEC File Number 001-044(cid:22)1.
Amendment No. 2 to Credit Agreement, dated as of (cid:37)uly 31, 2019, among Xerox Corporation,
Xerox Holdings Corporation, certain Lenders signatory thereto, and Citiban(cid:65), N.A., as
administrative agent.
Incorporated by reference to Exhibit 4.0 to Xerox Holdings Corporation(cid:85)s and Xerox Corporation(cid:85)s
combined (cid:44)uarterly Report on Form 10-(cid:44) for the quarter ended (cid:37)une 30, 2019. See SEC File
Numbers 001-39013 and 001-044(cid:22)1.
Amendment No. 3 to Credit Agreement, dated as of (cid:37)uly 31, 2020, among Xerox Corporation,
Xerox Holdings Corporation, certain Lenders signatory thereto, and Citiban(cid:65), N.A., as
administrative agent.
Incorporated by reference to Exhibit 4.1 to Xerox Holdings Corporation's and Xerox Corporation(cid:85)s
combined Current Report on Form 8-K dated August 3, 2020. See SEC File Numbers 001-39013
and 001-044(cid:22)1.
Xerox 2020 Annual Report 158
2(b)
3
3(a)(1)
3(a)(2)
3(b)(1)
3(b)(2)
4(b)(1)
4(b)(2)
4(b)(3)
4(b)(4)
158
4(c)
4(d)
4(e)
4(f)
4(g)
10
(cid:9)10(a)(1)
(cid:9)10(a)(2)
(cid:9)10(a)(3)
(cid:9)10(b)
(cid:9)10(c)
(cid:9)10(d)(1)
(cid:9)10(d)(2)
(cid:9)10(d)(3)
Form of Indenture dated as of December 4, 2009 between Xerox Corporation and the Ban(cid:65) of
New (cid:52)or(cid:65) (cid:40)ellon, as trustee, relating to an unlimited amount of senior debt securities.
Incorporated by reference to Exhibit 4(b)(5) to (cid:43)ost-Effective Amendment No. 1 to Xerox
Corporation's Registration Statement No. 333-142900. See SEC File Number 001-044(cid:22)1.
Form of Indenture dated August 6, 2020 among Xerox Holdings Corporation, Xerox Corporation
and U.S. Ban(cid:65) National Association, as Trustee, with respect to Xerox Holdings Corporation(cid:85)s
5.000(cid:4) Senior Notes due 2025.
Incorporated by reference to Exhibit 4.1 to Xerox Holdings Corporation(cid:85)s and Xerox Corporation(cid:85)s
combined Current Report on Form 8-K dated August 6, 2020. See SEC File Numbers 001-39013
and 001-044(cid:22)1.
Form of Indenture dated August 6, 2020 among Xerox Holdings Corporation, Xerox Corporation
and U.S. Ban(cid:65) National Association, as Trustee, with respect to Xerox Holdings Corporation(cid:85)s
5.500(cid:4) Senior Notes due 2028.
Incorporated by reference to Exhibit 4.2 to Xerox Holdings Corporation(cid:85)s and Xerox Corporation(cid:85)s
combined Current Report on Form 8-K dated August 6, 2020. See SEC File Numbers 001-39013
and 001-044(cid:22)1.
Description of Xerox Holdings Corporation Capital Stoc(cid:65).
Incorporated by reference to Exhibit 4(d) to Xerox Holdings Corporation(cid:85)s and Xerox Corporation(cid:85)s
combined Annual Report on Form 10-K for the fiscal year ended December 31, 2019. See SEC
File Numbers 001-39013 and 001-044(cid:22)1.
Instruments with respect to long-term debt where the total amount of securities authori(cid:80)ed
thereunder does not exceed 10 percent of the total assets of Xerox Holdings Corporation and(cid:14)or
Xerox Corporation, as applicable, and its subsidiaries on a consolidated basis have not been filed.
Xerox Holdings Corporation and(cid:14)or Xerox Corporation, as applicable, agrees to furnish to the
Commission a copy of each such instrument upon request.
The management contracts or compensatory plans or arrangements listed below that are
applicable to the executive officers named in the Summary Compensation Table which appears in
Xerox Holdings Corporation's 2020 (cid:43)roxy Statement or to our directors are preceded by an
asteris(cid:65) ((cid:9)).
Executive Salary Continuance (cid:43)rogram effective (cid:40)arch 1, 201(cid:22).
Incorporated by reference to paragraph 10(a)(3) to Xerox Corporation's Annual Report on Form
10-K for the fiscal year ended December 31, 2016. See SEC File Number 001-044(cid:22)1.
Form of Severance Agreement entered into with various executive officers, effective October
2010.
Incorporated by reference to Exhibit 10(t) to Xerox Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 2010. See SEC File Number 001-044(cid:22)1.
Officer Severance (cid:43)rogram, as amended and restated effective February 1(cid:22), 2021.
Amended Letter Agreement dated April 1(cid:22), 2019 between Xerox Corporation and (cid:34)iovanni ((cid:37)ohn)
(cid:49)isentin.
Incorporated by reference to Exhibit 10(b) to Xerox Corporation's Current Report on Form 8-K
dated April 1(cid:22), 2019. See SEC File Number 001-044(cid:22)1.
Compensation (cid:43)lan Agreement, dated as of (cid:37)uly 31, 2019 between Xerox Corporation and Xerox
Holdings Corporation.
Incorporated by reference to Exhibit 10.1 to Xerox Holdings Corporation(cid:85)s Current Report on Form
8-K Dated (cid:37)uly 31, 2019. See SEC File Number 001-39013.
Xerox Corporation's 2004 Equity Compensation (cid:43)lan for Non-Employee Directors, as amended
and restated as of (cid:37)uly 31, 2019 ((cid:2)2004 EC(cid:43)NED(cid:2)).
Incorporated by reference to Exhibit 10.3 to Xerox Holdings Corporation's Current Report on Form
8-K dated (cid:37)uly 31, 2019. See SEC File Number 001-044(cid:22)139013.
Form of Agreement under 2004 EC(cid:43)NED.
Incorporated by reference to Exhibit 10(d)(2) to Xerox Corporation's (cid:44)uarterly Report on Form 10-
(cid:44) for the (cid:44)uarter ended (cid:40)arch 31, 2005. See SEC File Number 001-044(cid:22)1.
Form of (cid:34)rant Summary under 2004 EC(cid:43)NED.
Incorporated by reference to Exhibit 10(d)(3) to Xerox Corporation's (cid:44)uarterly Report on Form 10-
(cid:44) for the (cid:44)uarter ended (cid:40)arch 31, 2005. See SEC File Number 001-044(cid:22)1.
Xerox 2020 Annual Report 159
Table of Contents
(cid:9)10(d)(4)
Form of DSU Deferral under 2004 EC(cid:43)NED.
Incorporated by reference to Exhibit 10(d)(4) to Xerox Corporation's (cid:44)uarterly Report on Form 10-
(cid:44) for the (cid:44)uarter ended (cid:40)arch 31, 2005. See SEC File Number 001-044(cid:22)1.
(cid:9)10(d)(5)
Form of Deferred Stoc(cid:65) Unit ((cid:86)DSU(cid:87)) Agreement under 2004 EC(cid:43)NED.
Incorporated by reference to Exhibit 10.13 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2019.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
(cid:9)10(d)(6)
Form of DSU Award Summary under 2004 EC(cid:43)NED.
Incorporated by reference to Exhibit 10.14 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2019.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
(cid:9)10(d)((cid:22))
Form of Restricted Stoc(cid:65) Unit ((cid:86)RSU(cid:87)) Agreement under 2004 EC(cid:43)NED.
Incorporated by reference to Exhibit 10.15 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2019.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
(cid:9)10(d)(8)
Form of RSU Award Summary under 2004 EC(cid:43)NED.
Incorporated by reference to Exhibit 10.16 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2019.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
Xerox Corporation's 2004 (cid:43)erformance Incentive (cid:43)lan, as amended and restated as of (cid:37)une 30,
201(cid:22) ((cid:2)201(cid:22) (cid:43)I(cid:43)(cid:2)).
Incorporated by reference to Exhibit 10(e)(1) to Xerox Corporation's (cid:44)uarterly Report on Form 10-
(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 201(cid:22). See SEC File Number 001-044(cid:22)1.
Amendment No. 1 dated February 1, 2018 to 201(cid:22) (cid:43)I(cid:43).
Incorporated by reference to Exhibit 10(e)(18) to Xerox Corporation(cid:85)s Annual Report on Form 10-
K for the year ended December 31, 201(cid:22). See SEC File Number 001-044(cid:22)1.
(cid:43)erformance Elements for 2018 Executive Long-Term Incentive (cid:43)rogram ((cid:2)2018 ELTI(cid:43)(cid:2)).
Incorporated by reference to Exhibit 10(e)(31) to Xerox Corporation's Annual Report on Form 10-
K for the fiscal year ended December 31, 201(cid:22). See SEC File Number 001-044(cid:22)1.
Form of Omnibus Award Agreement under (cid:43)I(cid:43)(cid:26) ELTI(cid:43)(cid:26) (cid:43)SU (cid:5) RSU (ratable).
Incorporated by reference to Exhibit 10(e)(32) to Xerox Corporation's Annual Report on Form 10-
K for the fiscal year ended December 31, 201(cid:22). See SEC File Number 001-044(cid:22)1.
Form of Award Summary Under (cid:43)I(cid:43)(cid:26) ELTI(cid:43)(cid:26) (cid:43)SU (cid:5) RSU (ratable).
Incorporated by reference to Exhibit 10(e)(33) to Xerox Corporation's Annual Report on Form 10-
K for the fiscal year ended December 31, 201(cid:22). See SEC File Number 001-044(cid:22)1.
Form of Omnibus Award Agreement under (cid:43)I(cid:43)(cid:26) ELTI(cid:43)(cid:26) RSU (ratable).
Incorporated by reference to Exhibit 10(e)(34) to Xerox Corporation's Annual Report on Form 10-
K for the fiscal year ended December 31, 201(cid:22). See SEC File Number 001-044(cid:22)1.
Form of Award Summary Under (cid:43)I(cid:43)(cid:26) ELTI(cid:43)(cid:26) RSU (ratable).
Incorporated by reference to Exhibit 10(e)(35) to Xerox Corporation's Annual Report on Form 10-
K for the fiscal year ended December 31, 201(cid:22). See SEC File Number 001-044(cid:22)1.
Form of Omnibus Award Agreement under (cid:43)I(cid:43)(cid:26) ELTI(cid:43): Stoc(cid:65) Options.
Incorporated by reference to Exhibit 10(e)(36) to Xerox Corporation's Annual Report on Form 10-
K for the fiscal year ended December 31, 201(cid:22). See SEC File Number 001-044(cid:22)1.
Form of Award Summary under (cid:43)I(cid:43)(cid:26) ELTI(cid:43): Stoc(cid:65) Options.
Incorporated by reference to Exhibit 10(e)(3(cid:22)) to Xerox Corporation's Annual Report on Form 10-
K for the fiscal year ended December 31, 201(cid:22). See SEC File Number 001-044(cid:22)1.
Amendment No. 2 dated (cid:40)ay 14, 2018 to 201(cid:22) (cid:43)I(cid:43).
Incorporated by reference to Exhibit 10.5 to Xerox Corporation's (cid:44)uarterly Report on Form 10-(cid:44)
for the (cid:44)uarter ended (cid:37)une 30, 2018. See SEC File Number 001-044(cid:22)1.
Amendment to CEO Option and (cid:43)erformance Share (cid:14) Restricted Stoc(cid:65) Unit Award Agreements.
Incorporated by reference to Exhibit 10.(cid:22) to Xerox Corporation's (cid:44)uarterly Report on Form 10-(cid:44)
for the (cid:44)uarter ended (cid:37)une 30, 2018. See SEC File Number 001-044(cid:22)1.
Xerox 2020 Annual Report 160
(cid:9)10(e)(1)
(cid:9)10(e)(2)
(cid:9)10(e)(3)
(cid:9)10(e)(4)
(cid:9)10(e)(5)
(cid:9)10(e)(6)
(cid:9)10(e)((cid:22))
(cid:9)10(e)(8)
(cid:9)10(e)(9)
(cid:9)10(e)(10)
(cid:9)10(e)(11)
160
(cid:9)10(e)(12)
Amendment No. 3 dated (cid:37)anuary 14, 2019 to 201(cid:22) (cid:43)I(cid:43).
(cid:9)10(e)(13)
(cid:9)10(e)(14)
(cid:9)10(e)(15)
(cid:9)10(e)(16)
(cid:9)10(e)(1(cid:22))
(cid:9)10(e)(18)
(cid:9)10(e)(19)
(cid:9)10(e)(20)
(cid:9)10(e)(21)
(cid:9)10(e)(22)
(cid:9)10(e)(23)
(cid:9)10(e)(24)
Incorporated by reference to Exhibit 10(e)(42) to Xerox Corporation(cid:85)s Annual Report on Form 10-
K for the fiscal year ended December 31, 2018. See SEC File Number 001-044(cid:22)1.
(cid:43)erformance Elements for 2019 Executive Long-Term Incentive (cid:43)rogram.
Incorporated by reference to Exhibit 10(e)(44) to Xerox Corporation(cid:85)s Annual Report on Form 10-
K for the fiscal year ended December 31, 2018. See SEC File Number 001-044(cid:22)1.
Form of Omnibus Award Agreement under (cid:43)I(cid:43)(cid:26) ELTI(cid:43)(cid:26) (cid:43)SU (cid:5) RSU (ratable).
Incorporated by reference to Exhibit 10(e)(45) to Xerox Corporation(cid:85)s Annual Report on Form 10-
K for the fiscal year ended December 31, 2018. See SEC File Number 001-044(cid:22)1.
Form of Omnibus Award Agreement under (cid:43)I(cid:43)(cid:26) ELTI(cid:43)(cid:26) RSU (ratable).
Incorporated by reference to Exhibit 10(e)(46) to Xerox Corporation(cid:85)s Annual Report on Form 10-
K for the fiscal year ended December 31, 2018. See SEC File Number 001-044(cid:22)1.
Form of Omnibus Award Agreement under (cid:43)I(cid:43)(cid:26) ELTI(cid:43)(cid:26) Stoc(cid:65) Options.
Incorporated by reference to Exhibit 10.3 to Xerox Corporation's (cid:44)uarterly Report on Form 10-(cid:44)
for the quarter ended (cid:40)arch 31, 2019. See SEC File Number 001-044(cid:22)1.
Xerox Corporation's 2004 (cid:43)erformance Incentive (cid:43)lan, as amended and restated as of (cid:37)uly 31,
2019.
Incorporated by reference to Exhibit 10.2 to Xerox Holdings Corporation(cid:85)s Current Report on Form
8-K dated (cid:37)uly 31, 2019. See SEC File No. 001-39013.
Form of (cid:43)erformance Share Unit ((cid:86)(cid:43)SU(cid:87)) Award Agreement under Xerox Corporation 2004
(cid:43)erformance Incentive (cid:43)lan, as amended.
Incorporated by reference to Exhibit 10.3 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2019.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
Form of Restricted Stoc(cid:65) Unit ((cid:86)RSU(cid:87)) Award Agreement under Xerox Corporation 2004
(cid:43)erformance Incentive (cid:43)lan, as amended.
Incorporated by reference to Exhibit 10.4 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2019.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
Form of One-(cid:52)ear RSU Agreement under Xerox Corporation 2004 (cid:43)erformance Incentive (cid:43)lan, as
amended.
Incorporated by reference to Exhibit 10.5 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2019.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
Form of Two-(cid:52)ear RSU Agreement under Xerox Corporation 2004 (cid:43)erformance Incentive (cid:43)lan, as
amended.
Incorporated by reference to Exhibit 10.6 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2019.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
Form of Three-(cid:52)ear RSU Agreement under Xerox Corporation 2004 (cid:43)erformance Incentive (cid:43)lan,
as amended.
Incorporated by reference to Exhibit 10.(cid:22) to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2019.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
Form of Stoc(cid:65) Option Agreement under Xerox Corporation 2005 (cid:43)erformance Incentive (cid:43)lan, as
amended.
Incorporated by reference to Exhibit 10.8 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2019.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
Form of (cid:43)SU Award Summary under Xerox Corporation 2004 (cid:43)erformance Incentive (cid:43)lan, as
amended.
Incorporated by reference to Exhibit 10.9 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2019.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
Xerox 2020 Annual Report 161
Table of Contents
(cid:9)10(e)(25)
Form of RSU Award Summaries under Xerox Corporation 2004 (cid:43)erformance Incentive (cid:43)lan, as
amended.
(cid:9)10(e)(26)
(cid:9)10(e)(2(cid:22))
(cid:9)10(e)(28)
Incorporated by reference to Exhibit 10.10 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2019.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
Form of Stoc(cid:65) Option Award Summary under Xerox Corporation 2004 (cid:43)erformance Incentive
(cid:43)lan, as amended.
Incorporated by reference to Exhibit 10.11 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2019.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
(cid:40)anagement Incentive (cid:43)lan for 2020.
(cid:43)erformance Elements for 2020 Executive Long-Term Incentive (cid:43)rogram.
Incorporated by reference to Exhibit 10(e)(43) to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined Annual Report on Form 10-K for the fiscal year ended December 31,
2019. See SEC File Numbers 001-39013 and 001-044(cid:22)1.
(cid:9)10(f)(1)
Xerox Holdings Corporation (cid:43)erformance Incentive (cid:43)lan ((cid:86)XHC(cid:43)I(cid:43)(cid:87)).
Incorporated by reference to Exhibit 10.1 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined Current Report on Form 8-K dated (cid:40)ay 28, 2020. See SEC File
Numbers 001-39013 and 001-044(cid:22)1.
(cid:9)10(f)(2)
Form of Omnibus Award Agreement under XHC(cid:43)I(cid:43): (cid:43)I(cid:43)(cid:26) ELTI(cid:43)(cid:26) (cid:43)SU.
Incorporated by reference to Exhibit 10.2 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2020.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
(cid:9)10(f)(3)
Form of Omnibus Award Agreement under XHC(cid:43)I(cid:43): (cid:43)I(cid:43)(cid:26) ELTI(cid:43)(cid:26) RSUs (ratable).
Incorporated by reference to Exhibit 10.3 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2020.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
(cid:9)10(f)(4)
Form of Omnibus Award Agreement under XCH(cid:43)I(cid:43): (cid:43)I(cid:43)(cid:26) ELTI(cid:43)(cid:26) 1-year RSUs.
Incorporated by reference to Exhibit 10.4 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2020.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
(cid:9)10(f)(5)
Form of Omnibus Award Agreement under XHC(cid:43)I(cid:43): (cid:43)I(cid:43)(cid:26) ELTI(cid:43)(cid:26) 2-year RSUs.
Incorporated by reference to Exhibit 10.5 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2020.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
(cid:9)10(f)(6)
Form of Omnibus Award Agreement under XHC(cid:43)I(cid:43): (cid:43)I(cid:43)(cid:26) ELTI(cid:43)(cid:26) 3-year RSUs.
Incorporated by reference to Exhibit 10.6 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2020.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
(cid:9)10(f)((cid:22))
Form of Omnibus Award Agreement under XHC(cid:43)I(cid:43): (cid:43)I(cid:43)(cid:26) ELTI(cid:43)(cid:26) Stoc(cid:65) Options.
Incorporated by reference to Exhibit 10.(cid:22) to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2020.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
(cid:9)10(f)(8)
Description of Leadership Retention Awards and RSU Awards for 2020.
(cid:9)10(f)(9)
(cid:9)10(f)(10)
(cid:9)10(f)(11)
(cid:9)10(f)(12)
162
Incorporated by reference to Item 5.02 of Xerox Holdings Corporation(cid:85)s and Xerox Corporation's
Current Report on Form 8-K dated November 19, 2020. See SEC File Numbers 001-39013 and
001-044(cid:22)1.
Form of Leadership Retention Award under XHC(cid:43)I(cid:43).
Form of Omnibus Award Agreement under XHC(cid:43)I(cid:43): (cid:43)I(cid:43)(cid:26) ELTI(cid:43)(cid:26) RSUs (2-year ratable 50(cid:14)50).
Form of Omnibus Award Agreement under XHC(cid:43)I(cid:43): (cid:43)I(cid:43)(cid:26) ELTI(cid:43)(cid:26) RSUs (3-year ratable 33(cid:14)33(cid:14)34).
Form of (cid:43)SU Award Summary under XHC(cid:43)I(cid:43).
Incorporated by reference to Exhibit 10.9 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2019.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
Xerox 2020 Annual Report 162
Table of Contents
(cid:9)10(f)(13)
Form of RSU Award Summary under XHC(cid:43)I(cid:43).
(cid:9)10(f)(14)
(cid:9)10(f)(15)
(cid:9)10(g)
Incorporated by reference to Exhibit 10.10 to Xerox Holdings Corporation(cid:85)s and Xerox
Corporation(cid:85)s combined (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter ended (cid:37)une 30, 2019.
See SEC File Nos. 001-39013 and 001-044(cid:22)1.
(cid:40)anagement Incentive (cid:43)lan for 2021.
(cid:43)erformance Elements for 2021 Executive Long-Term Incentive (cid:43)rogram.
Separation Agreement dated February 28, 2020 between Xerox France SAS and Herve N.
Tessler.
Incorporated by reference to Exhibit 10.3 to Xerox Holdings Corporation's and Xerox
Corporation(cid:85)s (cid:44)uarterly Report on Form 10-(cid:44) for the (cid:44)uarter Ended (cid:40)arch 31, 2020. See SEC
File Numbers 001-39013 and 001-044(cid:22)1.
(cid:9)10(h)
Compensation Terms for Xavier Heiss, Chief Financial Officer, effective (cid:37)anuary 1, 2021.
Incorporated by reference to Item 5.02 of Xerox Holding Corporation's and Xerox Corporation's
combined Current Report on Form 8-K dated December 10, 2020. See SEC File Numbers
001-39013 and 001-044(cid:22)1.
Uniform Rule dated December 1(cid:22), 2008 for all Deferred Compensation (cid:43)romised by Xerox
Corporation.
Incorporated by reference to Exhibit 10(r) to Xerox Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 2008. See SEC File Number 001-044(cid:22)1.
2006 Technology Agreement dated as of April 1, 2006 by and between Xerox Corporation and Fu(cid:64)i
Xerox Co., Ltd. ((cid:2)2006 Technology Agreement(cid:2)).
Incorporated by reference to Exhibit 99.4 to Xerox Corporation's Current Report on Form 8-K
dated (cid:37)anuary 31, 2018. See SEC File Number 001-044(cid:22)1.
Amendment No. 1, dated November 5, 2019, to 2006 Technology Agreement.
Incorporated by reference to Exhibit 10.1 to Xerox Holdings Corporation's Current Report on Form
8-K dated November 5, 2019. See SEC File Number 001-39013.
(cid:40)aster (cid:43)rogram Agreement dated as of September 9, 2013 by and between Xerox Corporation
and Fu(cid:64)i Xerox Co., Ltd. ((cid:2)(cid:40)aster (cid:43)rogram Agreement(cid:2)).
Incorporated by reference to Exhibit 99.5 to Xerox Corporation's Current Report on Form 8-K
dated (cid:37)anuary 31, 2018. See SEC File Number 001-044(cid:22)1.
Amendment No. 1, dated November 5, 2019, to (cid:40)aster (cid:43)rogram Agreement.
Incorporated by reference to Exhibit 10.2 to Xerox Holdings Corporation's Current Report on Form
8-K dated November 5, 2019. See SEC File Number 001-39013.
Nomination and Standstill Agreement, dated as of (cid:37)anuary 26, 2021, by and among Xerox
Holdings Corporation, Carl C. Icahn and the other parties named therein.
Incorporated by reference to Exhibit 10.1 to Xerox Holdings Corporation's and Xerox
Corporation(cid:85)s Current Report on Form 8-K dated (cid:37)anuary 26, 2021. See SEC File Numbers
001-39013 and 001-044(cid:22)1.
Nomination and Standstill Agreement, dated as of (cid:37)anuary 26, 2021, by and between Xerox
Holdings Corporation and Darwin Deason.
Incorporated by reference to Exhibit 10.2 to Xerox Holdings Corporation's and Xerox
Corporation(cid:85)s Current Report on Form 8-K dated (cid:37)anuary 26, 2021. See SEC File Numbers
001-39013 and 001-044(cid:22)1.
Subsidiaries of Registrant.
Consent of (cid:43)ricewaterhouseCoopers LL(cid:43) re Xerox Holdings Corporation.
Consent of (cid:43)ricewaterhouseCoopers LL(cid:43) re Xerox Corporation.
Certification of Xerox Holdings Corporation CEO pursuant to Rule 13a-14(a) or Rule 15d-14(a).
Certification of Xerox Corporation CEO pursuant to Rule 13a-14(a) or Rule 15d-14(a).
Certification of Xerox Holdings Corporation CFO pursuant to Rule 13a-14(a) or Rule 15d-14(a).
Certification of Xerox Corporation CFO pursuant to Rule 13a-14(a) or Rule 15d-14(a).
Certification of Xerox Holdings Corporation CEO and CFO pursuant to 18 U.S.C. §1350 as
adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
(cid:9)10(i)
10((cid:64))(1)
10((cid:64))(2)
10((cid:65))(1)
10((cid:65))(2)
10(l)
10(m)
21
23(a)
23(b)
31(a)(1)
31(a)(2)
31(b)(1)
31(b)(2)
32(a)
Xerox 2020 Annual Report 163
Xerox 2020 Annual Report 163
Table of Contents
32(b)
101
104
Certification of Xerox Corporation CEO and CFO pursuant to 18 U.S.C. §1350 as adopted
pursuant to §906 of the Sarbanes-Oxley Act of 2002.
The following financial information from Xerox Holdings Corporation and Xerox Corporation's
combined Annual Report on Form 10-K for the year ended December 31, 2020 was formatted in
iXBRL (Inline eXtensible Business Reporting Language): (i) Xerox Holdings Corporation
Consolidated Statements of Income, (ii) Xerox Holdings Corporation Consolidated Statements of
Comprehensive Income, (iii) Xerox Holdings Corporation Consolidated Balance Sheets, (iv) Xerox
Holdings Corporation Consolidated Statements of Cash Flows, (v) Xerox Holdings Corporation
Consolidated Statements of Shareholders' Equity (vi) Xerox Corporation Consolidated Statements
of Income, (vii) Xerox Corporation Consolidated Statements of Comprehensive Income, (viii)
Xerox Corporation Consolidated Balance Sheets, (ix) Xerox Corporation Consolidated Statements
of Cash Flows, (xi) Xerox Corporation Consolidated Statements of Shareholders' Equity and (xii)
Notes to the Consolidated Financial Statements.
The cover page of this Annual Report on Form 10-K, formatted in iXBRL (Inline eXtensible
Business Reporting Language) and contained in Exhibit 101.
164
Xerox 2020 Annual Report 164
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Table of Contents
Letter to the Shareholders
Board of Directors
Officers
FYI
2020 Form 10-K Insert
I
IV
IV
V
VI
FYI
Shareholder Information
For investor information, including comprehensive earnings
releases: https://www.news.xerox.com/investors
For shareholder services, call 800.828.6396 (TDD: 800.368.0328)
or 781.575.3222; or write to Computershare Trust Company, N.A.,
PO BOX 505000, Louisville, KY 40233; or via online access at
www.computershare.com.
Electronic Delivery Enrollment: Xerox offers shareholders
the convenience of electronic delivery, including immediate
receipt of the Proxy Statement and Annual Report and online
proxy voting.
Registered Shareholders, visit: www.computershare.com/
investor. You are a registered shareholder if you have your stock
certificate in your possession or if the shares are being held
by our transfer agent, Computershare.
Beneficial Shareholders, visit: http://enroll.icsdelivery.com/
xrx. You are a beneficial shareholder if you maintain your
position in Xerox within a brokerage account.
Investor Relations Contact: investorrelations@xerox.com
A D D I T I O N A L I N F O R M AT I O N
Independent Auditors
PricewaterhouseCoopers LLP
300 Atlantic Street
Stamford, CT 06901
203.539.3000
2020 Corporate Social Responsibility Report:
www.xerox.com/en-us/about/corporate-social-responsibility
Global Diversity and Inclusion Programs and EE0-1 Reports:
www.xerox.com/diversity
Minority and Women-Owned Business Suppliers:
www.xerox.com/supplierdiversity
Ethics Helpline:
• Online submission tool: www.xeroxethicshelpline.com
• Phone numbers: U.S. and Canada: 866.XRX.0001;
International numbers located at: www.xerox.com/ethics
Environment, Health, Safety and Sustainability:
www.xerox.com/environment
Governance:
www.xerox.com/governance
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Xerox Holdings Corporation
201 Merritt 7
Norwalk, CT 06851-1056
United States
www.xerox.com
© 2021 Xerox Holdings Corporation.
All rights reserved.
Xerox® is a trademark of Xerox
Corporation in the United States
and/or other countries. BR32844
2020 Annual
Report
Making Every Day Work Better
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