View:
Download DOC
Download PDF
Download XLS
Download XBRL
Form 8-K
false2019Q300017704500000108772 0001770450 2019-11-08 2019-11-08 0001770450 xrx:XeroxCorporationMember 2019-11-08 2019-11-08
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): November 15, 2019 (
November 8, 2019
)
 
XEROX HOLDINGS CORPORATION
XEROX CORPORATION
(Exact name of registrant as specified in its charter)
 
         
New York
New York
 
001-39013
001-04471
 
83-3933743
16-0468020
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
P.O. Box 4505, 201 Merritt 7
Norwalk, Connecticut
06851-1056
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (203) 968-3000
Not applicable
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐
 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
☐
 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
☐
 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 
 
 
 
 
 
 
 
 
 
 
 
☐
 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Securities registered pursuant to Section 12(b) of the Act:
         
Title of each class
 
Trading
Symbol
 
Name of each exchange
on which registered
Xerox Holdings Corporation Common Stock,
$1.00 par value
 
XRX
 
New York Stock Exchange
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company  
☐
If an emerging growth company, indicate by check mark 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.  
☐
 
 
 
 
Item 2.01.
Completion of Acquisition or Disposition of Assets.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
On November 8, 2019, Xerox Holdings Corporation (the “
Company
”) completed its previously announced series of transactions to restructure its relationship with FUJIFILM Holdings Corporation (“
FH
”).
On November 8, 2019, the Company completed its sale to indirect subsidiaries of FH of the Company’s indirect 25% equity interest in Fuji Xerox Co., Ltd., a Japanese company (“
FX
”), pursuant to the Stock Purchase Agreement, dated as of November 5, 2019 (the “
Stock Purchase Agreement
”), among Xerox Corporation (“
XC
”), Xerox Limited (“
XL
”), FH, FUJIFILM Asia Pacific Pte. Ltd. (“
FFAP
”) and FX, (the “
FX Sale Transaction
”), for total
 
after-tax
 
proceeds to the Company, including accrued but unpaid dividends through closing, of approximately $2.3 billion. As a result of the FX Sale Transaction, FX became an indirect, wholly owned subsidiary of FH.
The foregoing description of the Stock Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Stock Purchase Agreement, a copy of which is filed as Exhibit 2.1 to the Company’s Current Report on Form
8-K
filed with the Securities Exchange Commission on November 5, 2019 and incorporated by reference herein.
Item 8.01.
Other Events
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sale of 51% Partnership Interest in Xerox International Partners
On November 8, 2019, in connection with and concurrently with the completion of the FX Sale Transaction, the Company completed its previously announced sale to an indirect subsidiary of FH of the Company’s indirect 51% partnership interest in Xerox International Partners (“
XIP
”), pursuant to the Partnership Interest Purchase Agreement, dated as of November 5, 2019 (the “
XIP Purchase Agreement
”), among XC, Xerox International Joint Marketing, Inc., a subsidiary of XC that holds a 51% partnership interest in XIP (“
XIJM
”), FH, FX and FX Global, Inc., a subsidiary of FX that holds a 49% partnership interest in XIP (“
FXGI
”), for an aggregate purchase price of $23 million (the “
XIP Sale
”). As a result of the XIP Sale, XIP became an indirect, wholly owned subsidiary of FX.
Other Ancillary Agreements
Each of the following previously announced ancillary agreements, entered into by and among the Company and FH and/or certain of their respective subsidiaries in connection with the FX Sale Transaction and concurrently with the execution and delivery of the Stock Purchase Agreement (collectively, the “
Ancillary Agreements
”), became effective concurrently with the completion of the FX Sale Transaction:
  • Amendment 1 (the “
TA Amendment
”), to that certain Technology Agreement (the “
TA
”), dated as of April 1, 2006, by and between FX and XC, relating to licenses granted to FX by XC for XC’s trademarks and certain
non-marking
Document Processing Activities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The TA Amendment, among other things, (i) extends to two (2) years following the expiration of the TA (the “
Transition Period
”) the time period by which FX is required to transition away from the use of Xerox trademarks upon expiration of the TA, (ii) grants FX limited licenses to use Xerox trademarks for the Transition Period, subject to certain quality control standards and for a royalty in the amount of $100,000,000, payable to XC within three (3) business days from the first date of the Transition Period, and (iii) amends FX’s licenses for certain
non-marking
Document Processing Activities to become worldwide, royalty-free, and
non-exclusive
upon the expiration of the TA.
The foregoing description of the TA Amendment does not purport to be complete and is qualified in its entirety by reference to the TA Amendment, a copy of which is filed as Exhibit 10.1 to the Company’s Current Report on Form
8-K
filed with the Securities Exchange Commission on November 5, 2019 and incorporated by reference herein.
  •
Amendment 1
(the “
MPA Amendment
”), to that certain Master Program Agreement (the “
MPA
”), dated as of September 9, 2013, by and between FX and XC, relating to the supply arrangement from FX to XC for xerographic document products.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The MPA Amendment removes from the MPA termination provisions that are triggered by (i) a change in the composition of the board of directors of XC, (ii) a sale of substantially all assets of XC or (iii) any other
change-in-control
type scenario related to XC, and extends the effective term of certain product specific supply agreements governing existing product programs.
The foregoing description of the MPA Amendment does not purport to be complete and is qualified in its entirety by reference to the MPA Amendment, a copy of which is filed as Exhibit 10.2 to the Company’s Current Report on Form
8-K
filed with the Securities Exchange Commission on November 5, 2019 and incorporated by reference herein.
  • Amendments to (i) that certain License Agreement for Xerox Global Services Offerings, dated as of July 1, 2011, (ii)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2
 
 
  that certain
XGS-FXGS
Master Agreement for Global Services Offerings, dated as of January 1, 2008, and (iii) that certain Master Consulting Services Agreement, dated as of January 1, 2010, each by and between FX and XC for Xerox Global Services Offerings;
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  • A memorandum of understanding by and between FX and XC, relating to the license of certain software from XC to FX;
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  • An OEM license agreement (the “
OEM License Agreement
”), by and between FX and XC, granting FX the right to provide certain named original equipment manufacturers with OEM products outside the Territory (as defined in the OEM License Agreement) in exchange for a
one-time
upfront license fee of $77,000,000, paid by FX to XC when the OEM License Agreement became effective; and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  • An agreement, by and among FH, FX, FXGI, XC, XL, and XIJM, to dismiss with prejudice the litigation captioned
Fujifilm Holdings Corp. v. Xerox Corp.
, No. 1:18 cv
05458-JGK-BSM
(S.D.N.Y.) and to release claims as set forth in the agreement (which dismissal and release occurred on November 12, 2019).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Press Release
On November 8, 2019, the Company issued a press release announcing that it had completed each of the FX Sale Transaction, the XIP Sale and the effectiveness of the Ancillary Agreements. A copy of the press release is attached as Exhibit 99.1 hereto and is incorporated by reference herein.
Item 9.01.
Financial Statements and Exhibits.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Set forth below is the pro forma financial information relating to the completed disposition described in Item 2.01 of this Current Report on Form
8-K
that is required to be filed as part of this Current Report on Form
8-K.
(b) Pro Forma Financial Information.
The unaudited pro forma condensed consolidated balance sheet of the Company as of September 30, 2019, and the unaudited pro forma condensed consolidated statements of income of the Company for the nine (9) months ended September 30, 2019, and each of the last three (3) fiscal years ended December 31, 2018, are filed as Exhibit 99.2 hereto.
(d) Exhibits.
         
Exhibit
No.
    
Description of Exhibit
         
 
99.1
    
         
 
99.2
    
         
 
104
    
The cover page from this Current Report on Form 8-K (formatted as Inline XBRL document)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3
 
 
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
             
 
 
XEROX HOLDINGS CORPORATION
             
Date: November 15, 2019
 
 
By:
 
/s/ Douglas H. Marshall
 
 
Name:
 
Douglas H. Marshall
 
 
Title:
 
Secretary
         
 
 
XEROX CORPORATION
             
Date: November 15, 2019
 
 
By:
 
/s/ Douglas H. Marshall
 
 
Name:
 
Douglas H. Marshall
 
 
Title:
 
Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
 
EX-99.1

Exhibit 99.1

 

News from Xerox Holdings Corporation

   

LOGO

    

 

Xerox Holdings Corporation

201 Merritt 7

Norwalk, CT 06851-1056

 

tel  +1-203-968-3000

Xerox Closes Transactions with FUJIFILM

Norwalk, Conn., Nov. 8, 2019 – Xerox Holdings Corporation (NYSE: XRX) announced today that it has closed its previously announced transactions with FUJIFILM Holdings Corporation, which included:

 

  •  

Sale of Xerox’s 25% stake in Fuji Xerox Co., Ltd. (FX) to a subsidiary of FUJIFILM;

 
  •  

Modified sourcing terms for future product programs that will ensure Xerox’s product supply continuity;

 
  •  

Sale to an affiliate of FX of Xerox’s 51% stake in Xerox International Partners (XIP), an OEM joint venture between Xerox and FX, which, together with the grant of a new IP license, will allow FX to OEM certain products (such as printer engines) to named parties that are existing customers of XIP on a worldwide basis in exchange for a fixed royalty; and

 
  •  

Dismissal of the $1 billion lawsuit FUJIFILM filed against Xerox after last year’s terminated merger.

 

Total after-tax proceeds to Xerox from the transactions, which included accrued but unpaid dividends through closing, are approximately $2.3 billion. Xerox expects to use the proceeds opportunistically to pursue accretive M&A in core and adjacent industries, return capital to shareholders and pay down its $554 million December 2019 debt maturity.

Xerox expects to provide updated 2019 guidance by early December 2019 that incorporates the impact of the transactions.

King & Spalding LLP acted as legal counsel to Xerox in connection with the transactions.

About Xerox

In the era of intelligent work, we’re not just thinking about the future, we’re making it. Xerox Holdings Corporation is a technology leader focused on the intersection of digital and physical. We use automation and next-generation personalization to redefine productivity, drive growth and make the world more secure. Every day, our innovative technologies and intelligent work solutions—Powered by Xerox®—help people communicate and work better. Discover more at www.xerox.com and follow us on Twitter at @Xerox.

Forward-Looking Statements

This release, 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 factors 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 Xerox Corporation’s 2018 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 Current Reports on Form 8-K filed with the SEC. These forward-looking statements speak only as of the date of this release 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.

-XXX-

Media Contact:

Caroline Gransee-Linsey, Xerox, +1-203-849-2359, Caroline.Gransee-Linsey@xerox.com

Investor Contact:

Ann Pettrone, Xerox, +1-203-849-2590, Ann.Pettrone@xerox.com

Note: Xerox® and Powered by Xerox® are trademarks of Xerox in the United States and/or other countries.

 

2

EX-99.2

Exhibit 99.2

XEROX HOLDINGS CORPORATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited Pro Forma Condensed Consolidated Statements of Income of Xerox Holdings Corporation (“Xerox”) for the nine months ended September 30, 2019 and for the years ended December 31, 2018, 2017, and 2016 reflect Xerox’s results of operations as if the sales of Xerox’s indirect 25% equity interest in Fuji Xerox Co., Ltd., a Japanese company (“FX”), and of Xerox’s indirect 51% partnership interest in Xerox International Partners (“XIP”) (together, the “Sales”), had occurred on January 1, 2016. The following unaudited Pro Forma Condensed Consolidated Balance Sheet of Xerox as of September 30, 2019 assumes that the Sales occurred on September 30, 2019. Historical financial results of our equity method investment in FX and our XIP business, which was fully consolidated, for the periods prior to the Sales will be reflected in Xerox’s 2019 Annual Report on Form 10-K, as a discontinued operation.

The unaudited Pro Forma Condensed Consolidated Financial Statements are presented based on information currently available (which is subject to change), are intended for informational purposes only, and are not intended to represent what Xerox’s financial position and results of operations actually would have been had the Sales referenced above occurred on the dates indicated above. In addition, the unaudited Pro Forma Condensed Consolidated Financial Statements are not necessarily indicative of Xerox’s financial position and results of operations as of or for any future period.

The unaudited Pro Forma Condensed Consolidated Financial Statements and the accompanying notes should be read in conjunction with:

 

  i.

the audited Consolidated Financial Statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Xerox Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and

 

  ii.

the unaudited Condensed Consolidated Financial Statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Xerox’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019.

On July 31, 2019, we completed a Reorganization in which Xerox Corporation became a direct, wholly owned subsidiary of Xerox Holdings Corporation and Xerox Holdings Corporation became the successor issuer to Xerox Corporation. The Reorganization was accounted for as a transaction among entities under common control and all “As Reported” results prior to the reorganization for Xerox Holdings Corporation reflect the “As Reported” results of Xerox Corporation.

The pro forma adjustments are based on available information and assumptions that Xerox’s management believes are reasonable, that are factually supportable, that reflect the impacts of events directly attributable to the Sales referenced above, and for purposes of the Pro Forma Condensed Consolidated Statements of Income, are expected to have a continuing impact on Xerox. The pro forma adjustments do not reflect future events that may occur after the Sales, including the impact of any potential use of the proceeds from the Sales. In addition, the pro forma adjustments do not reflect any potential charges or the expected realization of any cost savings or other restructuring actions that may result from the Sales. Refer to the Notes to Pro Forma Condensed Consolidated Financial Statements for more information.

Xerox believes that the pro forma adjustments are consistent with the guidance for discontinued operations under U.S. GAAP. Xerox’s current estimates on a discontinued operations basis are preliminary and could change as the company finalizes discontinued operations accounting to be reported in the Annual Report on Form 10-K for the year ending December 31, 2019.

 

Xerox Pro Forma Financial Statements

1

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

XEROX HOLDINGS CORPORATION

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited)

 

    Nine Months Ended September 30, 2019  
 

 

 

  
(in millions, except per share data)  

Xerox Holdings
Corporation - As
Reported

 

    

Pro Forma
    Adjustments    

 

    

    Notes    

 

  

      Pro Forma      

 

  
 

 

 

    

 

 

    

 

  

 

 

  

Revenues

        

Sales

   $                 2,379      $ (72)     (A)   $                 2,307   

Services, maintenance and rentals

     4,132        (1)     (A)     4,131   

Financing

     184        —          184   
 

 

 

    

 

 

      

 

 

  

Total Revenues

     6,695        (73)         6,622   
 

 

 

    

 

 

      

 

 

  

Costs and Expenses

        

Cost of sales

     1,531        (39)     (A)     1,492   

Cost of services, maintenance and rentals

     2,400        (1)     (A)     2,399   

Cost of financing

     98        —          98   

Research, development and engineering expenses

     280        —          280   

Selling, administrative and general expenses

     1,580        (7)     (A)     1,573   

Restructuring and related costs

     176                          —          176   

Amortization of intangible assets

     35        —          35   

Transaction and related costs, net

     8        —          8   

Other expenses, net

     74        1      (A)     75   
 

 

 

    

 

 

      

 

 

  

Total Costs and Expenses

     6,182        (46)         6,136   
 

 

 

    

 

 

      

 

 

  

Income before Income Taxes and Equity Income

     513        (27)         486   

Income tax expense

     108        (8)     (B)     100   

Equity in net income of unconsolidated affiliates

     137        (132)     (A)     5   
 

 

 

    

 

 

      

 

 

  

Income from Continuing Operations

     542        (151)         391   

Less: Net income attributable to noncontrolling interests

     7        (4)     (A)     3   
 

 

 

    

 

 

      

 

 

  

Net Income from Continuing Operations Attributable to Xerox

   $ 535      $ (147)       $ 388   
 

 

 

    

 

 

      

 

 

  
       

Earnings per Share

        

Basic Earnings per Share

        

Continuing operations

   $ 2.34          $ 1.68   
 

 

 

        

 

 

  
       

Diluted Earnings per Share

        

Continuing operations

   $ 2.27          $ 1.65   
 

 

 

        

 

 

  
       

Pro Forma Shares Outstanding (in thousands)

        

Basic

     224,257            224,257   
 

 

 

        

 

 

  

Diluted

     235,465            235,465   
 

 

 

        

 

 

  

The accompanying notes are an integral part of these Pro Forma Condensed Consolidated Financial Statements.

 

Xerox Pro Forma Financial Statements

2

XEROX HOLDINGS CORPORATION

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited)

 

    Year Ended December 31, 2018
 

 

 

 

(in millions, except per share data)   Xerox Holdings
Corporation - As
Reported		   Pro Forma
    Adjustments    		         Notes             Pro Forma        
 

 

 

 

  

 

 

    

 

  

 

 

  

Revenues

        

Sales

   $                 3,972     $ (167)     (A)   $                 3,805   

Services, maintenance and rentals

     5,590       (2)     (A)     5,588   

Financing

     268                       —          268   
 

 

 

 

  

 

 

      

 

 

  

Total Revenues

     9,830       (169)         9,661   
 

 

 

 

  

 

 

      

 

 

  

Costs and Expenses

              

Cost of sales

     2,412       (107)     (A)     2,305   

Cost of services, maintenance and rentals

     3,359       (3)     (A)     3,356   

Cost of financing

     132       —          132   

Research, development and engineering expenses

     397       —          397   

Selling, administrative and general expenses

     2,390       (11)     (A)     2,379   

Restructuring and related costs

     158       (1)     (A)     157   

Amortization of intangible assets

     48       —          48   

Transaction and related costs, net

     68       —          68   

Other expenses, net

     268        2      (A)     270   
 

 

 

 

  

 

 

      

 

 

  

Total Costs and Expenses

     9,232       (120)         9,112   
 

 

 

 

  

 

 

      

 

 

  

Income before Income Taxes and Equity Income

     598       (49)         549   

Income tax expense

     257       (10)     (B)     247   

Equity in net income of unconsolidated affiliates

     33       (25)     (A)     8   
 

 

 

 

  

 

 

      

 

 

  

Income from Continuing Operations

     374       (64)         310   

Less: Net income attributable to noncontrolling interests

     13       (9)     (A)     4   
 

 

 

 

  

 

 

      

 

 

  

Net Income from Continuing Operations Attributable to Xerox

   $ 361     $ (55)       $ 306   
 

 

 

 

  

 

 

      

 

 

  
       

Earnings per Share

        

Basic Earnings per Share

        

Continuing operations

   $ 1.40         $ 1.17   
 

 

 

 

      

 

 

  
       

Diluted Earnings per Share

        

Continuing operations

   $ 1.38         $ 1.16   
 

 

 

 

      

 

 

  
       

Pro Forma Shares Outstanding (in thousands)

        

Basic

     248,707           248,707   
 

 

 

 

      

 

 

  

Diluted

     251,660           251,660   
 

 

 

 

      

 

 

  

The accompanying notes are an integral part of these Pro Forma Condensed Consolidated Financial Statements.

 

Xerox Pro Forma Financial Statements

3

XEROX HOLDINGS CORPORATION

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited)

 

    Year Ended December 31, 2017
 

 

 

 

(in millions, except per share data)  

Xerox Holdings
  Corporation - As  
Reported

 

  

Pro Forma
    Adjustments    

 

   

     Notes     

 

  

      Pro Forma      

 

 

 

 

 

  

 

 

 

   

 

  

 

 

 

Revenues

         

Sales

   $ 4,073     $ (272)      (A)   $ 3,801  

Services, maintenance and rentals

     5,898       (2)      (A)     5,896  

Financing

     294       —           294  
 

 

 

 

  

 

 

 

     

 

 

 

Total Revenues

     10,265       (274)          9,991  
 

 

 

 

  

 

 

 

     

 

 

 

Costs and Expenses

         

Cost of sales

     2,487       (214)      (A)     2,273  

Cost of services, maintenance and rentals

     3,518       (4)      (A)     3,514  

Cost of financing

     133       —           133  

Research, development and engineering expenses

     424       —           424  

Selling, administrative and general expenses

     2,526       (12)      (A)     2,514  

Restructuring and related costs

     216       —           216  

Amortization of intangible assets

     53       —           53  

Transaction and related costs, net

     9       —           9  

Other expenses, net

     329       1       (A)     330  
 

 

 

 

  

 

 

 

     

 

 

 

Total Costs and Expenses

     9,695       (229)          9,466  
 

 

 

 

  

 

 

 

     

 

 

 

Income before Income Taxes and Equity Income

     570       (45)          525  

Income tax expense

     481       (89)      (B)     392  

Equity in net income of unconsolidated affiliates

     115       (102)      (A)     13  
 

 

 

 

  

 

 

 

     

 

 

 

Income from Continuing Operations

     204       (58)          146  

Less: Net income attributable to noncontrolling interests

     12       (8)      (A)     4  
 

 

 

 

  

 

 

 

     

 

 

 

Net Income from Continuing Operations Attributable to Xerox

   $ 192     $ (50)        $ 142  
 

 

 

 

  

 

 

 

     

 

 

 

        

Earnings per Share

         

Basic Earnings per Share

         

Continuing operations

   $ 0.70          $ 0.50  
 

 

 

 

       

 

 

 

        

Diluted Earnings per Share

         

Continuing operations

   $ 0.70          $ 0.50  
 

 

 

 

       

 

 

 

        

Pro Forma Shares Outstanding (in thousands)

         

Basic

     254,341            254,341  
 

 

 

 

       

 

 

 

Diluted

     256,570            256,570  
 

 

 

 

       

 

 

 

The accompanying notes are an integral part of these Pro Forma Condensed Consolidated Financial Statements.

 

Xerox Pro Forma Financial Statements

4

XEROX HOLDINGS CORPORATION

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited)

 

    Year Ended December 31, 2016
 

 

 

 

(in millions, except per share data)   Xerox Holdings
  Corporation - As  
Reported		   Pro Forma
    Adjustments    		         Notes              Pro Forma      
 

 

 

 

  

 

 

 

   

 

  

 

 

 

Revenues

         

Sales

   $ 4,319     $ (329)      (A)   $ 3,990  

Services, maintenance and rentals

     6,127       (2)      (A)     6,125  

Financing

     325       —           325  
 

 

 

 

  

 

 

 

     

 

 

 

Total Revenues

     10,771       (331)          10,440  
 

 

 

 

  

 

 

 

     

 

 

 

Costs and Expenses

         

Cost of sales

     2,656       (263)      (A)     2,393  

Cost of services, maintenance and rentals

     3,682       (5)      (A)     3,677  

Cost of financing

     128       —           128  

Research, development and engineering expenses

     463       —           463  

Selling, administrative and general expenses

     2,636       (13)      (A)     2,623  

Restructuring and related costs

     259       (1)      (A)     258  

Amortization of intangible assets

     58       —           58  

Other expenses, net

     321       (1)      (A)     320  
 

 

 

 

  

 

 

 

     

 

 

 

Total Costs and Expenses

     10,203       (283)          9,920  
 

 

 

 

  

 

 

 

     

 

 

 

Income before Income Taxes and Equity Income

     568       (48)          520  

Income tax expense

     62       (33)      (B)     29  

Equity in net income of unconsolidated affiliates

     127       (114)      (A)     13  
 

 

 

 

  

 

 

 

     

 

 

 

Income from Continuing Operations

     633       (129)          504  

Less: Net income attributable to noncontrolling interests

     11       (8)      (A)     3  
 

 

 

 

  

 

 

 

     

 

 

 

Net Income from Continuing Operations Attributable to Xerox

   $ 622     $ (121)        $ 501  
 

 

 

 

  

 

 

 

     

 

 

 

        

Earnings per Share

         

Basic Earnings per Share

         

Continuing operations

   $ 2.36          $ 1.88  
 

 

 

 

       

 

 

 

        

Diluted Earnings per Share

         

Continuing operations

   $ 2.33          $ 1.86  
 

 

 

 

       

 

 

 

        

Pro Forma Shares Outstanding (in thousands)

         

Basic

     253,391            253,391  
 

 

 

 

       

 

 

 

Diluted

     255,995            255,995  
 

 

 

 

       

 

 

 

The accompanying notes are an integral part of these Pro Forma Condensed Consolidated Financial Statements.

 

Xerox Pro Forma Financial Statements

5

XEROX HOLDINGS CORPORATION

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

 

     September 30, 2019  
 (in millions)      Xerox Holdings
  Corporation - As
Reported		      Pro Forma
    Adjustments    		     

        Notes         

              Pro Forma          

 

Assets

            

Cash and cash equivalents

    $ 922       $ 2,230         (C)      $ 3,152   

Accounts receivable, net

      1,188         (5)        (D)        1,183   

Billed portion of finance receivables, net

      106         —            106   

Finance receivables, net

      1,145         —            1,145   

Inventories

      758         12         (D)        770   

Other current assets

      221         —            221   
  

 

 

     

 

 

        

 

 

  

Total current assets

      4,340         2,237            6,577   

Finance receivables due after one year, net

      2,037         —            2,037   

Equipment on operating leases, net

      374         —            374   

Land, buildings and equipment, net

      442         (1)        (D)        441   

Investments in affiliates, at equity

      1,517         (1,472)        (D)        45   

Intangible assets, net

      203         —            203   

Goodwill

      3,853         (8)        (E)        3,845   

Deferred tax assets

      688         (108)        (G)        580   

Other long-term assets

      1,206         —            1,206   
  

 

 

     

 

 

        

 

 

  

Total Assets

    $ 14,660       $ 648          $ 15,308   
  

 

 

     

 

 

        

 

 

  

Liabilities and Equity

            

Short-term debt and current portion of long-term debt

    $ 1,602       $ —          $ 1,602   

Accounts payable

      1,070         (8)        (D)        1,062   

Accrued compensation and benefits costs

      321         (1)        (D)        320   

Accrued expenses and other current liabilities

      930         58         (D)/(G)        988   
  

 

 

     

 

 

        

 

 

  

Total current liabilities

      3,923         49            3,972   

Long-term debt

      3,230         —            3,230   

Pension and other benefit liabilities

      1,599         —            1,599   

Post-retirement medical benefits

      335         —            335   

Other long-term liabilities

      473         (2)        (D)        471   
  

 

 

     

 

 

        

 

 

  

Total Liabilities

      9,560         47            9,607   
  

 

 

     

 

 

        

 

 

  
           

Convertible Preferred Stock

      214         —            214   
  

 

 

     

 

 

        

 

 

  
                 

Common stock

      221         —            221   

Additional paid-in capital

      3,000         —            3,000   

Treasury stock, at cost

      (68)        —            (68)  

Retained earnings

      5,552         432         (F)        5,984   

Accumulated other comprehensive loss

      (3,850)        193         (F)        (3,657)  
  

 

 

     

 

 

        

 

 

  

Xerox Holdings shareholders’ equity

      4,855         625            5,480   

Noncontrolling interests

      31         (24)        (D)        7   
  

 

 

     

 

 

        

 

 

  

Total Equity

      4,886         601            5,487   
  

 

 

     

 

 

        

 

 

  

Total Liabilities and Equity

    $ 14,660       $ 648          $ 15,308   
  

 

 

     

 

 

        

 

 

  

The accompanying notes are an integral part of these Pro Forma Condensed Consolidated Financial Statements.

 

Xerox Pro Forma Financial Statements

6

XEROX HOLDINGS CORPORATION

NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS (Unaudited)

The unaudited Pro Forma Condensed Consolidated Statements of Income for the nine months ended September 30, 2019 and for the years ended December 31, 2018, 2017 and 2016 and the unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2019, include the following pro forma adjustments:

 

  (A)

Pro forma adjustments reflect the elimination of the equity income of FX and the direct revenues and costs of XIP, including amounts related to the noncontrolling interest, for the respective periods. These adjustments do not include the elimination of any general corporate overhead costs. In addition, these adjustments also do not include any impacts from any potential use of proceeds as no specific uses have been determined at this stage.

 

  (B)

Pro forma adjustments to income tax expense reflect the following:

 

     Nine Months Ended      Year Ended December 30,  
     September 30, 2019                  2018                              2017                              2016              

XIP(1)

    $ (5)      $ (9)      $ (13)      $ (15)  

FX Equity Income(2)

      —         (21)        7         (18)  

Tax Reform Act(3)

      (3)        20         (83)        —   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Adjustment

    $ (8)      $ (10)      $ (89)      $ (33)  
  

 

 

     

 

 

     

 

 

     

 

 

  
                              

 

  (1)

Represents the estimated income tax impacts associated with the elimination of XIP’s pre-tax income, net of noncontrolling interest, at the applicable statutory income tax rates in effect during the periods presented.

 

  (2)

Represents the estimated income tax impacts associated with the elimination of dividends received from our equity method investment in FX, including the impact to related foreign tax credits.

 

  (3)

This adjustment removes the estimated repatriation tax expense/(benefit) associated with our equity method investment in FX resulting from the enactment of the 2017 Tax Reform Act.

 

  (C)

This adjustment reflects the following cash impacts from the Sales:

 

  (in millions)            September 30, 2019          

Sales proceeds - FX/XIP

    $ 2,223   

Dividend true-ups

      18   

Transaction costs

      (10)  

XIP cash balance sold

      (1)  
  

 

 

  

Net Cash impact

    $ 2,230   
  

 

 

  

 

  (D)

These adjustments reflect the elimination of Xerox’s investment in FX as well as the assets and liabilities attributable to XIP, including amounts related to noncontrolling interests.

 

  (E)

This adjustment reflects the elimination of the Goodwill allocated to our XIP business. Allocated Goodwill was based on the relative fair value of our XIP business, as per the sales price, as compared to the total estimated fair value of Xerox. No Goodwill was allocated to the disposal of 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 is not controlled by Xerox.

 

Xerox Pro Forma Financial Statements

7

  (F)

These adjustments reflect the estimated net after-tax gain on sale of approximately $432 million, as follows:

 

 (in millions)       September 30, 2019              
 

 

 

      

Sales proceeds - FX/XIP

   $ 2,223       

Dividend true-ups

     18       

Transaction costs

     (10)      
 

 

 

      

Total Proceeds

   $ 2,231      A  
 

 

 

      
     

Investment in FX/XIP

   $ 1,467       

XIP Intercompany payable

     (37)      

AOCL Release(1)

     193       

Estimated Goodwill allocation(2)

     8       
 

 

 

      

Net Investment

   $ 1,631      B  
 

 

 

      
     

Net Pre-tax gain

   $ 600      A-B  

Income tax on sale(3)

     (168)      
 

 

 

      

Net after-tax gain

   $ 432       
 

 

 

      
                                   

 

  (1)

Represents the release of amounts included in Accumulated other comprehensive loss (AOCL) related to our 25% investment in FX. Amounts primarily related to cumulative translation adjustments and defined benefit plans net actuarial losses and prior service credits.

 

  (2)

See Note (E) above.

 

  (3)

Income tax on sale is a preliminary estimate based on provisional assessments of our tax basis in the FX and XIP investments, and other factors that will impact the tax on the sale of the investments and repatriation of the proceeds. Our provisional assessments of these factors and estimated tax on sale are subject to change.

 

  (G)

The following balance sheet accounts were adjusted for the components of the estimated income tax on sale of $168 million per adjustment (F) above:

 

     September 30, 2019      
  

 

 

    
 (in millions)        Increase/(Decrease)             Tax Expense Component    
  

 

 

    

 

Deferred tax assets

    $ (108)     Deferred tax expense

Accrued expenses and other current liabilities

      60      Current tax expense

 

Xerox Pro Forma Financial Statements

8