New York | 001-04471 | 16-0468020 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
¨ | 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)) |
Exhibit No. | Description | |
Registrant’s fourth quarter 2018 earnings press release dated January 29, 2019 |
XEROX CORPORATION | ||
By: | /s/ Joseph H. Mancini, Jr. | |
Joseph H. Mancini, Jr. | ||
Vice President and Chief Accounting Officer |
Exhibit No. | Description | |
Registrant’s fourth quarter 2018 earnings press release dated January 29, 2019 |
• | Operating cash flow of $415 million in the quarter increases $564 million year-over-year, or $83 million year-over-year on an adjusted basis. |
• | Operating cash flow of $1.14 billion for the full year exceeds guidance and increases $1.32 billion year-over-year, or $168 million year-over-year on an adjusted basis. |
• | GAAP EPS from continuing operations of $0.56 in the quarter, an increase of $1.34 year-over-year; prior year included a $400 million charge associated with the enactment of U.S. tax reform. |
• | Adjusted EPS of $1.14 in the quarter, an increase of $0.11 year-over-year. |
• | Adjusted operating margin of 16.1 percent in the quarter expands 180 basis points year-over-year. |
• | Returned $969 million to shareholders in the form of share repurchases and dividends for the full year. |
• | Announcing 2019 full year guidance that includes delivering operating cash flow of $1.15 to $1.25 billion and free cash flow of $1.0 to $1.1 billion. |
• | 2019 full year guidance also includes expanding adjusted operating margin between 100 and 150 basis points year-over-year, as well as earnings growth that results in GAAP EPS of $2.60 to $2.70 and adjusted EPS of $3.70 to $3.80. |
• | Board approves incremental share repurchase authority of $1.0 billion; company expects at least $300 million of share repurchases in 2019. |
• | To drive revenue through expansion of our U.S. SMB business, we are transitioning over 28,000 of our small- and mid-sized government, healthcare, education and graphic communications accounts to Xerox Business Solutions (formerly Global Imaging Systems). This will provide these customers a high-touch, locally accessible model that aligns to the route to market best suited to deliver an exceptional experience for them. |
• | Over the last two quarters, we have focused on creating a simpler, more agile and effective organization through Project Own It, Xerox’s enterprise-wide transformation program. During the fourth quarter, we ramped up implementation of the program, which contributed to this quarter’s operating margin expansion. |
• | The company recently renewed a long-standing relationship with Office Depot, supplying more than 8,000 devices across Office Depot/OfficeMax’s retail stores and regional offsite production facilities. The contract covers print technology in approximately 1,400 locations, making walk-up customer use more efficient, and providing high-quality color output for promotional materials, posters, invitations and other applications. |
• | In a recent IDC report, Xerox was identified as the clear leader among document services providers, reflecting our broad portfolio of software and services solutions which deliver unique and differentiated value to our customers. Xerox's focus on security and digital transformation were highlighted as setting us apart from competitors, as were our industry-specific solutions expertise and global service delivery model. |
• | Earnings Per Share from continuing operations: |
◦ | GAAP EPS of $0.56 in the fourth quarter, an increase of $1.34 year-over-year, and $1.38 full year, an increase of $0.68 year-over-year. Prior year included a $400 million charge associated with the enactment of U.S. tax reform. |
◦ | Adjusted EPS of $1.14 in the fourth quarter, an increase of $0.11 year-over-year, and $3.46 full year, an increase of $0.01 year-over-year. |
• | Total Revenue: $2.53 billion in the quarter, a decrease of 7.8 percent year-over-year or 6.1 percent in constant currency; $9.83 billion full year, a decrease of 4.2 percent year-over-year or 4.9 percent in constant currency. |
• | Adjusted Operating Margin: 16.1 percent in the fourth quarter, an increase of 180 basis points year-over-year; 12.9 percent full year, an increase of 20 basis points year-over-year. |
• | Cash, Cash Equivalents and Restricted Cash: $1.15 billion at the end of the year. |
• | Cash Flow: |
◦ | Operating cash flow of $415 million in the fourth quarter, an increase of $564 million year-over-year, or $83 million year-over-year on an adjusted basis, and $1.14 billion full year, an increase of $1.32 billion year-over-year, or $168 million year-over-year on an adjusted basis. |
◦ | Free cash flow of $398 million in the fourth quarter, an increase of $101 million year-over-year, and $1.05 billion full year, an increase of $183 million year-over-year. |
• | Return to Shareholders: The company returned $969 million to shareholders in the form of share repurchases and dividends in 2018, or 92 percent of its free cash flow, exceeding its commitment to return at least 50 percent of free cash flow to shareholders. |
• | Operating cash flow between $1.15 and $1.25 billion and free cash flow between $1.0 and $1.1 billion. |
• | Revenue decline of approximately 5% at constant currency. |
• | Adjusted operating margin of 12.6 percent to 13.1 percent, an expansion of between 100 and 150 basis points year-over-year. In 2019, we are revising our definition of adjusted operating margin to exclude equity income. |
• | GAAP earnings between $2.60 and $2.70 per share. |
• | Adjusted earnings between $3.70 and $3.80 per share. |
• | Adjusted EPS, which excludes restructuring and related costs (including our share of Fuji Xerox restructuring), the amortization of intangibles, non-service retirement-related costs, transaction and related costs, net and other discrete adjustments including the impacts from the U.S. Tax Cuts and Jobs Act (U.S. tax reform) and a contract termination penalty. |
• | Adjusted operating margin, which excludes the EPS adjustments noted above as well as the remainder of other expenses, net and includes equity income, as adjusted. In 2019 we plan on revising our definition of Adjusted operating margin to exclude equity income - accordingly the full-year 2019 guidance for adjusted operating margin is compared to a revised full-year 2018 adjusted operating margin on the same basis. |
• | Constant currency revenue growth, which excludes the effects of currency translation. |
• | Free cash flow, which is cash flow from continuing operations less capital expenditures. |
• | A year-over-year change in fourth quarter and full year 2018 operating cash flows and free cash flows, which adjust 2017 cash flows for incremental voluntary pension contributions, deferred collections related to the sales of receivables, the termination of certain accounts receivable sale programs and the inclusion of changes in restricted cash. |
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
(in millions, except per-share data) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues | ||||||||||||||||
Sales | $ | 1,079 | $ | 1,146 | $ | 3,972 | $ | 4,073 | ||||||||
Services, maintenance and rentals | 1,390 | 1,530 | 5,590 | 5,898 | ||||||||||||
Financing | 64 | 71 | 268 | 294 | ||||||||||||
Total Revenues | 2,533 | 2,747 | 9,830 | 10,265 | ||||||||||||
Costs and Expenses | ||||||||||||||||
Cost of sales | 657 | 710 | 2,412 | 2,487 | ||||||||||||
Cost of services, maintenance and rentals | 830 | 895 | 3,359 | 3,518 | ||||||||||||
Cost of financing | 32 | 34 | 132 | 133 | ||||||||||||
Research, development and engineering expenses | 94 | 106 | 397 | 424 | ||||||||||||
Selling, administrative and general expenses | 555 | 636 | 2,390 | 2,526 | ||||||||||||
Restructuring and related costs | 67 | 24 | 158 | 216 | ||||||||||||
Amortization of intangible assets | 12 | 12 | 48 | 53 | ||||||||||||
Transaction and related costs, net | 5 | 9 | 68 | 9 | ||||||||||||
Other expenses, net | 142 | 95 | 268 | 329 | ||||||||||||
Total Costs and Expenses | 2,394 | 2,521 | 9,232 | 9,695 | ||||||||||||
Income before Income Taxes & Equity Income(1) | 139 | 226 | 598 | 570 | ||||||||||||
Income tax expense | 37 | 444 | 257 | 481 | ||||||||||||
Equity in net income of unconsolidated affiliates | 39 | 25 | 33 | 115 | ||||||||||||
Income (Loss) from Continuing Operations | 141 | (193 | ) | 374 | 204 | |||||||||||
Income from discontinued operations, net of tax | — | 6 | — | 3 | ||||||||||||
Net Income (Loss) | 141 | (187 | ) | 374 | 207 | |||||||||||
Less: Net income attributable to noncontrolling interests | 4 | 3 | 13 | 12 | ||||||||||||
Net Income (Loss) Attributable to Xerox | $ | 137 | $ | (190 | ) | $ | 361 | $ | 195 | |||||||
Amounts Attributable to Xerox: | ||||||||||||||||
Net income (loss) from continuing operations | $ | 137 | $ | (196 | ) | $ | 361 | $ | 192 | |||||||
Income from discontinued operations, net of tax | — | 6 | — | 3 | ||||||||||||
Net Income (Loss) Attributable to Xerox | $ | 137 | $ | (190 | ) | $ | 361 | $ | 195 | |||||||
Basic Earnings (Loss) per Share: | ||||||||||||||||
Continuing operations | $ | 0.56 | $ | (0.78 | ) | $ | 1.40 | $ | 0.70 | |||||||
Discontinued operations | — | 0.02 | — | 0.01 | ||||||||||||
Total Basic Earnings (Loss) per Share | $ | 0.56 | $ | (0.76 | ) | $ | 1.40 | $ | 0.71 | |||||||
Diluted Earnings (Loss) per Share: | ||||||||||||||||
Continuing operations | $ | 0.56 | $ | (0.78 | ) | $ | 1.38 | $ | 0.70 | |||||||
Discontinued operations | — | 0.02 | — | 0.01 | ||||||||||||
Total Diluted Earnings (Loss) per Share | $ | 0.56 | $ | (0.76 | ) | $ | 1.38 | $ | 0.71 |
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
(in millions) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income (loss) | $ | 141 | $ | (187 | ) | $ | 374 | $ | 207 | |||||||
Less: Net income attributable to noncontrolling interests | 4 | 3 | 13 | 12 | ||||||||||||
Net Income (Loss) Attributable to Xerox | 137 | (190 | ) | 361 | 195 | |||||||||||
Other Comprehensive (Loss) Income, Net: | ||||||||||||||||
Translation adjustments, net | (83 | ) | (8 | ) | (242 | ) | 483 | |||||||||
Unrealized gains, net | 11 | 5 | 16 | 1 | ||||||||||||
Changes in defined benefit plans, net | 218 | 150 | 409 | 106 | ||||||||||||
Other Comprehensive Income, Net | 146 | 147 | 183 | 590 | ||||||||||||
Less: Other comprehensive income, net attributable to noncontrolling interests | — | — | — | 1 | ||||||||||||
Other Comprehensive Income, Net Attributable to Xerox | 146 | 147 | 183 | 589 | ||||||||||||
Comprehensive Income (Loss), Net | 287 | (40 | ) | 557 | 797 | |||||||||||
Less: Comprehensive income, net attributable to noncontrolling interests | 4 | 3 | 13 | 13 | ||||||||||||
Comprehensive Income (Loss), Net Attributable to Xerox | $ | 283 | $ | (43 | ) | $ | 544 | $ | 784 |
(in millions, except share data in thousands) | December 31, 2018 | December 31, 2017 | ||||||
Assets | ||||||||
Cash and cash equivalents | $ | 1,084 | $ | 1,293 | ||||
Accounts receivable, net | 1,276 | 1,357 | ||||||
Billed portion of finance receivables, net | 105 | 112 | ||||||
Finance receivables, net | 1,218 | 1,317 | ||||||
Inventories | 818 | 915 | ||||||
Other current assets | 194 | 236 | ||||||
Total current assets | 4,695 | 5,230 | ||||||
Finance receivables due after one year, net | 2,149 | 2,323 | ||||||
Equipment on operating leases, net | 442 | 454 | ||||||
Land, buildings and equipment, net | 499 | 629 | ||||||
Investments in affiliates, at equity | 1,403 | 1,404 | ||||||
Intangible assets, net | 220 | 268 | ||||||
Goodwill | 3,867 | 3,930 | ||||||
Deferred tax assets | 740 | 1,026 | ||||||
Other long-term assets | 859 | 682 | ||||||
Total Assets | $ | 14,874 | $ | 15,946 | ||||
Liabilities and Equity | ||||||||
Short-term debt and current portion of long-term debt | $ | 961 | $ | 282 | ||||
Accounts payable | 1,091 | 1,108 | ||||||
Accrued compensation and benefits costs | 349 | 444 | ||||||
Accrued expenses and other current liabilities | 850 | 907 | ||||||
Total current liabilities | 3,251 | 2,741 | ||||||
Long-term debt | 4,269 | 5,235 | ||||||
Pension and other benefit liabilities | 1,482 | 1,595 | ||||||
Post-retirement medical benefits | 350 | 662 | ||||||
Other long-term liabilities | 269 | 206 | ||||||
Total Liabilities | 9,621 | 10,439 | ||||||
Convertible Preferred Stock | 214 | 214 | ||||||
Common stock | 232 | 255 | ||||||
Additional paid-in capital | 3,321 | 3,893 | ||||||
Treasury stock, at cost | (55 | ) | — | |||||
Retained earnings | 5,072 | 4,856 | ||||||
Accumulated other comprehensive loss | (3,565 | ) | (3,748 | ) | ||||
Xerox shareholders’ equity | 5,005 | 5,256 | ||||||
Noncontrolling interests | 34 | 37 | ||||||
Total Equity | 5,039 | 5,293 | ||||||
Total Liabilities and Equity | $ | 14,874 | $ | 15,946 | ||||
Shares of common stock issued | 231,690 | 254,613 | ||||||
Treasury stock | (2,067 | ) | — | |||||
Shares of Common Stock Outstanding | 229,623 | 254,613 |
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
(in millions) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Cash Flows from Operating Activities | ||||||||||||||||
Net Income (Loss) | $ | 141 | $ | (187 | ) | $ | 374 | $ | 207 | |||||||
Income from discontinued operations, net of tax | — | (6 | ) | — | (3 | ) | ||||||||||
Income (loss) from continuing operations | 141 | (193 | ) | 374 | 204 | |||||||||||
Adjustments required to reconcile net income (loss) to cash flows from operating activities: | ||||||||||||||||
Depreciation and amortization | 128 | 128 | 526 | 527 | ||||||||||||
Provisions | 14 | 14 | 70 | 73 | ||||||||||||
Net gain on sales of businesses and assets | — | (1 | ) | (35 | ) | (15 | ) | |||||||||
Undistributed equity in net income of unconsolidated affiliates | (16 | ) | 38 | (7 | ) | (18 | ) | |||||||||
Stock-based compensation | 13 | 13 | 57 | 52 | ||||||||||||
Restructuring and asset impairment charges | 66 | 23 | 157 | 197 | ||||||||||||
Payments for restructurings | (40 | ) | (55 | ) | (170 | ) | (220 | ) | ||||||||
Defined benefit pension cost | 86 | 61 | 175 | 194 | ||||||||||||
Contributions to defined benefit pension plans | (33 | ) | (119 | ) | (144 | ) | (836 | ) | ||||||||
(Increase) decrease in accounts receivable and billed portion of finance receivables | (7 | ) | (355 | ) | 30 | (529 | ) | |||||||||
Decrease (increase) in inventories | 126 | 118 | 35 | (69 | ) | |||||||||||
Increase in equipment on operating leases | (66 | ) | (62 | ) | (248 | ) | (217 | ) | ||||||||
(Increase) decrease in finance receivables | (15 | ) | (47 | ) | 166 | 162 | ||||||||||
Decrease (increase) in other current and long-term assets | 12 | 29 | 29 | (19 | ) | |||||||||||
Decrease in accounts payable | (30 | ) | (69 | ) | (18 | ) | (15 | ) | ||||||||
(Decrease) increase in accrued compensation | (15 | ) | 31 | (112 | ) | (27 | ) | |||||||||
Increase (decrease) in other current and long-term liabilities | 40 | (119 | ) | 51 | (80 | ) | ||||||||||
Net change in income tax assets and liabilities | 11 | 446 | 176 | 410 | ||||||||||||
Net change in derivative assets and liabilities | (12 | ) | (15 | ) | (14 | ) | 75 | |||||||||
Other operating, net | 12 | (15 | ) | 42 | (28 | ) | ||||||||||
Net cash provided by (used in) operating activities of continuing operations | 415 | (149 | ) | 1,140 | (179 | ) | ||||||||||
Net cash provided by (used in) operating activities of discontinued operations | — | 9 | — | (88 | ) | |||||||||||
Net cash provided by (used in) operating activities | 415 | (140 | ) | 1,140 | (267 | ) | ||||||||||
Cash Flows from Investing Activities | ||||||||||||||||
Cost of additions to land, buildings, equipment and software | (17 | ) | (35 | ) | (90 | ) | (105 | ) | ||||||||
Proceeds from sales of land, buildings and equipment | 27 | 1 | 59 | 3 | ||||||||||||
Proceeds from sale of businesses | — | — | — | 20 | ||||||||||||
Acquisitions, net of cash acquired | — | (11 | ) | — | (87 | ) | ||||||||||
Collections of deferred proceeds from sales of receivables | — | 56 | — | 213 | ||||||||||||
Collections on beneficial interest from sales of finance receivables | — | 8 | — | 21 | ||||||||||||
Other investing, net | 1 | 127 | 2 | 100 | ||||||||||||
Net cash provided by (used in) investing activities | 11 | 146 | (29 | ) | 165 | |||||||||||
Cash Flows from Financing Activities | ||||||||||||||||
Net payments on debt | (1 | ) | (486 | ) | (307 | ) | (822 | ) | ||||||||
Dividends | (65 | ) | (68 | ) | (269 | ) | (291 | ) | ||||||||
Payments to acquire treasury stock, including fees | (416 | ) | — | (700 | ) | — | ||||||||||
Other financing, net | (4 | ) | (1 | ) | (25 | ) | 128 | |||||||||
Net cash used in financing activities | (486 | ) | (555 | ) | (1,301 | ) | (985 | ) | ||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (10 | ) | (2 | ) | (30 | ) | 53 | |||||||||
Decrease in cash, cash equivalents and restricted cash | (70 | ) | (551 | ) | (220 | ) | (1,034 | ) | ||||||||
Cash, cash equivalents and restricted cash at beginning of period | 1,218 | 1,919 | 1,368 | 2,402 | ||||||||||||
Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 1,148 | $ | 1,368 | $ | 1,148 | $ | 1,368 |
Three Months Ended December 31, | % of Total Revenue | |||||||||||||||
(in millions) | 2018 | 2017 | % Change | CC % Change | 2018 | 2017 | ||||||||||
Equipment sales | $ | 629 | $ | 695 | (9.5)% | (7.7)% | 25% | 25% | ||||||||
Post sale revenue | 1,904 | 2,052 | (7.2)% | (5.5)% | 75% | 75% | ||||||||||
Total Revenue | $ | 2,533 | $ | 2,747 | (7.8)% | (6.1)% | 100% | 100% | ||||||||
Reconciliation to Condensed Consolidated Statements of Income: | ||||||||||||||||
Sales | $ | 1,079 | $ | 1,146 | (5.8)% | (4.1)% | ||||||||||
Less: Supplies, paper and other sales | (450 | ) | (464 | ) | (3.0)% | (1.3)% | ||||||||||
Add: Equipment-related training(1) | — | 13 | NM | NM | ||||||||||||
Equipment Sales | $ | 629 | $ | 695 | (9.5)% | (7.7)% | ||||||||||
Services, maintenance and rentals | $ | 1,390 | $ | 1,530 | (9.2)% | (7.5)% | ||||||||||
Add: Supplies, paper and other sales | 450 | 464 | (3.0)% | (1.3)% | ||||||||||||
Add: Financing | 64 | 71 | (9.9)% | (8.5)% | ||||||||||||
Less: Equipment-related training(1) | — | (13 | ) | NM | NM | |||||||||||
Post Sale Revenue | $ | 1,904 | $ | 2,052 | (7.2)% | (5.5)% | ||||||||||
North America | $ | 1,517 | $ | 1,601 | (5.2)% | (4.9)% | 60% | 58% | ||||||||
International | 929 | 1,001 | (7.2)% | (3.2)% | 37% | 37% | ||||||||||
Other | 87 | 145 | (40.0)% | (40.0)% | 3% | 5% | ||||||||||
Total Revenue(2) | $ | 2,533 | $ | 2,747 | (7.8)% | (6.1)% | 100% | 100% | ||||||||
Memo: | ||||||||||||||||
Managed Document Services(3) | $ | 876 | $ | 913 | (4.1)% | (1.7)% | 35% | 33% |
(1) | In 2018, upon adoption of ASU 2014-09 Revenue Recognition, revenue from training related to equipment installation is now included in Equipment Sales. In prior periods, this revenue was reported within Services, maintenance and rentals. |
(2) | Refer to Appendix II for our Geographic Sales Channels and Product/Offering Definitions. |
(3) | Excluding equipment revenue, Managed Document Services (MDS) was $745 million and $768 million in fourth quarter 2018 and 2017, respectively, representing a decrease of 3.0% including a 2.1-percentage point unfavorable impact from currency. |
• | Post 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. Post sale revenue decreased 7.2% as compared to fourth quarter 2017, with a 1.7-percentage point unfavorable impact from currency and a 0.9-percentage point unfavorable impact from lower licensing revenues associated with a prior year agreement. |
◦ | Services, maintenance and rentals revenue includes rental and maintenance revenue (including bundled supplies) as well as the post sale component of the document services revenue from our Managed Document Services (MDS) offerings, and revenues from our Communication and Marketing Solutions (CMS). These revenues decreased 9.2% with a 1.7-percentage point unfavorable impact from currency. 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 signings and lower installs in prior periods. This decline also reflected $20 million of lower revenues associated with a prior year licensing agreement, and was partially mitigated by higher revenues from our partner print services offering. |
◦ | Supplies, paper and other sales includes unbundled supplies and other sales. These revenues decreased 3.0% as compared to fourth quarter 2017, including a 1.7-percentage point unfavorable impact from currency. The decline at constant currency1 included a 1.3-percentage point unfavorable impact from lower OEM sales, as well as the impact of lower supplies revenues in North America and Europe, partially offset by higher supplies and paper sales in developing markets and higher IT network integration solutions sales from our Xerox Business Solutions (XBS) business, formerly known as Global Imaging Systems. |
◦ | Financing revenue is generated from financed equipment sale transactions. The 9.9% decline in these revenues reflected a continued decline in finance receivables balance due to lower equipment sales in prior periods and included a 1.4-percentage point unfavorable impact from currency. |
Three Months Ended December 31, | % of Equipment Sales | |||||||||||||||
(in millions) | 2018 | 2017 | % Change | CC % Change | 2018 | 2017 | ||||||||||
Entry(1) | $ | 66 | $ | 68 | (2.9)% | 0.2% | 11% | 10% | ||||||||
Mid-range | 418 | 428 | (2.3)% | (1.2)% | 66% | 61% | ||||||||||
High-end | 138 | 166 | (16.9)% | (14.7)% | 22% | 24% | ||||||||||
Other(1) | 7 | 33 | (78.8)% | (78.8)% | 1% | 5% | ||||||||||
Equipment Sales(2) | $ | 629 | $ | 695 | (9.5)% | (7.7)% | 100% | 100% |
(1) | In 2018 revenues from our OEM business are included in Other, which had historically been reported within Entry. This reclassification was made to provide better transparency to our business results. Prior year amounts have been adjusted to conform to this change. |
(2) | In 2018, upon adoption of ASU 2014-09 Revenue Recognition, revenue from training related to equipment installation is now included in Equipment Sales (previously included in Post Sale Revenue). Prior year amounts have been adjusted to conform to this change. |
• | Equipment sales revenue decreased 9.5% as compared to fourth quarter 2017, with a 1.8-percentage point unfavorable impact from currency and was impacted by price declines of approximately 5% (which were in-line with our historic declines), and included a 3.0-percentage point unfavorable impact from lower OEM equipment sales. The decline at constant currency1 was partially affected by higher sales in the prior year following the completion of the ConnectKey launch, and reflected the following: |
◦ | Entry - The modest increase reflected higher installs of our ConnectKey devices in our European and U.S. indirect channels. |
◦ | Mid-range - The decrease primarily reflected lower sales through our Enterprise channel in the U.S. (impacted by lower signings in prior periods), partially offset by higher revenues from our XBS business and indirect channels in the U.S. as well as Europe. |
◦ | High-end - The decrease was driven by lower sales of our iGen and Versant systems along with lower revenues from black-and-white systems, reflecting market decline trends. These declines were only partially mitigated by demand for our Iridesse production press and higher sales of our recently upgraded cut-sheet inkjet production systems. |
• | 11% increase in color multifunction devices, reflecting higher installs of ConnectKey devices through our indirect channels in the U.S. and Europe. |
• | 9% increase in black-and-white multifunction devices, driven largely by higher activity from low-end devices in developing markets as well as higher installs of ConnectKey devices through our indirect channels in the U.S. and Europe. |
• | 3% increase in mid-range color installs reflecting higher installs of ConnectKey devices through our indirect channels in the U.S. and Europe. |
• | 1% increase in mid-range black-and-white, reflecting demand for ConnectKey products primarily from our Europe and U.S. indirect channels. |
• | 12% decrease in high-end color installs, as demand for our new Iridesse production press was offset by lower installs of iGen and lower-end production systems including Versant systems. |
• | 34% decrease in high-end black-and-white systems reflecting market trends and our customers' technology refresh cycles in the U.S. |
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
(in millions) | 2018 | 2017 | % Change | CC % Change | 2018 | 2017 | % Change | CC % Change | ||||||||||||||||
Signings | $ | 747 | $ | 953 | (21.6)% | (22.6)% | $ | 2,366 | $ | 2,714 | (12.8)% | (13.9)% |
(1) | See the “Non-GAAP Financial Measures” section for an explanation of the non-GAAP financial measure. |
(2) | Entry installations exclude OEM sales; including OEM sales, Entry color multifunction devices decreased 22%, while Entry black-and-white multifunction devices decreased 8%. |
(3) | Mid-range and High-end color installations exclude Fuji Xerox digital front-end sales; including Fuji Xerox digital front-end sales, Mid-range color devices increased 3%, and High-end color systems decreased 13%. |
Three Months Ended December 31, | ||||||||||||
(in millions) | 2018 | 2017 | B/(W) | |||||||||
Gross Profit | $ | 1,014 | $ | 1,108 | $ | (94 | ) | |||||
RD&E | 94 | 106 | 12 | |||||||||
SAG | 555 | 636 | 81 | |||||||||
Equipment Gross Margin | 33.1 | % | 27.8 | % | 5.3 pts. | |||||||
Post sale Gross Margin | 42.3 | % | 44.6 | % | (2.3) pts. | |||||||
Total Gross Margin | 40.0 | % | 40.3 | % | (0.3) pts. | |||||||
RD&E as a % of Revenue | 3.7 | % | 3.9 | % | 0.2 pts. | |||||||
SAG as a % of Revenue | 21.9 | % | 23.2 | % | 1.3 pts. | |||||||
Pre-tax Income | $ | 139 | $ | 226 | $ | (87 | ) | |||||
Pre-tax Income Margin | 5.5 | % | 8.2 | % | (2.7) pts. | |||||||
Adjusted(1) Operating Profit | $ | 409 | $ | 392 | $ | 17 | ||||||
Adjusted(1) Operating Margin | 16.1 | % | 14.3 | % | 1.8 pts. |
Three Months Ended December 31, | ||||||||
(in millions) | 2018 | 2017 | ||||||
Non-financing interest expense | $ | 28 | $ | 30 | ||||
Non-service retirement-related costs | 67 | 59 | ||||||
Interest income | (3 | ) | (2 | ) | ||||
Gains on sales of businesses and assets | — | (1 | ) | |||||
Currency losses, net | 3 | — | ||||||
Loss on sales of accounts receivable | 1 | 1 | ||||||
Contract termination costs - IT services | 43 | — | ||||||
Loss on early extinguishment of debt | — | 7 | ||||||
All other expenses, net | 3 | 1 | ||||||
Other expenses, net | $ | 142 | $ | 95 |
Three Months Ended December 31, | ||||||||||||
(in millions) | 2018 | 2017 | Change | |||||||||
Net cash provided by (used in) operating activities of continuing operations | $ | 415 | $ | (149 | ) | $ | 564 | |||||
Net cash provided by operating activities of discontinued operations | — | 9 | (9 | ) | ||||||||
Net cash provided by (used in) operating activities | 415 | (140 | ) | 555 | ||||||||
Net cash provided by investing activities | 11 | 146 | (135 | ) | ||||||||
Net cash used in financing activities | (486 | ) | (555 | ) | 69 | |||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (10 | ) | (2 | ) | (8 | ) | ||||||
Decrease in cash, cash equivalents and restricted cash | (70 | ) | (551 | ) | 481 | |||||||
Cash, cash equivalents and restricted cash at beginning of period | 1,218 | 1,919 | (701 | ) | ||||||||
Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 1,148 | $ | 1,368 | $ | (220 | ) |
• | $348 million increase from accounts receivable primarily due to the termination of all accounts receivable sales arrangements in North America and all but one arrangement in Europe during the fourth quarter 2017 and the prior year reclassification of $56 million of collections of deferred proceeds from the sales of accounts receivables to investing. |
• | $86 million increase from lower pension contributions. |
• | $57 million increase due to the prior year payment of restricted cash balances in connection with the termination of our accounts receivable sales arrangements. |
• | $38 million increase from accounts payable primarily due to the year-over-year timing of supplier and vendor payments. |
• | $36 million increase primarily related to the prior year settlements of foreign currency derivative contracts associated with intercompany borrowings. |
• | $32 million increase from finance receivables primarily related to a higher level of run-off. |
• | $15 million increase from lower restructuring payments. |
• | $43 million decrease due to dividends received in the prior year from equity investments other than Fuji Xerox representing the accumulation of earnings over multiple years. |
• | $28 million decrease from higher net tax payments. |
• | $127 million decrease due to the prior year receipt of the final payment of the performance-based instrument associated with our 1997 sale of The Resolution Group (TRG). |
• | $56 million decrease is primarily a result of the termination of certain accounts receivable sales arrangements in fourth quarter 2017. |
• | $26 million increase due to the sale of surplus buildings in Ireland in fourth quarter 2018. |
• | $18 million increase from lower capital expenditures. |
• | $485 million decrease from net debt activity. Fourth quarter 2017 reflects payments of $488 million on Senior Notes, which includes a prepayment premium of $13 million compared to no debt activity in the current year. |
• | $416 million increase due to the resumption of share repurchases in 2018. |
(in millions) | December 31, 2018 | December 31, 2017 | ||||||
Cash and cash equivalents | $ | 1,084 | $ | 1,293 | ||||
Restricted cash | ||||||||
Litigation deposits in Brazil | 61 | 72 | ||||||
Other restricted cash | 3 | 3 | ||||||
Total Restricted cash | 64 | 75 | ||||||
Cash, cash equivalents and restricted cash | $ | 1,148 | $ | 1,368 |
(in millions) | December 31, 2018 | December 31, 2017 | ||||||
Other current assets | $ | 1 | $ | 1 | ||||
Other long-term assets | 63 | 74 | ||||||
Total Restricted cash | $ | 64 | $ | 75 |
(in millions) | December 31, 2018 | December 31, 2017 | ||||||
Principal debt balance(1) | $ | 5,281 | $ | 5,579 | ||||
Net unamortized discount | (25 | ) | (35 | ) | ||||
Debt issuance costs | (25 | ) | (32 | ) | ||||
Fair value adjustments(2) | ||||||||
- terminated swaps | 2 | 4 | ||||||
- current swaps | (3 | ) | 1 | |||||
Total Debt | $ | 5,230 | $ | 5,517 |
(1) | Includes Notes Payable of $6 million as of December 31, 2017. There were no Notes Payable as of December 31, 2018. |
(2) | Fair value adjustments include the following: (i) fair value adjustments to debt associated with terminated interest rate swaps, which are being amortized to interest expense over the remaining term of the related notes; and (ii) changes in fair value of hedged debt obligations attributable to movements in benchmark interest rates. Hedge accounting requires hedged debt instruments to be reported inclusive of any fair value adjustment. |
• | The annual facility fee under the Company’s $1.8 billion Credit Facility increased from 0.200% to 0.250% on the total facility amount and the spread to LIBOR for borrowings under the Credit Facility will increase from 1.175% to 1.375%. The Company currently has no outstanding borrowings under the Credit Facility and none at December 31, 2018. |
• | The Company’s $1.0 billion Senior Notes due 2023 include a provision that requires an increase in the coupon rate for rating downgrades by Moody’s and/or S&P. Accordingly, the coupon rate of 3.625% will increase by 0.50% to 4.125% effective March 15, 2019. |
(in millions) | December 31, 2018 | December 31, 2017 | ||||||
Total finance receivables, net(1) | $ | 3,472 | $ | 3,752 | ||||
Equipment on operating leases, net | 442 | 454 | ||||||
Total Finance Assets, net(2) | $ | 3,914 | $ | 4,206 |
(1) | Includes (i) Billed portion of finance receivables, net, (ii) Finance receivables, net and (iii) Finance receivables due after one year, net as included in our Condensed Consolidated Balance Sheets. |
(2) | The change from December 31, 2017 includes a decrease of $94 million due to currency. |
(in millions) | December 31, 2018 | December 31, 2017 | ||||||
Finance receivables debt(1) | $ | 3,038 | $ | 3,283 | ||||
Equipment on operating leases debt | 387 | 397 | ||||||
Financing debt | 3,425 | 3,680 | ||||||
Core debt | 1,805 | 1,837 | ||||||
Total Debt | $ | 5,230 | $ | 5,517 |
(1) | Finance receivables debt is the basis for our calculation of "Cost of financing" expense in the Condensed Consolidated Statements of Income. |
Three Months Ended December 31, | ||||||||
(in millions) | 2018 | 2017 | ||||||
Accounts receivable sales(1) | $ | 108 | $ | 135 | ||||
Loss on sales of accounts receivable | 1 | 1 | ||||||
Estimated increase (decrease) to operating cash flows(2),(3) | 36 | (262 | ) |
(1) | Customers may also enter into structured-payable arrangements that require us to sell our receivables from that customer to a third-party financial institution, which then makes payments to us to settle the customer's receivable. In these instances, we ensure the sale of the receivables are bankruptcy 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. |
(2) | Represents the difference between current and prior period accounts receivable sales adjusted for the effects of the deferred proceeds, collections prior to the end of the quarter and currency. |
(3) | Year 2017 reflects a decrease associated with the termination of certain accounts receivable sales programs in the fourth quarter of 2017. |
• | Net income and Earnings per share (EPS) |
• | Effective tax rate |
• | Amortization of intangible assets: The amortization of intangible assets is driven by our acquisition activity which can vary in size, 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. Amortization of intangible assets will recur in future periods. |
• | Restructuring and related costs: Restructuring and related costs 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 workforce 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. |
• | Non-service retirement-related costs: 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 markets 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) amortization of prior plan amendments, (iv) amortized actuarial gains/losses and (v) the impacts of any plan settlements/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 as a result of our adoption of ASU 2017-07 - Reporting of Retirement Related Benefit Costs in 2018. Adjusted 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. |
• | Transaction and related costs, net: Transaction and related costs, net are expenses incurred in connection with Xerox's planned combination transaction with Fuji Xerox, which was terminated in May 2018, as well as costs and expenses related to the previously disclosed settlement agreement reached with certain shareholders and litigation related to the terminated transaction and other shareholder actions. 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 combination transaction and the related shareholder settlement agreement and litigation. |
• | Restructuring and other charges - Fuji Xerox: We adjust our 25% share of Fuji Xerox’s net income for similar items noted above such as Restructuring and related costs and Transaction and related costs, net based on the same rationale discussed above. |
• | Other discrete, unusual or infrequent items: We excluded the following items given their discrete, unusual or infrequent nature and their impact on our results for the period. |
• | Fourth Quarter and Full Year 2018 - Contract termination costs associated with a minimum purchase commitment for IT services. |
• | Fourth Quarter and Full Year 2017 - Losses on early extinguishment of debt. |
• | Fourth Quarter and Full Year 2017 and 2018 - impacts associated the Tax Cuts and Jobs Act (the "Tax Act") enacted in December 2017. See the “Income Taxes” section for further explanation. |
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||||||||||
(in millions, except per share amounts) | Net Income | EPS | Net (Loss) Income | EPS | Net Income | EPS | Net Income | EPS | ||||||||||||||||||||||||
Reported(1) | $ | 137 | $ | 0.56 | $ | (196 | ) | $ | (0.78 | ) | $ | 361 | $ | 1.38 | $ | 192 | $ | 0.70 | ||||||||||||||
Adjustments: | ||||||||||||||||||||||||||||||||
Restructuring and related costs | 67 | 24 | 158 | 216 | ||||||||||||||||||||||||||||
Amortization of intangible assets | 12 | 12 | 48 | 53 | ||||||||||||||||||||||||||||
Transaction and related costs, net | 5 | 9 | 68 | 9 | ||||||||||||||||||||||||||||
Non-service retirement-related costs | 67 | 59 | 150 | 188 | ||||||||||||||||||||||||||||
Contract termination costs - IT services | 43 | — | 43 | — | ||||||||||||||||||||||||||||
Loss on early extinguishment of debt | — | 7 | — | 20 | ||||||||||||||||||||||||||||
Income tax on adjustments(2) | (50 | ) | (44 | ) | (119 | ) | (166 | ) | ||||||||||||||||||||||||
Restructuring and other charges - Fuji Xerox(3) | 5 | 1 | 95 | 10 | ||||||||||||||||||||||||||||
Tax Act | (6 | ) | 400 | 89 | 400 | |||||||||||||||||||||||||||
Remeasurement of unrecognized tax positions | — | — | — | (16 | ) | |||||||||||||||||||||||||||
Adjusted | $ | 280 | $ | 1.14 | $ | 272 | $ | 1.03 | $ | 893 | $ | 3.46 | $ | 906 | $ | 3.45 | ||||||||||||||||
Dividends on preferred stock used in adjusted EPS calculation(4) | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
Weighted average shares for adjusted EPS(4) | 246 | 264 | 258 | 263 | ||||||||||||||||||||||||||||
Fully diluted shares at end of period(5) | 240 |
(1) | Net income (loss) and EPS from continuing operations attributable to Xerox. |
(2) | Refer to Effective Tax Rate reconciliation. |
(3) | Other charges in 2018 represent costs associated with the terminated combination transaction. |
(4) | For those periods that exclude the preferred stock dividend, the average shares for the calculations of diluted EPS include 7 million shares associated with our Series B convertible preferred stock, as applicable. |
(5) | Represents common shares outstanding at December 31, 2018 as well as shares associated with our Series B convertible preferred stock plus potential dilutive common shares as used for the calculation of diluted earnings per share for the fourth quarter 2018. |
Three Months Ended December 31, 2018 | Three Months Ended December 31, 2017 | |||||||||||||||||||||
(in millions) | Pre-Tax Income | Income Tax Expense | Effective Tax Rate | Pre-Tax Income | Income Tax Expense | Effective Tax Rate | ||||||||||||||||
Reported(1) | $ | 139 | $ | 37 | 26.6 | % | $ | 226 | $ | 444 | 196.5 | % | ||||||||||
Non-GAAP Adjustments(2) | 194 | 50 | 111 | 44 | ||||||||||||||||||
Tax Act | — | 6 | — | (400 | ) | |||||||||||||||||
Adjusted(3) | $ | 333 | $ | 93 | 27.9 | % | $ | 337 | $ | 88 | 26.1 | % |
Year Ended December 31, 2018 | Year Ended December 31, 2017 | |||||||||||||||||||||
(in millions) | Pre-Tax Income | Income Tax Expense | Effective Tax Rate | Pre-Tax Income | Income Tax Expense | Effective Tax Rate | ||||||||||||||||
Reported(1) | $ | 598 | $ | 257 | 43.0 | % | $ | 570 | $ | 481 | 84.4 | % | ||||||||||
Non-GAAP Adjustments(2) | 467 | 119 | 486 | 166 | ||||||||||||||||||
Tax Act | — | (89 | ) | — | (400 | ) | ||||||||||||||||
Remeasurement of unrecognized tax positions | — | — | — | 16 | ||||||||||||||||||
Adjusted(3) | $ | 1,065 | $ | 287 | 26.9 | % | $ | 1,056 | $ | 263 | 24.9 | % |
(1) | Pre-Tax Income and Income Tax Expense from continuing operations. |
(2) | Refer to Net Income (Loss) and EPS reconciliation for details. |
(3) | The tax impact on Adjusted Pre-Tax Income from continuing operations is calculated under the same accounting principles applied to the Reported Pre-Tax Income under ASC 740, which employs an annual effective tax rate method to the results. |
Three Months Ended December 31, 2018 | Three Months Ended December 31, 2017 | |||||||||||||||||||||
(in millions) | Profit | Revenue | Margin | Profit | Revenue | Margin | ||||||||||||||||
Reported(1) | $ | 139 | $ | 2,533 | 5.5 | % | $ | 226 | $ | 2,747 | 8.2 | % | ||||||||||
Adjustments: | ||||||||||||||||||||||
Restructuring and related costs | 67 | 24 | ||||||||||||||||||||
Amortization of intangible assets | 12 | 12 | ||||||||||||||||||||
Transaction and related costs, net | 5 | 9 | ||||||||||||||||||||
Equity in net income of unconsolidated affiliates | 39 | 25 | ||||||||||||||||||||
Restructuring and other charges - Fuji Xerox(2) | 5 | 1 | ||||||||||||||||||||
Other expenses, net(3) (4) | 142 | 95 | ||||||||||||||||||||
Adjusted | $ | 409 | $ | 2,533 | 16.1 | % | $ | 392 | $ | 2,747 | 14.3 | % | ||||||||||
Equity in net income of unconsolidated affiliates | (39 | ) | (25 | ) | ||||||||||||||||||
Restructuring and other charges - Fuji Xerox(2) | (5 | ) | (1 | ) | ||||||||||||||||||
Adjusted (Effective for 2019) | $ | 365 | $ | 2,533 | 14.4 | % | $ | 366 | $ | 2,747 | 13.3 | % |
Year Ended December 31, 2018 | Year Ended December 31, 2017 | |||||||||||||||||||||
(in millions) | Profit | Revenue | Margin | Profit | Revenue | Margin | ||||||||||||||||
Reported(1) | $ | 598 | $ | 9,830 | 6.1 | % | $ | 570 | $ | 10,265 | 5.6 | % | ||||||||||
Adjustments: | ||||||||||||||||||||||
Restructuring and related costs | 158 | 216 | ||||||||||||||||||||
Amortization of intangible assets | 48 | 53 | ||||||||||||||||||||
Transaction and related costs, net | 68 | 9 | ||||||||||||||||||||
Equity in net income of unconsolidated affiliates | 33 | 115 | ||||||||||||||||||||
Restructuring and other charges - Fuji Xerox(2) | 95 | 10 | ||||||||||||||||||||
Other expenses, net(3),(4) | 268 | 329 | ||||||||||||||||||||
Adjusted | $ | 1,268 | $ | 9,830 | 12.9 | % | $ | 1,302 | $ | 10,265 | 12.7 | % | ||||||||||
Equity in net income of unconsolidated affiliates | (33 | ) | (115 | ) | ||||||||||||||||||
Restructuring and other charges - Fuji Xerox(2) | (95 | ) | (10 | ) | ||||||||||||||||||
Adjusted (Effective for 2019) | $ | 1,140 | $ | 9,830 | 11.6 | % | $ | 1,177 | $ | 10,265 | 11.5 | % |
(1) | Pre-Tax Income and revenue from continuing operations. |
(2) | Other charges in 2018 represent costs associated with the terminated combination transaction. |
(3) | Includes non-service retirement-related costs of $67 million and $59 million, and $150 million and $188 million for the three and twelve months ended December 31, 2018 and 2017, respectively. |
(4) | Includes a $43 million penalty associated with the termination of an IT services arrangement, for the three and twelve months ended December 31, 2018. |
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
(in millions) | 2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||||||||
Reported(1) | $ | 415 | $ | (149 | ) | $ | 564 | $ | 1,140 | $ | (179 | ) | $ | 1,319 | ||||||||||
Incremental voluntary contributions to U.S. defined benefit pension plans | — | — | — | — | 500 | (500 | ) | |||||||||||||||||
Collections on beneficial interests received in sales of receivables | — | 64 | (64 | ) | — | 234 | (234 | ) | ||||||||||||||||
Elimination of certain accounts receivables sales programs | — | 350 | (350 | ) | — | 350 | (350 | ) | ||||||||||||||||
Restricted cash - classification change(2) | — | 57 | (57 | ) | — | 67 | (67 | ) | ||||||||||||||||
Other | — | 10 | (10 | ) | — | — | — | |||||||||||||||||
Operating Cash Flow - Adjusted | $ | 415 | $ | 332 | $ | 83 | $ | 1,140 | $ | 972 | $ | 168 | ||||||||||||
Capital Expenditures | (17 | ) | (35 | ) | 18 | (90 | ) | (105 | ) | 15 | ||||||||||||||
Free Cash Flow | $ | 398 | $ | 297 | $ | 101 | $ | 1,050 | $ | 867 | $ | 183 |
(1) | Net cash provided by (used in) operating activities from continuing operations. |
(2) | Per ASU 2016-18, Statement of Cash Flows - Restricted Cash, restricted cash and restricted cash equivalents should be included with Cash and cash equivalents when reconciling beginning and end-of-period amounts per the Statement of Cash Flows. |
FY 2019 | ||||||
(in millions, except per share amounts) | Net Income | EPS | ||||
Estimated(1) | $ | 635 | ~ $2.60 - $2.70 | |||
Adjustments: | ||||||
Restructuring and related costs(2) | 225 | |||||
Amortization of intangible assets | 40 | |||||
Non-service retirement-related costs | 90 | |||||
Income tax on adjustments | (90 | ) | ||||
Adjusted | $ | 900 | ~ $3.70 - $3.80 | |||
Weighted average shares for adjusted EPS(3) | ~ 240 |
(1) | Net Income and EPS from continuing operations attributable to Xerox |
(2) | Excludes any potential Fuji Xerox restructuring |
(3) | Fully diluted shares at the end of 2018 |
FY 2019 | |||||||||
(in millions) | Profit | Revenue | Margin | ||||||
Estimated(1) | $ | 705 | $ | 9,340 | ~ 7.2% - 7.7% | ||||
Adjustments: | |||||||||
Restructuring and related costs | 225 | ||||||||
Amortization of intangible assets | 40 | ||||||||
Non-service retirement-related costs | 90 | ||||||||
Other Expenses, net | 140 | ||||||||
Adjusted | $ | 1,200 | $ | 9,340 | ~ 12.6% - 13.1% |
(1) | Pre-Tax Income and revenue from continuing operations |
Free Cash Flow | |||
(in millions) | FY 2019 | ||
Operating Cash Flow(1) | $1,150 - $1,250 | ||
Less: capital expenditures | (150 | ) | |
Free Cash Flow | $1,000 - $1,100 |
(1) | Net cash provided by operating activities from continuing operations |
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Basic Earnings (Loss) per Share: | ||||||||||||||||
Net income (loss) from continuing operations attributable to Xerox | $ | 137 | $ | (196 | ) | $ | 361 | $ | 192 | |||||||
Accrued dividends on preferred stock | (3 | ) | (3 | ) | (14 | ) | (14 | ) | ||||||||
Adjusted net income (loss) from continuing operations available to common shareholders | 134 | (199 | ) | 347 | 178 | |||||||||||
Income from discontinued operations attributable to Xerox, net of tax | — | 6 | — | 3 | ||||||||||||
Adjusted net income (loss) available to common shareholders | $ | 134 | $ | (193 | ) | $ | 347 | $ | 181 | |||||||
Weighted average common shares outstanding | 236,190 | 254,616 | 248,707 | 254,341 | ||||||||||||
Basic Earnings (Loss) per Share: | ||||||||||||||||
Continuing operations | $ | 0.56 | $ | (0.78 | ) | $ | 1.40 | $ | 0.70 | |||||||
Discontinued operations | — | 0.02 | — | 0.01 | ||||||||||||
Basic Earnings (Loss) per Share | $ | 0.56 | $ | (0.76 | ) | $ | 1.40 | $ | 0.71 | |||||||
Diluted Earnings (Loss) per Share: | ||||||||||||||||
Net income (loss) from continuing operations attributable to Xerox | $ | 137 | $ | (196 | ) | $ | 361 | $ | 192 | |||||||
Accrued dividends on preferred stock | — | (3 | ) | (14 | ) | (14 | ) | |||||||||
Adjusted net income (loss) from continuing operations available to common shareholders | 137 | (199 | ) | 347 | 178 | |||||||||||
Income from discontinued operations attributable to Xerox, net of tax | — | 6 | — | 3 | ||||||||||||
Adjusted net income (loss) available to common shareholders | $ | 137 | $ | (193 | ) | $ | 347 | $ | 181 | |||||||
Weighted average common shares outstanding | 236,190 | 254,616 | 248,707 | 254,341 | ||||||||||||
Common shares issuable with respect to: | ||||||||||||||||
Stock Options | — | — | — | — | ||||||||||||
Restricted stock and performance shares | 3,188 | — | 2,953 | 2,229 | ||||||||||||
Convertible preferred stock | 6,742 | — | — | — | ||||||||||||
Adjusted weighted average common shares outstanding | 246,120 | 254,616 | 251,660 | 256,570 | ||||||||||||
Diluted Earnings (Loss) per Share: | ||||||||||||||||
Continuing operations | $ | 0.56 | $ | (0.78 | ) | $ | 1.38 | $ | 0.70 | |||||||
Discontinued operations | — | 0.02 | — | 0.01 | ||||||||||||
Diluted Earnings (Loss) per Share | $ | 0.56 | $ | (0.76 | ) | $ | 1.38 | $ | 0.71 | |||||||
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: | ||||||||||||||||
Stock Options | 1,022 | — | 1,022 | — | ||||||||||||
Restricted stock and performance shares | 2,833 | 5,935 | 3,068 | 3,706 | ||||||||||||
Convertible preferred stock | — | 6,742 | 6,742 | 6,742 | ||||||||||||
Total Anti-Dilutive Securities | 3,855 | 12,677 | 10,832 | 10,448 | ||||||||||||
Dividends per Common Share | $ | 0.25 | $ | 0.25 | $ | 1.00 | $ | 1.00 |
• | North America, which includes our sales channels in the U.S. and Canada. |
• | International, which includes our sales channels in Europe, Eurasia, Latin America, Middle East, Africa and India. |
• | Other, primarily includes our OEM business, as well as sales to and royalties from Fuji Xerox, and our licensing revenue. |
• | “Entry”, which includes A4 devices and desktop printers. Prices in this product group can range from approximately $150 to $3,000. |
• | “Mid-Range”, which includes A3 Office and Light Production devices that generally serve workgroup environments in mid to large enterprises. Prices in this product group can range from approximately $2,000 to $75,000+. |
• | “High-End”, which includes production printing and publishing systems that generally serve the graphic communications marketplace and large enterprises. Prices for these systems can range from approximately $30,000 to $1,000,000+. |
• | Managed Document Services (MDS) revenue, which includes solutions and services that span from managing print to automating processes to managing content. Our primary offerings within MDS are Managed Print Services (including from XBS), as well as workflow automation services, and Centralized Print Services and Solutions (CPS). MDS excludes Communication and Marketing Solutions (CMS). |
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