EX-99.2 3 d779159dex992.htm EX-99.2 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

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