Document

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

XEROX HOLDINGS CORPORATION

XEROX CORPORATION

(Exact Name of Registrant as specified in its charter)



New York	001-39013	83-3933743
New York	001-04471	16-0468020
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(IRS Employer Identification No.)

	P.O. Box 4505, 201 Merritt 7 Norwalk, Connecticut 06851-1056
	(Address of principal executive offices)

(203) 968-3000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $1 par value	XRX	New York Stock Exchange
Title of each class	Trading Symbol	Name of each exchange on which registered

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Xerox Holdings Corporation Yes ☒ No ☐ Xerox Corporation Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Xerox Holdings Corporation Yes ☒ No ☐ Xerox Corporation Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Xerox Holdings Corporation		Xerox Corporation
Large accelerated filer	☒	Large accelerated filer	☒
Accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Smaller reporting company	☐
Emerging growth company	☐	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.

Xerox Holdings Corporation o Xerox Corporation o

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Xerox Holdings Corporation Yes ☐ No ☒ Xerox Corporation Yes ☐ No ☒



Class		Outstanding at July 31, 2019
Xerox Holdings Corporation Common Stock, $1 par value		221,283,933 shares

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and any exhibits to this Report 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: our ability to address our business challenges in order to reverse revenue declines, reduce costs and increase productivity so that we can invest in and grow our business; our ability to attract and retain key personnel; changes in economic and political conditions, trade protection measures, licensing requirements and tax laws in the United States and in the foreign countries in which we do business; the imposition of new or incremental trade protection measures such as tariffs and import or export restrictions; changes in foreign currency exchange rates; our ability to successfully develop new products, technologies and service offerings and to protect our intellectual property rights; the risk that multi-year contracts with governmental entities could be terminated prior to the end of the contract term and that civil or criminal penalties and administrative sanctions could be imposed on us if we fail to comply with the terms of such contracts and applicable law; the risk that partners, subcontractors and software vendors will not perform in a timely, quality manner; actions of competitors and our ability to promptly and effectively react to changing technologies and customer expectations; our ability to obtain adequate pricing for our products and services and to maintain and improve cost efficiency of operations, including savings from restructuring actions; the risk that confidential and/or individually identifiable information of ours, our customers, clients and employees could be inadvertently disclosed or disclosed as a result of a breach of our security systems due to cyber attacks or other intentional acts; reliance on third parties, including subcontractors, for manufacturing of products and provision of services; the exit of the United Kingdom from the European Union; our ability to manage changes in the printing environment and expand equipment placements; interest rates, cost of borrowing and access to credit markets; funding requirements associated with our employee pension and retiree health benefit plans; the risk that our operations and products may not comply with applicable worldwide regulatory requirements, particularly environmental regulations and directives and anti-corruption laws; the outcome of litigation and regulatory proceedings to which we may be a party; any potential termination or restructuring of our relationship with Fujifilm Holdings Corporation; the shared services arrangements entered into by us as part of Project Own It; any potential strategic transaction involving our customer financing business and/or related assets; and other factors that are set forth in the “Risk Factors” section, the “Legal Proceedings” section, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other sections of this Quarterly Report on Form 10-Q, Xerox Corporation's quarterly report on Form 10-Q for the quarter ended March 31, 2019 and Xerox Corporation's 2018 Annual Report on Form 10-K, as well as our Current Reports on Form 8-K filed with the Securities and Exchange Commission (SEC). These forward-looking statements speak only as of the date of this report 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.

Xerox 2019 Form 10-Q

XEROX HOLDINGS CORPORATION

For additional information about Xerox Holdings Corporation and Xerox Corporation and access to our Annual Reports to Shareholders and SEC filings, free of charge, please visit our website at www.xerox.com/investor. Any information on or linked from the website is not incorporated by reference into this Form 10-Q.

Xerox 2019 Form 10-Q

ITEM 1 — FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)



	Three Months Ended June 30,				Six Months Ended June 30,
(in millions, except per-share data)	2019		2018		2019		2018
Revenues
Sales⁽¹⁾	$	825	$	927	$	1,575	$	1,772
Services, maintenance and rentals⁽¹⁾	1,403		1,515		2,796		3,034
Financing	61		68		124		139
Total Revenues	2,289		2,510		4,495		4,945
Costs and Expenses
Cost of sales⁽¹⁾	552		593		1,016		1,125
Cost of services, maintenance and rentals⁽¹⁾	807		883		1,628		1,782
Cost of financing	33		33		65		67
Research, development and engineering expenses	88		101		180		201
Selling, administrative and general expenses	519		624		1,067		1,252
Restructuring and related costs	37		34		149		62
Amortization of intangible assets	11		12		26		24
Transaction and related costs, net	4		58		4		96
Other expenses, net	38		39		77		69
Total Costs and Expenses	2,089		2,377		4,212		4,678
Income before Income Taxes and Equity Income	200		133		283		267
Income tax expense	50		38		42		78
Equity in net income (loss) of unconsolidated affiliates	34		19		79		(49		)
Net Income	184		114		320		140
Less: Net income attributable to noncontrolling interests	3		2		6		5
Net Income Attributable to Xerox	$	181	$	112	$	314	$	135

Basic Earnings per Share	$	0.79	$	0.42	$	1.36	$	0.50
Diluted Earnings per Share	$	0.77	$	0.42	$	1.32	$	0.50

Certain prior year amounts have been conformed to the current year presentation. Refer to Note 1 - Basis of Presentation for additional information.

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

Xerox 2019 Form 10-Q

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)



	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2019			2018			2019		2018
Net Income	$	184		$	114		$	320	$	140
Less: Net income attributable to noncontrolling interests	3			2			6		5
Net Income Attributable to Xerox	181			112			314		135

Other Comprehensive (Loss) Income, Net⁽¹⁾
Translation adjustments, net	(4		)	(322		)	33		(146		)
Unrealized (losses) gains, net	—			(3		)	2		14
Changes in defined benefit plans, net	9			90			10		108
Other Comprehensive Income (Loss), Net Attributable to Xerox	5			(235		)	45		(24		)

Comprehensive Income (Loss), Net	189			(121		)	365		116
Less: Comprehensive income, net attributable to noncontrolling interests	3			2			6		5
Comprehensive Income (Loss), Net Attributable to Xerox	$	186		$	(123	)	$	359	$	111

__________________________

(1) Refer to Note 19 - Other Comprehensive Income (Loss) for gross components of Other Comprehensive Income (Loss), reclassification adjustments out of Accumulated Other Comprehensive Loss and related tax effects.

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

Xerox 2019 Form 10-Q

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)



(in millions, except share data in thousands)	June 30, 2019			December 31, 2018
Assets
Cash and cash equivalents	$	712		$	1,084
Accounts receivable, net	1,256			1,276
Billed portion of finance receivables, net	108			105
Finance receivables, net	1,177			1,218
Inventories	788			818
Other current assets	196			194
Total current assets	4,237			4,695
Finance receivables due after one year, net	2,064			2,149
Equipment on operating leases, net	399			442
Land, buildings and equipment, net	455			499
Investments in affiliates, at equity	1,472			1,403
Intangible assets, net	212			220
Goodwill	3,887			3,867
Deferred tax assets	739			740
Other long-term assets	1,219			859
Total Assets	$	14,684		$	14,874
Liabilities and Equity
Short-term debt and current portion of long-term debt	$	866		$	961
Accounts payable	1,052			1,091
Accrued compensation and benefits costs	312			349
Accrued expenses and other current liabilities	946			850
Total current liabilities	3,176			3,251
Long-term debt	3,962			4,269
Pension and other benefit liabilities	1,502			1,482
Post-retirement medical benefits	348			350
Other long-term liabilities	490			269
Total Liabilities	9,478			9,621

Commitments and Contingencies (See Note 21)
Convertible Preferred Stock	214			214

Common stock	225			232
Additional paid-in capital	3,124			3,321
Treasury stock, at cost	(131		)	(55		)
Retained earnings	5,391			5,072
Accumulated other comprehensive loss	(3,647		)	(3,565		)
Xerox shareholders’ equity	4,962			5,005
Noncontrolling interests	30			34
Total Equity	4,992			5,039
Total Liabilities and Equity	$	14,684		$	14,874

Shares of common stock issued	224,752			231,690
Treasury stock	(3,965		)	(2,067		)
Shares of Common Stock Outstanding	220,787			229,623

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

Xerox 2019 Form 10-Q

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



	Three Months Ended June 30,					Six Months Ended June 30,
(in millions)	2019		2018			2019			2018
Cash Flows from Operating Activities
Net income	$	184	$	114		$	320		$	140
Adjustments required to reconcile Net income to Cash flows from operating activities
Depreciation and amortization	110		138			228			276
Provisions	20		23			42			40
Net gain on sales of businesses and assets	—		(16		)	(1		)	(32		)
Undistributed equity in net income of unconsolidated affiliates	(



		Page
Part I — Financial Information
Item 1.	Financial Statements (Unaudited)	3
	Xerox Corporation Condensed Consolidated Statements of Income	3
	Xerox Corporation Condensed Consolidated Statements of Comprehensive Income	4
	Xerox Corporation Condensed Consolidated Balance Sheets	5
	Xerox Corporation Condensed Consolidated Statements of Cash Flows	6
	Xerox Holdings Corporation Condensed Balance Sheet	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
	Capital Resources and Liquidity	53
	Financial Risk Management	56
	Non-GAAP Financial Measures	57
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	60
Item 4.	Controls and Procedures	60
Part II — Other Information
Item 1.	Legal Proceedings	61
Item 1A.	Risk Factors	61
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
Item 3.	Defaults Upon Senior Securities	62
Item 4.	Mine Safety Disclosures	62
Item 5.	Other Information	62
Item 6.	Exhibits	63
Signatures		65
Exhibit Index		66