xrx-20210930

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: September 30, 2021


☐			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) 849-5216
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Xerox Holdings Corporation
Common Stock, $1 par value	XRX	Nasdaq Global Select Market
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 October 31, 2021
Xerox Holdings Corporation Common Stock, $1 par value						178,512,056 shares

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This document, and other written or oral statements made from time to time by management contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. The words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “will”, “should”, “targeting”, “projecting”, “driving” and similar expressions, as they relate to us, our performance and/or our technology, are intended to identify forward-looking statements. These statements reflect management’s current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially. Such factors include but are not limited to: the effects of the COVID-19 pandemic on our and our customers' businesses and the duration and extent to which this will impact our future results of operations and overall financial performance; our ability to address our business challenges in order to reverse revenue declines, reduce costs and increase productivity so that we can invest in and grow our business; our ability to attract and retain key personnel; changes in economic and political conditions, trade protection measures, licensing requirements and tax laws in the United States and in the foreign countries in which we do business; the imposition of new or incremental trade protection measures such as tariffs and import or export restrictions; changes in foreign currency exchange rates; our ability to successfully develop new products, technologies and service offerings and to protect our intellectual property rights; the risk that multi-year contracts with governmental entities could be terminated prior to the end of the contract term and that civil or criminal penalties and administrative sanctions could be imposed on us if we fail to comply with the terms of such contracts and applicable law; the risk that partners, subcontractors and software vendors will not perform in a timely, quality manner; actions of competitors and our ability to promptly and effectively react to changing technologies and customer expectations; our ability to obtain adequate pricing for our products and services and to maintain and improve cost efficiency of operations, including savings from restructuring actions; the risk that confidential and/or individually identifiable information of ours, our customers, clients and employees could be inadvertently disclosed or disclosed as a result of a breach of our security systems due to cyber attacks or other intentional acts; reliance on third parties, including subcontractors, for manufacturing of products and provision of services; the exit of the United Kingdom from the European Union; our ability to manage changes in the printing environment and expand equipment placements; interest rates, cost of borrowing and access to credit markets; funding requirements associated with our employee pension and retiree health benefit plans; the risk that our operations and products may not comply with applicable worldwide regulatory requirements, particularly environmental regulations and directives and anti-corruption laws; the outcome of litigation and regulatory proceedings to which we may be a party; any impacts resulting from the restructuring of our relationship with Fujifilm Holdings Corporation; and the shared services arrangements entered into by us as part of Project Own It. Additional risks that may affect Xerox’s operations are set forth in the “Risk Factors” section, the “Legal Proceedings” section, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other sections of this combined Quarterly Report on Form 10-Q, Xerox Holdings Corporation’s and Xerox Corporation’s combined Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021, and Xerox Holdings Corporation’s and Xerox Corporation’s combined 2020 Annual Report on Form 10-K, as well as in Xerox Holdings Corporation’s and Xerox Corporation’s Current Reports on Form 8-K filed with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this document or as of the date to which they refer, and we assume no obligation to update any forward-looking statements as a result of new information or future events or developments, except as required by law.

Throughout this combined Quarterly Report on Form 10-Q (combined Form 10-Q), references to “Xerox Holdings” refer to Xerox Holdings Corporation and its consolidated subsidiaries while references to “Xerox” refer to Xerox Corporation and its consolidated subsidiaries. References herein to “we,” “us,” “our,” the “Company” refer collectively to both Xerox Holdings and Xerox unless the context suggests otherwise. References to “Xerox Holdings Corporation” refer to the stand-alone parent company and do not include its subsidiaries. References to “Xerox Corporation” refer to the stand-alone company and do not include subsidiaries.

Xerox Holdings Corporation's primary direct operating subsidiary is Xerox and therefore Xerox reflects nearly all of Xerox Holdings' operations.

Xerox 2021 Form 10-Q 1

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. The content of our website is not incorporated by reference into this combined Form 10-Q unless expressly noted.

Xerox 2021 Form 10-Q 2

ITEM 1 — FINANCIAL STATEMENTS

XEROX HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions, except per-share data)	2021		2020		2021		2020
Revenues
Sales	$	657	$	651	$	1,929	$	1,676
Services, maintenance and rentals	1,046		1,061		3,166		3,246
Financing	55		55		166		170
Total Revenues	1,758		1,767		5,261		5,092
Costs and Expenses
Cost of sales	498		476		1,386		1,201
Cost of services, maintenance and rentals	662		611		1,971		1,875
Cost of financing	29		29		85		89
Research, development and engineering expenses	82		76		235		236
Selling, administrative and general expenses	413		444		1,295		1,411
Restructuring and related costs, net	10		20		39		64
Amortization of intangible assets	13		13		42		34
Transaction and related costs, net	—		(6)		—		18
Other expenses, net	(33)		(15)		(28)		15
Total Costs and Expenses	1,674		1,648		5,025		4,943
Income before Income Taxes and Equity Income	84		119		236		149
Income tax (benefit) expense	(4)		29		19		36
Equity in net income of unconsolidated affiliates	1		—		2		2


Net Income	89		90		219		115
Less: Net loss attributable to noncontrolling interests	(1)		—		(1)		—

Net Income Attributable to Xerox Holdings	$	90	$	90	$	220	$	115









Basic Earnings per Share	$	0.48	$	0.41	$	1.12	$	0.49





Diluted Earnings per Share	$	0.48	$	0.41	$	1.10	$	0.49

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

Xerox 2021 Form 10-Q 3

XEROX HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2021		2020		2021		2020
Net Income	$	89	$	90	$	219	$	115
Less: Net loss attributable to noncontrolling interests	(1)		—		(1)		—

Net Income Attributable to Xerox Holdings	90		90		220		115

Other Comprehensive (Loss) Income, Net(1)
Translation adjustments, net	(125)		179		(122)		7
Unrealized gains (losses), net	4		1		(3)		4
Changes in defined benefit plans, net	51		(92)		122		42


Other Comprehensive (Loss) Income, Net Attributable to Xerox Holdings	(70)		88		(3)		53

Comprehensive Income, Net	19		178		216		168
Less: Comprehensive loss, net attributable to noncontrolling interests	(1)		—		(1)		—

Comprehensive Income, Net Attributable to Xerox Holdings	$	20	$	178	$	217	$	168

(1) Refer to Note 18 - Other Comprehensive (Loss) Income for gross components of Other comprehensive (loss) income, net, 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 2021 Form 10-Q 4

XEROX HOLDINGS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


(in millions, except share data in thousands)	September 30, 2021		December 31, 2020
Assets
Cash and cash equivalents	$	2,209	$	2,625
Accounts receivable (net of allowance of $62 and $69, respectively)	891		883
Billed portion of finance receivables (net of allowance of $4 and $4, respectively)	100		99
Finance receivables, net	1,039		1,082
Inventories	788		843

Other current assets	209		251
Total current assets	5,236		5,783
Finance receivables due after one year (net of allowance of $123 and $129, respectively)	1,936		1,984
Equipment on operating leases, net	254		296
Land, buildings and equipment, net	370		407

Intangible assets, net	216		237
Goodwill	4,066		4,071
Deferred tax assets	511		508
Other long-term assets	1,492		1,455
Total Assets	$	14,081	$	14,741
Liabilities and Equity
Short-term debt and current portion of long-term debt	$	646	$	394
Accounts payable	1,032		983
Accrued compensation and benefits costs	262		261


Accrued expenses and other current liabilities	844		840
Total current liabilities	2,784		2,478
Long-term debt	3,673		4,050
Pension and other benefit liabilities	1,381		1,566
Post-retirement medical benefits	333		340
Other long-term liabilities	491		497
Total Liabilities	8,662		8,931

Commitments and Contingencies (See Note 20)

Noncontrolling Interests (See Note 5)	10		—

Convertible Preferred Stock	214		214

Common stock	182		198

Additional paid-in capital	2,080		2,445
Treasury stock, at cost	(87)		—
Retained earnings	6,348		6,281
Accumulated other comprehensive loss	(3,335)		(3,332)
Xerox Holdings shareholders’ equity	5,188		5,592
Noncontrolling interests	7		4
Total Equity	5,195		5,596
Total Liabilities and Equity	$	14,081	$	14,741

Shares of common stock issued	182,217		198,386
Treasury stock	(3,731)		—
Shares of Common Stock Outstanding	178,486		198,386

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

Xerox 2021 Form 10-Q 5

XEROX HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2021		2020		2021		2020
Cash Flows from Operating Activities
Net Income	$	89	$	90	$	219	$	115


Adjustments required to reconcile Net income to Cash flows from operating activities
Depreciation and amortization	79		90		249		272
Provisions	4		23		38		124

Net gain on sales of businesses and assets	(39)		(28)		(40)		(29)

Stock-based compensation	14		8		44		32
Restructuring and asset impairment charges	3		20		28		47
Payments for restructurings	(12)		(11)		(61)		(63)
Defined benefit pension cost	(3)		9		(5)		46
Contributions to defined benefit pension plans	(33)		(33)		(102)		(97)
(Increase) decrease in accounts receivable and billed portion of finance receivables	(67)		(96)		(30)		332
Decrease (increase) in inventories	6		(49)		10		(274)
Increase in equipment on operating leases	(29)		(31)		(92)		(86)
Decrease in finance receivables	21		31		33		221
(Increase) decrease in other current and long-term assets	(2)		17		64		2
Increase (decrease) in accounts payable	107		90		74		(69)
Decrease in accrued compensation	(21)		(20)		(56)		(149)
(Decrease) increase in other current and long-term liabilities	(12)		(16)		80		(146)
Net change in income tax assets and liabilities	(13)		10		(11)		13
Net change in derivative assets and liabilities	1		1		(1)		(1)
Other operating, net	7		1		(10)		23


Net cash provided by operating activities	100		106		431		313
Cash Flows from Investing Activities
Cost of additions to land, buildings, equipment and software	(19)		(18)		(52)		(60)
Proceeds from sales of businesses and assets	38		27		39		29


Acquisitions, net of cash acquired	(1)		—		(38)		(193)


Other investing, net	—		—		(3)		1


Net cash provided by (used in) investing activities	18		9		(54)		(223)
Cash Flows from Financing Activities
Net proceeds from short-term debt	1		1		1		1
Proceeds from issuance of long-term debt	311		1,849		311		1,854
Payments on long-term debt	(236)		(773)		(445)		(1,086)
Dividends	(49)		(61)		(157)		(176)



Payments to acquire treasury stock, including fees	(87)		(150)		(500)		(150)



Other financing, net	14		(10)		(3)		(19)
Net cash (used in) provided by financing activities	(46)		856		(793)		424
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(13)		12		(13)		(12)

Increase (decrease) in cash, cash equivalents and restricted cash	59		983		(429)		502
Cash, cash equivalents and restricted cash at beginning of period	2,203		2,314		2,691		2,795
Cash, Cash Equivalents and Restricted Cash at End of Period	$	2,262	$	3,297	$	2,262	$	3,297

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

Xerox 2021 Form 10-Q 6

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2021		2020		2021		2020
Revenues
Sales	$	657	$	651	$	1,929	$	1,676
Services, maintenance and rentals	1,046		1,061		3,166		3,246
Financing	55		55		166		170
Total Revenues	1,758		1,767		5,261		5,092
Costs and Expenses
Cost of sales	498		476		1,386		1,201
Cost of services, maintenance and rentals	662		611		1,971		1,875
Cost of financing	29		29		85		89
Research, development and engineering expenses	82		76		235		236
Selling, administrative and general expenses	413		444		1,295		1,411
Restructuring and related costs, net	10		20		39		64
Amortization of intangible assets	13		13		42		34
Transaction and related costs, net	—		(6)		—		18
Other expenses, net	(33)		(15)		(28)		15
Total Costs and Expenses	1,674		1,648		5,025		4,943
Income before Income Taxes and Equity Income	84		119		236		149
Income (benefit) tax expense	(4)		29		19		36
Equity in net income of unconsolidated affiliates	1		—		2		2


Net Income	89		90		219		115
Less: Net loss attributable to noncontrolling interests	(1)		—		(1)		—

Net Income Attributable to Xerox	$	90	$	90	$	220	$	115

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

Xerox 2021 Form 10-Q 7

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2021		2020		2021		2020
Net Income	$	89	$	90	$	219	$	115
Less: Net loss attributable to noncontrolling interests	(1)		—		(1)		—

Net Income Attributable to Xerox	90		90		220		115

Other Comprehensive (Loss) Income, Net(1)
Translation adjustments, net	(125)		179		(122)		7
Unrealized gains (losses), net	4		1		(3)		4
Changes in defined benefit plans, net	51		(92)		122		42


Other Comprehensive (Loss) Income, Net Attributable to Xerox	(70)		88		(3)		53

Comprehensive Income, Net	19		178		216		168
Less: Comprehensive loss, net attributable to noncontrolling interests	(1)		—		(1)		—

Comprehensive Income, Net Attributable to Xerox	$	20	$	178	$	217	$	168

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

Xerox 2021 Form 10-Q 8

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


(in millions)	September 30, 2021		December 31, 2020
Assets
Cash and cash equivalents	$	2,209	$	2,625
Accounts receivable (net of allowance of $62 and $69, respectively)	891		883
Billed portion of finance receivables (net of allowance of $4 and $4, respectively)	100		99
Finance receivables, net	1,039		1,082
Inventories	788		843

Other current assets	209		251
Total current assets	5,236		5,783
Finance receivables due after one year (net of allowance of $123 and $129, respectively)	1,936		1,984
Equipment on operating leases, net	254		296
Land, buildings and equipment, net	370		407

Intangible assets, net	216		237
Goodwill	4,066		4,071
Deferred tax assets	511		508
Other long-term assets	1,489		1,455
Total Assets	$	14,078	$	14,741
Liabilities and Equity
Short-term debt and current portion of long-term debt	$	646	$	394
Accounts payable	1,032		983
Accrued compensation and benefits costs	262


		Page
Part I — Financial Information
Item 1.	Financial Statements (Unaudited)	3
	Xerox Holdings Corporation Condensed Consolidated Statements of Income	3
	Xerox Holdings Corporation Condensed Consolidated Statements of Comprehensive Income	4
	Xerox Holdings Corporation Condensed Consolidated Balance Sheets	5
	Xerox Holdings Corporation Condensed Consolidated Statements of Cash Flows	6
	Xerox Corporation Condensed Consolidated Statements of Income	7
	Xerox Corporation Condensed Consolidated Statements of Comprehensive Income	8
	Xerox Corporation Condensed Consolidated Balance Sheets	9
	Xerox Corporation Condensed Consolidated Statements of Cash Flows	10
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
	Capital Resources and Liquidity	56
	Financial Risk Management	61
	Non-GAAP Financial Measures	62
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	65
Item 4.	Controls and Procedures	65
Part II — Other Information
Item 1.	Legal Proceedings	66
Item 1A.	Risk Factors	66
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 3.	Defaults Upon Senior Securities	68
Item 4.	Mine Safety Disclosures	68
Item 5.	Other Information	68
Item 6.	Exhibits	68
Signatures		69
Exhibit Index		70