[August 01, 2017] |
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Xerox Reports Second-Quarter 2017 Earnings
Xerox
(NYSE: XRX) today announced its second-quarter 2017 financial results.
"We are pleased with the strong operating margins and cash flow we
delivered, as well as the continued progress on our Strategic
Transformation initiatives," said Jeff
Jacobson, Xerox chief executive officer. "This resulted in solid
operating results despite revenue declines, which were driven by lower
equipment sales as we transition to the recently launched ConnectKey
portfolio." Jacobson added, "The new product line-up has been met with
enthusiasm by customers, partners and industry experts, fueling our
confidence in improving revenue trends later this year and into next."
The company delivered second-quarter 2017 GAAP earnings per share (EPS)
from continuing operations of 63 cents, reflecting its one-for-four
reverse stock split on June 14, 2017. Adjusted EPS was 87 cents, which
excludes 24 cents per share of after-tax costs related to the
amortization of intangibles, restructuring and related costs, and
certain retirement related costs.
Revenues were $2.57 billion in the quarter, down 8.1 percent or 6.4
percent in constant currency. Post sale revenue was 79 percent of total
revenue.
Second-quarter adjusted operating margin was 13.3 percent, up 0.4
percentage points from the same quarter a year ago.
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EPS from continuing operations
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Gross Margin
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SAG as % of Revenue
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Tax Rate
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GAAP
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Better/(Worse)
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$0.63
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40.2%
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25.0%
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22.3%
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Year-over-Year
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($0.12)
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0.4 pts
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(0.3) pts
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(12.9) pts
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Adjusted
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Better/(Worse)
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$0.87
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40.7%
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24.3%
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27.0%
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Year-over-Year
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($0.11)
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0.5 pts
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(0.1) pts
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(8.5) pts
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Xerox generated operating cash flow of $343 million from continuing
operations during the second quarter and ended the period with a cash
balance of $1.25 billion. The company returned $68 million in dividends
to shareholders.
Full-Year 2017 Guidance The company narrowed its full-year
2017 guidance of GAAP EPS from continuing operations to $1.84 to $2.08
and adjusted EPS to $3.20 to $3.44.
Xerox continues to expect to generate operating cash flow from
continuing operations of $700 to $900 million and free cash flow from
continuing operations of $525 to $725 million in 2017.
Fuji Xerox Accounting Review Fuji Xerox is a joint venture
between Xerox Corporation and Fujifilm Holdings Corporation, in which
Xerox holds a noncontrolling 25% equity interest. During the second
quarter, a review by an independent investigation committee of the
appropriateness of the accounting practices at Fuji Xerox related to the
recovery of receivables associated with certain bundled leasing
transactions in Fuji Xerox's New Zealand and Australian subsidiaries was
completed. The review identified that total adjustments of approximately
JPY 40 billion (approximately $360 million based on the Yen/U.S. Dollar
spot exchange rate of 111.89 at March 31, 2017) were required to Fuji
Xerox's results for the period 2009 through 2017. Xerox determined that
its share of that amount was approximately $90 million. Although Xerox
determined that the impact to its equity income was immaterial to its
previously issued financial statements, the cumulative correction would
have a material effect on the company's current year consolidated
financial statements. Accordingly, Xerox will revise its previously
issued annual and interim consolidated financial statements for 2014,
2015 and 2016 and the first quarter of 2017 the next time they are
filed. Prior period amounts throughout this release have been adjusted
to incorporate the revised amounts, where applicable.
About Xerox Xerox Corporation is an $11 billion technology
leader that innovates the way the world communicates, connects and
works. Our expertise is more important than ever as customers of all
sizes look to improve productivity, maximize profitability and increase
satisfaction. We do this for small
and mid-size businesses, large
enterprises, governments, graphic communications providers, and for
our partners who serve them.
We understand what's at the heart of work - and all of the forms it can
take. We embrace the increasingly complex world of paper and digital. Office
and mobile. Personal and social. Every day across the globe - in more
than 160 countries - our technology,
software and people successfully navigate those intersections. We
automate, personalize, package, analyze and secure information to keep
our customers moving at an accelerated pace. For more information visit www.xerox.com.
Non-GAAP Measures: This release refers to the following
non-GAAP financial measures:
-
Adjusted EPS, for the second quarter 2017 as well as for the full-year
2017 guidance, which excludes the amortization of intangibles,
restructuring and related costs, certain retirement related costs and
other discrete adjustments.
-
Adjusted operating margin, for the second quarter 2017, which excludes
other expenses, net in addition to the EPS adjustments noted above and
includes equity income.
-
Adjusted Gross Margin and SAG (Selling, Administrative and General) as
a percent of Revenue for the second quarter 2017, which excludes
certain retirement related costs.
-
Constant currency revenue growth for the second quarter 2017, which
excludes the effects of currency translation.
-
Free cash flow for the full-year 2017 guidance, which is operating
cash flow from continuing operations less capital expenditures
including internal use software.
Refer to the "Non-GAAP Financial Measures" section of this release for a
discussion of these non-GAAP measures and their reconciliation to the
reported GAAP measure.
Forward-Looking Statements This release contains
"forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995. The words "anticipate", "believe",
"estimate", "expect", "intend", "will", "should" and similar
expressions, as they relate to us, 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; changes in economic conditions, political conditions, trade
protection measures, licensing requirements and tax laws in the United
States and in the foreign countries in which we do business; 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 individually identifiable
information of customers, clients and employees could be inadvertently
disclosed or disclosed as a result of a breach of our security systems;
reliance on third parties, including subcontractors, for manufacturing
of products and provision of services; our ability to manage changes in
the printing environment and markets 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; the risk that we do not realize all of the expected strategic and
financial benefits from the separation and spin-off of our Business
Process Outsourcing business; 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 our 2016 Annual Report on
Form 10-K, as well as in our Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K filed with the Securities and Exchange Commission
("SEC"). 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.
Fuji Xerox Co., Ltd. ("Fuji Xerox") is a joint venture between Xerox
Corporation and Fujifilm Holdings Corporation ("Fujifilm") in which
Xerox holds a noncontrolling 25% equity interest and Fujifilm holds the
remaining equity interest. Given our status as a minority investor, we
have limited contractual and other rights to information with respect to
Fuji Xerox matters. On April 20, 2017, Fujifilm publicly announced it
had formed an independent investigation committee (IIC) to conduct a
review of the appropriateness of the accounting practices at Fuji
Xerox's New Zealand subsidiary. Fujifilm publicly announced that the IIC
completed its review during the second quarter 2017 and identified
additional adjustments from the amount initially disclosed by Fujifilm
bringing the total aggregate adjustments to approximately JPY 40 billion
(approximately $360 million based on the Yen/U.S. Dollar spot exchange
rate at March 31, 2017 of 111.89). The increase in adjustments related
to subsequent findings by the IIC in their investigation primarily
related to misstatements at Fuji Xerox's Australian subsidiary, as well
as certain other adjustments. We determined that our cumulative share of
the revised amount of total adjustments identified as part of the
investigation was approximately $90 million and impacted our fiscal
years 2009 through 2017. Based on our procedures, as well as those
performed by Fuji Xerox and Fujifilm, we concluded that the cumulative
correction of the misstatements in our historical financial statements
would have had a material effect on our current year consolidated
financial statements. Accordingly, we concluded that we should revise
our previously issued annual and interim consolidated financial
statements for 2014, 2015 and 2016 and the first quarter of 2017 the
next time they are filed. The Fujifilm audited financial statements were
issued in Japan on July 31, 2017, and our review of this matter is
substantially completed. Although we are not aware of any issues that
will cause further adjustments to our financial statements, Xerox
continues to finalize its review of this matter and additional issues
may be identified that may require adjustments to the amount and timing
of charges that we have already recognized as part of our revision. In
addition, we can provide no assurances relative to the outcome of any
potential governmental investigations or any consequences thereof.
Note: To receive RSS news feeds, visit https://www.news.xerox.com.
For open commentary, industry perspectives and views visit http://twitter.com/xerox,
http://www.linkedin.com/company/xerox,
http://connect.blogs.xerox.com,
http://www.facebook.com/XeroxCorp,
http://www.youtube.com/XeroxCorp.
Xerox® and Xerox and Design® are trademarks of
Xerox in the United States and/or other countries.
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Xerox Corporation
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Condensed Consolidated Statements of Income (Unaudited)
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Three Months Ended June 30,
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Six Months Ended June 30,
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(in millions, except per-share data)
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2017
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2016
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2017
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2016
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Revenues
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Sales
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$
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1,010
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$
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1,126
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$
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1,946
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$
|
2,129
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Services, maintenance and rentals
|
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|
1,483
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|
1,585
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|
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|
2,925
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|
3,114
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Financing
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|
74
|
|
|
|
82
|
|
|
|
150
|
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165
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Total Revenues
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2,567
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|
2,793
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|
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|
5,021
|
|
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|
5,408
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|
Costs and Expenses
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Cost of sales
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619
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696
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1,186
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|
1,310
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|
Cost of services, maintenance and rentals
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884
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|
953
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1,784
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|
1,903
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Cost of financing
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33
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|
32
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66
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65
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Research, development and engineering expenses
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106
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119
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224
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245
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Selling, administrative and general expenses
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|
643
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|
691
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|
1,307
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|
|
|
1,392
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Restructuring and related costs
|
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|
40
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|
|
|
47
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|
|
160
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147
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Amortization of intangible assets
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|
15
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|
16
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29
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|
30
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Other expenses, net
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|
34
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|
48
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88
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93
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Total Costs and Expenses
|
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|
2,374
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|
|
|
2,602
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|
4,844
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5,185
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Income before Income Taxes & Equity Income(1)
|
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|
|
193
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|
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|
191
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177
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223
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Income tax expense
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|
43
|
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18
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|
19
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16
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Equity in net income of unconsolidated affiliates
|
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|
|
20
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26
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|
|
|
60
|
|
|
|
60
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|
Income from Continuing Operations
|
|
|
|
170
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|
|
|
199
|
|
|
|
218
|
|
|
|
267
|
|
Loss from discontinued operations, net of tax
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|
-
|
|
|
|
(38
|
)
|
|
|
(6
|
)
|
|
|
(73
|
)
|
Net Income
|
|
|
|
170
|
|
|
|
161
|
|
|
|
212
|
|
|
|
194
|
|
Less: Net income attributable to noncontrolling interests
|
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|
|
4
|
|
|
|
3
|
|
|
|
6
|
|
|
|
5
|
|
Net Income Attributable to Xerox
|
|
|
|
$
|
166
|
|
|
|
$
|
158
|
|
|
|
$
|
206
|
|
|
|
$
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Attributable to Xerox:
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|
|
|
|
|
|
|
|
|
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|
|
Net income from continuing operations
|
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|
|
$
|
166
|
|
|
|
$
|
196
|
|
|
|
$
|
212
|
|
|
|
$
|
262
|
|
Loss from discontinued operations, net of tax
|
|
|
|
-
|
|
|
|
(38
|
)
|
|
|
(6
|
)
|
|
|
(73
|
)
|
Net Income Attributable to Xerox
|
|
|
|
$
|
166
|
|
|
|
$
|
158
|
|
|
|
$
|
206
|
|
|
|
$
|
189
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|
|
|
|
|
|
|
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|
|
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Basic Earnings (Loss) per Share(2):
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|
|
|
|
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|
|
|
|
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Continuing operations
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|
$
|
0.64
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|
|
|
$
|
0.75
|
|
|
|
$
|
0.81
|
|
|
|
$
|
0.99
|
|
Discontinued operations
|
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|
|
-
|
|
|
|
(0.15
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)
|
|
|
(0.03
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)
|
|
|
(0.29
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)
|
Total Basic Earnings per Share
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|
|
|
$
|
0.64
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|
|
|
$
|
0.60
|
|
|
|
$
|
0.78
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|
|
|
$
|
0.70
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|
Diluted Earnings (Loss) per Share(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
$
|
0.63
|
|
|
|
$
|
0.75
|
|
|
|
$
|
0.80
|
|
|
|
$
|
0.98
|
|
Discontinued operations
|
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|
|
-
|
|
|
|
(0.15
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)
|
|
|
(0.02
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)
|
|
|
(0.28
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)
|
Total Diluted Earnings per Share
|
|
|
|
$
|
0.63
|
|
|
|
$
|
0.60
|
|
|
|
$
|
0.78
|
|
|
|
$
|
0.70
|
|
|
|
|
|
|
|
|
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|
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____________________________ (1) Referred to
as "Pre-Tax Income" throughout the remainder of this document. (2)
Reflects our one-for-four reverse stock split that became
effective on June 14, 2017. See "Financial Review" section.
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|
Xerox Corporation
|
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
(in millions)
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
Net income
|
|
|
|
$
|
170
|
|
|
|
$
|
161
|
|
|
|
$
|
212
|
|
|
|
$
|
194
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
|
4
|
|
|
|
3
|
|
|
|
6
|
|
|
|
5
|
|
Net Income Attributable to Xerox
|
|
|
|
166
|
|
|
|
158
|
|
|
|
206
|
|
|
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss), Net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustments, net
|
|
|
|
204
|
|
|
|
(82
|
)
|
|
|
337
|
|
|
|
107
|
|
Unrealized (losses) gains, net
|
|
|
|
(14
|
)
|
|
|
24
|
|
|
|
(6
|
)
|
|
|
33
|
|
Changes in defined benefit plans, net
|
|
|
|
(29
|
)
|
|
|
20
|
|
|
|
(3
|
)
|
|
|
(92
|
)
|
Other Comprehensive Income (Loss), Net
|
|
|
|
161
|
|
|
|
(38
|
)
|
|
|
328
|
|
|
|
48
|
|
Less: Other comprehensive (loss) income, net attributable to
noncontrolling interests
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
(1
|
)
|
Other Comprehensive Income (Loss), Net Attributable to Xerox
|
|
|
|
161
|
|
|
|
(37
|
)
|
|
|
327
|
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income, Net
|
|
|
|
331
|
|
|
|
123
|
|
|
|
540
|
|
|
|
242
|
|
Less: Comprehensive income, net attributable to noncontrolling
interests
|
|
|
|
4
|
|
|
|
2
|
|
|
|
7
|
|
|
|
4
|
|
Comprehensive Income, Net Attributable to Xerox
|
|
|
|
$
|
327
|
|
|
|
$
|
121
|
|
|
|
$
|
533
|
|
|
|
$
|
238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Xerox Corporation
|
Condensed Consolidated Balance Sheets (Unaudited)
|
|
|
|
|
|
|
|
|
(in millions, except share data in thousands)
|
|
|
|
June 30, 2017
|
|
|
December 31, 2016
|
Assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
1,246
|
|
|
|
$
|
2,223
|
|
Accounts receivable, net
|
|
|
|
1,037
|
|
|
|
961
|
|
Billed portion of finance receivables, net
|
|
|
|
84
|
|
|
|
90
|
|
Finance receivables, net
|
|
|
|
1,278
|
|
|
|
1,256
|
|
Inventories
|
|
|
|
944
|
|
|
|
841
|
|
Assets of discontinued operations
|
|
|
|
-
|
|
|
|
1,002
|
|
Other current assets
|
|
|
|
389
|
|
|
|
619
|
|
Total current assets
|
|
|
|
4,978
|
|
|
|
6,992
|
|
Finance receivables due after one year, net
|
|
|
|
2,341
|
|
|
|
2,398
|
|
Equipment on operating leases, net
|
|
|
|
464
|
|
|
|
475
|
|
Land, buildings and equipment, net
|
|
|
|
636
|
|
|
|
660
|
|
Investments in affiliates, at equity
|
|
|
|
1,398
|
|
|
|
1,294
|
|
Intangible assets, net
|
|
|
|
286
|
|
|
|
290
|
|
Goodwill
|
|
|
|
3,893
|
|
|
|
3,787
|
|
Deferred tax assets, long-term
|
|
|
|
1,481
|
|
|
|
1,472
|
|
Other long-term assets
|
|
|
|
690
|
|
|
|
683
|
|
Total Assets
|
|
|
|
$
|
16,167
|
|
|
|
$
|
18,051
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
Short-term debt and current portion of long-term debt
|
|
|
|
$
|
765
|
|
|
|
$
|
1,011
|
|
Accounts payable
|
|
|
|
1,202
|
|
|
|
1,126
|
|
Accrued compensation and benefits costs
|
|
|
|
373
|
|
|
|
420
|
|
Unearned income
|
|
|
|
191
|
|
|
|
187
|
|
Liabilities of discontinued operations
|
|
|
|
-
|
|
|
|
1,002
|
|
Other current liabilities
|
|
|
|
883
|
|
|
|
908
|
|
Total current liabilities
|
|
|
|
3,414
|
|
|
|
4,654
|
|
Long-term debt
|
|
|
|
4,236
|
|
|
|
5,305
|
|
Pension and other benefit liabilities
|
|
|
|
2,281
|
|
|
|
2,240
|
|
Post-retirement medical benefits
|
|
|
|
676
|
|
|
|
698
|
|
Other long-term liabilities
|
|
|
|
188
|
|
|
|
193
|
|
Total Liabilities
|
|
|
|
10,795
|
|
|
|
13,090
|
|
|
|
|
|
|
|
|
|
Convertible Preferred Stock
|
|
|
|
214
|
|
|
|
214
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
|
254
|
|
|
|
254
|
|
Additional paid-in capital
|
|
|
|
3,875
|
|
|
|
3,858
|
|
Retained earnings
|
|
|
|
5,004
|
|
|
|
4,934
|
|
Accumulated other comprehensive loss
|
|
|
|
(4,010
|
)
|
|
|
(4,337
|
)
|
Xerox shareholders' equity
|
|
|
|
5,123
|
|
|
|
4,709
|
|
Noncontrolling interests
|
|
|
|
35
|
|
|
|
38
|
|
Total Equity
|
|
|
|
5,158
|
|
|
|
4,747
|
|
Total Liabilities and Equity
|
|
|
|
$
|
16,167
|
|
|
|
$
|
18,051
|
|
|
|
|
|
|
|
|
|
Shares of common stock issued and outstanding
|
|
|
|
254,170
|
|
|
|
253,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Xerox Corporation
|
Condensed Consolidated Statements of Cash Flows (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
(in millions)
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
170
|
|
|
|
$
|
161
|
|
|
|
$
|
212
|
|
|
|
$
|
194
|
|
Loss from discontinued operations, net of tax
|
|
|
|
-
|
|
|
|
38
|
|
|
|
6
|
|
|
|
73
|
|
Income from continuing operations
|
|
|
|
170
|
|
|
|
199
|
|
|
|
218
|
|
|
|
267
|
|
Adjustments required to reconcile net income to cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
135
|
|
|
|
144
|
|
|
|
268
|
|
|
|
286
|
|
Provision for receivables
|
|
|
|
10
|
|
|
|
11
|
|
|
|
23
|
|
|
|
24
|
|
Provision for inventory
|
|
|
|
7
|
|
|
|
6
|
|
|
|
12
|
|
|
|
15
|
|
Net (gain) loss on sales of businesses and assets
|
|
|
|
(1
|
)
|
|
|
3
|
|
|
|
(1
|
)
|
|
|
(17
|
)
|
Undistributed equity in net income of unconsolidated affiliates
|
|
|
|
10
|
|
|
|
5
|
|
|
|
(30
|
)
|
|
|
(29
|
)
|
Stock-based compensation
|
|
|
|
12
|
|
|
|
7
|
|
|
|
25
|
|
|
|
17
|
|
Restructuring and asset impairment charges
|
|
|
|
33
|
|
|
|
43
|
|
|
|
143
|
|
|
|
141
|
|
Payments for restructurings
|
|
|
|
(67
|
)
|
|
|
(24
|
)
|
|
|
(127
|
)
|
|
|
(45
|
)
|
Defined benefit pension cost
|
|
|
|
37
|
|
|
|
33
|
|
|
|
99
|
|
|
|
76
|
|
Contributions to defined benefit pension plans
|
|
|
|
(23
|
)
|
|
|
(34
|
)
|
|
|
(46
|
)
|
|
|
(68
|
)
|
Increase in accounts receivable and billed portion of finance
receivables
|
|
|
|
(63
|
)
|
|
|
(111
|
)
|
|
|
(140
|
)
|
|
|
(160
|
)
|
Collections of deferred proceeds from sales of receivables
|
|
|
|
51
|
|
|
|
74
|
|
|
|
99
|
|
|
|
133
|
|
(Increase) decrease in inventories
|
|
|
|
(30
|
)
|
|
|
7
|
|
|
|
(88
|
)
|
|
|
(92
|
)
|
Increase in equipment on operating leases
|
|
|
|
(50
|
)
|
|
|
(68
|
)
|
|
|
(102
|
)
|
|
|
(130
|
)
|
Decrease in finance receivables
|
|
|
|
69
|
|
|
|
21
|
|
|
|
134
|
|
|
|
85
|
|
Collections on beneficial interest from sales of finance receivables
|
|
|
|
5
|
|
|
|
7
|
|
|
|
11
|
|
|
|
15
|
|
Decrease (increase) in other current and long-term assets
|
|
|
|
14
|
|
|
|
46
|
|
|
|
(43
|
)
|
|
|
9
|
|
Decrease in accounts payable and accrued compensation
|
|
|
|
(21
|
)
|
|
|
(90
|
)
|
|
|
-
|
|
|
|
(166
|
)
|
(Decrease) increase in other current and long-term liabilities
|
|
|
|
-
|
|
|
|
(50
|
)
|
|
|
3
|
|
|
|
(114
|
)
|
Net change in income tax assets and liabilities
|
|
|
|
5
|
|
|
|
10
|
|
|
|
(36
|
)
|
|
|
(22
|
)
|
Net change in derivative assets and liabilities
|
|
|
|
44
|
|
|
|
(66
|
)
|
|
|
99
|
|
|
|
(49
|
)
|
Other operating, net
|
|
|
|
(4
|
)
|
|
|
86
|
|
|
|
12
|
|
|
|
170
|
|
Net cash provided by operating activities of continuing operations
|
|
|
|
343
|
|
|
|
259
|
|
|
|
533
|
|
|
|
346
|
|
Net cash used in operating activities of discontinued operations
|
|
|
|
(15
|
)
|
|
|
(82
|
)
|
|
|
(95
|
)
|
|
|
(194
|
)
|
Net cash provided by operating activities
|
|
|
|
328
|
|
|
|
177
|
|
|
|
438
|
|
|
|
152
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of additions to land, buildings and equipment
|
|
|
|
(13
|
)
|
|
|
(27
|
)
|
|
|
(30
|
)
|
|
|
(46
|
)
|
Proceeds from sales of land, buildings and equipment
|
|
|
|
-
|
|
|
|
1
|
|
|
|
1
|
|
|
|
20
|
|
Cost of additions to internal use software
|
|
|
|
(8
|
)
|
|
|
(11
|
)
|
|
|
(17
|
)
|
|
|
(24
|
)
|
Acquisitions, net of cash acquired
|
|
|
|
(65
|
)
|
|
|
-
|
|
|
|
(76
|
)
|
|
|
(18
|
)
|
Other investing, net
|
|
|
|
9
|
|
|
|
3
|
|
|
|
10
|
|
|
|
4
|
|
Net cash used in investing activities of continuing operations
|
|
|
|
(77
|
)
|
|
|
(34
|
)
|
|
|
(112
|
)
|
|
|
(64
|
)
|
Net cash used in investing activities of discontinued operations
|
|
|
|
-
|
|
|
|
(33
|
)
|
|
|
-
|
|
|
|
(128
|
)
|
Net cash used in investing activities
|
|
|
|
(77
|
)
|
|
|
(67
|
)
|
|
|
(112
|
)
|
|
|
(192
|
)
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (payments) proceeds on debt
|
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
(1,324
|
)
|
|
|
42
|
|
Common stock dividends
|
|
|
|
(64
|
)
|
|
|
(78
|
)
|
|
|
(145
|
)
|
|
|
(149
|
)
|
Preferred stock dividends
|
|
|
|
(4
|
)
|
|
|
(6
|
)
|
|
|
(10
|
)
|
|
|
(12
|
)
|
Proceeds from issuances of common stock
|
|
|
|
-
|
|
|
|
2
|
|
|
|
-
|
|
|
|
3
|
|
Repurchases related to stock-based compensation
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(8
|
)
|
|
|
-
|
|
Distributions to noncontrolling interests
|
|
|
|
(11
|
)
|
|
|
(1
|
)
|
|
|
(12
|
)
|
|
|
(12
|
)
|
Proceeds from Conduent
|
|
|
|
-
|
|
|
|
-
|
|
|
|
161
|
|
|
|
-
|
|
Other financing
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(1
|
)
|
Net cash used in financing activities
|
|
|
|
(80
|
)
|
|
|
(87
|
)
|
|
|
(1,338
|
)
|
|
|
(129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
|
30
|
|
|
|
(8
|
)
|
|
|
35
|
|
|
|
4
|
|
Increase in cash of discontinued operations
|
|
|
|
-
|
|
|
|
(18
|
)
|
|
|
-
|
|
|
|
(20
|
)
|
Increase (decrease) in cash and cash equivalents
|
|
|
|
201
|
|
|
|
(3
|
)
|
|
|
(977
|
)
|
|
|
(185
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
|
1,045
|
|
|
|
1,046
|
|
|
|
2,223
|
|
|
|
1,228
|
|
Cash and Cash Equivalents at End of Period
|
|
|
|
$
|
1,246
|
|
|
|
$
|
1,043
|
|
|
|
$
|
1,246
|
|
|
|
$
|
1,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Review
Reverse Stock Split
As a result of the spin-off of the company's business process
outsourcing business, now Conduent Incorporated, Xerox's market
capitalization was divided. Consequently, the company proposed a reverse
stock split, which was intended to increase the per share trading price
of Xerox common stock and to improve its liquidity and facilitate its
trading. On May 23, 2017, the Board of Directors authorized the reverse
stock split of outstanding Xerox common stock at a ratio of one-for-four
shares, together with the proportionate reduction in the authorized
shares of its common stock from 1,750,000,000 shares to 437,500,000
shares. Shareholder approval for the reverse stock split was obtained at
the company's Annual Shareholders Meeting on May 23, 2017 and the
reverse stock split became effective on June 14, 2017. At the effective
time, every four shares of the company's common stock that were issued
and outstanding were automatically combined into one issued and
outstanding share, without any change in par value of such shares.
Accordingly, we reclassified $760 million from Common stock to
Additional paid-in capital. The reverse stock split also correspondingly
affected all outstanding Xerox equity awards and outstanding convertible
securities.
All authorized, issued and outstanding stock and per share amounts
contained within the accompanying Condensed Consolidated Financial
Statements have been adjusted to reflect this reverse stock split for
all prior periods presented.
Correction of Fuji Xerox Misstatement in Prior Period Financial
Statements
Fuji Xerox is a joint venture between Xerox Corporation and Fujifilm
Holdings Corporation ("Fujifilm") in which Xerox holds a noncontrolling
25% equity interest and Fujifilm holds the remaining equity interest. On
April 20, 2017, Fujifilm publicly announced it had formed an independent
investigation committee (IIC) to conduct a review of the appropriateness
of the accounting practices at Fuji Xerox's New Zealand subsidiary
related to the recovery of receivables associated with certain bundled
leasing transactions that occurred in, or prior to, Fuji Xerox's fiscal
year ending March 31, 2016. In first quarter 2017, Xerox's Equity in net
income of unconsolidated affiliates included an out-of-period charge of
approximately $30 million1, which represented our estimated
share at that time of the cumulative Fujifilm adjustments from this
initial review of JPY 22 billion (approximately $200 million based on
the Yen/U.S. Dollar spot exchange rate at March 31, 2017 of 111.89), as
publicly disclosed by Fujifilm. In the first quarter 2017, the impact of
this adjustment was not considered to be material to any of our
previously issued financial statements nor was it considered to be
material to Xerox's anticipated full year 2017 results.
The IIC's review, completed during the second quarter 2017, subsequently
identified additional adjustments from the amount initially disclosed by
Fujifilm and recorded by Xerox in the first quarter 2017, bringing the
total aggregate adjustments to approximately JPY 40 billion
(approximately $360 million based on the Yen/U.S. Dollar spot exchange
rate at March 31, 2017 of 111.89). The additional adjustments identified
by the IIC during the second quarter 2017 primarily related to
misstatements at Fuji Xerox's Australian subsidiary as well as certain
other adjustments. We determined that our cumulative share of the
revised amount of total adjustments identified as part of the
investigation was approximately $90 million2 and impacted our
fiscal years 2009 through 2017.
Accordingly, in the second quarter 2017, we updated our previous
materiality evaluation with the additional adjustments identified by the
IIC during the second quarter 2017 and determined that the misstatements
to our equity income in prior years and in first quarter 2017 continued
to be immaterial to our previously issued financial statements. However,
based on this updated evaluation, we concluded that the cumulative
correction of these misstatements would have had a material effect on
our current year consolidated financial statements. Accordingly, we will
revise our previously issued annual and interim consolidated financial
statements for 2014, 2015 and 2016 and the first quarter of 2017 the
next time they are filed. Certain of the corrections discussed above
affected periods prior to fiscal year 2014, and this effect has been
reflected as a cumulative, net of tax adjustment to reduce retained
earnings as of January 1, 2014 by $69 million. The effect of the
revision on our previously issued financial statements is provided in
Appendix III. Amounts throughout this release have been adjusted to
incorporate the revised amounts, where applicable.
_____________
(1)
|
|
|
The difference between the $30 million out-of-period adjustment
recorded in the first quarter 2017 and the revision adjustment of
$24 million in the revision table for the three months ended March
31, 2017 primarily relates to the additional adjustments
subsequently identified as part of the IIC review as described above.
|
(2)
|
|
|
The difference between the aggregate revision to retained earnings
and the $90 million impact at March 31, 2017 is primarily due to
currency and the impact of adjustments recorded directly by Xerox in
the first quarter 2017.
|
|
|
|
|
Separation Update
On December 31, 2016, Xerox Corporation completed the separation of its
Business Process Outsourcing (BPO) business from its Document Technology
and Document Outsourcing (DT/DO) business (the "Separation"). The
Separation was accomplished through the transfer of the BPO business
into a new legal entity, Conduent Incorporated ("Conduent"), and then
distributing one hundred percent (100%) of the outstanding common stock
of Conduent to Xerox Corporation stockholders (the "Distribution").
Conduent is now an independent public company trading on the New York
Stock Exchange ("NYSE") under the symbol "CNDT". As a result of the
Separation and Distribution, the BPO business is presented as a
discontinued operation and, as such, has been excluded from continuing
operations for all periods presented.
Segment Changes
Following the separation of the BPO business, we realigned our
operations to better manage the business and serve our customers and the
markets in which we operate. In 2017 we transitioned to a geographic
focus and are primarily organized from a sales perspective on the basis
of "go-to-market" sales channels. These sales channels are structured to
serve a range of customers for our products and services. As a result of
this transition and change in structure, we concluded that we have one
operating and reportable segment - the design, development and sale of
document management systems and solutions. Our chief executive officer
was identified as the chief operating decision maker ("CODM"). All of
the company's activities are interrelated, and each activity is
dependent upon and supportive of the other, including product
development, supply chain and back-office support services. In addition,
all significant operating decisions are largely based upon an analysis
of Xerox at the consolidated level, including assessments related to the
company's incentive compensation plan, as well as at the Board level.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
|
|
|
|
% of Total Revenue
|
(in millions)
|
|
|
|
2017
|
|
|
2016
|
|
|
% Change
|
|
|
CC % Change
|
|
|
2017
|
|
|
2016
|
Equipment sales
|
|
|
|
$
|
546
|
|
|
|
$
|
650
|
|
|
|
(16.0)%
|
|
|
(14.6)%
|
|
|
21%
|
|
|
23%
|
Post sale revenue
|
|
|
|
2,021
|
|
|
|
2,143
|
|
|
|
(5.7)%
|
|
|
(3.9)%
|
|
|
79%
|
|
|
77%
|
Total Revenue
|
|
|
|
$
|
2,567
|
|
|
|
$
|
2,793
|
|
|
|
(8.1)%
|
|
|
(6.4)%
|
|
|
100%
|
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to Condensed Consolidated Statements of Income:
|
|
|
|
|
|
|
Sales
|
|
|
|
$
|
1,010
|
|
|
|
$
|
1,126
|
|
|
|
(10.3)%
|
|
|
(9.0)%
|
|
|
|
|
|
|
Less: Supplies, paper and other sales
|
|
|
|
(464
|
)
|
|
|
(476
|
)
|
|
|
(2.5)%
|
|
|
(1.3)%
|
|
|
|
|
|
|
Equipment Sales(1)
|
|
|
|
$
|
546
|
|
|
|
$
|
650
|
|
|
|
(16.0)%
|
|
|
(14.6)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services, maintenance and rentals
|
|
|
|
$
|
1,483
|
|
|
|
$
|
1,585
|
|
|
|
(6.4)%
|
|
|
(4.4)%
|
|
|
|
|
|
|
Add: Supplies, paper and other sales
|
|
|
|
464
|
|
|
|
476
|
|
|
|
(2.5)%
|
|
|
(1.3)%
|
|
|
|
|
|
|
Add: Financing
|
|
|
|
74
|
|
|
|
82
|
|
|
|
(9.8)%
|
|
|
(8.0)%
|
|
|
|
|
|
|
Post Sale Revenue(1)
|
|
|
|
$
|
2,021
|
|
|
|
$
|
2,143
|
|
|
|
(5.7)%
|
|
|
(3.9)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
|
$
|
1,534
|
|
|
|
$
|
1,654
|
|
|
|
(7.3)%
|
|
|
(6.9)%
|
|
|
60%
|
|
|
59%
|
International
|
|
|
|
895
|
|
|
|
982
|
|
|
|
(8.9)%
|
|
|
(4.6)%
|
|
|
35%
|
|
|
35%
|
Other
|
|
|
|
138
|
|
|
|
157
|
|
|
|
(12.1)%
|
|
|
(12.1)%
|
|
|
5%
|
|
|
6%
|
Total Revenue(2)
|
|
|
|
$
|
2,567
|
|
|
|
$
|
2,793
|
|
|
|
(8.1)%
|
|
|
(6.4)%
|
|
|
100%
|
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Memo:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Managed Document Services(3)
|
|
|
|
$
|
834
|
|
|
|
$
|
887
|
|
|
|
(6.0)%
|
|
|
(3.9)%
|
|
|
32%
|
|
|
32%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________________
CC - Constant Currency (see "Non-GAAP Financial Measures" section).
|
(1)
|
|
|
Equipment sales revenue in 2016 has been revised to reclassify
certain Global Imaging Systems equipment sales to other sales, which
are included in Post sale revenue.
|
(2)
|
|
|
Refer to Appendix II for our Geographic Sales Channels and
Product/Offering Definitions.
|
(3)
|
|
|
Excluding equipment revenue, Managed Document Services (MDS) was
$736 million in second quarter 2017 and $754 million in second
quarter 2016, representing a decline of 2.4% including a
2.2-percentage point negative impact from currency.
|
|
|
|
|
Second quarter 2017 total revenues decreased 8.1% as compared to second
quarter 2016, with a 1.7-percentage point negative impact from currency.
Second quarter 2017 total revenues reflect the following:
-
Post sale revenue decreased 5.7% as compared to second quarter
2016, with a 1.8-percentage point negative impact from currency. Post
sale revenue is comprised of the following:
-
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) offerings that
transferred to Xerox from the Business Process Outsourcing (BPO)
business upon Separation. These revenues declined 6.4%, with a
2.0-percentage point negative impact from currency; the decline at
constant currency1 reflected lower signings and
installs in prior periods and the ongoing decline in page volumes.
-
Supplies, paper and other sales includes unbundled supplies
and other sales. These revenues declined 2.5%, with a
1.2-percentage point negative impact from currency. The decline at
constant currency1 was driven by lower original
equipment manufacturer (OEM) supplies as well as lower supplies
demand consistent with lower equipment sales in prior periods.
-
Financing revenue is generated from financed equipment sale
transactions. The 9.8% decline in these revenues reflected a
declining finance receivables balance due to lower equipment sales
in prior periods, along with a 1.8-percentage point negative
impact from currency.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
|
|
|
|
% of Equipment Sales
|
(in millions)
|
|
|
|
2017
|
|
|
2016
|
|
|
% Change
|
|
|
CC % Change
|
|
|
2017
|
|
|
2016
|
Entry
|
|
|
|
$
|
92
|
|
|
|
$
|
102
|
|
|
|
(9.8)%
|
|
|
(8.6)%
|
|
|
17%
|
|
|
16%
|
Mid-range
|
|
|
|
342
|
|
|
|
415
|
|
|
|
(17.6)%
|
|
|
(16.3)%
|
|
|
63%
|
|
|
64%
|
High-end
|
|
|
|
106
|
|
|
|
126
|
|
|
|
(15.9)%
|
|
|
(13.9)%
|
|
|
20%
|
|
|
20%
|
Other
|
|
|
|
6
|
|
|
|
7
|
|
|
|
NM
|
|
|
NM
|
|
|
NM
|
|
|
NM
|
Equipment Sales(1)
|
|
|
|
$
|
546
|
|
|
|
$
|
650
|
|
|
|
(16.0)%
|
|
|
(14.6)%
|
|
|
100%
|
|
|
100%
|
____________________________
CC - Constant Currency (see "Non-GAAP Financial Measures" section).
|
(1)
|
|
|
Equipment sales revenue in 2016 has been revised to reclassify
certain Global Imaging Systems equipment sales to other sales, which
are included in Post sale revenue.
|
|
|
|
|
-
Equipment sales revenue decreased 16.0% as compared to second
quarter 2016, with a 1.4-percentage point negative impact from
currency. Revenue declined across all product areas and was impacted
by price declines of approximately 5% (which were in-line with our
historic impact). The decline in mid-range sales was in part due to
the anticipated impact of the timing of new products further
exacerbated by a slower roll-out associated with a large portfolio
transition, and ongoing black-and-white revenue declines that
reflected overall market decline trends; in addition, the second
quarter of 2016 benefited from an earlier roll-out of the i-series
product portfolio refresh. The decline in high-end sales reflected
primarily lower revenues from our black-and-white systems, consistent
with overall market decline trends, along with the impact of elevated
partner sales in the prior year associated with drupa, and timing and
delays related to the recent launch of the Versant entry production
color system; these declines were partially mitigated by higher sales
of our continuous feed inkjet systems. The decline in entry sales
reflects lower OEM activity, and an unfavorable mix caused by higher
install activity associated with new ConnectKey products that are at
the lower end of the portfolio, as well as low-end printers in
developing markets.
Revenue Metrics
Total Installs Install activity
includes Managed Document Services and Xerox-branded products shipped to
Global Imaging Systems. Detail by product group (see Appendix II) is
shown below:
Entry2
-
24% increase in color multifunction devices, reflecting demand for
recently launched products in this space.
-
10% increase in black-and-white multifunction devices, driven largely
by higher activity for low-end printers in developing markets.
Mid-Range3
-
15% decrease in mid-range color installs, reflecting the transition to
the new product portfolio partly offset by growth in developing
markets.
-
14% decrease in mid-range black-and-white, reflecting overall market
decline as well as the impact of transitioning to the new product
portfolio partly offset by growth in developing markets.
High-End3
-
9% decrease in high-end color systems, as growth from continuous feed
color and the recently launched Versant products was offset by a
decline in iGen and older entry-production products.
-
34% decrease in high-end black-and-white systems reflects overall
market decline and trends, and higher declines in North America.
Signings Signings are defined
as estimated future revenues from contracts signed during the period,
including renewals of existing contracts. Our reported signings mostly
represent those from our Enterprise deals, as we do not currently
include signings from our growing partner print services offerings or
those from our Global Imaging Systems channel. Our signings, expressed
in Total Contract Value (TCV), were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
(in millions)
|
|
|
|
2017
|
|
|
2016
|
|
|
% Change
|
|
|
CC % Change
|
|
|
2017
|
|
|
2016
|
|
|
% Change
|
|
|
CC % Change
|
Signings
|
|
|
|
$
|
643
|
|
|
|
$
|
700
|
|
|
|
(8.1)%
|
|
|
(6.5)%
|
|
|
$
|
1,155
|
|
|
|
$
|
1,266
|
|
|
|
(8.8)%
|
|
|
(7.1)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________________ Note: TCV is the estimated total
contractual revenue related to signed contracts.
Second quarter 2017 signings decreased 8.1% from second quarter 2016,
with a 1.6-percentage point unfavorable impact from currency, reflecting
a lower contribution from new business. On a trailing twelve month (TTM)
basis, signings decreased 9.8% from the comparable prior year period,
with a 4.5-percentage point unfavorable impact from currency.
New business TCV declined 35.2% from second quarter 2016, with a
1.6-percentage point unfavorable impact from currency. New business TCV
for the six months ended June 30, 2017 decreased 24.3% from the prior
year period, with a 1.9-percentage point unfavorable impact from
currency. On a TTM basis, new business TCV decreased 27.3% from the
comparable prior year period, with a 3.7-percentage point unfavorable
impact from currency; this performance is the result of ongoing
competitive pressure in the market as well as the timing of new products
amplified by the longer sales cycles in this area of the business.
Renewal rate Renewal rate is
defined as the annual recurring revenue (ARR) on contracts that are
renewed during the period as a percentage of ARR on all contracts for
which a renewal decision was made during the period. Second quarter 2017
contract renewal rate was 86%, an increase of 4-percentage points as
compared to our full year 2016 renewal rate of 82%.
Costs, Expenses and Other Income
Summary of Key Financial Ratios
The following is a summary of key financial ratios used to assess our
performance:
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
Reported
|
|
|
Adjusted(1)
|
(in millions)
|
|
|
|
2017
|
|
|
2016
|
|
|
B/(W)
|
|
|
2017
|
|
|
2016
|
|
|
B/(W)
|
Gross Profit
|
|
|
|
$
|
1,031
|
|
|
|
$
|
1,112
|
|
|
|
$
|
(81
|
)
|
|
|
$
|
1,045
|
|
|
|
$
|
1,124
|
|
|
|
$
|
(79
|
)
|
RD&E
|
|
|
|
106
|
|
|
|
119
|
|
|
|
13
|
|
|
|
102
|
|
|
|
113
|
|
|
|
11
|
|
SAG
|
|
|
|
643
|
|
|
|
691
|
|
|
|
48
|
|
|
|
624
|
|
|
|
677
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment Gross Margin
|
|
|
|
28.5
|
%
|
|
|
29.9
|
%
|
|
|
(1.4) pts.
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
Post sale Gross Margin
|
|
|
|
43.3
|
%
|
|
|
42.9
|
%
|
|
|
0.4 pts.
|
|
|
44.0
|
%
|
|
|
43.4
|
%
|
|
|
0.6 pts.
|
Total Gross Margin
|
|
|
|
40.2
|
%
|
|
|
39.8
|
%
|
|
|
0.4 pts.
|
|
|
40.7
|
%
|
|
|
40.2
|
%
|
|
|
0.5 pts.
|
RD&E as a % of Revenue
|
|
|
|
4.1
|
%
|
|
|
4.3
|
%
|
|
|
0.2 pts.
|
|
|
4.0
|
%
|
|
|
4.0
|
%
|
|
|
- pts.
|
SAG as a % of Revenue
|
|
|
|
25.0
|
%
|
|
|
24.7
|
%
|
|
|
(0.3) pts.
|
|
|
24.3
|
%
|
|
|
24.2
|
%
|
|
|
(0.1) pts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax Income
|
|
|
|
$
|
193
|
|
|
|
$
|
191
|
|
|
|
$
|
2
|
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
Pre-tax Income Margin
|
|
|
|
7.5
|
%
|
|
|
6.8
|
%
|
|
|
0.7 pts.
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
Adjusted Operating Profit
|
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
342
|
|
|
|
361
|
|
|
|
(19
|
)
|
Adjusted Operating Margin
|
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
13.3
|
%
|
|
|
12.9
|
%
|
|
|
0.4 pts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Memo:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-service retirement-related costs
|
|
|
|
$
|
37
|
|
|
|
$
|
32
|
|
|
|
$
|
(5
|
)
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________________ (1) See the
"Non-GAAP Financial Measures" section for an explanation of the non-GAAP
financial measure. In fourth quarter 2016, we began to include
Equity in net income of unconsolidated affiliates in the calculation of
adjusted operating income and margin. Prior periods have been
restated accordingly to conform to current year presentation.
Pre-tax Income Margin Second
quarter 2017 pre-tax income margin of 7.5% increased 0.7-percentage
points as compared to second quarter 2016. The increase was primarily
driven by cost and expense reduction (net of higher non-service
retirement related costs), that outpaced the rate of revenue decline,
along with lower interest expense, included in Other expenses, net, and
lower restructuring.
Adjusted1
Operating Margin Second quarter 2017 adjusted1
operating margin of 13.3% increased 0.4-percentage points as compared to
second quarter 2016. The improvement was driven primarily by cost
productivity and savings from strategic transformation, including
restructuring savings, that outpaced the rate of revenue decline. Those
improvements were partly offset by adverse transaction currency of
1.0-percentage point.
Gross Margin Second quarter
2017 gross margin of 40.2% increased by 0.4-percentage points compared
to second quarter 2016. On an adjusted1 basis, gross margin
of 40.7% increased by 0.5-percentage points. This performance reflects
cost savings from strategic transformation and cost productivity, partly
offset by adverse transaction currency of 1.0-percentage point.
Second quarter 2017 equipment gross margin of 28.5% decreased
1.4-percentage points as compared to second quarter 2016, as a result of
adverse transaction currency and pricing, along with an unfavorable mix
towards entry sales, that more than offset product cost productivity.
Second quarter 2017 post sale gross margin of 43.3% increased
0.4-percentage points as compared to second quarter 2016. On an adjusted1
basis, post sale gross margin of 44.0% improved 0.6-percentage points,
as a result of cost savings from strategic transformation, including
restructuring, which more than offset the pace of revenue decline and
the impact of adverse transaction currency.
Research, Development and Engineering Expenses
(RD&E) Second quarter 2017 RD&E as a percentage of
revenue of 4.1% decreased 0.2-percentage points from second quarter
2016. On an adjusted1 basis, RD&E was 4.0% of revenue and was
flat compared to second quarter 2016.
RD&E of $106 million decreased by $13 million compared to second quarter
2016. On an adjusted1 basis, RD&E of $102 million decreased
by $11 million and reflected savings from strategic transformation
including restructuring savings and the transfer of resources to
Electronics for Imaging (EFI), a third party print server supplier. We
strategically coordinate our R&D investments with Fuji Xerox.
Selling, Administrative and General Expenses
(SAG) SAG as a percentage of revenue of 25.0% increased
by 0.3-percentage points from second quarter 2016. On an adjusted1
basis, SAG was 24.3% of revenue and increased 0.1-percentage points,
reflecting the impact of lower revenues only partly mitigated by
productivity and cost savings from strategic transformation.
SAG of $643 million was $48 million lower than second quarter 2016. On
an adjusted1 basis, SAG of $624 million decreased $53
million, including an approximate $13 million favorable impact from
currency and reflecting primarily cost savings, including savings from
restructuring, as well as a decrease in selling expenses related to
lower incentives and marketing expenses consistent with lower revenues.
Bad debt expense of $9 million was $1 million lower and remained at less
than one percent of receivables.
Non-Service Retirement-Related Costs Non-service
retirement-related costs were $5 million higher than second quarter
2016, primarily driven by higher losses from pension settlements.
Restructuring and Related Costs Restructuring
and related costs of $40 million include restructuring and asset
impairment charges of $33 million as well as $7 million of additional
costs primarily related to professional support services associated with
the implementation of the Strategic Transformation program.
Second quarter 2017 net restructuring and asset impairment charges of
$33 million included $50 million of severance costs related to headcount
reductions of approximately 500 employees worldwide and $1 million of
lease cancellation costs. The second quarter 2017 actions impacted
several functional areas, with approximately 35% focused on gross margin
improvements, approximately 60% on SAG reductions, and the remainder
focused on RD&E optimization. These costs were partially offset by $18
million of net reversals for changes in estimated reserves from prior
period initiatives, primarily reflecting unanticipated attrition and
other job changes prior to the completion of certain restructuring
initiatives as well as a $5 million favorable adjustment on the early
termination of the lease for the corporate airplane.
During second quarter 2016 restructuring and related costs were $47
million which included restructuring and asset impairment charges of $43
million as well as $4 million of additional costs primarily related to
professional support services associated with the implementation of the
Strategic Transformation program.
Second quarter 2016 net restructuring and asset impairment charges of
$43 million included $51 million of severance costs related to headcount
reductions of approximately 850 employees worldwide and $1 million of
lease cancellation costs. The second quarter 2016 actions impacted
several functional areas, with approximately 40% focused on gross margin
improvements, approximately 50% on SAG reductions and approximately 10%
focused on RD&E optimization. These costs were partially offset by $4
million of net reversals for changes in estimated reserves from prior
period initiatives, as well as a gain of $5 million from the sale of
real estate impaired in prior periods.
The restructuring reserve balance as of June 30, 2017 for all programs
was $151 million, of which $148 million is expected to be spent over the
next twelve months.
We expect to incur additional restructuring and related costs of
approximately $35 million in third quarter 2017 for actions and
initiatives that have not yet been finalized. For full-year 2017, we
expect to incur restructuring and related costs of approximately $225
million.
Amortization of Intangible Assets Second
quarter 2017 amortization of intangible assets of $15 million was $1
million lower than second quarter 2016.
Worldwide Employment Worldwide
employment was approximately 36,900 as of June 30, 2017 and decreased by
approximately 700 from December 31, 2016. The reduction is primarily due
to the impact of restructuring and productivity-related reductions.
|
|
|
|
|
Other Expenses, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
(in millions)
|
|
|
|
2017
|
|
|
2016
|
Non-financing interest expense
|
|
|
|
$
|
24
|
|
|
|
$
|
42
|
|
Interest income
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
(Gains) losses on sales of businesses and assets
|
|
|
|
(1
|
)
|
|
|
3
|
|
Currency losses (gains), net
|
|
|
|
1
|
|
|
|
(1
|
)
|
Litigation matters
|
|
|
|
2
|
|
|
|
-
|
|
Loss on sales of accounts receivable
|
|
|
|
3
|
|
|
|
4
|
|
All other expenses, net
|
|
|
|
7
|
|
|
|
2
|
|
Total other expenses, net
|
|
|
|
$
|
34
|
|
|
|
$
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-financing interest expense Second
quarter 2017 non-financing interest expense of $24 million was $18
million lower than second quarter 2016. When combined with financing
interest expense (Cost of financing), total interest expense declined by
$17 million from second quarter 2016 primarily due to a lower debt
balance reflecting the repayment of approximately $1.3 billion of debt
in the first quarter 2017.
Income Taxes
Second quarter 2017 effective tax rate was 22.3%. On an adjusted1
basis, second quarter 2017 tax rate was 27.0%. Both rates were lower
than the U.S. statutory tax rate primarily due to foreign tax credits
and the geographical mix of profits. The adjusted1 effective
tax rate excludes the tax benefits associated with the following
charges: restructuring and related costs, amortization of intangible
assets and non-service retirement-related costs.
Second quarter 2016 effective tax rate was 9.4%. On an adjusted1
basis, second quarter 2016 tax rate was 18.5%. These rates were lower
than the U.S. statutory tax rate primarily due to the redetermination of
certain unrecognized tax positions upon conclusion of several audits, as
well as foreign tax credits resulting from anticipated dividends from
our foreign subsidiaries. The adjusted1 effective tax rate
excludes the tax benefits associated with the following charges:
restructuring and related costs, amortization of intangible assets and
non-service retirement-related costs.
Our effective tax rate is based on nonrecurring events as well as
recurring factors, including the taxation of foreign income. In
addition, our effective tax rate will change based on discrete or other
nonrecurring events that may not be predictable. Excluding the effects
of intangibles amortization, restructuring and related costs,
non-service retirement-related costs, separation costs and other
discrete items, we anticipate that our adjusted1 effective
tax rate will be approximately 25% to 28% for full year 2017.
Equity in Net Income of Unconsolidated Affiliates
Equity in net income of unconsolidated affiliates primarily reflects our
25% share of Fuji Xerox net income. Second quarter 2017 equity income of
$20 million decreased by $6 million compared to second quarter 2016,
including $2 million of higher year-over-year charges related to our
share of Fuji Xerox after-tax restructuring. As noted earlier, we have
revised Equity in net income of unconsolidated affiliates for all
applicable prior periods presented throughout this document (see
Appendix III).
Net Income from Continuing Operations
Second quarter 2017 net income from continuing operations attributable
to Xerox was $166 million, or $0.63 per diluted share. On an adjusted1
basis, net income from continuing operations attributable to Xerox was
$227 million, or $0.87 per diluted share. Second quarter 2017
adjustments to net income include the amortization of intangible assets,
restructuring and related costs, and non-service retirement-related
costs.
Second quarter 2016 net income from continuing operations attributable
to Xerox was $196 million, or $0.75 per diluted share. On an adjusted1
basis, net income from continuing operations attributable to Xerox was
$257 million, or $0.98 per diluted share. Second quarter 2016
adjustments to net income include the amortization of intangible assets,
restructuring and related costs, and non-service retirement-related
costs.
The Net Income and EPS reconciliation table in the "Non-GAAP
Financial Measures" section contains the second quarter adjustments to
net income. See the "Non-GAAP Financial Measures" section for
calculation of adjusted EPS. The calculations of basic and diluted
earnings per share are included as Appendix I.
Discontinued Operations
Business Process Outsourcing (BPO):
As previously noted, on December 31, 2016, Xerox completed the
Separation of its BPO business through the Distribution of all of the
issued and outstanding stock of Conduent to Xerox Corporation
stockholders. As a result of the Separation and Distribution, the
financial position and results of operations of the BPO Business are
presented as discontinued operations and, as such, have been excluded
from continuing operations for all periods presented.
Separation costs were $28 million for the three months ended June 30,
2016, and are included in Loss from discontinued operations, net of tax,
in the accompanying Condensed Consolidated Statements of Income.
Summarized financial information for our Discontinued Operations is as
follows:
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
(in millions)
|
|
|
|
2017
|
|
|
2016
|
Revenue
|
|
|
|
$
|
-
|
|
|
|
$
|
1,597
|
|
|
|
|
|
|
|
|
|
Cost of services
|
|
|
|
-
|
|
|
|
1,343
|
|
Other expenses(1)
|
|
|
|
-
|
|
|
|
300
|
|
Total costs and expenses
|
|
|
|
-
|
|
|
|
1,643
|
|
|
|
|
|
|
|
|
|
Net loss before income taxes
|
|
|
|
-
|
|
|
|
(46
|
)
|
Income tax benefit
|
|
|
|
-
|
|
|
|
8
|
|
Loss from discontinued operations, net of tax
|
|
|
|
$
|
-
|
|
|
|
$
|
(38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________________
(1) 2016 includes $28 million of separation costs
and $6 million of interest on the $1.0 billion Senior Unsecured Term
Facility, which was required to be repaid upon completion of the
Separation and therefore was reported in the loss from discontinued
operations.
____________________________
(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 10%, while Entry
black-and-white multifunction devices increased 4%.
|
(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 decreased 15%, and High-end color
systems decreased 14%.
|
|
|
|
|
Capital Resources and Liquidity
The following summarizes our cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
(in millions)
|
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
Net cash provided by operating activities of continuing operations
|
|
|
|
$
|
343
|
|
|
|
$
|
259
|
|
|
|
$
|
84
|
|
Net cash used in operating activities of discontinued operations
|
|
|
|
(15
|
)
|
|
|
(82
|
)
|
|
|
67
|
|
Net cash provided by operating activities
|
|
|
|
328
|
|
|
|
177
|
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities of continuing operations
|
|
|
|
(77
|
)
|
|
|
(34
|
)
|
|
|
(43
|
)
|
Net cash used in investing activities of discontinued operations
|
|
|
|
-
|
|
|
|
(33
|
)
|
|
|
33
|
|
Net cash used in investing activities
|
|
|
|
(77
|
)
|
|
|
(67
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
|
(80
|
)
|
|
|
(87
|
)
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
|
30
|
|
|
|
(8
|
)
|
|
|
38
|
|
Increase in cash of discontinued operations
|
|
|
|
-
|
|
|
|
(18
|
)
|
|
|
18
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
|
201
|
|
|
|
(3
|
)
|
|
|
204
|
|
Cash and cash equivalents at beginning of period
|
|
|
|
1,045
|
|
|
|
1,046
|
|
|
|
(1
|
)
|
Cash and Cash Equivalents at End of Period
|
|
|
|
$
|
1,246
|
|
|
|
$
|
1,043
|
|
|
|
$
|
203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities
Net cash provided by operating activities of continuing operations was
$343 million in second quarter 2017. The $84 million increase in
operating cash from second quarter 2016 was primarily due to the
following:
-
$69 million increase in accounts payable and accrued compensation
primarily related to the year-over-year timing of vendor payments.
-
$46 million increase from finance receivables primarily related to a
higher level of run-off due to lower originations.
-
$25 million increase from accounts receivable primarily due to a
higher impact from sales of receivables as well as lower revenues.
-
$18 million increase due to lower placements of equipment on operating
leases reflecting decreased installs.
-
$11 million increase from lower pension contributions.
-
$43 million decrease from higher restructuring payments.
-
$37 million decrease from inventory primarily due to a lower volume of
supplies sales and the impact of new product launches.
-
$30 million decrease due to higher tax payments.
Cash Flows from Investing Activities
Net cash used in investing activities of continuing operations was $77
million in second quarter 2017. The $43 million change from second
quarter 2016 was primarily due to the following:
-
$65 million decrease related to the acquisition of MT Business
Technologies, Inc. in 2017.
-
$17 million increase due to lower capital expenditures (including
internal use software).
Cash Flows from Financing Activities
Net cash used in financing activities was $80 million in second quarter
2017. The $7 million increase in cash from second quarter 2016 was
primarily due to the following:
-
$16 million increase due to lower common and preferred stock dividends.
-
$10 million decrease due to higher distributions to noncontrolling
interests.
Debt and Customer Financing Activities
The following summarizes our debt:
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
June 30, 2017
|
|
|
December 31, 2016
|
Principal debt balance(1)
|
|
|
|
$
|
5,047
|
|
|
|
$
|
6,349
|
|
Net unamortized discount
|
|
|
|
(38
|
)
|
|
|
(43
|
)
|
Debt issuance costs
|
|
|
|
(29
|
)
|
|
|
(21
|
)
|
Fair value adjustments(2)
|
|
|
|
|
|
|
|
- terminated swaps
|
|
|
|
16
|
|
|
|
27
|
|
- current swaps
|
|
|
|
5
|
|
|
|
4
|
|
Total Debt
|
|
|
|
$
|
5,001
|
|
|
|
$
|
6,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________________
(1)
|
|
|
Includes Notes Payable of $5 million and $4 million as of June 30,
2017 and December 31, 2016, respectively.
|
(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.
|
|
|
|
|
Separation Debt Activity
In connection with the Separation, Conduent made a cash distribution of
approximately $1.8 billion to Xerox in fourth quarter 2016. Xerox used a
portion of the cash distribution proceeds to repay its $1.0 billion
Senior Unsecured Term Facility in January 2017, which was required to be
repaid upon completion of the Separation. This $1.0 billion of cash and
debt was excluded from the Cash and cash equivalents and Total Debt at
December 31, 2016, respectively, and was reported in Current Assets and
Current Liabilities of discontinued operations at December 31, 2016,
respectively. Interest expense associated with this borrowing incurred
during 2016 was included in the Loss from discontinued operations, net
of tax. Xerox used the balance of the proceeds received as well as cash
on hand to repay its $500 million 6.75% Senior Notes and $500 million
2.95% Senior Notes that came due in first quarter 2017.
Finance Assets and Related Debt
The following represents our total finance assets, net associated with
our lease and finance operations:
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
June 30, 2017
|
|
|
December 31, 2016
|
Total finance receivables, net(1)
|
|
|
|
$
|
3,703
|
|
|
|
$
|
3,744
|
Equipment on operating leases, net
|
|
|
|
464
|
|
|
|
475
|
Total Finance Assets, net(2)
|
|
|
|
$
|
4,167
|
|
|
|
$
|
4,219
|
|
|
|
|
|
|
|
|
|
|
|
____________________________
(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, 2016 includes an increase of $128
million due to currency.
|
|
|
|
|
Our lease contracts permit customers to pay for equipment over time
rather than at the date of installation; therefore, we maintain a
certain level of debt (that we refer to as financing debt) to support
our investment in these lease contracts, which are reflected in total
finance assets, net. For this financing aspect of our business, we
maintain an assumed 7:1 leverage ratio of debt to equity as compared to
our finance assets.
Based on this leverage, the following represents the breakdown of total
debt between financing debt and core debt:
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
June 30, 2017
|
|
|
December 31, 2016
|
Finance receivables debt(1)
|
|
|
|
$
|
3,240
|
|
|
|
$
|
3,276
|
Equipment on operating leases debt
|
|
|
|
406
|
|
|
|
416
|
Financing debt
|
|
|
|
3,646
|
|
|
|
3,692
|
Core debt
|
|
|
|
1,355
|
|
|
|
2,624
|
Total Debt
|
|
|
|
$
|
5,001
|
|
|
|
$
|
6,316
|
|
|
|
|
|
|
|
|
|
|
|
____________________________
(1)
|
|
|
Finance receivables debt is the basis for our calculation of "Cost
of financing" expense in the Condensed Consolidated Statements of
Income.
|
|
|
|
|
Sales of Accounts Receivable
Accounts receivable sales arrangements are utilized in the normal course
of business as part of our cash and liquidity management. We have
facilities in the U.S., Canada and several countries in Europe that
enable us to sell certain accounts receivable, without recourse, to
third-parties. The accounts receivables sold are generally short-term
trade receivables with payment due dates of less than 60 days. Of the
accounts receivable sold and derecognized from our balance sheet, $548
million and $531 million remain uncollected as of June 30, 2017 and
December 31, 2016, respectively. Our risk of loss following the sales of
accounts receivable is limited to the outstanding deferred purchase
price receivable. These receivables are included in Other current assets
in the accompanying Condensed Consolidated Balance Sheets and were $57
million and $48 million at June 30, 2017 and December 31, 2016,
respectively. Accounts receivable sales were as follows:
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
(in millions)
|
|
|
|
2017
|
|
|
2016
|
Accounts receivable sales
|
|
|
|
$
|
567
|
|
|
|
$
|
582
|
|
Deferred proceeds
|
|
|
|
56
|
|
|
|
59
|
|
Loss on sales of accounts receivable
|
|
|
|
3
|
|
|
|
4
|
|
Estimated increase (decrease) to operating cash flows(1)
|
|
|
|
54
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
____________________________
(1)
|
|
|
Represents the difference between current and prior period
receivable sales adjusted for the effects of the deferred proceeds,
collections prior to the end of the quarter and currency.
|
|
|
|
|
Forward-Looking Statements
This release contains "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. The words
"anticipate", "believe", "estimate", "expect", "intend", "will",
"should" and similar expressions, as they relate to us, 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; changes in economic conditions, political conditions,
trade protection measures, licensing requirements and tax laws in the
United States and in the foreign countries in which we do business;
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 individually identifiable
information of customers, clients and employees could be inadvertently
disclosed or disclosed as a result of a breach of our security systems;
reliance on third parties, including subcontractors, for manufacturing
of products and provision of services; our ability to manage changes in
the printing environment and markets 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; the risk that we do not realize all of the expected strategic and
financial benefits from the separation and spin-off of our Business
Process Outsourcing business; 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 our 2016 Annual Report on
Form 10-K, as well as in our Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K filed with the Securities and Exchange Commission
("SEC"). 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.
Fuji Xerox Co., Ltd. ("Fuji Xerox") is a joint venture between Xerox
Corporation and Fujifilm Holdings Corporation ("Fujifilm") in which
Xerox holds a noncontrolling 25% equity interest and Fujifilm holds the
remaining equity interest. Given our status as a minority investor, we
have limited contractual and other rights to information with respect to
Fuji Xerox matters. On April 20, 2017, Fujifilm publicly announced it
had formed an independent investigation committee (IIC) to conduct a
review of the appropriateness of the accounting practices at Fuji
Xerox's New Zealand subsidiary. Fujifilm publicly announced that the IIC
completed its review during the second quarter 2017 and identified
additional adjustments from the amount initially disclosed by Fujifilm
bringing the total aggregate adjustments to approximately JPY 40 billion
(approximately $360 million based on the Yen/U.S. Dollar spot exchange
rate at March 31, 2017 of 111.89). The increase in adjustments related
to subsequent findings by the IIC in their investigation primarily
related to misstatements at Fuji Xerox's Australian subsidiary, as well
as certain other adjustments. We determined that our cumulative share of
the revised amount of total adjustments identified as part of the
investigation was approximately $90 million and impacted our fiscal
years 2009 through 2017. Based on our procedures, as well as those
performed by Fuji Xerox and Fujifilm, we concluded that the cumulative
correction of the misstatements in our historical financial statements
would have had a material effect on our current year consolidated
financial statements. Accordingly, we concluded that we should revise
our previously issued annual and interim consolidated financial
statements for 2014, 2015 and 2016 and the first quarter of 2017 the
next time they are filed. The Fujifilm audited financial statements were
issued in Japan on July 31, 2017, and our review of this matter is
substantially completed. Although we are not aware of any issues that
will cause further adjustments to our financial statements, Xerox
continues to finalize its review of this matter and additional issues
may be identified that may require adjustments to the amount and timing
of charges that we have already recognized as part of our revision. In
addition, we can provide no assurances relative to the outcome of any
potential governmental investigations or any consequences thereof.
Non-GAAP Financial Measures
We have reported our financial results in accordance with generally
accepted accounting principles (GAAP). In addition, we have discussed
our financial results using the non-GAAP measures described below. We
believe these non-GAAP measures allow investors to better understand the
trends in our business and to better understand and compare our results.
Accordingly, we believe it is necessary to adjust several reported
amounts, determined in accordance with GAAP, to exclude the effects of
certain items as well as their related income tax effects.
A reconciliation of these non-GAAP financial measures to the most
directly comparable financial measures calculated and presented in
accordance with GAAP are set forth below as well as in the second
quarter 2017 presentation slides available at www.xerox.com/investor.
These non-GAAP financial measures should be viewed in addition to, and
not as a substitute for, the company's reported results prepared in
accordance with GAAP.
Adjusted Earnings Measures
-
Net income and Earnings per share (EPS)
-
Effective tax rate
-
Gross margin, RD&E and SAG (adjusted for non-service
retirement-related costs only)
The above measures were adjusted for the following items:
-
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 Strategic
Transformation program 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
Strategic Transformation program 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) amortized actuarial
gains/losses and (iv) 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. Adjusted
earnings will continue to include the elements of our retirement costs
related to current employee service (service cost and amortization of
prior service cost) as well as the cost of our defined contribution
plans.
-
Other discrete, unusual or infrequent items:
In addition, during the first quarter of 2017 we also excluded the
following additional items given the discrete, unusual or infrequent
nature of the items and their impact on our results for the period: 1)
a loss on early extinguishment of debt; and 2) a benefit from the
remeasurement of a tax matter related to a previously adjusted item.
We believe the exclusion of these items allows investors to better
understand and analyze the results for the period as compared to prior
periods and expected future trends in our business.
Adjusted Operating Income/Margin We
also calculate and utilize operating income and margin earnings measures
by adjusting our pre-tax income and margin amounts. In addition to the
costs noted for our Adjusted Earnings measures, operating income and
margin also exclude other expenses, net. Other expenses, net is
primarily comprised of non-financing interest expense and also includes
certain other non-operating costs and expenses. We exclude these amounts
in order to evaluate our current and past operating performance and to
better understand the expected future trends in our business. Operating
income and margin also includes Equity in net income of unconsolidated
affiliates. Equity in net income of unconsolidated affiliates primarily
reflects our 25% share of Fuji Xerox net income. We include this amount
in our measure of operating income and margin as Fuji Xerox is our
primary intermediary to the Asia/Pacific market for distribution of
Xerox branded products and services.
Constant Currency To better
understand trends in our business, we believe that it is helpful to
adjust revenue to exclude the impact of changes in the translation of
foreign currencies into U.S. dollars. We refer to this adjusted revenue
as "constant currency." Management believes the constant currency
measure provides investors an additional perspective on revenue trends.
Currency impact can be determined as the difference between actual
growth rates and constant currency growth rates.
Free Cash Flow To better
understand trends in our business, we believe that it is helpful to
subtract amounts for capital expenditures (inclusive of internal use
software) from cash flows from continuing operations. Management
believes this measure gives investors an additional perspective on cash
flow from operating activities in excess of amounts required for
reinvestment. It provides a measure of our ability to fund acquisitions,
dividends and share repurchase. It is also used to measure our yield on
market capitalization.
Summary:
Management believes that all of these non-GAAP financial measures
provide an additional means of analyzing the current period's results
against the corresponding prior period's results. However, these
non-GAAP financial measures should be viewed in addition to, and not as
a substitute for, the company's reported results prepared in accordance
with GAAP. Our non-GAAP financial measures are not meant to be
considered in isolation or as a substitute for comparable GAAP measures
and should be read only in conjunction with our consolidated financial
statements prepared in accordance with GAAP. Our management regularly
uses our supplemental non-GAAP financial measures internally to
understand, manage and evaluate our business and make operating
decisions. These non-GAAP measures are among the primary factors
management uses in planning for and forecasting future periods.
Compensation of our executives is based in part on the performance of
our business based on these non-GAAP measures.
A reconciliation of these non-GAAP financial measures and the most
directly comparable measures calculated and presented in accordance with
GAAP are set forth on the following tables:
|
|
|
|
|
|
|
|
Net Income and EPS reconciliation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2017
|
|
|
Three Months Ended June 30, 2016
|
(in millions, except per share amounts)
|
|
|
|
Net Income
|
|
|
EPS
|
|
|
Net Income
|
|
|
EPS
|
Reported(1)
|
|
|
|
$
|
166
|
|
|
|
$
|
0.63
|
|
|
|
$
|
196
|
|
|
|
$
|
0.75
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and related costs
|
|
|
|
40
|
|
|
|
|
|
|
47
|
|
|
|
|
Amortization of intangible assets
|
|
|
|
15
|
|
|
|
|
|
|
16
|
|
|
|
|
Non-service retirement-related costs
|
|
|
|
37
|
|
|
|
|
|
|
32
|
|
|
|
|
Income tax on adjustments(2)
|
|
|
|
(34
|
)
|
|
|
|
|
|
(35
|
)
|
|
|
|
Restructuring charges - Fuji Xerox
|
|
|
|
3
|
|
|
|
|
|
|
1
|
|
|
|
|
Adjusted
|
|
|
|
$
|
227
|
|
|
|
$
|
0.87
|
|
|
|
$
|
257
|
|
|
|
$
|
0.98
|
Dividends on preferred stock used in adjusted EPS calculation(3)
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
$
|
-
|
Weighted average shares for adjusted EPS(3)
|
|
|
|
|
|
|
263
|
|
|
|
|
|
|
262
|
Fully diluted shares at end of period(4)
|
|
|
|
|
|
|
263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________________
(1)
|
|
|
Net income and EPS from continuing operations attributable to Xerox.
|
(2)
|
|
|
Refer to Effective Tax Rate reconciliation.
|
(3)
|
|
|
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 A or Series B convertible
preferred stock, as applicable.
|
(4)
|
|
|
Represents common shares outstanding at June 30, 2017 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 second quarter 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate reconciliation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2017
|
|
|
Three Months Ended June 30, 2016
|
(in millions)
|
|
|
|
Pre-Tax
Income
|
|
|
Income Tax Expense
|
|
|
Effective Tax Rate
|
|
|
Pre-Tax Income
|
|
|
Income Tax Expense
|
|
|
Effective Tax Rate
|
Reported(1)
|
|
|
|
$
|
193
|
|
|
|
$
|
43
|
|
|
|
22.3
|
%
|
|
|
$
|
191
|
|
|
|
$
|
18
|
|
|
|
9.4
|
%
|
Non-GAAP Adjustments(2)
|
|
|
|
92
|
|
|
|
34
|
|
|
|
|
|
|
95
|
|
|
|
35
|
|
|
|
|
Adjusted(3)
|
|
|
|
$
|
285
|
|
|
|
$
|
77
|
|
|
|
27.0
|
%
|
|
|
$
|
286
|
|
|
|
$
|
53
|
|
|
|
18.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________________
(1)
|
|
|
Pre-Tax Income and Income Tax Expense from continuing operations.
|
(2)
|
|
|
Refer to Net Income 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 As
Reported Pre-Tax Income under ASC 740, which employs an annual
effective tax rate method to the results.
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income / Margin reconciliation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2017
|
|
|
Three Months Ended June 30, 2016
|
(in millions)
|
|
|
|
Profit
|
|
|
Revenue
|
|
|
Margin
|
|
|
Profit
|
|
|
Revenue
|
|
|
Margin
|
Reported(1)
|
|
|
|
$
|
193
|
|
|
|
$
|
2,567
|
|
|
|
7.5
|
%
|
|
|
$
|
191
|
|
|
|
$
|
2,793
|
|
|
|
6.8
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and related costs
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
47
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
Non-service retirement-related costs
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
Equity in net income of unconsolidated affiliates
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
Restructuring charges - Fuji Xerox
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
Other expenses, net
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
48
|
|
|
|
|
|
|
|
Adjusted
|
|
|
|
$
|
342
|
|
|
|
$
|
2,567
|
|
|
|
13.3
|
%
|
|
|
$
|
361
|
|
|
|
$
|
2,793
|
|
|
|
12.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________________
(1)
|
|
|
Pre-Tax Income and revenue from continuing operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Financial Ratios reconciliation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2017
|
|
|
Three Months Ended June 30, 2016
|
(in millions)
|
|
|
|
As Reported(1)
|
|
|
Non-service retirement- related costs
|
|
|
Adjusted
|
|
|
As Reported(1)
|
|
|
Non-service retirement- related costs
|
|
|
Adjusted
|
Total Revenue
|
|
|
|
$
|
2,567
|
|
|
|
$
|
-
|
|
|
|
$
|
2,567
|
|
|
|
$
|
2,793
|
|
|
|
$
|
-
|
|
|
|
$
|
2,793
|
|
Total Gross Profit
|
|
|
|
1,031
|
|
|
|
14
|
|
|
|
1,045
|
|
|
|
1,112
|
|
|
|
12
|
|
|
|
1,124
|
|
Post sale revenue
|
|
|
|
2,021
|
|
|
|
-
|
|
|
|
2,021
|
|
|
|
2,143
|
|
|
|
-
|
|
|
|
2,143
|
|
Post sale gross profit
|
|
|
|
875
|
|
|
|
14
|
|
|
|
889
|
|
|
|
919
|
|
|
|
12
|
|
|
|
931
|
|
RD&E
|
|
|
|
106
|
|
|
|
(4
|
)
|
|
|
102
|
|
|
|
119
|
|
|
|
(6
|
)
|
|
|
113
|
|
SAG
|
|
|
|
643
|
|
|
|
(19
|
)
|
|
|
624
|
|
|
|
691
|
|
|
|
(14
|
)
|
|
|
677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Margin
|
|
|
|
40.2
|
%
|
|
|
|
|
|
40.7
|
%
|
|
|
39.8
|
%
|
|
|
|
|
|
40.2
|
%
|
Post sale Gross Margin
|
|
|
|
43.3
|
%
|
|
|
|
|
|
44.0
|
%
|
|
|
42.9
|
%
|
|
|
|
|
|
43.4
|
%
|
RD&E as a % of Revenue
|
|
|
|
4.1
|
%
|
|
|
|
|
|
4.0
|
%
|
|
|
4.3
|
%
|
|
|
|
|
|
4.0
|
%
|
SAG as a % of Revenue
|
|
|
|
25.0
|
%
|
|
|
|
|
|
24.3
|
%
|
|
|
24.7
|
%
|
|
|
|
|
|
24.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________________
(1)
|
|
|
Revenue and costs from continuing operations.
|
|
|
|
|
|
|
|
|
|
Guidance:
|
|
|
|
|
|
|
|
|
|
Earnings per Share
|
|
|
|
|
FY 2017
|
GAAP EPS from Continuing Operations
|
|
|
|
$1.84 - $2.08
|
Non-GAAP Adjustments
|
|
|
|
1.36
|
Adjusted EPS from Continuing Operations
|
|
|
|
$3.20 - $3.44
|
|
|
|
|
|
____________________________ Note: Adjusted EPS guidance
excludes amortization of intangible assets, restructuring and related
costs and non-service retirement-related costs, as well as other
discretely identified adjustments. Current GAAP range reflects an
expected lower level of non-service retirement-related costs than
originally anticipated at the beginning of the year.
|
|
|
|
|
|
|
|
|
Free Cash Flow
|
(in millions)
|
|
|
|
FY 2017 Estimated
|
Operating Cash Flows from Continuing Operations
|
|
|
|
$ 700 - 900
|
Less: Capital Expenditures (including Internal Use Software)
|
|
|
|
(175)
|
Free Cash Flows from Continuing Operations
|
|
|
|
$ 525 - 725
|
|
|
|
|
|
APPENDIX I
|
|
|
|
|
|
|
|
Xerox Corporation
|
Earnings per Common Share
|
(in millions except per share data, shares in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
Basic Earnings (Loss) per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations attributable to Xerox
|
|
|
|
$
|
166
|
|
|
|
$
|
196
|
|
|
|
$
|
212
|
|
|
|
$
|
262
|
|
Accrued dividends on preferred stock
|
|
|
|
(3
|
)
|
|
|
(6
|
)
|
|
|
(7
|
)
|
|
|
(12
|
)
|
Adjusted net income from continuing operations available to common
shareholders
|
|
|
|
$
|
163
|
|
|
|
$
|
190
|
|
|
|
$
|
205
|
|
|
|
$
|
250
|
|
Net loss from discontinued operations attributable to Xerox
|
|
|
|
-
|
|
|
|
(38
|
)
|
|
|
(6
|
)
|
|
|
(73
|
)
|
Adjusted net income available to common shareholders
|
|
|
|
$
|
163
|
|
|
|
$
|
152
|
|
|
|
$
|
199
|
|
|
|
$
|
177
|
|
Weighted average common shares outstanding
|
|
|
|
254,193
|
|
|
|
253,321
|
|
|
|
254,107
|
|
|
|
253,291
|
|
Basic Earnings (Loss) per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
$
|
0.64
|
|
|
|
$
|
0.75
|
|
|
|
$
|
0.81
|
|
|
|
$
|
0.99
|
|
Discontinued operations
|
|
|
|
-
|
|
|
|
(0.15
|
)
|
|
|
(0.03
|
)
|
|
|
(0.29
|
)
|
Total
|
|
|
|
$
|
0.64
|
|
|
|
$
|
0.60
|
|
|
|
$
|
0.78
|
|
|
|
$
|
0.70
|
|
Diluted Earnings (Loss) per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations attributable to Xerox
|
|
|
|
$
|
166
|
|
|
|
$
|
196
|
|
|
|
$
|
212
|
|
|
|
$
|
262
|
|
Accrued dividends on preferred stock
|
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
(7
|
)
|
|
|
(12
|
)
|
Adjusted net income from continuing operations available to common
shareholders
|
|
|
|
$
|
166
|
|
|
|
$
|
190
|
|
|
|
$
|
205
|
|
|
|
$
|
250
|
|
Net loss from discontinued operations attributable to Xerox
|
|
|
|
-
|
|
|
|
(38
|
)
|
|
|
(6
|
)
|
|
|
(73
|
)
|
Adjusted net income available to common shareholders
|
|
|
|
$
|
166
|
|
|
|
$
|
152
|
|
|
|
$
|
199
|
|
|
|
$
|
177
|
|
Weighted average common shares outstanding
|
|
|
|
254,193
|
|
|
|
253,321
|
|
|
|
254,107
|
|
|
|
253,291
|
|
Common shares issuable with respect to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
|
-
|
|
|
|
205
|
|
|
|
-
|
|
|
|
209
|
|
Restricted stock and performance shares
|
|
|
|
2,275
|
|
|
|
1,979
|
|
|
|
2,190
|
|
|
|
1,789
|
|
Convertible preferred stock
|
|
|
|
6,742
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Adjusted weighted average common shares outstanding
|
|
|
|
263,210
|
|
|
|
255,505
|
|
|
|
256,297
|
|
|
|
255,289
|
|
Diluted Earnings (Loss) per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
$
|
0.63
|
|
|
|
$
|
0.75
|
|
|
|
$
|
0.80
|
|
|
|
$
|
0.98
|
|
Discontinued operations
|
|
|
|
-
|
|
|
|
(0.15
|
)
|
|
|
(0.02
|
)
|
|
|
(0.28
|
)
|
Total
|
|
|
|
$
|
0.63
|
|
|
|
$
|
0.60
|
|
|
|
$
|
0.78
|
|
|
|
$
|
0.70
|
|
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
|
|
|
|
-
|
|
|
|
486
|
|
|
|
-
|
|
|
|
483
|
|
Restricted stock and performance shares
|
|
|
|
2,375
|
|
|
|
3,977
|
|
|
|
2,460
|
|
|
|
4,167
|
|
Convertible preferred stock
|
|
|
|
-
|
|
|
|
6,742
|
|
|
|
6,742
|
|
|
|
6,742
|
|
Total Anti-Dilutive Securities
|
|
|
|
2,375
|
|
|
|
11,205
|
|
|
|
9,202
|
|
|
|
11,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per Common Share
|
|
|
|
$
|
0.25
|
|
|
|
$
|
0.31
|
|
|
|
$
|
0.50
|
|
|
|
$
|
0.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
APPENDIX II
Xerox Corporation Geographic Sales Channels and
Product/Offering Definitions
Our business is aligned to a geographic focus and is primarily organized
on the basis of two main go-to-market sales channels, which are
structured to serve a range of customers for our products and services:
-
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.
Our products and offerings include:
-
"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 Global Imaging Systems), as well as workflow
automation services, and Centralized Print Services and Solutions
(CPS). MDS excludes Communication and Marketing Solutions (CMS).
APPENDIX III
Xerox Corporation Correction of Fuji Xerox Misstatement
in Prior Period Financial Statements
Revised Consolidated Statements of Income (Loss) and Non-GAAP
Financial Measures
The following tables reconcile selected lines from the company's first
quarter of 2017 and fiscal years of 2016, 2015 and 2014 Consolidated
Statements of Income (Loss) and applicable non-GAAP Operating
Income/Margin reconciliations from the previously reported amounts to
the revised amounts. The revision did not have an impact on the
company's operating cash flows.
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2017
|
|
|
Year Ended December 31, 2016
|
(in millions)
|
|
|
|
As Reported
|
|
|
Adjustment (1)
|
|
|
As Revised
|
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Revised
|
Equity in net income of unconsolidated affiliates
|
|
|
|
$
|
16
|
|
|
|
$
|
24
|
|
|
|
$
|
40
|
|
|
|
$
|
121
|
|
|
|
$
|
6
|
|
|
|
$
|
127
|
|
Income from Continuing Operations
|
|
|
|
24
|
|
|
|
24
|
|
|
|
48
|
|
|
|
627
|
|
|
|
6
|
|
|
|
633
|
|
Net Income (Loss)
|
|
|
|
18
|
|
|
|
24
|
|
|
|
42
|
|
|
|
(466
|
)
|
|
|
6
|
|
|
|
(460
|
)
|
Net Income (Loss) Attributable to Xerox
|
|
|
|
16
|
|
|
|
24
|
|
|
|
40
|
|
|
|
(477
|
)
|
|
|
6
|
|
|
|
(471
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations attributable to Xerox
|
|
|
|
$
|
22
|
|
|
|
$
|
24
|
|
|
|
$
|
46
|
|
|
|
$
|
616
|
|
|
|
$
|
6
|
|
|
|
$
|
622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings (Loss) per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
$
|
0.07
|
|
|
|
$
|
0.10
|
|
|
|
$
|
0.17
|
|
|
|
$
|
2.33
|
|
|
|
$
|
0.03
|
|
|
|
$
|
2.36
|
|
Total
|
|
|
|
$
|
0.05
|
|
|
|
$
|
0.09
|
|
|
|
$
|
0.14
|
|
|
|
$
|
(1.98
|
)
|
|
|
$
|
0.03
|
|
|
|
$
|
(1.95
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings (Loss) per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
$
|
0.07
|
|
|
|
$
|
0.09
|
|
|
|
$
|
0.16
|
|
|
|
$
|
2.31
|
|
|
|
$
|
0.02
|
|
|
|
$
|
2.33
|
|
Total
|
|
|
|
$
|
0.05
|
|
|
|
$
|
0.09
|
|
|
|
$
|
0.14
|
|
|
|
$
|
(1.96
|
)
|
|
|
$
|
0.03
|
|
|
|
$
|
(1.93
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income
|
|
|
|
$
|
154
|
|
|
|
$
|
24
|
|
|
|
$
|
178
|
|
|
|
$
|
921
|
|
|
|
$
|
6
|
|
|
|
$
|
927
|
|
Adjusted EPS
|
|
|
|
$
|
0.58
|
|
|
|
$
|
0.09
|
|
|
|
$
|
0.67
|
|
|
|
$
|
3.50
|
|
|
|
$
|
0.03
|
|
|
|
$
|
3.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Profit (2)
|
|
|
|
$
|
250
|
|
|
|
$
|
24
|
|
|
|
$
|
274
|
|
|
|
$
|
1,345
|
|
|
|
$
|
6
|
|
|
|
$
|
1,351
|
|
Adjusted Operating Margin
|
|
|
|
10.2
|
%
|
|
|
|
|
|
11.2
|
%
|
|
|
12.5
|
%
|
|
|
|
|
|
12.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________________
(1)
|
|
|
The difference between the $30 million out-of-period adjustment
recorded in the first quarter 2017 and the revision adjustment of
$24 million, primarily relates to the additional adjustments
subsequently identified as part of the IIC review.
|
|
|
|
|
(2)
|
|
|
As reported Adjusted Operating Profit excludes Fuji Xerox
restructuring charges. As reported Adjusted Operating Profit for the
three months ended March 31, 2017 also reflects the reversal of the
$30 million out-of-period adjustment recorded in the first quarter
2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2015
|
|
|
Year Ended December 31, 2014
|
(in millions)
|
|
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Revised
|
Equity in net income of unconsolidated affiliates
|
|
|
|
$
|
135
|
|
|
|
$
|
(26
|
)
|
|
|
$
|
109
|
|
|
|
$
|
160
|
|
|
|
$
|
(18
|
)
|
|
|
$
|
142
|
|
Income from Continuing Operations
|
|
|
|
866
|
|
|
|
(26
|
)
|
|
|
840
|
|
|
|
1,052
|
|
|
|
(18
|
)
|
|
|
1,034
|
|
Net Income
|
|
|
|
492
|
|
|
|
(26
|
)
|
|
|
466
|
|
|
|
1,036
|
|
|
|
(18
|
)
|
|
|
1,018
|
|
Net Income Attributable to Xerox
|
|
|
|
474
|
|
|
|
(26
|
)
|
|
|
448
|
|
|
|
1,013
|
|
|
|
(18
|
)
|
|
|
995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations attributable to Xerox
|
|
|
|
$
|
848
|
|
|
|
$
|
(26
|
)
|
|
|
$
|
822
|
|
|
|
$
|
1,029
|
|
|
|
$
|
(18
|
)
|
|
|
$
|
1,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
$
|
3.10
|
|
|
|
$
|
(0.10
|
)
|
|
|
$
|
3.00
|
|
|
|
$
|
3.48
|
|
|
|
$
|
(0.06
|
)
|
|
|
$
|
3.42
|
|
Total
|
|
|
|
$
|
1.69
|
|
|
|
$
|
(0.10
|
)
|
|
|
$
|
1.59
|
|
|
|
$
|
3.43
|
|
|
|
$
|
(0.06
|
)
|
|
|
$
|
3.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
$
|
3.06
|
|
|
|
$
|
(0.09
|
)
|
|
|
$
|
2.97
|
|
|
|
$
|
3.43
|
|
|
|
$
|
(0.06
|
)
|
|
|
$
|
3.37
|
|
Total
|
|
|
|
$
|
1.67
|
|
|
|
$
|
(0.09
|
)
|
|
|
$
|
1.58
|
|
|
|
$
|
3.38
|
|
|
|
$
|
(0.06
|
)
|
|
|
$
|
3.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income
|
|
|
|
$
|
978
|
|
|
|
$
|
(26
|
)
|
|
|
$
|
952
|
|
|
|
$
|
1,148
|
|
|
|
$
|
(18
|
)
|
|
|
$
|
1,130
|
|
Adjusted EPS
|
|
|
|
$
|
3.55
|
|
|
|
$
|
(0.10
|
)
|
|
|
$
|
3.45
|
|
|
|
$
|
3.83
|
|
|
|
$
|
(0.06
|
)
|
|
|
$
|
3.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Profit (1)
|
|
|
|
$
|
1,461
|
|
|
|
$
|
(26
|
)
|
|
|
$
|
1,435
|
|
|
|
$
|
1,688
|
|
|
|
$
|
(18
|
)
|
|
|
$
|
1,670
|
|
Adjusted Operating Margin
|
|
|
|
12.7
|
%
|
|
|
|
|
|
12.5
|
%
|
|
|
13.3
|
%
|
|
|
|
|
|
13.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
__________________________
(1)
|
|
|
As reported Adjusted Operating Profit excludes Fuji Xerox
restructuring charges.
|
|
|
|
|
Revised Quarterly Results of Operations
The following tables reconcile selected lines from the company's 2016
and 2015 quarterly Consolidated Statements of Income (Loss) from the
previously reported amounts to the revised amounts:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2016
|
|
|
Three Months Ended June 30, 2016
|
(in millions)
|
|
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Revised
|
Equity in net income of unconsolidated affiliates
|
|
|
|
$
|
37
|
|
|
|
$
|
(3
|
)
|
|
|
$
|
34
|
|
|
|
$
|
22
|
|
|
|
$
|
4
|
|
|
|
$
|
26
|
|
Income from Continuing Operations
|
|
|
|
71
|
|
|
|
(3
|
)
|
|
|
68
|
|
|
|
195
|
|
|
|
4
|
|
|
|
199
|
|
Net Income
|
|
|
|
36
|
|
|
|
(3
|
)
|
|
|
33
|
|
|
|
157
|
|
|
|
4
|
|
|
|
161
|
|
Net Income Attributable to Xerox
|
|
|
|
34
|
|
|
|
(3
|
)
|
|
|
31
|
|
|
|
154
|
|
|
|
4
|
|
|
|
158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
$
|
0.25
|
|
|
|
$
|
(0.01
|
)
|
|
|
$
|
0.24
|
|
|
|
$
|
0.74
|
|
|
|
$
|
0.01
|
|
|
|
$
|
0.75
|
|
Total
|
|
|
|
$
|
0.11
|
|
|
|
$
|
(0.01
|
)
|
|
|
$
|
0.10
|
|
|
|
$
|
0.59
|
|
|
|
$
|
0.01
|
|
|
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
$
|
0.24
|
|
|
|
$
|
(0.01
|
)
|
|
|
$
|
0.23
|
|
|
|
$
|
0.73
|
|
|
|
$
|
0.02
|
|
|
|
$
|
0.75
|
|
Total
|
|
|
|
$
|
0.11
|
|
|
|
$
|
(0.01
|
)
|
|
|
$
|
0.10
|
|
|
|
$
|
0.58
|
|
|
|
$
|
0.02
|
|
|
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income
|
|
|
|
$
|
186
|
|
|
|
$
|
(3
|
)
|
|
|
$
|
183
|
|
|
|
$
|
253
|
|
|
|
$
|
4
|
|
|
|
$
|
257
|
|
Adjusted EPS
|
|
|
|
$
|
0.70
|
|
|
|
$
|
(0.01
|
)
|
|
|
$
|
0.69
|
|
|
|
$
|
0.97
|
|
|
|
$
|
0.01
|
|
|
|
$
|
0.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Profit (1)
|
|
|
|
$
|
274
|
|
|
|
$
|
(3
|
)
|
|
|
$
|
271
|
|
|
|
$
|
357
|
|
|
|
$
|
4
|
|
|
|
$
|
361
|
|
Adjusted Operating Margin
|
|
|
|
10.5
|
%
|
|
|
|
|
|
10.4
|
%
|
|
|
12.8
|
%
|
|
|
|
|
|
12.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2016
|
|
|
Three Months Ended December 31, 2016
|
(in millions)
|
|
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Revised
|
Equity in net income of unconsolidated affiliates
|
|
|
|
$
|
39
|
|
|
|
$
|
1
|
|
|
|
$
|
40
|
|
|
|
$
|
23
|
|
|
|
$
|
4
|
|
|
|
$
|
27
|
|
Income from Continuing Operations
|
|
|
|
177
|
|
|
|
1
|
|
|
|
178
|
|
|
|
184
|
|
|
|
4
|
|
|
|
188
|
|
Net Income (Loss)
|
|
|
|
185
|
|
|
|
1
|
|
|
|
186
|
|
|
|
(844
|
)
|
|
|
4
|
|
|
|
(840
|
)
|
Net Income (Loss) Attributable to Xerox
|
|
|
|
182
|
|
|
|
1
|
|
|
|
183
|
|
|
|
(847
|
)
|
|
|
4
|
|
|
|
(843
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings (Loss) per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
$
|
0.66
|
|
|
|
$
|
-
|
|
|
|
$
|
0.66
|
|
|
|
$
|
0.69
|
|
|
|
$
|
0.02
|
|
|
|
$
|
0.71
|
|
Total
|
|
|
|
$
|
0.69
|
|
|
|
$
|
-
|
|
|
|
$
|
0.69
|
|
|
|
$
|
(3.37
|
)
|
|
|
$
|
0.02
|
|
|
|
$
|
(3.35
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings (Loss) per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
$
|
0.65
|
|
|
|
$
|
0.01
|
|
|
|
$
|
0.66
|
|
|
|
$
|
0.68
|
|
|
|
$
|
0.02
|
|
|
|
$
|
0.70
|
|
Total
|
|
|
|
$
|
0.68
|
|
|
|
$
|
0.01
|
|
|
|
$
|
0.69
|
|
|
|
$
|
(3.32
|
)
|
|
|
$
|
0.02
|
|
|
|
$
|
(3.30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income
|
|
|
|
$
|
222
|
|
|
|
$
|
1
|
|
|
|
$
|
223
|
|
|
|
$
|
260
|
|
|
|
$
|
4
|
|
|
|
$
|
264
|
|
Adjusted EPS
|
|
|
|
$
|
0.84
|
|
|
|
$
|
-
|
|
|
|
$
|
0.84
|
|
|
|
$
|
0.99
|
|
|
|
$
|
0.01
|
|
|
|
$
|
1.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Profit (1)
|
|
|
|
$
|
330
|
|
|
|
$
|
1
|
|
|
|
$
|
331
|
|
|
|
$
|
384
|
|
|
|
$
|
4
|
|
|
|
$
|
388
|
|
Adjusted Operating Margin
|
|
|
|
12.6
|
%
|
|
|
|
|
|
12.6
|
%
|
|
|
14.0
|
%
|
|
|
|
|
|
14.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________________
(1)
|
|
|
As reported Adjusted Operating Profit excludes Fuji Xerox
restructuring charges.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2015
|
|
|
Three Months Ended June 30, 2015
|
(in millions)
|
|
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Revised
|
Equity in net income of unconsolidated affiliates
|
|
|
|
$
|
34
|
|
|
|
$
|
(18
|
)
|
|
|
$
|
16
|
|
|
|
$
|
29
|
|
|
|
$
|
(4
|
)
|
|
|
$
|
25
|
|
Income from Continuing Operations
|
|
|
|
189
|
|
|
|
(18
|
)
|
|
|
171
|
|
|
|
210
|
|
|
|
(4
|
)
|
|
|
206
|
|
Net Income
|
|
|
|
230
|
|
|
|
(18
|
)
|
|
|
212
|
|
|
|
17
|
|
|
|
(4
|
)
|
|
|
13
|
|
Net Income Attributable to Xerox
|
|
|
|
225
|
|
|
|
(18
|
)
|
|
|
207
|
|
|
|
12
|
|
|
|
(4
|
)
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
$
|
0.64
|
|
|
|
$
|
(0.06
|
)
|
|
|
$
|
0.58
|
|
|
|
$
|
0.73
|
|
|
|
$
|
(0.01
|
)
|
|
|
$
|
0.72
|
|
Total
|
|
|
|
$
|
0.79
|
|
|
|
$
|
(0.07
|
)
|
|
|
$
|
0.72
|
|
|
|
$
|
0.02
|
|
|
|
$
|
(0.01
|
)
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
$
|
0.63
|
|
|
|
$
|
(0.06
|
)
|
|
|
$
|
0.57
|
|
|
|
$
|
0.72
|
|
|
|
$
|
(0.01
|
)
|
|
|
$
|
0.71
|
|
Total
|
|
|
|
$
|
0.78
|
|
|
|
$
|
(0.07
|
)
|
|
|
$
|
0.71
|
|
|
|
$
|
0.02
|
|
|
|
$
|
(0.01
|
)
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income
|
|
|
|
$
|
229
|
|
|
|
$
|
(18
|
)
|
|
|
$
|
211
|
|
|
|
$
|
225
|
|
|
|
$
|
(4
|
)
|
|
|
$
|
221
|
|
Adjusted EPS
|
|
|
|
$
|
0.79
|
|
|
|
$
|
(0.06
|
)
|
|
|
$
|
0.73
|
|
|
|
$
|
0.80
|
|
|
|
$
|
(0.02
|
)
|
|
|
$
|
0.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Profit (1)
|
|
|
|
$
|
343
|
|
|
|
$
|
(18
|
)
|
|
|
$
|
325
|
|
|
|
$
|
353
|
|
|
|
$
|
(4
|
)
|
|
|
$
|
349
|
|
Adjusted Operating Margin
|
|
|
|
12.2
|
%
|
|
|
|
|
|
11.6
|
%
|
|
|
12.1
|
%
|
|
|
|
|
|
11.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2015
|
|
|
Three Months Ended December 31, 2015
|
(in millions)
|
|
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Revised
|
Equity in net income of unconsolidated affiliates
|
|
|
|
$
|
40
|
|
|
|
$
|
-
|
|
|
|
$
|
40
|
|
|
|
$
|
32
|
|
|
|
$
|
(4
|
)
|
|
|
$
|
28
|
|
Income from Continuing Operations
|
|
|
|
206
|
|
|
|
-
|
|
|
|
206
|
|
|
|
261
|
|
|
|
(4
|
)
|
|
|
257
|
|
Net (Loss) Income
|
|
|
|
(31
|
)
|
|
|
-
|
|
|
|
(31
|
)
|
|
|
276
|
|
|
|
(4
|
)
|
|
|
272
|
|
Net (Loss) Income Attributable to Xerox
|
|
|
|
(34
|
)
|
|
|
-
|
|
|
|
(34
|
)
|
|
|
271
|
|
|
|
(4
|
)
|
|
|
267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (Loss) Earnings per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
$
|
0.75
|
|
|
|
$
|
-
|
|
|
|
$
|
0.75
|
|
|
|
$
|
0.99
|
|
|
|
$
|
(0.02
|
)
|
|
|
$
|
0.97
|
|
Total
|
|
|
|
$
|
(0.16
|
)
|
|
|
$
|
-
|
|
|
|
$
|
(0.16
|
)
|
|
|
$
|
1.05
|
|
|
|
$
|
(0.02
|
)
|
|
|
$
|
1.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (Loss) Earnings per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
$
|
0.75
|
|
|
|
$
|
-
|
|
|
|
$
|
0.75
|
|
|
|
$
|
0.98
|
|
|
|
$
|
(0.02
|
)
|
|
|
$
|
0.96
|
|
Total
|
|
|
|
$
|
(0.16
|
)
|
|
|
$
|
-
|
|
|
|
$
|
(0.16
|
)
|
|
|
$
|
1.04
|
|
|
|
$
|
(0.02
|
)
|
|
|
$
|
1.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income
|
|
|
|
$
|
239
|
|
|
|
$
|
-
|
|
|
|
$
|
239
|
|
|
|
$
|
285
|
|
|
|
$
|
(4
|
)
|
|
|
$
|
281
|
|
Adjusted EPS
|
|
|
|
$
|
0.88
|
|
|
|
$
|
-
|
|
|
|
$
|
0.88
|
|
|
|
$
|
1.09
|
|
|
|
$
|
(0.01
|
)
|
|
|
$
|
1.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Profit (1)
|
|
|
|
$
|
372
|
|
|
|
$
|
-
|
|
|
|
$
|
372
|
|
|
|
$
|
393
|
|
|
|
$
|
(4
|
)
|
|
|
$
|
389
|
|
Adjusted Operating Margin
|
|
|
|
13.4
|
%
|
|
|
|
|
|
13.4
|
%
|
|
|
13.3
|
%
|
|
|
|
|
|
13.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________________
(1)
|
|
|
As reported Adjusted Operating Profit excludes Fuji Xerox
restructuring charges.
|
|
|
|
|
NOTE: The sum of quarterly earnings per share may differ from the
full-year amounts due to rounding, or in the case of diluted earnings
per share, because securities that are anti-dilutive in certain quarters
may not be anti-dilutive on a full year-year basis.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170801005496/en/
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