x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
New York | 16-0468020 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |
P.O. Box 4505, 45 Glover Avenue Norwalk, Connecticut | 06856-4505 | |
(Address of principal executive offices) | (Zip Code) |
Class | Outstanding at September 30, 2014 | |
Common Stock, $1 par value | 1,141,555,719 shares |
Page | ||
Item 1. | ||
Condensed Consolidated Statements of Comprehensive (Loss) Income | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 6. | ||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(in millions, except per-share data) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Revenues | ||||||||||||||||
Sales | $ | 1,279 | $ | 1,360 | $ | 3,891 | $ | 4,084 | ||||||||
Outsourcing, maintenance and rentals | 3,745 | 3,742 | 11,315 | 11,345 | ||||||||||||
Financing | 96 | 133 | 294 | 364 | ||||||||||||
Total Revenues | 5,120 | 5,235 | 15,500 | 15,793 | ||||||||||||
Costs and Expenses | ||||||||||||||||
Cost of sales | 777 | 859 | 2,399 | 2,589 | ||||||||||||
Cost of outsourcing, maintenance and rentals | 2,733 | 2,686 | 8,250 | 8,150 | ||||||||||||
Cost of financing | 35 | 40 | 107 | 125 | ||||||||||||
Research, development and engineering expenses | 138 | 145 | 424 | 448 | ||||||||||||
Selling, administrative and general expenses | 951 | 1,015 | 2,879 | 3,090 | ||||||||||||
Restructuring and asset impairment charges | 28 | 35 | 93 | 60 | ||||||||||||
Amortization of intangible assets | 85 | 83 | 253 | 249 | ||||||||||||
Other expenses, net | 73 | 38 | 179 | 115 | ||||||||||||
Total Costs and Expenses | 4,820 | 4,901 | 14,584 | 14,826 | ||||||||||||
Income before Income Taxes and Equity Income | 300 | 334 | 916 | 967 | ||||||||||||
Income tax expense | 71 | 85 | 202 | 203 | ||||||||||||
Equity in net income of unconsolidated affiliates | 44 | 43 | 119 | 126 | ||||||||||||
Income from Continuing Operations | 273 | 292 | 833 | 890 | ||||||||||||
Loss from discontinued operations, net of tax | (1 | ) | (1 | ) | (3 | ) | (22 | ) | ||||||||
Net Income | 272 | 291 | 830 | 868 | ||||||||||||
Less: Net income attributable to noncontrolling interests | 6 | 5 | 17 | 15 | ||||||||||||
Net Income Attributable to Xerox | $ | 266 | $ | 286 | $ | 813 | $ | 853 | ||||||||
Amounts Attributable to Xerox: | ||||||||||||||||
Net income from continuing operations | $ | 267 | $ | 287 | $ | 816 | $ | 875 | ||||||||
Net loss from discontinued operations | (1 | ) | (1 | ) | (3 | ) | (22 | ) | ||||||||
Net Income Attributable to Xerox | $ | 266 | $ | 286 | $ | 813 | $ | 853 | ||||||||
Basic Earnings per Share: | ||||||||||||||||
Continuing operations | $ | 0.23 | $ | 0.23 | $ | 0.69 | $ | 0.70 | ||||||||
Discontinued operations | — | — | (0.01 | ) | (0.02 | ) | ||||||||||
Total Basic Earnings per Share | $ | 0.23 | $ | 0.23 | $ | 0.68 | $ | 0.68 | ||||||||
Diluted Earnings per Share: | ||||||||||||||||
Continuing operations | $ | 0.22 | $ | 0.22 | $ | 0.68 | $ | 0.68 | ||||||||
Discontinued operations | — | — | (0.01 | ) | (0.01 | ) | ||||||||||
Total Diluted Earnings per Share | $ | 0.22 | $ | 0.22 | $ | 0.67 | $ | 0.67 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Net income | $ | 272 | $ | 291 | $ | 830 | $ | 868 | ||||||||
Less: Net income attributable to noncontrolling interests | 6 | 5 | 17 | 15 | ||||||||||||
Net Income Attributable to Xerox | 266 | 286 | 813 | 853 | ||||||||||||
Other Comprehensive (Loss) Income, Net(1): | ||||||||||||||||
Translation adjustments, net | (492 | ) | 269 | (401 | ) | (178 | ) | |||||||||
Unrealized (losses) gains, net | (9 | ) | 14 | 32 | 7 | |||||||||||
Changes in defined benefit plans, net | 73 | (38 | ) | (81 | ) | 121 | ||||||||||
Other Comprehensive (Loss) Income, Net | (428 | ) | 245 | (450 | ) | (50 | ) | |||||||||
Less: Other comprehensive loss, net attributable to noncontrolling interests | (2 | ) | — | (1 | ) | — | ||||||||||
Other Comprehensive (Loss) Income, Net Attributable to Xerox | (426 | ) | 245 | (449 | ) | (50 | ) | |||||||||
Comprehensive (Loss) Income, Net | (156 | ) | 536 | 380 | 818 | |||||||||||
Less: Comprehensive income, net attributable to noncontrolling interests | 4 | 5 | 16 | 15 | ||||||||||||
Comprehensive (Loss) Income, Net Attributable to Xerox | $ | (160 | ) | $ | 531 | $ | 364 | $ | 803 |
(in millions, except share data in thousands) | September 30, 2014 | December 31, 2013 | ||||||
Assets | ||||||||
Cash and cash equivalents | $ | 1,015 | $ | 1,764 | ||||
Accounts receivable, net | 3,026 | 2,929 | ||||||
Billed portion of finance receivables, net | 126 | 113 | ||||||
Finance receivables, net | 1,427 | 1,500 | ||||||
Inventories | 1,069 | 998 | ||||||
Other current assets | 1,219 | 1,207 | ||||||
Total current assets | 7,882 | 8,511 | ||||||
Finance receivables due after one year, net | 2,708 | 2,917 | ||||||
Equipment on operating leases, net | 526 | 559 | ||||||
Land, buildings and equipment, net | 1,388 | 1,466 | ||||||
Investments in affiliates, at equity | 1,365 | 1,285 | ||||||
Intangible assets, net | 2,317 | 2,503 | ||||||
Goodwill | 9,351 | 9,205 | ||||||
Other long-term assets | 2,340 | 2,590 | ||||||
Total Assets | $ | 27,877 | $ | 29,036 | ||||
Liabilities and Equity | ||||||||
Short-term debt and current portion of long-term debt | $ | 1,305 | $ | 1,117 | ||||
Accounts payable | 1,550 | 1,626 | ||||||
Accrued compensation and benefits costs | 800 | 734 | ||||||
Unearned income | 546 | 496 | ||||||
Other current liabilities | 1,502 | 1,713 | ||||||
Total current liabilities | 5,703 | 5,686 | ||||||
Long-term debt | 6,355 | 6,904 | ||||||
Pension and other benefit liabilities | 2,248 | 2,136 | ||||||
Post-retirement medical benefits | 761 | 785 | ||||||
Other long-term liabilities | 553 | 757 | ||||||
Total Liabilities | 15,620 | 16,268 | ||||||
Series A Convertible Preferred Stock | 349 | 349 | ||||||
Common stock | 1,160 | 1,210 | ||||||
Additional paid-in capital | 4,710 | 5,282 | ||||||
Treasury stock, at cost | (252 | ) | (252 | ) | ||||
Retained earnings | 9,412 | 8,839 | ||||||
Accumulated other comprehensive loss | (3,228 | ) | (2,779 | ) | ||||
Xerox shareholders’ equity | 11,802 | 12,300 | ||||||
Noncontrolling interests | 106 | 119 | ||||||
Total Equity | 11,908 | 12,419 | ||||||
Total Liabilities and Equity | $ | 27,877 | $ | 29,036 | ||||
Shares of common stock issued | 1,160,568 | 1,210,321 | ||||||
Treasury stock | (19,012 | ) | (22,001 | ) | ||||
Shares of common stock outstanding | 1,141,556 | 1,188,320 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Cash Flows from Operating Activities: | ||||||||||||||||
Net income | $ | 272 | $ | 291 | $ | 830 | $ | 868 | ||||||||
Adjustments required to reconcile net income to cash flows from operating activities: | ||||||||||||||||
Depreciation and amortization | 349 | 340 | 1,070 | 1,012 | ||||||||||||
Provision for receivables | 18 | 27 | 56 | 86 | ||||||||||||
Provision for inventory | 6 | 10 | 20 | 22 | ||||||||||||
Net gain on sales of businesses and assets | (9 | ) | (24 | ) | (38 | ) | (14 | ) | ||||||||
Undistributed equity in net income of unconsolidated affiliates | (37 | ) | (41 | ) | (77 | ) | (85 | ) | ||||||||
Stock-based compensation | 26 | 19 | 76 | 78 | ||||||||||||
Restructuring and asset impairment charges | 28 | 35 | 93 | 60 | ||||||||||||
Payments for restructurings | (31 | ) | (34 | ) | (103 | ) | (107 | ) | ||||||||
Contributions to defined benefit pension plans | (101 | ) | (64 | ) | (206 | ) | (162 | ) | ||||||||
Increase in accounts receivable and billed portion of finance receivables | (96 | ) | (55 | ) | (485 | ) | (557 | ) | ||||||||
Collections of deferred proceeds from sales of receivables | 106 | 140 | 332 | 371 | ||||||||||||
Increase in inventories | (34 | ) | (41 | ) | (137 | ) | (182 | ) | ||||||||
Increase in equipment on operating leases | (81 | ) | (79 | ) | (204 | ) | (207 | ) | ||||||||
Decrease in finance receivables | 28 | 400 | 82 | 519 | ||||||||||||
Collections on beneficial interest from sales of finance receivables | 20 | 16 | 62 | 43 | ||||||||||||
Increase in other current and long-term assets | (61 | ) | (38 | ) | (179 | ) | (158 | ) | ||||||||
Increase (decrease) in accounts payable and accrued compensation | 126 | (61 | ) | 38 | (123 | ) | ||||||||||
Increase (decrease) in other current and long-term liabilities | 28 | 77 | (80 | ) | (34 | ) | ||||||||||
Net change in income tax assets and liabilities | 56 | 56 | 128 | 95 | ||||||||||||
Net change in derivative assets and liabilities | (4 | ) | 13 | (25 | ) | (28 | ) | |||||||||
Other operating, net | (14 | ) | (26 | ) | (47 | ) | (90 | ) | ||||||||
Net cash provided by operating activities | 595 | 961 | 1,206 | 1,407 | ||||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||
Cost of additions to land, buildings and equipment | (91 | ) | (84 | ) | (277 | ) | (253 | ) | ||||||||
Proceeds from sales of land, buildings and equipment | 8 | 41 | 43 | 52 | ||||||||||||
Cost of additions to internal use software | (21 | ) | (18 | ) | (61 | ) | (63 | ) | ||||||||
Proceeds from sale of businesses | 1 | — | 16 | 11 | ||||||||||||
Acquisitions, net of cash acquired | (25 | ) | (24 | ) | (306 | ) | (155 | ) | ||||||||
Other investing, net | — | 3 | 11 | 9 | ||||||||||||
Net cash used in investing activities | (128 | ) | (82 | ) | (574 | ) | (399 | ) | ||||||||
Cash Flows from Financing Activities: | ||||||||||||||||
Net payments on debt | (40 | ) | (610 | ) | (335 | ) | (931 | ) | ||||||||
Common stock dividends | (77 | ) | (77 | ) | (218 | ) | (201 | ) | ||||||||
Preferred stock dividends | (6 | ) | (6 | ) | (18 | ) | (18 | ) | ||||||||
Proceeds from issuances of common stock | 10 | 43 | 49 | 96 | ||||||||||||
Excess tax benefits from stock-based compensation | 9 | 12 | 15 | 13 | ||||||||||||
Payments to acquire treasury stock, including fees | (251 | ) | (162 | ) | (730 | ) | (172 | ) | ||||||||
Repurchases related to stock-based compensation | (39 | ) | (44 | ) | (40 | ) | (54 | ) | ||||||||
Distributions to noncontrolling interests | (23 | ) | (27 | ) | (40 | ) | (32 | ) | ||||||||
Other financing | — | — | (10 | ) | (3 | ) | ||||||||||
Net cash used in financing activities | (417 | ) | (871 | ) | (1,327 | ) | (1,302 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | (42 | ) | 11 | (54 | ) | (4 | ) | |||||||||
Increase (decrease) in cash and cash equivalents | 8 | 19 | (749 | ) | (298 | ) | ||||||||||
Cash and cash equivalents at beginning of period | 1,007 | 929 | 1,764 | 1,246 | ||||||||||||
Cash and Cash Equivalents at End of Period | $ | 1,015 | $ | 948 | $ | 1,015 | $ | 948 |
• | Business Process Outsourcing (BPO) |
• | Document Outsourcing (which includes Managed Print Services) (DO) |
• | Information Technology Outsourcing (ITO) |
• | “Entry,” which includes A4 devices and desktop printers; to |
• | “Mid-range,” which includes A3 devices that generally serve workgroup environments in midsize to large enterprises and includes products that fall into the following market categories: Color 41+ ppm priced at less than $100K and Light Production 91+ ppm priced at less than $100K; to |
• | “High-end,” which includes production printing and publishing systems that generally serve the graphic communications marketplace and large enterprises. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
Segment Revenue | Segment Profit (Loss) | Segment Revenue | Segment Profit(Loss) | ||||||||||||
2014 | |||||||||||||||
Services | $ | 2,948 | $ | 262 | $ | 8,852 | $ | 769 | |||||||
Document Technology | 2,029 | 285 | 6,199 | 841 | |||||||||||
Other | 143 | (85 | ) | 449 | (211 | ) | |||||||||
Total | $ | 5,120 | $ | 462 | $ | 15,500 | $ | 1,399 | |||||||
2013 | |||||||||||||||
Services | $ | 2,932 | $ | 292 | $ | 8,787 | $ | 865 | |||||||
Document Technology | 2,159 | 261 | 6,557 | 692 | |||||||||||
Other | 144 | (56 | ) | 449 | (186 | ) | |||||||||
Total | $ | 5,235 | $ | 497 | $ | 15,793 | $ | 1,371 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
Reconciliation to Pre-tax Income | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Segment Profit | $ | 462 | $ | 497 | $ | 1,399 | $ | 1,371 | ||||||||
Reconciling items: | ||||||||||||||||
Restructuring and related costs(1) | (34 | ) | (35 | ) | (109 | ) | (60 | ) | ||||||||
Restructuring charges of Fuji Xerox | (1 | ) | (3 | ) | (3 | ) | (8 | ) | ||||||||
Amortization of intangible assets | (85 | ) | (83 | ) | (253 | ) | (249 | ) | ||||||||
Litigation matters (Q1 2013 only) | — | — | — | 37 | ||||||||||||
Equity in net income of unconsolidated affiliates | (44 | ) | (43 | ) | (119 | ) | (126 | ) | ||||||||
Other | 2 | 1 | 1 | 2 | ||||||||||||
Pre-tax Income | $ | 300 | $ | 334 | $ | 916 | $ | 967 |
(1) | Includes Restructuring and asset impairment charges of $28 and $93 for the three and nine months ended September 30, 2014, respectively, and Business transformation costs of $6 and $16 for the three and nine months ended September 30, 2014, respectively. Business transformation costs represent incremental costs incurred directly in support of our business transformation and restructuring initiatives such as compensation costs for overlapping staff, consulting costs and training costs. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Revenues | $ | 6 | $ | 109 | $ | 45 | $ | 442 | ||||||||
(Loss) Income from operations | (1 | ) | — | (1 | ) | 4 | ||||||||||
Loss on disposal | (1 | ) | (1 | ) | (1 | ) | (22 | ) | ||||||||
Net Loss Before Income Taxes | (2 | ) | (1 | ) | (2 | ) | (18 | ) | ||||||||
Income tax (benefit) expense | (1 | ) | — | 1 | 4 | |||||||||||
Loss From Discontinued Operations, Net of Tax | $ | (1 | ) | $ | (1 | ) | $ | (3 | ) | $ | (22 | ) |
September 30, 2014 | December 31, 2013 | |||||||
Amounts billed or billable | $ | 2,760 | $ | 2,651 | ||||
Unbilled amounts | 364 | 390 | ||||||
Allowance for doubtful accounts | (98 | ) | (112 | ) | ||||
Accounts Receivable, Net | $ | 3,026 | $ | 2,929 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Accounts receivable sales | $ | 696 | $ | 814 | $ | 2,244 | $ | 2,587 | |||||||
Deferred proceeds | 94 | 125 | 314 | 384 | |||||||||||
Loss on sales of accounts receivable | 4 | 4 | 12 | 13 | |||||||||||
Estimated decrease to operating cash flows(1) | (22 | ) | (75 | ) | (42 | ) | (42 | ) |
(1) | Represents the difference between current and prior period receivable sales adjusted for the effects of: (i) the deferred proceeds, (ii) collections prior to the end of the quarter and (iii) currency. |
Year Ended December 31, | ||||||||
2013 | 2012 | |||||||
Net carrying value (NCV) sold | $ | 676 | $ | 682 | ||||
Allowance included in NCV | 17 | 18 | ||||||
Cash proceeds received | 635 | 630 | ||||||
Beneficial interests received | 86 | 101 | ||||||
Pre-tax gain on sales | 40 | 44 | ||||||
Net fees and expenses | 5 | 5 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Net cash received for sales of finance receivables(1) | $ | — | $ | 384 | $ | — | $ | 384 | ||||||||
Impact from prior sales of finance receivables(2) | (125 | ) | (84 | ) | (411 | ) | (258 | ) | ||||||||
Collections on beneficial interest | 23 | 16 | 74 | 43 | ||||||||||||
Estimated (Decrease) Increase to Operating Cash Flows | $ | (102 | ) | $ | 316 | $ | (337 | ) | $ | 169 |
(1) | Net of beneficial interest, fees and expenses. |
(2) | Represents cash that would have been collected had we not sold finance receivables. |
Allowance for Credit Losses: | United States | Canada | Europe | Other(3) | Total | |||||||||||||||
Balance at December 31, 2013 | $ | 45 | $ | 22 | $ | 81 | $ | 6 | $ | 154 | ||||||||||
Provision | 3 | 2 | 7 | 3 | 15 | |||||||||||||||
Charge-offs | (1 | ) | (4 | ) | (5 | ) | (2 | ) | (12 | ) | ||||||||||
Recoveries and other(1) | 1 | — | — | — | 1 | |||||||||||||||
Balance at March 31, 2014 | $ | 48 | $ | 20 | $ | 83 | $ | 7 | $ | 158 | ||||||||||
Provision | 1 | 2 | 11 | 1 | 15 | |||||||||||||||
Charge-offs | — | (4 | ) | (8 | ) | 1 | (11 | ) | ||||||||||||
Recoveries and other(1) | — | 2 | — | — | 2 | |||||||||||||||
Balance at June 30, 2014 | $ | 49 | $ | 20 | $ | 86 | $ | 9 | $ | 164 | ||||||||||
Provision | (1 | ) | 2 | 7 | 2 | 10 | ||||||||||||||
Charge-offs | (2 | ) | (2 | ) | (7 | ) | (1 | ) | (12 | ) | ||||||||||
Recoveries and other(1) | 1 | 1 | (6 | ) | (1 | ) | (5 | ) | ||||||||||||
Balance at September 30, 2014 | $ | 47 | $ | 21 | $ | 80 | $ | 9 | $ | 157 | ||||||||||
Finance receivables as of September 30, 2014 collectively evaluated for impairment(2) | $ | 1,699 | $ | 404 | $ | 1,952 | $ | 363 | $ | 4,418 | ||||||||||
Balance at December 31, 2012 | $ | 50 | $ | 31 | $ | 85 | $ | 4 | $ | 170 | ||||||||||
Provision | 2 | 2 | 9 | — | 13 | |||||||||||||||
Charge-offs | (2 | ) | (4 | ) | (15 | ) | — | (21 | ) | |||||||||||
Recoveries and other(1) | 1 | — | (3 | ) | — | (2 | ) | |||||||||||||
Balance at March 31, 2013 | $ | 51 | $ | 29 | $ | 76 | $ | 4 | $ | 160 | ||||||||||
Provision | 6 | 3 | 10 | 2 | 21 | |||||||||||||||
Charge-offs | (2 | ) | (3 | ) | (14 | ) | (1 | ) | (20 | ) | ||||||||||
Recoveries and other(1) | (1 | ) | — | 2 | — | 1 | ||||||||||||||
Balance at June 30, 2013 | $ | 54 | $ | 29 | $ | 74 | $ | 5 | $ | 162 | ||||||||||
Provision | 3 | 3 | 12 | 1 | 19 | |||||||||||||||
Charge-offs | (3 | ) | (4 | ) | (12 | ) | — | (19 | ) | |||||||||||
Recoveries and other(1) | 1 | 2 | 2 | (1 | ) | 4 | ||||||||||||||
Sale of finance receivables | (12 | ) | — | — | — | (12 | ) | |||||||||||||
Balance at September 30, 2013 | $ | 43 | $ | 30 | $ | 76 | $ | 5 | $ | 154 | ||||||||||
Finance receivables as of September 30, 2013 collectively evaluated for impairment(2) | $ | 1,587 | $ | 696 | $ | 2,279 | $ | 270 | $ | 4,832 |
(1) | Includes the impacts of foreign currency translation and adjustments to reserves necessary to reflect events of non-payment such as customer accommodations and contract terminations. |
(2) | Total Finance receivables exclude residual values of $0 and $1, and the allowance for credit losses of $157 and $154 at September 30, 2014 and 2013, respectively. |
(3) | Includes developing market countries and smaller units. |
• | Investment grade: This rating includes accounts with excellent to good business credit, asset quality and the capacity to meet financial obligations. These customers are less susceptible to adverse effects due to shifts in economic conditions or changes in circumstance. The rating generally equates to a Standard & Poors (S&P) rating of BBB- or better. Loss rates in this category are normally minimal at less than 1%. |
• | Non-investment grade: This rating includes accounts with average credit risk that are more susceptible to loss in the event of adverse business or economic conditions. This rating generally equates to a BB S&P rating. Although we experience higher loss rates associated with this customer class, we believe the risk is somewhat mitigated by the fact that our leases are fairly well dispersed across a large and diverse customer base. In addition, the higher loss rates are largely offset by the higher rates of return we obtain on such leases. Loss rates in this category are generally in the range of 2% to 4%. |
• | Substandard: This rating includes accounts that have marginal credit risk such that the customer’s ability to make repayment is impaired or may likely become impaired. We use numerous strategies to mitigate risk including higher rates of interest, prepayments, personal guarantees, etc. Accounts in this category include customers who were downgraded during the term of the lease from investment and non-investment grade status when the lease was originated. Accordingly, there is a distinct possibility for a loss of principal and interest or customer default. The loss rates in this category are around 10%. |
September 30, 2014 | December 31, 2013 | ||||||||||||||||||||||||||||||
Investment Grade | Non-investment Grade | Substandard | Total Finance Receivables | Investment Grade | Non-investment Grade | Substandard | Total Finance Receivables | ||||||||||||||||||||||||
Finance and other services | $ | 188 | $ | 143 | $ | 52 | $ | 383 | $ | 189 | $ | 102 | $ | 34 | $ | 325 | |||||||||||||||
Government and education | 600 | 14 | 4 | 618 | 656 | 12 | 3 | 671 | |||||||||||||||||||||||
Graphic arts | 139 | 72 | 97 | 308 | 142 | 59 | 108 | 309 | |||||||||||||||||||||||
Industrial | 96 | 34 | 19 | 149 | 92 | 28 | 15 | 135 | |||||||||||||||||||||||
Healthcare | 80 | 25 | 14 | 119 | 74 | 25 | 16 | 115 | |||||||||||||||||||||||
Other | 55 | 37 | 30 | 122 | 55 | 27 | 29 | 111 | |||||||||||||||||||||||
Total United States | 1,158 | 325 | 216 | 1,699 | 1,208 | 253 | 205 | 1,666 | |||||||||||||||||||||||
Finance and other services | 49 | 26 | 11 | 86 | 46 | 18 | 11 | 75 | |||||||||||||||||||||||
Government and education | 78 | 8 | 2 | 88 | 96 | 9 | 1 | 106 | |||||||||||||||||||||||
Graphic arts | 54 | 48 | 36 | 138 | 56 | 52 | 48 | 156 | |||||||||||||||||||||||
Industrial | 23 | 12 | 5 | 40 | 23 | 12 | 6 | 41 | |||||||||||||||||||||||
Other | 33 | 15 | 4 | 52 | 29 | 9 | 5 | 43 | |||||||||||||||||||||||
Total Canada(1) | 237 | 109 | 58 | 404 | 250 | 100 | 71 | 421 | |||||||||||||||||||||||
France | 255 | 272 | 123 | 650 | 282 | 314 | 122 | 718 | |||||||||||||||||||||||
U.K./Ireland | 170 | 170 | 35 | 375 | 199 | 171 | 42 | 412 | |||||||||||||||||||||||
Central(2) | 245 | 299 | 38 | 582 | 287 | 394 | 43 | 724 | |||||||||||||||||||||||
Southern(3) | 73 | 153 | 43 | 269 | 102 | 187 | 58 | 347 | |||||||||||||||||||||||
Nordics(4) | 26 | 50 | — | 76 | 46 | 42 | 3 | 91 | |||||||||||||||||||||||
Total Europe | 769 | 944 | 239 | 1,952 | 916 | 1,108 | 268 | 2,292 | |||||||||||||||||||||||
Other | 202 | 132 | 29 | 363 | 226 | 69 | 9 | 304 | |||||||||||||||||||||||
Total | $ | 2,366 | $ | 1,510 | $ | 542 | $ | 4,418 | $ | 2,600 | $ | 1,530 | $ | 553 | $ | 4,683 |
(1) | Historically, the Company had included certain Canadian customers with graphic arts activity in their industry sector. In 2014, these customers were reclassified to Graphic Arts to better reflect their primary business activity. The December 31, 2013 amounts have been revised to reclassify $33 of graphic arts customers from Finance and Other Services and to reclassify $38 from Industrial to be consistent with the September 30, 2014 presentation. |
(2) | Switzerland, Germany, Austria, Belgium and Holland. |
(3) | Italy, Greece, Spain and Portugal. |
(4) | Sweden, Norway, Denmark and Finland. |
September 30, 2014 | |||||||||||||||||||||||||||
Current | 31-90 Days Past Due | >90 Days Past Due | Total Billed | Unbilled | Total Finance Receivables | >90 Days and Accruing | |||||||||||||||||||||
Finance and other services | $ | 9 | $ | 2 | $ | 1 | $ | 12 | $ | 371 | $ | 383 | $ | 12 | |||||||||||||
Government and education | 18 | 3 | 2 | 23 | 595 | 618 | 20 | ||||||||||||||||||||
Graphic arts | 15 | 1 | — | 16 | 292 | 308 | 9 | ||||||||||||||||||||
Industrial | 4 | 1 | 1 | 6 | 143 | 149 | 6 | ||||||||||||||||||||
Healthcare | 4 | 1 | — | 5 | 114 | 119 | 5 | ||||||||||||||||||||
Other | 3 | 1 | — | 4 | 118 | 122 | 4 | ||||||||||||||||||||
Total United States | 53 | 9 | 4 | 66 | 1,633 | 1,699 | 56 | ||||||||||||||||||||
Canada | 3 | 2 | 1 | 6 | 398 | 404 | 15 | ||||||||||||||||||||
France | 1 | 3 | 6 | 10 | 640 | 650 | 43 | ||||||||||||||||||||
U.K./Ireland | — | 3 | — | 3 | 372 | 375 | 1 | ||||||||||||||||||||
Central(1) | 5 | 1 | 1 | 7 | 575 | 582 | 19 | ||||||||||||||||||||
Southern(2) | 17 | 6 | 6 | 29 | 240 | 269 | 23 | ||||||||||||||||||||
Nordics(3) | 1 | — | — | 1 | 75 | 76 | 5 | ||||||||||||||||||||
Total Europe | 24 | 13 | 13 | 50 | 1,902 | 1,952 | 91 | ||||||||||||||||||||
Other | 9 | 1 | — | 10 | 353 | 363 | — | ||||||||||||||||||||
Total | $ | 89 | $ | 25 | $ | 18 | $ | 132 | $ | 4,286 | $ | 4,418 | $ | 162 | |||||||||||||
December 31, 2013 | |||||||||||||||||||||||||||
Current | 31-90 Days Past Due | >90 Days Past Due | Total Billed | Unbilled | Total Finance Receivables | >90 Days and Accruing | |||||||||||||||||||||
Finance and other services | $ | 7 | $ | 2 | $ | 1 | $ | 10 | $ | 315 | $ | 325 | $ | 12 | |||||||||||||
Government and education | 17 | 4 | 3 | 24 | 647 | 671 | 34 | ||||||||||||||||||||
Graphic arts | 12 | 1 | — | 13 | 296 | 309 | 5 | ||||||||||||||||||||
Industrial | 3 | 1 | 1 | 5 | 130 | 135 | 6 | ||||||||||||||||||||
Healthcare | 3 | 1 | — | 4 | 111 | 115 | 5 | ||||||||||||||||||||
Other | 3 | 1 | — | 4 | 107 | 111 | 3 | ||||||||||||||||||||
Total United States | 45 | 10 | 5 | 60 | 1,606 | 1,666 | 65 | ||||||||||||||||||||
Canada | 4 | 3 | 3 | 10 | 411 | 421 | 19 | ||||||||||||||||||||
France | — | — | — | — | 718 | 718 | 40 | ||||||||||||||||||||
U.K./Ireland | 1 | 1 | — | 2 | 410 | 412 | 2 | ||||||||||||||||||||
Central(1) | 3 | 2 | 3 | 8 | 716 | 724 | 23 | ||||||||||||||||||||
Southern(2) | 21 | 5 | 7 | 33 | 314 | 347 | 45 | ||||||||||||||||||||
Nordics(3) | 2 | — | — | 2 | 89 | 91 | — | ||||||||||||||||||||
Total Europe | 27 | 8 | 10 | 45 | 2,247 | 2,292 | 110 | ||||||||||||||||||||
Other | 8 | 1 | — | 9 | 295 | 304 | — | ||||||||||||||||||||
Total | $ | 84 | $ | 22 | $ | 18 | $ | 124 | $ | 4,559 | $ | 4,683 | $ | 194 |
(1) | Switzerland, Germany, Austria, Belgium and Holland. |
(2) | Italy, Greece, Spain and Portugal. |
(3) | Sweden, Norway, Denmark and Finland. |
September 30, 2014 | December 31, 2013 | ||||||
Finished goods | $ | 899 | $ | 837 | |||
Work-in-process | 68 | 60 | |||||
Raw materials | 102 | 101 | |||||
Total Inventories | $ | 1,069 | $ | 998 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Fuji Xerox | $ | 41 | $ | 40 | $ | 111 | $ | 117 | |||||||
Other investments | 3 | 3 | 8 | 9 | |||||||||||
Total Equity in Net Income of Unconsolidated Affiliates | $ | 44 | $ | 43 | $ | 119 | $ | 126 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Summary of Operations: | |||||||||||||||
Revenues | $ | 2,872 | $ | 2,909 | $ | 8,600 | $ | 8,653 | |||||||
Costs and expenses | 2,612 | 2,670 | 7,923 | 7,960 | |||||||||||
Income before income taxes | 260 | 239 | 677 | 693 | |||||||||||
Income tax expense | 87 | 72 | 212 | 197 | |||||||||||
Net Income | 173 | 167 | 465 | 496 | |||||||||||
Less: Net income – noncontrolling interests | 1 | 1 | 3 | 4 | |||||||||||
Net Income – Fuji Xerox | $ | 172 | $ | 166 | $ | 462 | $ | 492 | |||||||
Weighted Average Exchange Rate(1) | 104.07 | 98.89 | 102.97 | 96.61 |
(1) | Represents Yen/U.S. Dollar exchange rate used to translate. |
Severance and Related Costs | Lease Cancellation and Other Costs | Asset Impairments(2) | Total | ||||||||||||
Balance at December 31, 2013 | $ | 109 | $ | 7 | $ | — | $ | 116 | |||||||
Provision | 99 | 4 | 7 | 110 | |||||||||||
Reversals | (15 | ) | (2 | ) | — | (17 | ) | ||||||||
Net Current Period Charges(1) | 84 | 2 | 7 | 93 | |||||||||||
Charges against reserve and currency | (105 | ) | (4 | ) | (7 | ) | (116 | ) | |||||||
Balance at September 30, 2014 | $ | 88 | $ | 5 | $ | — | $ | 93 |
(1) | Represents net amount recognized within the Condensed Consolidated Statements of Income for the period shown. |
(2) | Charges associated with asset impairments represent the write-down of the related assets to their new cost basis and are recorded concurrently with the recognition of the provision. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Charges against reserve | $ | (35 | ) | $ | (34 | ) | $ | (116 | ) | $ | (107 | ) | |||
Asset impairments | — | — | 7 | — | |||||||||||
Effects of foreign currency and other non-cash items | 4 | — | 6 | — | |||||||||||
Restructuring Cash Payments | $ | (31 | ) | $ | (34 | ) | $ | (103 | ) | $ | (107 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Services | $ | 6 | $ | 10 | $ | 20 | $ | 18 | |||||||
Document Technology | 20 | 25 | 62 | 42 | |||||||||||
Other | 2 | — | 11 | — | |||||||||||
Total Net Restructuring Charges | $ | 28 | $ | 35 | $ | 93 | $ | 60 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Interest expense(1) | $ | 92 | $ | 100 | $ | 288 | $ | 308 | |||||||
Interest income(2) | 98 | 136 | 301 | 373 |
(1) | Includes Equipment financing interest as well as non-financing interest expense that is included in Other expenses, net in the Condensed Consolidated Statements of Income. |
(2) | Includes Finance income as well as other interest income that is included in Other expenses, net in the Condensed Consolidated Statements of Income. |
Nine Months Ended September 30, | ||||||||
2014 | 2013 | |||||||
Net (payments) proceeds on short-term debt | $ | (4 | ) | $ | 6 | |||
Proceeds from issuance of long-term debt | 778 | 102 | ||||||
Payments on long-term debt(1) | (1,109 | ) | (1,039 | ) | ||||
Net Payments on Debt | $ | (335 | ) | $ | (931 | ) |
(1) | Includes current maturities. |
Debt Instrument | Year First Designated | Notional Amount | Net Fair Value | Weighted Average Interest Rate Paid | Interest Rate Received | Basis | Maturity | |||||||||||||
Senior Note 2021 | 2014 | $ | 300 | $ | — | 2.43 | % | 4.5 | % | Libor | 2021 |
• | Foreign currency-denominated assets and liabilities |
• | Forecasted purchases and sales in foreign currency |
Currency Hedged (Buy/Sell) | Gross Notional Value | Fair Value Asset (Liability)(1) | |||||
Euro/U.K. Pound Sterling | $ | 703 | $ | (13 | ) | ||
Japanese Yen/U.S. Dollar | 480 | (27 | ) | ||||
U.S. Dollar/Euro | 415 | 14 | |||||
Canadian Dollar/Euro | 380 | 26 | |||||
Japanese Yen/Euro | 349 | (1 | ) | ||||
Euro/U.S. Dollar | 284 | 1 | |||||
U.K. Pound Sterling/Euro | 158 | 2 | |||||
Swiss Franc/Euro | 62 | — | |||||
Philippine Peso/U.S. Dollar | 62 | (1 | ) | ||||
Mexican Peso/U.S. Dollar | 51 | (1 | ) | ||||
Indian Rupee/U.S. Dollar | 49 | — | |||||
Euro/Danish Krone | 25 | — | |||||
Mexican Peso/Euro | 22 | 1 | |||||
Euro/Canadian Dollar | 22 | (1 | ) | ||||
U.S. Dollar/Canadian Dollar | 21 | — | |||||
All Other | 122 | 1 | |||||
Total Foreign Exchange Hedging | $ | 3,205 | $ | 1 |
(1) | Represents the net receivable (payable) amount included in the Condensed Consolidated Balance Sheet at September 30, 2014. |
Designation of Derivatives | Balance Sheet Location | September 30, 2014 | December 31, 2013 | |||||||
Derivatives Designated as Hedging Instruments | ||||||||||
Foreign exchange contracts – forwards | Other current assets | $ | 40 | $ | 1 | |||||
Other current liabilities | (25 | ) | (51 | ) | ||||||
Currency options | Other current assets | 1 | — | |||||||
Interest rate swaps | Other long-term assets | — | — | |||||||
Net Designated Derivative Asset (Liability) | $ | 16 | $ | (50 | ) | |||||
Derivatives NOT Designated as Hedging Instruments | ||||||||||
Foreign exchange contracts – forwards | Other current assets | $ | 8 | $ | 5 | |||||
Other current liabilities | (23 | ) | (19 | ) | ||||||
Net Undesignated Derivative Liability | $ | (15 | ) | $ | (14 | ) | ||||
Summary of Derivatives | Total Derivative Assets | $ | 49 | $ | 6 | |||||
Total Derivative Liabilities | (48 | ) | (70 | ) | ||||||
Net Derivative Asset (Liability) | $ | 1 | $ | (64 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
Gain (Loss) on Derivative Instruments | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Fair Value Hedges - Interest rate contracts | ||||||||||||||||
Derivative (loss) recognized in interest expense | $ | (2 | ) | $ | — | $ | — | $ | — | |||||||
Hedged item gain recognized in interest expense | 2 | — | — | — | ||||||||||||
Cash Flow Hedges - Foreign exchange forward contracts and options | ||||||||||||||||
Derivative (loss) gain recognized in OCI (effective portion) | $ | (19 | ) | $ | (13 | ) | $ | 10 | $ | (81 | ) | |||||
Derivative (loss) reclassified from AOCI to income - Cost of sales (effective portion) | (3 | ) | (35 | ) | (32 | ) | (89 | ) |
Derivatives NOT Designated as Hedging Instruments | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
Location of Derivative Gain (Loss) | 2014 | 2013 | 2014 | 2013 | ||||||||||||||
Foreign exchange contracts – forwards | Other expense – Currency gains (losses), net | $ | 1 | $ | (12 | ) | $ | 1 | $ | (45 | ) |
September 30, 2014 | December 31, 2013 | ||||||
Assets: | |||||||
Foreign exchange contracts-forwards | $ | 48 | $ | 6 | |||
Currency options | 1 | — | |||||
Deferred compensation investments in cash surrender life insurance | 93 | 88 | |||||
Deferred compensation investments in mutual funds | 31 | 28 | |||||
Total | $ | 173 | $ | 122 | |||
Liabilities: | |||||||
Foreign exchange contracts-forwards | $ | 48 | $ | 70 | |||
Deferred compensation plan liabilities | 131 | 125 | |||||
Total | $ | 179 | $ | 195 |
September 30, 2014 | December 31, 2013 | ||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||
Cash and cash equivalents | $ | 1,015 | $ | 1,015 | $ | 1,764 | $ | 1,764 | |||||||
Accounts receivable, net | 3,026 | 3,026 | 2,929 | 2,929 | |||||||||||
Short-term debt | 1,305 | 1,317 | 1,117 | 1,126 | |||||||||||
Long-term debt | 6,355 | 6,802 | 6,904 | 7,307 |
Three Months Ended September 30, | |||||||||||||||||||||||
Pension Benefits | |||||||||||||||||||||||
U.S. Plans | Non-U.S. Plans | Retiree Health | |||||||||||||||||||||
Components of Net Periodic Benefit Costs: | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||
Service cost | $ | 2 | $ | 2 | $ | 9 | $ | 24 | $ | 2 | $ | 2 | |||||||||||
Interest cost | 39 | 37 | 71 | 64 | 9 | 8 | |||||||||||||||||
Expected return on plan assets | (41 | ) | (41 | ) | (88 | ) | (78 | ) | — | — | |||||||||||||
Recognized net actuarial loss | 5 | 2 | 13 | 20 | 1 | — | |||||||||||||||||
Amortization of prior service credit | — | (1 | ) | (1 | ) | (1 | ) | (11 | ) | (10 | ) | ||||||||||||
Recognized curtailment loss | — | — | 1 | — | — | — | |||||||||||||||||
Recognized settlement loss | 13 | 20 | — | — | — | — | |||||||||||||||||
Defined Benefit Plans | 18 | 19 | 5 | 29 | 1 | — | |||||||||||||||||
Defined contribution plans | 17 | 15 | 13 | 7 | — | — | |||||||||||||||||
Net Periodic Benefit Cost | 35 | 34 | 18 | 36 | 1 | — | |||||||||||||||||
Other changes in plan assets and benefit obligations recognized in Other Comprehensive (Loss) Income: | |||||||||||||||||||||||
Net actuarial loss(1) | 25 | — | — | — | — | — | |||||||||||||||||
Amortization of prior service credit | — | 1 | 1 | 1 | 11 | 10 | |||||||||||||||||
Amortization of net actuarial loss | (18 | ) | (22 | ) | (13 | ) | (20 | ) | (1 | ) | — | ||||||||||||
Total Recognized in Other Comprehensive (Loss) Income(2) | 7 | (21 | ) | (12 | ) | (19 | ) | 10 | 10 | ||||||||||||||
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive (Loss) Income | $ | 42 | $ | 13 | $ | 6 | $ | 17 | $ | 11 | $ | 10 |
Nine Months Ended September 30, | |||||||||||||||||||||||
Pension Benefits | |||||||||||||||||||||||
U.S. Plans | Non-U.S. Plans | Retiree Health | |||||||||||||||||||||
Components of Net Periodic Benefit Costs: | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||
Service cost | $ | 7 | $ | 7 | $ | 26 | $ | 69 | $ | 6 | $ | 7 | |||||||||||
Interest cost | 117 | 109 | 207 | 193 | 27 | 25 | |||||||||||||||||
Expected return on plan assets | (121 | ) | (130 | ) | (260 | ) | (235 | ) | — | — | |||||||||||||
Recognized net actuarial loss | 13 | 16 | 41 | 58 | 1 | 1 | |||||||||||||||||
Amortization of prior service credit | (1 | ) | (1 | ) | (2 | ) | (1 | ) | (32 | ) | (32 | ) | |||||||||||
Recognized curtailment loss (gain) | — | — | 1 | (6 | ) | — | — | ||||||||||||||||
Recognized settlement loss | 38 | 99 | — | — | — | — | |||||||||||||||||
Defined Benefit Plans | 53 | 100 | 13 | 78 | 2 | 1 | |||||||||||||||||
Defined contribution plans | 49 | 53 | 33 | 20 | — | — | |||||||||||||||||
Net Periodic Benefit Cost | 102 | 153 | 46 | 98 | 2 | 1 | |||||||||||||||||
Other changes in plan assets and benefit obligations recognized in Other Comprehensive (Loss) Income: | |||||||||||||||||||||||
Net actuarial loss (gain)(1) | 322 | 11 | — | — | — | (36 | ) | ||||||||||||||||
Amortization of prior service credit | 1 | 1 | 2 | 1 | 32 | 32 | |||||||||||||||||
Amortization of net actuarial loss | (51 | ) | (115 | ) | (41 | ) | (58 | ) | (1 | ) | (1 | ) | |||||||||||
Total Recognized in Other Comprehensive (Loss) Income(2) | 272 | (103 | ) | (39 | ) | (57 | ) | 31 | (5 | ) | |||||||||||||
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive (Loss) Income | $ | 374 | $ | 50 | $ | 7 | $ | 41 | $ | 33 | $ | (4 | ) |
(1) | The net actuarial loss (gain) for U.S. Plans primarily reflect i) the remeasurement of our primary U.S. pension plans as a result of the payment of periodic settlements; and ii) adjustments for the actual valuation results based on January 1st plan census data. |
(2) | Amounts represent the pre-tax effect included within Other comprehensive income. Refer to Note 16 - Other Comprehensive (Loss) Income for related tax effects and the after-tax amounts. |
Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings | AOCL(1) | Xerox Shareholders’ Equity | Non-controlling Interests | Total Equity | ||||||||||||||||||||||||
Balance at December 31, 2013 | $ | 1,210 | $ | 5,282 | $ | (252 | ) | $ | 8,839 | $ | (2,779 | ) | $ | 12,300 | $ | 119 | $ | 12,419 | |||||||||||||
Comprehensive income (loss), net | — | — | — | 813 | (449 | ) | 364 | 16 | 380 | ||||||||||||||||||||||
Cash dividends declared- common stock(2) | — | — | — | (222 | ) | — | (222 | ) | — | (222 | ) | ||||||||||||||||||||
Cash dividends declared - preferred stock(3) | — | — | — | (18 | ) | — | (18 | ) | — | (18 | ) | ||||||||||||||||||||
Conversion of notes to common stock | 1 | 8 | — | — | — | 9 | — | 9 | |||||||||||||||||||||||
Stock option and incentive plans, net | 13 | 86 | — | — | — | 99 | — | 99 | |||||||||||||||||||||||
Payments to acquire treasury stock, including fees | — | — | (730 | ) | — | — | (730 | ) | — | (730 | ) | ||||||||||||||||||||
Cancellation of treasury stock | (64 | ) | (666 | ) | 730 | — | — | — | — | — | |||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | (29 | ) | (29 | ) | |||||||||||||||||||||
Balance at September 30, 2014 | $ | 1,160 | $ | 4,710 | $ | (252 | ) | $ | 9,412 | $ | (3,228 | ) | $ | 11,802 | $ | 106 | $ | 11,908 |
Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings | AOCL(1) | Xerox Shareholders’ Equity | Non- controlling Interests | Total Equity | ||||||||||||||||||||||||
Balance at December 31, 2012 | $ | 1,239 | $ | 5,622 | $ | (104 | ) | $ | 7,991 | $ | (3,227 | ) | $ | 11,521 | $ | 143 | $ | 11,664 | |||||||||||||
Comprehensive income (loss), net | — | — | — | 853 | (50 | ) | 803 | 15 | 818 | ||||||||||||||||||||||
Cash dividends declared-common stock(2) | — | — | — | (218 | ) | — | (218 | ) | — | (218 | ) | ||||||||||||||||||||
Cash dividends declared-preferred stock(3) | — | — | — | (18 | ) | — | (18 | ) | — | (18 | ) | ||||||||||||||||||||
Stock option and incentive plans, net | 24 | 106 | — | — | — | 130 | — | 130 | |||||||||||||||||||||||
Payments to acquire treasury stock, including fees | — | — | (172 | ) | — | — | (172 | ) | — | (172 | ) | ||||||||||||||||||||
Cancellation of treasury stock | (16 | ) | (98 | ) | 114 | — | — | — | — | — | |||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | (24 | ) | (24 | ) | |||||||||||||||||||||
Balance at September 30, 2013 | $ | 1,247 | $ | 5,630 | $ | (162 | ) | $ | 8,608 | $ | (3,277 | ) | $ | 12,046 | $ | 134 | $ | 12,180 |
(1) | Refer to Note 16 - Other Comprehensive (Loss) Income for components of AOCL. |
(2) | Cash dividends declared on common stock of $0.0625 per share in each quarter of 2014 and $0.0575 per share in each quarter of 2013. |
(3) | Cash dividends declared on preferred stock of $20.00 per share in each quarter of 2014 and 2013. |
Shares | Amount | ||||||
December 31, 2013 | 22,001 | $ | 252 | ||||
Purchases (1) | 60,926 | 730 | |||||
Cancellations | (63,915 | ) | (730 | ) | |||
September 30, 2014 | 19,012 | $ | 252 |
(1) | Includes associated fees. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||
Pre-tax | Net of Tax | Pre-tax | Net of Tax | Pre-tax | Net of Tax | Pre-tax | Net of Tax | |||||||||||||||||||||||||
Translation Adjustments (Losses) Gains | $ | (494 | ) | $ | (492 | ) | $ | 266 | $ | 269 | $ | (400 | ) | $ | (401 | ) | $ | (185 | ) | $ | (178 | ) | ||||||||||
Unrealized (Losses) Gains: | ||||||||||||||||||||||||||||||||
Changes in fair value of cash flow hedges - (losses) gains | (19 | ) | (10 | ) | (13 | ) | (11 | ) | 10 | 10 | (81 | ) | (57 | ) | ||||||||||||||||||
Changes in cash flow hedges reclassed to earnings(1) | 3 | 2 | 35 | 24 | 32 | 23 | 89 | 62 | ||||||||||||||||||||||||
Other (losses) gains | (1 | ) | (1 | ) | 1 | 1 | (1 | ) | (1 | ) | 2 | 2 | ||||||||||||||||||||
Net Unrealized (Losses) Gains | (17 | ) | (9 | ) | 23 | 14 | 41 | 32 | 10 | 7 | ||||||||||||||||||||||
Defined Benefit Plans (Losses) Gains: | ||||||||||||||||||||||||||||||||
Net actuarial (loss) gain | (25 | ) | (15 | ) | — | — | (322 | ) | (198 | ) | 25 | 15 | ||||||||||||||||||||
Prior service amortization(2) | (12 | ) | (8 | ) | (12 | ) | (7 | ) | (35 | ) | (22 | ) | (34 | ) | (21 | ) | ||||||||||||||||
Actuarial loss amortization(2) | 32 | 22 | 42 | 29 | 93 | 63 | 174 | 116 | ||||||||||||||||||||||||
Fuji Xerox changes in defined benefit plans, net(3) | 4 | 4 | 11 | 11 | 34 | 34 | 7 | 7 | ||||||||||||||||||||||||
Other gains (losses)(4) | 70 | 70 | (71 | ) | (71 | ) | 42 | 42 | 4 | 4 | ||||||||||||||||||||||
Change in Defined Benefit Plans Gains (Losses) | 69 | 73 | (30 | ) | (38 | ) | (188 | ) | (81 | ) | 176 | 121 | ||||||||||||||||||||
Other Comprehensive (Loss) Income | (442 | ) | (428 | ) | 259 | 245 | (547 | ) | (450 | ) | 1 | (50 | ) | |||||||||||||||||||
Less: Other comprehensive loss attributable to noncontrolling interests | (2 | ) | (2 | ) | — | — | (1 | ) | (1 | ) | — | — | ||||||||||||||||||||
Other Comprehensive (Loss) Income Attributable to Xerox | $ | (440 | ) | $ | (426 | ) | $ | 259 | $ | 245 | $ | (546 | ) | $ | (449 | ) | $ | 1 | $ | (50 | ) |
(1) | Reclassified to Cost of sales - refer to Note 12 - Financial Instruments for additional information regarding our cash flow hedges. |
(2) | Reclassified to Total Net Periodic Benefit Cost - refer to Note 14 - Employee Benefit Plans for additional information. |
(3) | Represents our share of Fuji Xerox's benefit plan changes. |
(4) | Primarily represents currency impact on cumulative amount of benefit plan net actuarial gains (losses), prior service credits and tax effect included in AOCL. |
September 30, 2014 | December 31, 2013 | |||||||
Cumulative translation adjustments | $ | (1,410 | ) | $ | (1,010 | ) | ||
Benefit plans net actuarial losses and prior service credits(1) | (1,813 | ) | (1,732 | ) | ||||
Other unrealized losses, net | (5 | ) | (37 | ) | ||||
Total Accumulated Other Comprehensive Loss Attributable to Xerox | $ | (3,228 | ) | $ | (2,779 | ) |
(1) | Includes our share of Fuji Xerox. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Basic Earnings per Share: | |||||||||||||||
Net income from continuing operations attributable to Xerox | $ | 267 | $ | 287 | $ | 816 | $ | 875 | |||||||
Accrued dividends on preferred stock | (6 | ) | (6 | ) | (18 | ) | (18 | ) | |||||||
Adjusted Net Income From Continuing Operations Available to Common Shareholders | 261 | 281 | 798 | 857 | |||||||||||
Net loss from discontinued operations attributable to Xerox | (1 | ) | (1 | ) | (3 | ) | (22 | ) | |||||||
Adjusted Net Income Available to Common Shareholders | $ | 260 | $ | 280 | $ | 795 | $ | 835 | |||||||
Weighted-average common shares outstanding | 1,149,113 | 1,236,485 | 1,163,442 | 1,230,787 | |||||||||||
Basic Earnings (Loss) per Share: | |||||||||||||||
Continuing operations | $ | 0.23 | $ | 0.23 | $ | 0.69 | $ | 0.70 | |||||||
Discontinued operations | — | — | (0.01 | ) | (0.02 | ) | |||||||||
Total | $ | 0.23 | $ | 0.23 | $ | 0.68 | $ | 0.68 | |||||||
Diluted Earnings per Share: | |||||||||||||||
Net income from continuing operations attributable to Xerox | $ | 267 | $ | 287 | $ | 816 | $ | 875 | |||||||
Accrued dividends on preferred stock | — | — | — | — | |||||||||||
Interest on convertible securities, net | — | — | — | 1 | |||||||||||
Adjusted Net Income From Continuing Operations Available to Common Shareholders | $ | 267 | $ | 287 | $ | 816 | $ | 876 | |||||||
Net loss from discontinued operations attributable to Xerox | (1 | ) | (1 | ) | (3 | ) | (22 | ) | |||||||
Adjusted Net Income Available to Common Shareholders | $ | 266 | $ | 286 | $ | 813 | $ | 854 | |||||||
Weighted-average common shares outstanding | 1,149,113 | 1,236,485 | 1,163,442 | 1,230,787 | |||||||||||
Common shares issuable with respect to: | |||||||||||||||
Stock options | 2,793 | 5,225 | 3,177 | 5,422 | |||||||||||
Restricted stock and performance shares | 13,533 | 14,910 | 14,363 | 18,429 | |||||||||||
Convertible preferred stock | 26,966 | 26,966 | 26,966 | 26,966 | |||||||||||
Convertible securities | — | 1,992 | — | 1,992 | |||||||||||
Adjusted Weighted Average Common Shares Outstanding | 1,192,405 | 1,285,578 | 1,207,948 | 1,283,596 | |||||||||||
Diluted Earnings (Loss) per Share: | |||||||||||||||
Continuing operations | $ | 0.22 | $ | 0.22 | $ | 0.68 | $ | 0.68 | |||||||
Discontinued operations | — | — | (0.01 | ) | (0.01 | ) | |||||||||
Total | $ | 0.22 | $ | 0.22 | $ | 0.67 | $ | 0.67 | |||||||
The following securities were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive (shares in thousands): | |||||||||||||||
Stock options | 4,143 | 13,102 | 3,759 | 12,905 | |||||||||||
Restricted stock and performance shares | 18,958 | 12,016 | 18,128 | 8,497 | |||||||||||
Total Anti-Dilutive Securities | 23,101 | 25,118 | 21,887 | 21,402 | |||||||||||
Dividends per Common Share | $ | 0.0625 | $ | 0.0575 | $ | 0.1875 | $ | 0.1725 |
• | $479 for letters of credit issued to (i) guarantee our performance under certain services contracts; (ii) support certain insurance programs; and (iii) support our obligations related to the Brazil tax and labor contingencies. |
• | $742 for outstanding surety bonds. Certain contracts, primarily those involving public sector customers, require us to provide a surety bond as a guarantee of our performance of contractual obligations. |
• | Services - improving growth and profit through improved operational execution, portfolio management and cost productivity. |
• | Document Technology - capitalizing on the most advantaged segments of the business to maintain our leadership position in the industry while maintaining strong profitability. |
• | Maintaining consistent and strong cash flow from operations. |
Three Months Ended September 30, | Nine Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
(in millions) | 2014 | 2013 | % Change | 2014 | 2013 | % Change | % of Total Revenue 2014 | % of Total Revenue 2013 | ||||||||||||||||||||
Equipment sales | $ | 748 | $ | 810 | (8 | )% | $ | 2,244 | $ | 2,389 | (6 | )% | 14 | % | 15 | % | ||||||||||||
Annuity revenue | 4,372 | 4,425 | (1 | )% | 13,256 | 13,404 | (1 | )% | 86 | % | 85 | % | ||||||||||||||||
Total Revenue | $ | 5,120 | $ | 5,235 | (2 | )% | $ | 15,500 | $ | 15,793 | (2 | )% | 100 | % | 100 | % | ||||||||||||
Reconciliation to Condensed Consolidated Statements of Income: | ||||||||||||||||||||||||||||
Sales | $ | 1,279 | $ | 1,360 | (6 | )% | $ | 3,891 | $ | 4,084 | (5 | )% | ||||||||||||||||
Less: Supplies, paper and other sales | (531 | ) | (550 | ) | (3 | )% | (1,647 | ) | (1,695 | ) | (3 | )% | ||||||||||||||||
Equipment Sales | $ | 748 | $ | 810 | (8 | )% | $ | 2,244 | $ | 2,389 | (6 | )% | ||||||||||||||||
Outsourcing, maintenance and rentals | $ | 3,745 | $ | 3,742 | — | % | $ | 11,315 | $ | 11,345 | — | % | ||||||||||||||||
Add: Supplies, paper and other sales | 531 | 550 | (3 | )% | 1,647 | 1,695 | (3 | )% | ||||||||||||||||||||
Add: Financing | 96 | 133 | (28 | )% | 294 | 364 | (19 | )% | ||||||||||||||||||||
Annuity Revenue | $ | 4,372 | $ | 4,425 | (1 | )% | $ | 13,256 | $ | 13,404 | (1 | )% |
• | Annuity revenue decreased 1% as compared to third quarter 2013, with no impact from currency. Annuity revenue is comprised of the following: |
◦ | Outsourcing, maintenance and rentals revenue of $3,745 million includes outsourcing revenue within our Services segment and maintenance revenue (including bundled supplies) and rental revenue, both primarily within our Document Technology segment. Growth in the Services segment was offset by a decline in the Document Technology segment. |
◦ | Supplies, paper and other sales of $531 million includes unbundled supplies and other sales, primarily within our Document Technology segment. The decrease of 3% was due to modestly lower supplies demand and a decline in other sales revenue. |
◦ | Financing revenue is generated from financed sale transactions primarily within our Document Technology segment. The decrease of 28% is primarily due to a $25 million pre-tax gain on finance receivables sales in third quarter 2013, with the remainder of the decrease reflecting a lower finance receivable balance mostly as a result of lower originations from decreased equipment sales and prior period sales of finance receivables. See "Sales of Finance Receivables" section for further discussion. |
• | Equipment sales revenue is reported primarily within our Document Technology segment and the document outsourcing business within our Services segment. Equipment sales revenue decreased 8% as compared to third quarter 2013, with no impact from currency. The decline was primarily driven by lower sales in entry products due to product launch timing and overall price declines that were within our historical range of 5% to 10%. |
• | Annuity revenue for the nine months ended September 30, 2014 decreased 1% as compared to the prior year period, with no impact from currency. Annuity revenue is comprised of the following: |
◦ | Outsourcing, maintenance and rentals revenue of $11,315 million includes outsourcing revenue within our Services segment and maintenance revenue (including bundled supplies) and rental revenue, both primarily within our Document Technology segment. Growth in the Services segment was offset by a decline in the Document Technology segment. |
◦ | Supplies, paper and other sales of $1,647 million includes unbundled supplies and other sales, primarily within our Document Technology segment. The decrease of 3% was driven by a decline in other sales revenue and moderately lower supplies demand. |
◦ | Financing revenue is generated from financed sale transactions primarily within our Document Technology segment. The decrease of 19% is primarily due to a $25 million pre-tax gain on finance receivables sales in third quarter 2013 as well as a lower finance receivable balance mostly as a result of prior period sales of finance receivables and lower originations due to decreased equipment sales. See "Sales of Finance Receivables" section for further discussion. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
2014 | 2013 | Change | 2014 | 2013 | Change | |||||||||||||
Total Gross Margin | 30.8 | % | 31.5 | % | (0.7) pts | 30.6 | % | 31.2 | % | (0.6) pts | ||||||||
RD&E as a % of Revenue | 2.7 | % | 2.8 | % | (0.1) pts | 2.7 | % | 2.8 | % | (0.1) pts | ||||||||
SAG as a % of Revenue | 18.6 | % | 19.4 | % | (0.8) pts | 18.6 | % | 19.6 | % | (1.0) pts | ||||||||
Operating Margin(1) | 9.5 | % | 9.4 | % | 0.1 pts | 9.3 | % | 8.8 | % | 0.5 pts | ||||||||
Pre-tax Income Margin | 5.9 | % | 6.4 | % | (0.5) pts | 6.0 | % | 6.1 | % | (0.1) pts |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
(in millions) | 2014 | 2013 | Change | 2014 | 2013 | Change | |||||||||||||||||
R&D | $ | 104 | $ | 115 | $ | (11 | ) | $ | 329 | $ | 358 | $ | (29 | ) | |||||||||
Sustaining engineering | 34 | 30 | 4 | 95 | 90 | 5 | |||||||||||||||||
Total RD&E Expenses | $ | 138 | $ | 145 | $ | (7 | ) | $ | 424 | $ | 448 | $ | (24 | ) |
• | $28 million decrease in selling expenses. |
• | $27 million decrease in general and administrative expenses. |
• | $9 million decrease in bad debt expenses to $18 million. Bad debt expense for the quarter remained less than one percent of receivables. |
• | $98 million decrease in selling expenses. |
• | $82 million decrease in general and administrative expenses. |
• | $31 million decrease in bad debt expenses to $54 million, reflecting lower write-offs as well as a first quarter 2014 recovery against a prior period write-off. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | |||||||||||
Non-financing interest expense | $ | 57 | $ | 60 | $ | 181 | $ | 183 | |||||||
Interest income | (2 | ) | (3 | ) | (7 | ) | (9 | ) | |||||||
Gains on sales of businesses and assets | (9 | ) | (24 | ) | (39 | ) | (33 | ) | |||||||
Currency losses (gains), net | 1 | — | 1 | (7 | ) | ||||||||||
Litigation matters | 16 | — | 14 | (37 | ) | ||||||||||
Loss on sales of accounts receivable | 4 | 4 | 12 | 13 | |||||||||||
Deferred compensation investment gains | (1 | ) | (6 | ) | (6 | ) | (11 | ) | |||||||
All other expenses, net | 7 | 7 | 23 | 16 | |||||||||||
Total Other Expenses, Net | $ | 73 | $ | 38 | $ | 179 | $ | 115 |
(1) | Refer to the Effective Tax reconciliation table in the Non-GAAP Financial Measures section. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Total equity in net income of unconsolidated affiliates | $ | 44 | $ | 43 | $ | 119 | $ | 126 | ||||||||
Fuji Xerox after-tax restructuring costs included in equity income | 1 | 3 | 3 | 8 |
(1) | Refer to the Net Income and EPS reconciliation table in the Non-GAAP Financial Measures section. |
Three Months Ended September 30, | |||||||||||||||||||||
(in millions) | Equipment Sales Revenue | Annuity Revenue | Total Revenue | % of Total Revenue | Segment Profit (Loss) | Segment Margin | |||||||||||||||
2014 | |||||||||||||||||||||
Services | $ | 120 | $ | 2,828 | $ | 2,948 | 57 | % | $ | 262 | 8.9 | % | |||||||||
Document Technology | 599 | 1,430 | 2,029 | 40 | % | 285 | 14.0 | % | |||||||||||||
Other | 29 | 114 | 143 | 3 | % | (85 | ) | (59.4 | )% | ||||||||||||
Total | $ | 748 | $ | 4,372 | $ | 5,120 | 100 | % | $ | 462 | 9.0 | % | |||||||||
2013 | |||||||||||||||||||||
Services | $ | 132 | $ | 2,800 | $ | 2,932 | 56 | % | $ | 292 | 10.0 | % | |||||||||
Document Technology | 647 | 1,512 | 2,159 | 41 | % | 261 | 12.1 | % | |||||||||||||
Other | 31 | 113 | 144 | 3 | % | (56 | ) | (38.9 | )% | ||||||||||||
Total | $ | 810 | $ | 4,425 | $ | 5,235 | 100 | % | $ | 497 | 9.5 | % |
Nine Months Ended September 30, | |||||||||||||||||||||
(in millions) | Equipment Sales Revenue | Annuity Revenue | Total Revenue | % of Total Revenue | Segment Profit (Loss) | Segment Margin | |||||||||||||||
2014 | |||||||||||||||||||||
Services | $ | 364 | $ | 8,488 | $ | 8,852 | 57 | % | $ | 769 | 8.7 | % | |||||||||
Document Technology | 1,789 | 4,410 | 6,199 | 40 | % | 841 | 13.6 | % | |||||||||||||
Other | 91 | 358 | 449 | 3 | % | (211 | ) | (47.0 | )% | ||||||||||||
Total | $ | 2,244 | $ | 13,256 | $ | 15,500 | 100 | % | $ | 1,399 | 9.0 | % | |||||||||
2013 | |||||||||||||||||||||
Services | $ | 357 | $ | 8,430 | $ | 8,787 | 56 | % | $ | 865 | 9.8 | % | |||||||||
Document Technology | 1,937 | 4,620 | 6,557 | 41 | % | 692 | 10.6 | % | |||||||||||||
Other | 95 | 354 | 449 | 3 | % | (186 | ) | (41.4 | )% | ||||||||||||
Total | $ | 2,389 | $ | 13,404 | $ | 15,793 | 100 | % | $ | 1,371 | 8.7 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
(in millions) | 2014 | 2013 | Change | 2014 | 2013 | Change | ||||||||||||||||
Business Processing Outsourcing | $ | 1,786 | $ | 1,751 | 2 | % | $ | 5,333 | $ | 5,316 | — | % | ||||||||||
Document Outsourcing | 832 | 828 | — | % | 2,515 | 2,448 | 3 | % | ||||||||||||||
Information Technology Outsourcing | 376 | 389 | (3 | )% | 1,143 | 1,148 | — | % | ||||||||||||||
Less: Intra-segment elimination | (46 | ) | (36 | ) | 28 | % | (139 | ) | (125 | ) | 11 | % | ||||||||||
Total Services Revenue | $ | 2,948 | $ | 2,932 | 1 | % | $ | 8,852 | $ | 8,787 | 1 | % |
• | BPO revenue increased 2% and represented 60% of total Services revenue. Increased growth from acquisitions along with growth in commercial healthcare, litigation services, commercial European BPO and portions of government healthcare, were partially offset by declines in portions of the customer care and government and transportation. In addition, the anticipated run-off of the student loan business and the Texas Medicaid contract had a combined 3.6-percentage point negative impact on BPO revenue growth in the quarter and a 2.1-percentage point negative impact on total Services revenue. |
◦ | In third quarter 2014, BPO revenue mix across the major business areas was as follows: commercial 46%; government and transportation 24%; commercial healthcare 18%; and government healthcare 12%. |
• | DO revenue was flat and represented 28% of total Services revenue. Growth in the partner print services offerings was offset by declines in other markets. |
• | ITO revenue decreased 3% and represented 12% of total Services revenue. Revenue ramp from lower prior period signings was more than offset by lost business, as we have become more selective in our participation in the ITO market with our main focus on margin improvement. |
• | BPO revenue remained flat and represented 59% of total Services revenue. Growth in commercial healthcare, litigation services and commercial European BPO along with growth from acquisitions, were partially offset by declines in portions of the government healthcare, customer care and government and transportation businesses. The anticipated run-off of the student loan business and the Texas Medicaid contract had a combined 2.3-percentage point negative impact on BPO revenue growth in the nine months ended September 30, 2014 and a 1.4-percentage point negative impact on total Services revenue growth. |
◦ | BPO revenue mix for the nine months ended September 30, 2014 across the major business areas was as follows: commercial 46%; government and transportation 24%; commercial healthcare 17%; and government healthcare 13%. |
• | DO revenue increased 3% and represented 28% of total Services revenue. DO growth was driven primarily by our partner print services offerings and improvement in Europe, slightly offset by declines in other markets. |
• | ITO revenue was flat and represented 13% of total Services revenue. ITO revenue ramp from lower prior period signings and strength in our healthcare offerings were offset by lost business as we have become more selective in our participation in the ITO market with our main focus on margin improvement. |
(in billions) | Three Months Ended September 30, 2014 | Nine Months Ended September 30, 2014 | ||||||
BPO | $ | 1.4 | $ | 5.5 | ||||
DO | 0.7 | 2.0 | ||||||
ITO | 0.2 | 0.5 | ||||||
Total Signings | $ | 2.3 | $ | 8.0 |
Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | |||||||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||
Equipment sales | $ | 599 | $ | 647 | (7 | )% | $ | 1,789 | $ | 1,937 | (8 | )% | ||||||||||
Annuity revenue | 1,430 | 1,512 | (5 | )% | 4,410 | 4,620 | (5 | )% | ||||||||||||||
Total Revenue | $ | 2,029 | $ | 2,159 | (6 | )% | $ | 6,199 | $ | 6,557 | (5 | )% |
• | Equipment sales revenue decreased by 7% from third quarter 2013 with no impact from currency. The decrease in equipment sales reflects weakness in entry products due to product launch timing, weakness in developing markets, the continued migration of customers to our growing partner print services offering (included in our Services segment), which impacts both the entry and mid-range products, and overall price declines that were within our historical range of 5% to 10%. |
• | Annuity revenue decreased by 5% from third quarter 2013, including a 1-percentage point positive impact from currency. Third quarter 2013 Annuity revenue included a $25 million gain in Financing revenue from the sale of finance receivables in that quarter. The overall decrease in Financing revenue from third quarter 2013 contributed 2-percentage points to the Annuity revenue decline and 1-percentage point to the overall Document Technology revenue decline, and reflects the impact of the gain as well as a lower receivables balance due to lower originations and prior finance receivables sales. The remainder of the decrease in Annuity revenue reflects a modest decline in total pages, weakness in entry products due to lower supplies demand, and continued migration of customers to our partner print services offering (included in our Services segment). |
• | Document Technology revenue mix was 56% mid-range, 24% high-end and 20% entry, consistent with recent quarters. |
• | Equipment sales revenue decreased by 8% from the prior year period with no impact from currency. The decrease in equipment sales reflects weakness in entry products due to product launch timing, the continued migration of customers to our growing partner print services offering (included in our Services segment), weakness in developing markets and price declines of approximately 5%. 2013 was favorably impacted by the ConnectKey mid-range product launch and entry production product launches, which included several large account sales. |
• | Annuity revenue decreased by 5% from the prior year period, with no impact from currency. The decrease reflects a modest decline in total pages, weakness in developing markets and entry products due to product launch timing, a continued decline in financing revenue as a result of prior period sales of finance receivables and lower receivables balance due to lower originations. The overall decrease in Financing revenue from the prior year period contributed 2-percentage points to the Annuity revenue decline and no impact to the overall Document Technology revenue decline. Annuity revenue is also impacted by the continued migration of customers to our partner print services offering (included in our Services segment). |
• | Document Technology revenue mix was 57% mid-range, 23% high-end and 20% entry, consistent with recent quarters. |
• | 15% decrease in color printers. |
• | 20% decrease in color multifunction devices. |
• | 20% decrease in black-and-white multifunction devices. |
• | Mid-range color flat with growth in office multifunction devices offset by declines in entry production devices. |
• | 8% decrease in mid-range black-and-white with consistent declines across office multifunction devices and entry production devices. |
• | 24% decrease in high-end color systems. Excluding Fuji Xerox digital front-end (DFE) sales, high-end color installs increased 3% with growth in the new Versant product, the C75 and J75 color press products and the Impika products. |
• | 1% increase in high-end black-and-white systems, with growth across the Nuvera product line partially offset by decreased demand across the DocuPrint product line. |
• | 3% decrease in color printers. |
• | 7% decrease in color multifunction devices. |
• | 22% decrease in black-and-white multifunction devices. |
• | 1% increase in mid-range color devices. |
• | 15% decrease in mid-range black-and-white devices driven primarily by developing markets. |
• | 14% decrease in high-end color systems. Excluding Fuji Xerox DFE sales, high-end color installs increased 5% with growth in iGen offset by declines in entry product color and Color Press which reflects the lapping of product launches in second quarter 2013. |
• | 10% decrease in high-end black-and-white systems, reflecting decreased demand across our DocuPrint and Nuvera product lines. |
(1) | Revenues from DO installations are reported in our Services segment. |
2013 | 2014 | |||||||||||||||||||||||||||
(in millions) | Q1 | Q2 | Q3 | Q4 | YTD | Q1 | Q2 | |||||||||||||||||||||
Services segment revenue | $ | 2,909 | $ | 2,946 | $ | 2,932 | $ | 3,027 | $ | 11,814 | $ | 2,912 | $ | 2,992 | ||||||||||||||
Other segment revenue | 138 | 167 | 144 | 170 | 619 | 142 | 164 | |||||||||||||||||||||
Total performance revenue | 5,182 | 5,376 | 5,235 | 5,548 | 21,341 | 5,099 | 5,281 | |||||||||||||||||||||
Services segment profit | $ | 272 | $ | 301 | $ | 292 | $ | 290 | $ | 1,155 | $ | 250 | $ | 257 | ||||||||||||||
Other Segment Profit | (69 | ) | (61 | ) | (56 | ) | (35 | ) | (221 | ) | (51 | ) | (75 | ) | ||||||||||||||
Total segment profit | 390 | 484 | 497 | 529 | 1,900 | 449 | 488 | |||||||||||||||||||||
Services segment margin | 9.4 | % | 10.2 | % | 10.0 | % | 9.6 | % | 9.8 | % | 8.6 | % | 8.6 | % | ||||||||||||||
Other Segment margin | (50.0 | )% | (36.5 | )% | (38.9 | )% | (20.6 | )% | (35.7 | )% | (35.9 | )% | (45.7 | )% | ||||||||||||||
Total segment margin | 7.5 | % | 9.0 | % | 9.5 | % | 9.5 | % | 8.9 | % | 8.8 | % | 9.2 | % |
Nine Months Ended September 30, | Change | ||||||||||
(in millions) | 2014 | 2013 | |||||||||
Net cash provided by operating activities | $ | 1,206 | $ | 1,407 | $ | (201 | ) | ||||
Net cash used in investing activities | (574 | ) | (399 | ) | (175 | ) | |||||
Net cash used in financing activities | (1,327 | ) | (1,302 | ) | (25 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (54 | ) | (4 | ) | (50 | ) | |||||
Decrease in cash and cash equivalents | (749 | ) | (298 | ) | (451 | ) | |||||
Cash and cash equivalents at beginning of period | 1,764 | 1,246 | 518 | ||||||||
Cash and Cash Equivalents at End of Period | $ | 1,015 | $ | 948 | $ | 67 |
• | $418 million decrease from finance receivables primarily related to the impact from prior period sales of receivables partially offset by higher net run-off. See "Sales of Finance Receivables" section for further discussion. |
• | $44 million decrease due to higher contributions to our defined benefit pension plans. |
• | $161 million increase in accounts payable and accrued compensation primarily related to the timing of accounts payable payments. |
• | $45 million increase primarily due to higher inventory growth in 2013 to support the ConnectKey product launch. |
• | $35 million increase from lower spending for product software and up-front costs for outsourcing services. |
• | $33 million increase from accounts receivable primarily due to the timing of collections partially offset by the impact from quarterly revenue changes. |
• | $151 million increase in acquisitions. 2014 acquisitions include ISG Holdings, Inc. for $225 million, Invoco Holding GmbH for $54 million, Consilience Software, Inc. for $25 million and one smaller acquisition for $2 million. 2013 acquisitions include Zeno Office Solutions, Inc. for $59 million, Impika for $53 million and four smaller acquisitions totaling $43 million. |
• | $22 million increase from higher capital expenditures (including internal use software). |
• | $558 million increase from share repurchases. |
• | $47 million increase in the use of cash due to lower proceeds from the issuance of common stock under our stock option plans. |
• | $25 million increase due to higher common stock dividends of $17 million as well as distributions to noncontrolling interests of $8 million. |
• | $596 million decrease from net debt activity. 2014 reflects payments of $1,050 million on Senior Notes offset by net proceeds of $700 million from the issuance of Senior Notes. 2013 reflects payments of $1 billion on Senior Notes offset by net proceeds of $39 million from the sale and capital leaseback of a building in the U.S. |
(in millions) | September 30, 2014 | December 31, 2013 | ||||||
Total Finance receivables, net(1) | $ | 4,261 | $ | 4,530 | ||||
Equipment on operating leases, net | 526 | 559 | ||||||
Total Finance Assets, net(2) | $ | 4,787 | $ | 5,089 |
(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, 2013 includes a decrease of $178 million due to currency across all Finance Assets, with the remainder due primarily to repayments exceeding new originations. |
(in millions) | September 30, 2014 | December 31, 2013 | ||||||
Financing debt(1) | $ | 4,189 | $ | 4,453 | ||||
Core debt | 3,471 | 3,568 | ||||||
Total Debt | $ | 7,660 | $ | 8,021 |
(1) | Financing debt includes $3,728 million and $3,964 million as of September 30, 2014 and December 31, 2013, respectively, of debt associated with Total finance receivables, net and is the basis for our calculation of “Equipment financing interest” expense. The remainder of the financing debt is associated with Equipment on operating leases. |
(in millions) | September 30, 2014 | December 31, 2013 | ||||||
Principal debt balance(1) | $ | 7,640 | $ | 7,979 | ||||
Net unamortized discount | (55 | ) | (58 | ) | ||||
Fair Value Adjustments(2) | ||||||||
- terminated swaps | 75 | 100 | ||||||
- current swaps | — | — | ||||||
Total Debt | $ | 7,660 | $ | 8,021 |
(1) | Includes Notes Payable of $2 million as of September 30, 2014 and $5 million as of December 31, 2013. |
(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. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Accounts receivable sales | $ | 696 | $ | 814 | $ | 2,244 | $ | 2,587 | ||||||||
Deferred proceeds | 94 | 125 | 314 | 384 | ||||||||||||
Loss on sales of accounts receivable | 4 | 4 | 12 | 13 | ||||||||||||
Estimated decrease to operating cash flows(1) | (22 | ) | (75 | ) | (42 | ) | (42 | ) |
(1) | Represents the difference between current and prior period receivable sales adjusted for the effects of: (i) the deferred proceeds, (ii) collections prior to the end of the quarter, and (iii) currency. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Net cash received for sales of finance receivables (1) | $ | — | $ | 384 | $ | — | $ | 384 | ||||||||
Impact from prior sales of finance receivables(2) | (125 | ) | (84 | ) | (411 | ) | (258 | ) | ||||||||
Collections on beneficial interest | 23 | 16 | 74 | 43 | ||||||||||||
Estimated (Decrease) Increase to Operating Cash Flows | $ | (102 | ) | $ | 316 | $ | (337 | ) | $ | 169 |
(1) | Net of beneficial interest, fees and expenses. |
(2) | Represents cash that would have been collected had we not sold finance receivables. |
Year | Amount | |||
2014 Q4 | $ | 15 | ||
2015 | 1,300 | |||
2016 | 991 | |||
2017 | 1,032 | |||
2018 | 1,020 | |||
2019 | 1,158 | |||
2020 | 407 | |||
2021 | 1,067 | |||
2022 | 300 | |||
2023 and thereafter | 350 | |||
Total | $ | 7,640 |
• | Net income and Earnings per share (EPS) |
• | Effective tax rate |
Three Months Ended September 30, 2014 | Three Months Ended September 30, 2013 | Nine Months Ended September 30, 2014 | Nine Months Ended September 30, 2013 | |||||||||||||||||||||||||||||
(in millions; except per share amounts) | Net Income | EPS | Net Income | EPS | Net Income | EPS | Net Income | EPS | ||||||||||||||||||||||||
As Reported(1) | $ | 267 | $ | 0.22 | $ | 287 | $ | 0.22 | $ | 816 | $ | 0.68 | $ | 875 | $ | 0.68 | ||||||||||||||||
Adjustments: | ||||||||||||||||||||||||||||||||
Amortization of intangible assets | 53 | 0.05 | 52 | 0.04 | 157 | 0.13 | 154 | 0.12 | ||||||||||||||||||||||||
Adjusted | $ | 320 | $ | 0.27 | $ | 339 | $ | 0.26 | $ | 973 | $ | 0.81 | $ | 1,029 | $ | 0.80 | ||||||||||||||||
Weighted average shares for adjusted EPS(2) | 1,192 | 1,286 | 1,208 | 1,284 | ||||||||||||||||||||||||||||
Fully diluted shares at end of period(3) | 1,185 | 1,185 |
(1) | Net income and EPS from continuing operations attributable to Xerox. |
(2) | Average shares for the calculation of adjusted EPS include 27 million of shares associated with the Series A convertible preferred stock and therefore the related quarterly dividend was excluded. |
(3) | Represents common shares outstanding at September 30, 2014, as well as shares associated with our Series A convertible preferred stock plus dilutive potential common shares as used for the calculation of diluted earnings per share for the third quarter 2014. |
Three Months Ended September 30, 2014 | Three Months Ended September 30, 2013 | Nine Months Ended September 30, 2014 | Nine Months Ended September 30, 2013 | ||||||||||||||||||||||||||||||||||||||||
(in millions) | Pre-Tax Income | Income Tax Expense | Effective Tax Rate | Pre-Tax Income | Income Tax Expense | Effective Tax Rate | Pre-Tax Income | Income Tax Expense | Effective Tax Rate | Pre-Tax Income | Income Tax Expense | Effective Tax Rate | |||||||||||||||||||||||||||||||
As Reported(1) | $ | 300 | $ | 71 | 23.7 | % | $ | 334 | $ | 85 | 25.4 | % | $ | 916 | $ | 202 | 22.1 | % | $ | 967 | $ | 203 | 21.0 | % | |||||||||||||||||||
Adjustments: | |||||||||||||||||||||||||||||||||||||||||||
Amortization of intangible assets | 85 | 32 | 83 | 31 | 253 | 96 | 249 | 95 | |||||||||||||||||||||||||||||||||||
Adjusted | $ | 385 | $ | 103 | 26.8 | % | $ | 417 | $ | 116 | 27.8 | % | $ | 1,169 | $ | 298 | 25.5 | % | $ | 1,216 | $ | 298 | 24.5 | % |
(1) | Pre-tax income and Income tax expense from continuing operations attributable to Xerox. |
Three Months Ended September 30, 2014 | Three Months Ended September 30, 2013 | Nine Months Ended September 30, 2014 | Nine Months Ended September 30, 2013 | ||||||||||||||||||||||||||||||||||||||||
(in millions) | Profit | Revenue | Margin | Profit | Revenue | Margin | Profit | Revenue | Margin | Profit | Revenue | Margin | |||||||||||||||||||||||||||||||
Reported Pre-tax Income(1) | $ | 300 | $ | 5,120 | 5.9 | % | $ | 334 | $ | 5,235 | 6.4 | % | $ | 916 | $ | 15,500 | 6.0 | % | $ | 967 | $ | 15,793 | 6.1 | % | |||||||||||||||||||
Adjustments: | |||||||||||||||||||||||||||||||||||||||||||
Amortization of intangible assets | 85 | 83 | 253 | 249 | |||||||||||||||||||||||||||||||||||||||
Xerox restructuring charge | 28 | 35 | 93 | 60 | |||||||||||||||||||||||||||||||||||||||
Other expenses, net | 73 | 38 | 179 | 115 | |||||||||||||||||||||||||||||||||||||||
Adjusted Operating Income/Margin | $ | 486 | $ | 5,120 | 9.5 | % | $ | 490 | $ | 5,235 | 9.4 | % | $ | 1,441 | $ | 15,500 | 9.3 | % | $ | 1,391 | $ | 15,793 | 8.8 | % | |||||||||||||||||||
Equity in net income of unconsolidated affiliates | 44 | 43 | 119 | 126 | |||||||||||||||||||||||||||||||||||||||
Business transformation costs | 6 | — | 16 | — | |||||||||||||||||||||||||||||||||||||||
Fuji Xerox restructuring charge | 1 | 3 | 3 | 8 | |||||||||||||||||||||||||||||||||||||||
Litigation matters | — | — | — | (37 | ) | ||||||||||||||||||||||||||||||||||||||
Other expenses, net* | (75 | ) | (39 | ) | (180 | ) | (117 | ) | |||||||||||||||||||||||||||||||||||
Segment Profit / Revenue | $ | 462 | $ | 5,120 | 9.0 | % | $ | 497 | $ | 5,235 | 9.5 | % | $ | 1,399 | $ | 15,500 | 9.0 | % | $ | 1,371 | $ | 15,793 | 8.7 | % |
(1) | Profit and revenue from continuing operations attributable to Xerox. |
(a) | Sales of Unregistered Securities during the Quarter ended September 30, 2014 |
a. | Securities issued on July 15, 2014: Registrant issued 36,844 deferred stock units (DSUs), representing the right to receive shares of Common stock, par value $1 per share, at a future date. |
b. | No underwriters participated. The shares were issued to each of the non-employee Directors of Registrant: Richard J. Harrington, William Curt Hunter, Robert J. Keegan, Robert A. McDonald, Charles Prince, Ann N. Reese, Sara Martinez Tucker and Mary Agnes Wilderotter. |
c. | The DSUs were issued at a deemed purchase price of $12.645 per DSU (aggregate price $465,892), based upon the market value on the date of issuance, in payment of the semi-annual Director's fees pursuant to Registrant’s 2004 Equity Compensation Plan for Non-Employee Directors. |
d. | Exemption from registration under the Act was claimed based upon Section 4(2) as a sale by an issuer not involving a public offering. |
a. | Securities issued on July 31, 2014: Registrant issued 4,260 DSUs, representing the right to receive shares of Common stock, par value $1 per share, at a future date. |
b. | No underwriters participated. The shares were issued to each of the non-employee Directors of Registrant: Glenn A. Britt, Richard J. Harrington, William Curt Hunter, Robert J. Keegan, Robert A. McDonald, Charles Prince, Ann N. Reese, Sara Martinez Tucker and Mary Agnes Wilderotter. |
c. | The DSUs were issued at a deemed purchase price of $12.485 per DSU (aggregate price $53,186), based upon the market value on the date of record, in payment of the dividend equivalents due to DSU holders pursuant to Registrant’s 2004 Equity Compensation Plan for Non-Employee Directors. |
d. | Exemption from registration under the Act was claimed based upon Section 4(2) as a sale by an issuer not involving a public offering. |
(b) | Issuer Purchases of Equity Securities during the Quarter ended September 30, 2014 |
Total Number of Shares Purchased | Average Price Paid per Share(1) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) | Maximum Approximate Dollar Value of Share That May Yet Be Purchased Under the Plans or Programs(2) | ||||||||||
July 1 through 31 | 6,188,100 | $ | 12.62 | 6,188,100 | $ | 558,186,747 | |||||||
August 1 through 31 | 5,520,370 | 13.33 | 5,520,370 | 484,623,734 | |||||||||
September 1 through 30 | 7,303,179 | 13.64 | 7,303,179 | 384,979,855 | |||||||||
Total | 19,011,649 | 19,011,649 |
(1) | Exclusive of fees and costs. |
(2) | Of the cumulative $6.5 billion of share repurchase authority previously granted by our Board of Directors, exclusive of fees and expenses, approximately $6.1 billion has been used through September 30, 2014. Repurchases may be made on the open market, or through derivative or negotiated transactions. Open-market repurchases will be made in compliance with the Securities and Exchange Commission’s Rule 10b-18, and are subject to market conditions, as well as applicable legal and other considerations. |
Total Number of Shares Purchased | Average Price Paid per Share(2) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum That May Be Purchased under the Plans or Programs | |||||||
July 1 through 31 | 3,143,819 | $ | 12.38 | n/a | n/a | |||||
August 1 through 31 | 18,448 | 13.04 | n/a | n/a | ||||||
September 1 through 30 | 9,658 | 13.81 | n/a | n/a | ||||||
Total | 3,171,925 |
(1) | These repurchases are made under a provision in our restricted stock compensation programs for the indirect repurchase of shares through a net-settlement feature upon the vesting of shares in order to satisfy minimum statutory tax-withholding requirements. |
3(a) | Restated Certificate of Incorporation of Registrant filed with the Department of State of New York on February 21, 2013. | |
Incorporated by reference to Exhibit 3(a) to Registrant’s Annual Report on Form 10-K dated for the fiscal year ended December 31, 2012. | ||
3(b) | By-Laws of Registrant, as amended through May 21, 2009. | |
Incorporated by reference to Exhibit 3(b) to Registrant’s Current Report on Form 8-K dated May 21, 2009. | ||
12 | Computation of Ratio of Earnings to Fixed Charges. | |
31(a) | Certification of CEO pursuant to Rule 13a-14(a) or Rule 15d-14(a). | |
31(b) | Certification of CFO pursuant to Rule 13a-14(a) or Rule 15d-14(a). | |
32 | Certification of CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase. | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase. | |
101.INS | XBRL Instance Document. | |
101.LAB | XBRL Taxonomy Extension Label Linkbase. | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase. | |
101.SCH | XBRL Taxonomy Extension Schema Linkbase. |
XEROX CORPORATION (Registrant) | |
By: | /S/ JOSEPH H. MANCINI, JR. |
Joseph H. Mancini, Jr. Vice President and Chief Accounting Officer (Principal Accounting Officer) |
3(a) | Restated Certificate of Incorporation of Registrant filed with the Department of State of New York on February 21, 2013. | |
Incorporated by reference to Exhibit 3(a) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2012. | ||
3(b) | By-Laws of Registrant, as amended through May 21, 2009. | |
Incorporated by reference to Exhibit 3(b) to Registrant's Current Report on Form 8-K dated May 21, 2009. | ||
12 | Computation of Ratio of Earnings to Fixed Charges. | |
31(a) | Certification of CEO pursuant to Rule 13a-14(a) or Rule 15d-14(a). | |
31(b) | Certification of CFO pursuant to Rule 13a-14(a) or Rule 15d-14(a). | |
32 | Certification of CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase. | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase. | |
101.INS | XBRL Instance Document. | |
101.LAB | XBRL Taxonomy Extension Label Linkbase. | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase. | |
101.SCH | XBRL Taxonomy Extension Schema Linkbase. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Fixed Charges: | ||||||||||||||||
Interest expense | $ | 92 | $ | 100 | $ | 288 | $ | 308 | ||||||||
Capitalized interest | 1 | — | 3 | 3 | ||||||||||||
Portion of rental expense which represents interest factor | 68 | 69 | 203 | 188 | ||||||||||||
Total Fixed Charges | $ | 161 | $ | 169 | $ | 494 | $ | 499 | ||||||||
Earnings Available for Fixed Charges: | ||||||||||||||||
Pre-tax income | $ | 300 | $ | 334 | $ | 916 | $ | 967 | ||||||||
Add: Distributed equity income of affiliated companies | 7 | 2 | 42 | 41 | ||||||||||||
Add: Fixed charges | 161 | 169 | 494 | 499 | ||||||||||||
Less: Capitalized interest | (1 | ) | — | (3 | ) | (3 | ) | |||||||||
Less: Net income-noncontrolling interests | (6 | ) | (5 | ) | (17 | ) | (15 | ) | ||||||||
Total Earnings Available for Fixed Charges | $ | 461 | $ | 500 | $ | 1,432 | $ | 1,489 | ||||||||
Ratio of Earnings to Fixed Charges | 2.86 | 2.96 | 2.90 | 2.98 | ||||||||||||
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends: | ||||||||||||||||
Fixed Charges: | ||||||||||||||||
Interest expense | $ | 92 | $ | 100 | $ | 288 | $ | 308 | ||||||||
Capitalized interest | 1 | — | 3 | 3 | ||||||||||||
Portion of rental expense which represents interest factor | 68 | 69 | 203 | 188 | ||||||||||||
Total Fixed Charges before preferred stock dividends pre-tax income requirements | 161 | 169 | 494 | 499 | ||||||||||||
Preferred stock dividends pre-tax income requirements | 10 | 10 | 29 | 29 | ||||||||||||
Total Combined Fixed Charges and Preferred Stock Dividends | $ | 171 | $ | 179 | $ | 523 | $ | 528 | ||||||||
Earnings Available for Fixed Charges: | ||||||||||||||||
Pre-tax income | $ | 300 | $ | 334 | $ | 916 | $ | 967 | ||||||||
Add: Distributed equity income of affiliated companies | 7 | 2 | 42 | 41 | ||||||||||||
Add: Fixed charges before preferred stock dividends | 161 | 169 | 494 | 499 | ||||||||||||
Less: Capitalized interest | (1 | ) | — | (3 | ) | (3 | ) | |||||||||
Less: Net income-noncontrolling interests | (6 | ) | (5 | ) | (17 | ) | (15 | ) | ||||||||
Total Earnings Available for Fixed Charges and Preferred Stock Dividends | $ | 461 | $ | 500 | $ | 1,432 | $ | 1,489 | ||||||||
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends | 2.70 | 2.79 | 2.74 | 2.82 |
1. | I have reviewed this Quarterly Report on Form 10-Q of Xerox Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/S/ URSULA M. BURNS | |
Ursula M. Burns Principal Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Xerox Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Kathryn A. Mikells Principal Financial Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Ursula M. Burns Chief Executive Officer | |
October 30, 2014 | |
Kathryn A. Mikells Chief Financial Officer | |
October 30, 2014 |
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Segment Reporting, Segment Revenue and Segment Profit (Loss) (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2014
|
Sep. 30, 2013
|
Sep. 30, 2014
primaryreportablesegment
|
Sep. 30, 2013
|
|
Segment Reporting Information [Line Items] | ||||
Primary Reportable Segments, Number | 2 | |||
Segment Revenue | $ 5,120 | $ 5,235 | $ 15,500 | $ 15,793 |
Segment Profit (Loss) | 462 | 497 | 1,399 | 1,371 |
Services Segment [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Segment Revenue | 2,948 | 2,932 | 8,852 | 8,787 |
Segment Profit (Loss) | 262 | 292 | 769 | 865 |
Services Segment [Member] | Outsourcing Offerings [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Outsourcing Service Offerings, Number | 3 | |||
Document Technology Segment [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Segment Revenue | 2,029 | 2,159 | 6,199 | 6,557 |
Segment Profit (Loss) | 285 | 261 | 841 | 692 |
All Other Segments [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Segment Revenue | 143 | 144 | 449 | 449 |
Segment Profit (Loss) | $ (85) | $ (56) | $ (211) | $ (186) |
Debt, Net Payments and Proceeds on Other Debt (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2014
|
Sep. 30, 2013
|
Sep. 30, 2014
|
Sep. 30, 2013
|
|||||
Debt Disclosure [Abstract] | ||||||||
Net (payments) proceeds on short-term debt | $ (4) | $ 6 | ||||||
Proceeds from issuance of long-term debt | 778 | 102 | ||||||
Payments on long-term debt(1) | (1,109) | [1] | (1,039) | [1] | ||||
Net Payments on Debt | $ (40) | $ (610) | $ (335) | $ (931) | ||||
|
Inventories (Details) (USD $)
In Millions, unless otherwise specified |
Sep. 30, 2014
|
Dec. 31, 2013
|
---|---|---|
Inventories, net [Abstract] | ||
Finished goods | $ 899 | $ 837 |
Work-in-process | 68 | 60 |
Raw materials | 102 | 101 |
Total Inventories | $ 1,069 | $ 998 |
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