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 June 30, 2015 | |
Common Stock, $1 par value | 1,068,794,642 shares |
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Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in millions, except per-share data) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Revenues | ||||||||||||||||
Sales | $ | 1,224 | $ | 1,342 | $ | 2,350 | $ | 2,599 | ||||||||
Outsourcing, maintenance and rentals | 3,279 | 3,501 | 6,532 | 6,915 | ||||||||||||
Financing | 87 | 98 | 177 | 198 | ||||||||||||
Total Revenues | 4,590 | 4,941 | 9,059 | 9,712 | ||||||||||||
Costs and Expenses | ||||||||||||||||
Cost of sales | 776 | 832 | 1,450 | 1,610 | ||||||||||||
Cost of outsourcing, maintenance and rentals | 2,356 | 2,488 | 4,724 | 4,942 | ||||||||||||
Cost of financing | 32 | 36 | 65 | 72 | ||||||||||||
Research, development and engineering expenses | 142 | 143 | 283 | 288 | ||||||||||||
Selling, administrative and general expenses | 906 | 959 | 1,821 | 1,904 | ||||||||||||
Restructuring and asset impairment charges | 157 | 39 | 171 | 65 | ||||||||||||
Amortization of intangible assets | 79 | 78 | 156 | 155 | ||||||||||||
Other expenses, net | 68 | 65 | 114 | 104 | ||||||||||||
Total Costs and Expenses | 4,516 | 4,640 | 8,784 | 9,140 | ||||||||||||
Income before Income Taxes and Equity Income | 74 | 301 | 275 | 572 | ||||||||||||
Income tax (benefit) expense | (9 | ) | 73 | 30 | 115 | |||||||||||
Equity in net income of unconsolidated affiliates | 29 | 33 | 63 | 75 | ||||||||||||
Income from Continuing Operations | 112 | 261 | 308 | 532 | ||||||||||||
(Loss) income from discontinued operations, net of tax | (95 | ) | 11 | (61 | ) | 26 | ||||||||||
Net Income | 17 | 272 | 247 | 558 | ||||||||||||
Less: Net income attributable to noncontrolling interests | 5 | 6 | 10 | 11 | ||||||||||||
Net Income Attributable to Xerox | $ | 12 | $ | 266 | $ | 237 | $ | 547 | ||||||||
Amounts Attributable to Xerox: | ||||||||||||||||
Net income from continuing operations | $ | 107 | $ | 255 | $ | 298 | $ | 521 | ||||||||
Net (loss) income from discontinued operations | (95 | ) | 11 | (61 | ) | 26 | ||||||||||
Net Income Attributable to Xerox | $ | 12 | $ | 266 | $ | 237 | $ | 547 | ||||||||
Basic Earnings per Share: | ||||||||||||||||
Continuing operations | $ | 0.09 | $ | 0.21 | $ | 0.26 | $ | 0.43 | ||||||||
Discontinued operations | (0.08 | ) | 0.01 | (0.06 | ) | 0.03 | ||||||||||
Total Basic Earnings per Share | $ | 0.01 | $ | 0.22 | $ | 0.20 | $ | 0.46 | ||||||||
Diluted Earnings per Share: | ||||||||||||||||
Continuing operations | $ | 0.09 | $ | 0.21 | $ | 0.26 | $ | 0.43 | ||||||||
Discontinued operations | (0.08 | ) | 0.01 | (0.06 | ) | 0.02 | ||||||||||
Total Diluted Earnings per Share | $ | 0.01 | $ | 0.22 | $ | 0.20 | $ | 0.45 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in millions) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Net income | $ | 17 | $ | 272 | $ | 247 | $ | 558 | ||||||||
Less: Net income attributable to noncontrolling interests | 5 | 6 | 10 | 11 | ||||||||||||
Net Income Attributable to Xerox | 12 | 266 | 237 | 547 | ||||||||||||
Other Comprehensive Income (Loss), Net(1): | ||||||||||||||||
Translation adjustments, net | 194 | 92 | (315 | ) | 91 | |||||||||||
Unrealized (losses) gains, net | (19 | ) | 15 | 10 | 41 | |||||||||||
Changes in defined benefit plans, net | 67 | (70 | ) | 165 | (154 | ) | ||||||||||
Other Comprehensive Income (Loss), Net | 242 | 37 | (140 | ) | (22 | ) | ||||||||||
Less: Other comprehensive income, net attributable to noncontrolling interests | 1 | 1 | — | 1 | ||||||||||||
Other Comprehensive Income (Loss), Net Attributable to Xerox | 241 | 36 | (140 | ) | (23 | ) | ||||||||||
Comprehensive Income, Net | 259 | 309 | 107 | 536 | ||||||||||||
Less: Comprehensive income, net attributable to noncontrolling interests | 6 | 7 | 10 | 12 | ||||||||||||
Comprehensive Income, Net Attributable to Xerox | $ | 253 | $ | 302 | $ | 97 | $ | 524 |
(in millions, except share data in thousands) | June 30, 2015 | December 31, 2014 (1) | ||||||
Assets | ||||||||
Cash and cash equivalents | $ | 1,641 | $ | 1,411 | ||||
Accounts receivable, net | 2,722 | 2,652 | ||||||
Billed portion of finance receivables, net | 113 | 110 | ||||||
Finance receivables, net | 1,328 | 1,425 | ||||||
Inventories | 1,072 | 934 | ||||||
Assets of discontinued operations | — | 1,260 | ||||||
Other current assets | 956 | 1,082 | ||||||
Total current assets | 7,832 | 8,874 | ||||||
Finance receivables due after one year, net | 2,581 | 2,719 | ||||||
Equipment on operating leases, net | 500 | 525 | ||||||
Land, buildings and equipment, net | 1,078 | 1,123 | ||||||
Investments in affiliates, at equity | 1,377 | 1,338 | ||||||
Intangible assets, net | 1,890 | 2,031 | ||||||
Goodwill | 8,810 | 8,805 | ||||||
Other long-term assets | 1,948 | 2,243 | ||||||
Total Assets | $ | 26,016 | $ | 27,658 | ||||
Liabilities and Equity | ||||||||
Short-term debt and current portion of long-term debt | $ | 1,648 | $ | 1,427 | ||||
Accounts payable | 1,568 | 1,584 | ||||||
Accrued compensation and benefits costs | 664 | 754 | ||||||
Unearned income | 428 | 431 | ||||||
Liabilities of discontinued operations | — | 371 | ||||||
Other current liabilities | 1,422 | 1,509 | ||||||
Total current liabilities | 5,730 | 6,076 | ||||||
Long-term debt | 5,998 | 6,314 | ||||||
Pension and other benefit liabilities | 2,634 | 2,847 | ||||||
Post-retirement medical benefits | 790 | 865 | ||||||
Other long-term liabilities | 418 | 454 | ||||||
Total Liabilities | 15,570 | 16,556 | ||||||
Series A Convertible Preferred Stock | 349 | 349 | ||||||
Common stock | 1,097 | 1,124 | ||||||
Additional paid-in capital | 3,967 | 4,283 | ||||||
Treasury stock, at cost | (316 | ) | (105 | ) | ||||
Retained earnings | 9,605 | 9,535 | ||||||
Accumulated other comprehensive loss | (4,299 | ) | (4,159 | ) | ||||
Xerox shareholders’ equity | 10,054 | 10,678 | ||||||
Noncontrolling interests | 43 | 75 | ||||||
Total Equity | 10,097 | 10,753 | ||||||
Total Liabilities and Equity | $ | 26,016 | $ | 27,658 | ||||
Shares of common stock issued | 1,096,623 | 1,124,354 | ||||||
Treasury stock | (27,828 | ) | (7,609 | ) | ||||
Shares of Common Stock Outstanding | 1,068,795 | 1,116,745 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in millions) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Cash Flows from Operating Activities: | ||||||||||||||||
Net income | $ | 17 | $ | 272 | $ | 247 | $ | 558 | ||||||||
Adjustments required to reconcile net income to cash flows from operating activities: | ||||||||||||||||
Depreciation and amortization | 297 | 376 | 593 | 721 | ||||||||||||
Provision for receivables | 14 | 22 | 32 | 38 | ||||||||||||
Provision for inventory | 10 | 4 | 16 | 14 | ||||||||||||
Net loss (gain) on sales of businesses and assets | 74 | 1 | 62 | (29 | ) | |||||||||||
Undistributed equity in net income of unconsolidated affiliates | (3 | ) | 2 | (34 | ) | (40 | ) | |||||||||
Stock-based compensation | 23 | 24 | 45 | 50 | ||||||||||||
Restructuring and asset impairment charges | 157 | 38 | 171 | 65 | ||||||||||||
Payments for restructurings | (30 | ) | (36 | ) | (61 | ) | (72 | ) | ||||||||
Contributions to defined benefit pension plans | (57 | ) | (68 | ) | (98 | ) | (105 | ) | ||||||||
Increase in accounts receivable and billed portion of finance receivables | (6 | ) | (150 | ) | (245 | ) | (389 | ) | ||||||||
Collections of deferred proceeds from sales of receivables | 62 | 106 | 134 | 226 | ||||||||||||
Increase in inventories | (67 | ) | (43 | ) | (193 | ) | (103 | ) | ||||||||
Increase in equipment on operating leases | (69 | ) | (66 | ) | (139 | ) | (123 | ) | ||||||||
Decrease in finance receivables | 6 | 18 | 78 | 54 | ||||||||||||
Collections on beneficial interest from sales of finance receivables | 12 | 21 | 27 | 42 | ||||||||||||
Decrease (increase) in other current and long-term assets | 11 | (24 | ) | (60 | ) | (118 | ) | |||||||||
Decrease in accounts payable and accrued compensation | (21 | ) | (96 | ) | (38 | ) | (88 | ) | ||||||||
Decrease in other current and long-term liabilities | (57 | ) | (82 | ) | (83 | ) | (108 | ) | ||||||||
Net change in income tax assets and liabilities | 17 | 43 | 49 | 72 | ||||||||||||
Net change in derivative assets and liabilities | 14 | (20 | ) | 2 | (21 | ) | ||||||||||
Other operating, net | (55 | ) | (17 | ) | (43 | ) | (33 | ) | ||||||||
Net cash provided by operating activities | 349 | 325 | 462 | 611 | ||||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||
Cost of additions to land, buildings and equipment | (77 | ) | (102 | ) | (152 | ) | (186 | ) | ||||||||
Proceeds from sales of land, buildings and equipment | — | 2 | 16 | 35 | ||||||||||||
Cost of additions to internal use software | (25 | ) | (21 | ) | (45 | ) | (40 | ) | ||||||||
Proceeds from sale of businesses | 930 | 15 | 933 | 15 | ||||||||||||
Acquisitions, net of cash acquired | (20 | ) | (227 | ) | (48 | ) | (281 | ) | ||||||||
Other investing, net | 23 | 7 | 29 | 11 | ||||||||||||
Net cash provided by (used in) investing activities | 831 | (326 | ) | 733 | (446 | ) | ||||||||||
Cash Flows from Financing Activities: | ||||||||||||||||
Net proceeds (payments) on debt | 53 | (299 | ) | (97 | ) | (295 | ) | |||||||||
Common stock dividends | (77 | ) | (73 | ) | (147 | ) | (141 | ) | ||||||||
Preferred stock dividends | (6 | ) | (6 | ) | (12 | ) | (12 | ) | ||||||||
Proceeds from issuances of common stock | 4 | 19 | 14 | 39 | ||||||||||||
Excess tax benefits from stock-based compensation | 1 | 3 | 3 | 6 | ||||||||||||
Payments to acquire treasury stock, including fees | (395 | ) | (204 | ) | (611 | ) | (479 | ) | ||||||||
Repurchases related to stock-based compensation | — | — | (1 | ) | (1 | ) | ||||||||||
Distributions to noncontrolling interests | (2 | ) | (1 | ) | (56 | ) | (17 | ) | ||||||||
Other financing | (1 | ) | — | (1 | ) | (10 | ) | |||||||||
Net cash used in financing activities | (423 | ) | (561 | ) | (908 | ) | (910 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | 12 | 2 | (57 | ) | (12 | ) | ||||||||||
Increase (decrease) in cash and cash equivalents | 769 | (560 | ) | 230 | (757 | ) | ||||||||||
Cash and cash equivalents at beginning of period | 872 | 1,567 | 1,411 | 1,764 | ||||||||||||
Cash and Cash Equivalents at End of Period | $ | 1,641 | $ | 1,007 | $ | 1,641 | $ | 1,007 |
Three Months Ended December 31, 2014 | Year Ended December 31, 2014 | |||||||||||||||
As Reported | As Revised | As Reported | As Revised | |||||||||||||
Income tax expense | $ | 78 | $ | 34 | $ | 259 | $ | 215 | ||||||||
Income from Continuing Operations | 311 | 355 | 1,107 | 1,151 | ||||||||||||
Net Income | 162 | 206 | 992 | 1,036 | ||||||||||||
Net Income Attributable to Xerox | 156 | 200 | 969 | 1,013 | ||||||||||||
Net Income Attributable to Xerox - continuing operations | 305 | 349 | 1,084 | 1,128 | ||||||||||||
Basic Earnings per Share: | ||||||||||||||||
Continuing Operations | $ | 0.26 | $ | 0.30 | $ | 0.92 | $ | 0.96 | ||||||||
Total Basic Earnings per Share | 0.13 | 0.17 | 0.82 | 0.86 | ||||||||||||
Diluted Earnings per Share: | ||||||||||||||||
Continuing Operations | $ | 0.26 | $ | 0.30 | $ | 0.90 | $ | 0.94 | ||||||||
Total Diluted Earnings per Share | 0.13 | 0.17 | 0.81 | 0.85 |
December 31, 2014 | ||||||||
As Reported | As Revised | |||||||
Other long-term liabilities | $ | 498 | $ | 454 | ||||
Total Liabilities | 16,600 | 16,556 | ||||||
Retained earnings | 9,491 | 9,535 | ||||||
Xerox shareholders' equity | 10,634 | 10,678 | ||||||
Total Equity | 10,709 | 10,753 |
Year Ended December 31, 2014 | ||||||||
As Reported | As Revised | |||||||
Net income | $ | 992 | $ | 1,036 | ||||
Net change in income tax assets and liabilities | 29 | (15 | ) |
• | Business Process Outsourcing (BPO) |
• | Document Outsourcing (which includes Managed Print Services) (DO) |
• | “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 June 30, | Six Months Ended June 30, | ||||||||||||||
Segment Revenue | Segment Profit (Loss) | Segment Revenue | Segment Profit(Loss) | ||||||||||||
2015 | |||||||||||||||
Services | $ | 2,569 | $ | 192 | $ | 5,083 | $ | 381 | |||||||
Document Technology | 1,880 | 228 | 3,710 | 431 | |||||||||||
Other | 141 | (76 | ) | 266 | (138 | ) | |||||||||
Total | $ | 4,590 | $ | 344 | $ | 9,059 | $ | 674 | |||||||
2014 | |||||||||||||||
Services | $ | 2,651 | $ | 226 | $ | 5,236 | $ | 448 | |||||||
Document Technology | 2,126 | 306 | 4,170 | 555 | |||||||||||
Other | 164 | (75 | ) | 306 | (125 | ) | |||||||||
Total | $ | 4,941 | $ | 457 | $ | 9,712 | $ | 878 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
Reconciliation to Pre-tax Income | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Segment Profit | $ | 344 | $ | 457 | $ | 674 | $ | 878 | ||||||||
Reconciling items: | ||||||||||||||||
Restructuring and asset impairment charges, and related costs(1) | (160 | ) | (46 | ) | (178 | ) | (75 | ) | ||||||||
Restructuring charges of Fuji Xerox | (1 | ) | 1 | (2 | ) | (2 | ) | |||||||||
Amortization of intangible assets | (79 | ) | (78 | ) | (156 | ) | (155 | ) | ||||||||
Equity in net income of unconsolidated affiliates | (29 | ) | (33 | ) | (63 | ) | (75 | ) | ||||||||
Other | (1 | ) | — | — | 1 | |||||||||||
Pre-tax Income | $ | 74 | $ | 301 | $ | 275 | $ | 572 |
(1) | Includes business transformation costs of $3 and $7 for the three months ended June 30, 2015 and June 30, 2014, respectively, and $7 and $10 for the six months ended June 30, 2015 and June 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 June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||||||||||||||||||||||||||
ITO | Other | Total | ITO | Other | Total | ITO | Other | Total | ITO | Other | Total | |||||||||||||||||||||||||||||||||||||
Revenues | $ | 308 | $ | — | $ | 308 | $ | 341 | $ | 17 | $ | 358 | $ | 619 | $ | — | $ | 619 | $ | 669 | $ | 38 | $ | 707 | ||||||||||||||||||||||||
Income (loss) from operations (1), (2) | 43 | — | 43 | 23 | — | 23 | 104 | — | 104 | 44 | (1 | ) | 43 | |||||||||||||||||||||||||||||||||||
Loss on disposal | (68 | ) | — | (68 | ) | — | (2 | ) | (2 | ) | (72 | ) | — | (72 | ) | — | — | — | ||||||||||||||||||||||||||||||
Net (loss) income before income taxes | $ | (25 | ) | $ | — | $ | (25 | ) | $ | 23 | $ | (2 | ) | $ | 21 | $ | 32 | $ | — | $ | 32 | $ | 44 | $ | (1 | ) | $ | 43 | ||||||||||||||||||||
Income tax expense | (70 | ) | — | (70 | ) | (9 | ) | (1 | ) | (10 | ) | (93 | ) | — | (93 | ) | (16 | ) | (1 | ) | (17 | ) | ||||||||||||||||||||||||||
(Loss) income from discontinued operations, net of tax | $ | (95 | ) | $ | — | $ | (95 | ) | $ | 14 | $ | (3 | ) | $ | 11 | $ | (61 | ) | $ | — | $ | (61 | ) | $ | 28 | $ | (2 | ) | $ | 26 |
(1) | ITO Income from operations excludes depreciation and amortization expenses of approximately $41 and $80 (including $7 and $14 for intangible amortization) for the three and six months ended June 30, 2015, respectively, since the business was held for sale. |
(2) | ITO Income from operations includes intangible amortization and other expenses of approximately $8 and $16 for the three and six months ended June 30, 2014, respectively. |
December 31, 2014 | ||||
Accounts receivable, net | $ | 213 | ||
Other current assets | 146 | |||
Land, buildings and equipment, net | 220 | |||
Intangible assets, net | 197 | |||
Goodwill | 337 | |||
Other long-term assets | 147 | |||
Total Assets of Discontinued Operations | $ | 1,260 | ||
Current portion of long-term debt | $ | 31 | ||
Accounts payable | 32 | |||
Accrued pension and benefit costs | 9 | |||
Unearned income | 64 | |||
Other current liabilities | 112 | |||
Long-term debt | 44 | |||
Pension and other benefit liabilities | 25 | |||
Other long-term liabilities | 54 | |||
Total Liabilities of Discontinued Operations | $ | 371 |
June 30, 2015 | December 31, 2014 | |||||||
Amounts billed or billable | $ | 2,485 | $ | 2,421 | ||||
Unbilled amounts | 319 | 318 | ||||||
Allowance for doubtful accounts | (82 | ) | (87 | ) | ||||
Accounts Receivable, Net | $ | 2,722 | $ | 2,652 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Accounts receivable sales | $ | 586 | $ | 726 | $ | 1,188 | $ | 1,548 | |||||||
Deferred proceeds | 57 | 96 | 119 | 220 | |||||||||||
Loss on sales of accounts receivable | 3 | 4 | 6 | 8 | |||||||||||
Estimated decrease to operating cash flows(1) | (27 | ) | (31 | ) | (10 | ) | (20 | ) |
(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 June 30, | Six Months Ended June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Impact from prior sales of finance receivables(1) | $ | (89 | ) | $ | (137 | ) | $ | (194 | ) | $ | (286 | ) | ||||
Collections on beneficial interest | 15 | 25 | 33 | 51 | ||||||||||||
Estimated Decrease to Operating Cash Flows | $ | (74 | ) | $ | (112 | ) | $ | (161 | ) | $ | (235 | ) |
Allowance for Credit Losses: | United States | Canada | Europe | Other(3) | Total | |||||||||||||||
Balance at December 31, 2014 | $ | 41 | $ | 20 | $ | 58 | $ | 12 | $ | 131 | ||||||||||
Provision | 2 | 1 | 5 | 3 | 11 | |||||||||||||||
Charge-offs | — | (3 | ) | (1 | ) | (1 | ) | (5 | ) | |||||||||||
Recoveries and other(1) | — | — | (6 | ) | — | (6 | ) | |||||||||||||
Balance at March 31, 2015 | $ | 43 | $ | 18 | $ | 56 | $ | 14 | $ | 131 | ||||||||||
Provision | 1 | 1 | 6 | 2 | 10 | |||||||||||||||
Charge-offs | (1 | ) | (2 | ) | (5 | ) | (2 | ) | (10 | ) | ||||||||||
Recoveries and other(1) | (1 | ) | 1 | 3 | — | 3 | ||||||||||||||
Balance at June 30, 2015 | $ | 42 | $ | 18 | $ | 60 | $ | 14 | $ | 134 | ||||||||||
Finance receivables as of June 30, 2015 collectively evaluated for impairment(2) | $ | 1,710 | $ | 397 | $ | 1,619 | $ | 430 | $ | 4,156 | ||||||||||
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 | ||||||||||
Finance receivables as of June 30, 2014 collectively evaluated for impairment(2) | $ | 1,684 | $ | 421 | $ | 2,170 | $ | 339 | $ | 4,614 |
(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 the allowance for credit losses of $134 and $164 at June 30, 2015 and 2014, 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%. |
June 30, 2015 | December 31, 2014 | ||||||||||||||||||||||||||||||
Investment Grade | Non-investment Grade | Substandard | Total Finance Receivables | Investment Grade | Non-investment Grade | Substandard | Total Finance Receivables | ||||||||||||||||||||||||
Finance and other services | $ | 191 | $ | 177 | $ | 59 | $ | 427 | $ | 195 | $ | 159 | $ | 55 | $ | 409 | |||||||||||||||
Government and education | 556 | 13 | 4 | 573 | 589 | 13 | 3 | 605 | |||||||||||||||||||||||
Graphic arts | 150 | 81 | 83 | 314 | 148 | 79 | 90 | 317 | |||||||||||||||||||||||
Industrial | 91 | 41 | 16 | 148 | 92 | 41 | 18 | 151 | |||||||||||||||||||||||
Healthcare | 87 | 25 | 14 | 126 | 84 | 26 | 14 | 124 | |||||||||||||||||||||||
Other | 55 | 40 | 27 | 122 | 55 | 38 | 29 | 122 | |||||||||||||||||||||||
Total United States | 1,130 | 377 | 203 | 1,710 | 1,163 | 356 | 209 | 1,728 | |||||||||||||||||||||||
Finance and other services | 55 | 34 | 11 | 100 | 54 | 31 | 12 | 97 | |||||||||||||||||||||||
Government and education | 67 | 8 | 2 | 77 | 76 | 8 | 2 | 86 | |||||||||||||||||||||||
Graphic arts | 51 | 41 | 29 | 121 | 58 | 49 | 36 | 143 | |||||||||||||||||||||||
Industrial | 24 | 13 | 4 | 41 | 24 | 13 | 4 | 41 | |||||||||||||||||||||||
Other | 35 | 20 | 3 | 58 | 34 | 19 | 4 | 57 | |||||||||||||||||||||||
Total Canada | 232 | 116 | 49 | 397 | 246 | 120 | 58 | 424 | |||||||||||||||||||||||
France | 224 | 208 | 109 | 541 | 253 | 234 | 129 | 616 | |||||||||||||||||||||||
U.K./Ireland | 246 | 95 | 4 | 345 | 255 | 101 | 6 | 362 | |||||||||||||||||||||||
Central(1) | 217 | 216 | 28 | 461 | 230 | 278 | 30 | 538 | |||||||||||||||||||||||
Southern(2) | 31 | 145 | 30 | 206 | 60 | 148 | 36 | 244 | |||||||||||||||||||||||
Nordics(3) | 23 | 43 | — | 66 | 25 | 49 | 1 | 75 | |||||||||||||||||||||||
Total Europe | 741 | 707 | 171 | 1,619 | 823 | 810 | 202 | 1,835 | |||||||||||||||||||||||
Other | 167 | 205 | 58 | 430 | 195 | 163 | 40 | 398 | |||||||||||||||||||||||
Total | $ | 2,270 | $ | 1,405 | $ | 481 | $ | 4,156 | $ | 2,427 | $ | 1,449 | $ | 509 | $ | 4,385 |
(1) | Switzerland, Germany, Austria, Belgium and Holland. |
(2) | Italy, Greece, Spain and Portugal. |
(3) | Sweden, Norway, Denmark and Finland. |
June 30, 2015 | |||||||||||||||||||||||||||
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 | $ | 2 | $ | 11 | $ | 416 | $ | 427 | $ | 12 | |||||||||||||
Government and education | 16 | 3 | 3 | 22 | 551 | 573 | 25 | ||||||||||||||||||||
Graphic arts | 14 | 1 | 1 | 16 | 298 | 314 | 8 | ||||||||||||||||||||
Industrial | 4 | 1 | 1 | 6 | 142 | 148 | 7 | ||||||||||||||||||||
Healthcare | 3 | 1 | 1 | 5 | 121 | 126 | 5 | ||||||||||||||||||||
Other | 4 | — | — | 4 | 118 | 122 | 4 | ||||||||||||||||||||
Total United States | 48 | 8 | 8 | 64 | 1,646 | 1,710 | 61 | ||||||||||||||||||||
Canada | 9 | 2 | 1 | 12 | 385 | 397 | 11 | ||||||||||||||||||||
France | — | — | 1 | 1 | 540 | 541 | 31 | ||||||||||||||||||||
U.K./Ireland | 2 | 1 | — | 3 | 342 | 345 | 1 | ||||||||||||||||||||
Central(1) | 4 | 2 | 1 | 7 | 454 | 461 | 6 | ||||||||||||||||||||
Southern(2) | 12 | 4 | 3 | 19 | 187 | 206 | 10 | ||||||||||||||||||||
Nordics(3) | 1 | — | — | 1 | 65 | 66 | 3 | ||||||||||||||||||||
Total Europe | 19 | 7 | 5 | 31 | 1,588 | 1,619 | 51 | ||||||||||||||||||||
Other | 13 | 2 | — | 15 | 415 | 430 | — | ||||||||||||||||||||
Total | $ | 89 | $ | 19 | $ | 14 | $ | 122 | $ | 4,034 | $ | 4,156 | $ | 123 | |||||||||||||
December 31, 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 | $ | 7 | $ | 2 | $ | 1 | $ | 10 | $ | 399 | $ | 409 | $ | 13 | |||||||||||||
Government and education | 14 | 4 | 3 | 21 | 584 | 605 | 25 | ||||||||||||||||||||
Graphic arts | 12 | 1 | 1 | 14 | 303 | 317 | 6 | ||||||||||||||||||||
Industrial | 4 | 1 | 1 | 6 | 145 | 151 | 9 | ||||||||||||||||||||
Healthcare | 3 | 1 | — | 4 | 120 | 124 | 5 | ||||||||||||||||||||
Other | 3 | 1 | — | 4 | 118 | 122 | 6 | ||||||||||||||||||||
Total United States | 43 | 10 | 6 | 59 | 1,669 | 1,728 | 64 | ||||||||||||||||||||
Canada | 9 | 2 | 1 | 12 | 412 | 424 | 17 | ||||||||||||||||||||
France | — | 1 | 2 | 3 | 613 | 616 | 35 | ||||||||||||||||||||
U.K./Ireland | 1 | — | — | 1 | 361 | 362 | 1 | ||||||||||||||||||||
Central(1) | 2 | 2 | 1 | 5 | 533 | 538 | 15 | ||||||||||||||||||||
Southern(2) | 14 | 4 | 4 | 22 | 222 | 244 | 17 | ||||||||||||||||||||
Nordics(3) | 1 | — | — | 1 | 74 | 75 | 2 | ||||||||||||||||||||
Total Europe | 18 | 7 | 7 | 32 | 1,803 | 1,835 | 70 | ||||||||||||||||||||
Other | 13 | 1 | — | 14 | 384 | 398 | — | ||||||||||||||||||||
Total | $ | 83 | $ | 20 | $ | 14 | $ | 117 | $ | 4,268 | $ | 4,385 | $ | 151 |
(1) | Switzerland, Germany, Austria, Belgium and Holland. |
(2) | Italy, Greece, Spain and Portugal. |
(3) | Sweden, Norway, Denmark and Finland. |
June 30, 2015 | December 31, 2014 | ||||||
Finished goods | $ | 895 | $ | 778 | |||
Work-in-process | 66 | 58 | |||||
Raw materials | 111 | 98 | |||||
Total Inventories | $ | 1,072 | $ | 934 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Fuji Xerox | $ | 25 | $ | 31 | $ | 56 | $ | 70 | |||||||
Other investments | 4 | 2 | 7 | 5 | |||||||||||
Total Equity in Net Income of Unconsolidated Affiliates | $ | 29 | $ | 33 | $ | 63 | $ | 75 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Summary of Operations: | |||||||||||||||
Revenues | $ | 2,389 | $ | 2,707 | $ | 5,120 | $ | 5,728 | |||||||
Costs and expenses | 2,211 | 2,510 | 4,731 | 5,311 | |||||||||||
Income before income taxes | 178 | 197 | 389 | 417 | |||||||||||
Income tax expense | 63 | 67 | 129 | 125 | |||||||||||
Net Income | 115 | 130 | 260 | 292 | |||||||||||
Less: Net income – noncontrolling interests | 2 | 1 | 4 | 2 | |||||||||||
Net Income – Fuji Xerox | $ | 113 | $ | 129 | $ | 256 | $ | 290 | |||||||
Weighted Average Exchange Rate(1) | 121.39 | 102.13 | 120.27 | 102.41 |
(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, 2014 | $ | 93 | $ | 4 | $ | — | $ | 97 | |||||||
Provision | 38 | 3 | 146 | 187 | |||||||||||
Reversals | (13 | ) | (3 | ) | — | (16 | ) | ||||||||
Net Current Period Charges(1) | 25 | — | 146 | 171 | |||||||||||
Charges against reserve and currency | (65 | ) | (1 | ) | (146 | ) | (212 | ) | |||||||
Balance at June 30, 2015 | $ | 53 | $ | 3 | $ | — | $ | 56 |
(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 June 30, | Six Months Ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Charges against reserve | $ | (175 | ) | $ | (40 | ) | $ | (212 | ) | $ | (81 | ) | |||
Asset impairments | 146 | 3 | 146 | 7 | |||||||||||
Effects of foreign currency and other non-cash items | (1 | ) | 1 | 5 | 2 | ||||||||||
Restructuring Cash Payments | $ | (30 | ) | $ | (36 | ) | $ | (61 | ) | $ | (72 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Services (1)(2) | $ | 149 | $ | 5 | $ | 154 | $ | 14 | |||||||
Document Technology | 8 | 26 | 17 | 42 | |||||||||||
Other | — | 8 | — | 9 | |||||||||||
Total Net Restructuring Charges | $ | 157 | $ | 39 | $ | 171 | $ | 65 |
(1) | The three months ended June 30,2015 includes $146 of software asset impairment charges. |
(2) | The three months ended June 30, 2014 excludes $(1) related to the ITO business, which was reported as a discontinued operation up to its sale on June 30, 2015. Refer to Note 5 - Divestitures for additional information regarding this sale. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Interest expense(1),(2) | $ | 88 | $ | 96 | $ | 177 | $ | 195 | |||||||
Interest income(3) | 89 | 101 | 181 | 203 |
(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) | The six months ended June 30, 2015 and 2014 exclude $2 and $1, respectively, of interest on capital lease obligations related to our ITO business, which was reported as a discontinued operation up to its sale on June 30, 2015. These obligations were assumed by the purchaser of the ITO business. Refer to Note 5 - Divestitures for additional information regarding this sale. |
(3) | Includes Finance income as well as other interest income that is included in Other expenses, net in the Condensed Consolidated Statements of Income. |
Six Months Ended June 30, | ||||||||
2015 | 2014 | |||||||
Net proceeds on short-term debt | $ | 514 | $ | 45 | ||||
Proceeds from issuance of long-term debt | 673 | 741 | ||||||
Payments on long-term debt(1) | (1,284 | ) | (1,081 | ) | ||||
Net payments on debt | $ | (97 | ) | $ | (295 | ) |
(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 | $ | 5 | 2.44 | % | 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 | $ | 902 | $ | (3 | ) | ||
U.S. Dollar/U.K. Pound Sterling | 591 | (5 | ) | ||||
Japanese Yen/U.S. Dollar | 464 | (15 | ) | ||||
Japanese Yen/Euro | 302 | (2 | ) | ||||
U.S. Dollar/Euro | 280 | 2 | |||||
Canadian Dollar/Euro | 278 | 5 | |||||
U.K. Pound Sterling/Euro | 212 | 1 | |||||
Swiss Franc/Euro | 109 | — | |||||
Euro/U.S. Dollar | 75 | — | |||||
Euro/Canadian Dollar | 65 | 1 | |||||
Indian Rupee/U.S. Dollar | 56 | — | |||||
Philippine Peso/U.S. Dollar | 51 | (1 | ) | ||||
Mexican Peso/U.S. Dollar | 40 | (2 | ) | ||||
Mexican Peso/Euro | 30 | (1 | ) | ||||
U.S. Dollar/Canadian Dollar | 23 | — | |||||
Swedish Krone/Euro | 20 | — | |||||
Euro/Danish Krone | 20 | — | |||||
All Other | 113 | — | |||||
Total Foreign Exchange Hedging | $ | 3,631 | $ | (20 | ) |
(1) | Represents the net receivable (payable) amount included in the Condensed Consolidated Balance Sheet at June 30, 2015. |
Designation of Derivatives | Balance Sheet Location | June 30, 2015 | December 31, 2014 | |||||||
Derivatives Designated as Hedging Instruments | ||||||||||
Foreign exchange contracts – forwards | Other current assets | $ | 3 | $ | 7 | |||||
Other current liabilities | (20 | ) | (39 | ) | ||||||
Foreign currency options | Other current assets | 2 | 2 | |||||||
Other current liabilities | (3 | ) | — | |||||||
Interest rate swaps | Other long-term assets | 5 | 5 | |||||||
Net Designated Derivative Liability | $ | (13 | ) | $ | (25 | ) | ||||
Derivatives NOT Designated as Hedging Instruments | ||||||||||
Foreign exchange contracts – forwards | Other current assets | $ | 13 | $ | 13 | |||||
Other current liabilities | (15 | ) | (19 | ) | ||||||
Net Undesignated Derivative Liability | $ | (2 | ) | $ | (6 | ) | ||||
Summary of Derivatives | Total Derivative Assets | $ | 23 | $ | 27 | |||||
Total Derivative Liabilities | (38 | ) | (58 | ) | ||||||
Net Derivative Liability | $ | (15 | ) | $ | (31 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(Loss) Gain on Derivative Instruments | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Fair Value Hedges - Interest rate contracts | ||||||||||||||||
Derivative (loss) gain recognized in interest expense | $ | (4 | ) | $ | 5 | $ | — | $ | 2 | |||||||
Hedged item gain (loss) recognized in interest expense | 4 | (5 | ) | — | (2 | ) | ||||||||||
Cash Flow Hedges - Foreign exchange forward contracts and options | ||||||||||||||||
Derivative (loss) gain recognized in OCI (effective portion) | $ | (24 | ) | $ | 11 | $ | 7 | $ | 29 | |||||||
Derivative loss reclassified from AOCI to income - Cost of sales (effective portion) | — | (8 | ) | (10 | ) | (29 | ) |
Derivatives NOT Designated as Hedging Instruments | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
Location of Derivative Gain (Loss) | 2015 | 2014 | 2015 | 2014 | ||||||||||||||
Foreign exchange contracts – forwards | Other expense – Currency loss, net | $ | (50 | ) | $ | — | $ | (35 | ) | $ | — |
June 30, 2015 | December 31, 2014 | ||||||
Assets: | |||||||
Foreign exchange contracts - forwards | $ | 16 | $ | 20 | |||
Foreign currency options | 2 | 2 | |||||
Interest rate swaps | 5 | 5 | |||||
Deferred compensation investments in cash surrender life insurance | 97 | 94 | |||||
Deferred compensation investments in mutual funds | 34 | 32 | |||||
Total | $ | 154 | $ | 153 | |||
Liabilities: | |||||||
Foreign exchange options | $ | 3 | $ | — | |||
Foreign exchange contracts - forwards | 35 | 58 | |||||
Deferred compensation plan liabilities | 145 | 135 | |||||
Total | $ | 183 | $ | 193 |
June 30, 2015 | December 31, 2014 | ||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||
Cash and cash equivalents | $ | 1,641 | $ | 1,641 | $ | 1,411 | $ | 1,411 | |||||||
Accounts receivable, net | 2,722 | 2,722 | 2,652 | 2,652 | |||||||||||
Short-term debt | 1,648 | 1,664 | 1,427 | 1,417 | |||||||||||
Long-term debt | 5,998 | 6,262 | 6,314 | 6,719 |
Three Months Ended June 30, | |||||||||||||||||||||||
Pension Benefits | |||||||||||||||||||||||
U.S. Plans | Non-U.S. Plans | Retiree Health | |||||||||||||||||||||
Components of Net Periodic Benefit Costs: | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||
Service cost | $ | 1 | $ | 3 | $ | 9 | $ | 8 | $ | 2 | $ | 2 | |||||||||||
Interest cost | 38 | 38 | 53 | 67 | 8 | 9 | |||||||||||||||||
Expected return on plan assets | (38 | ) | (42 | ) | (74 | ) | (85 | ) | — | — | |||||||||||||
Recognized net actuarial loss | 6 | 6 | 21 | 14 | 1 | — | |||||||||||||||||
Amortization of prior service credit | — | (1 | ) | (2 | ) | — | (8 | ) | (10 | ) | |||||||||||||
Recognized settlement loss | 18 | 13 | — | — | — | — | |||||||||||||||||
Recognized curtailment gain | — | — | — | — | (22 | ) | — | ||||||||||||||||
Defined Benefit Plans | 25 | 17 | 7 | 4 | (19 | ) | 1 | ||||||||||||||||
Defined contribution plans (3) | 15 | 15 | 11 | 8 | — | — | |||||||||||||||||
Net Periodic Benefit Cost | 40 | 32 | 18 | 12 | (19 | ) | 1 | ||||||||||||||||
Other changes in plan assets and benefit obligations recognized in Other Comprehensive Loss: | |||||||||||||||||||||||
Net actuarial (gain) loss(1) | (140 | ) | 100 | (2 | ) | — | (58 | ) | — | ||||||||||||||
Amortization of prior service credit | — | 1 | 2 | — | 8 | 10 | |||||||||||||||||
Amortization of net actuarial loss | (24 | ) | (19 | ) | (21 | ) | (14 | ) | (1 | ) | — | ||||||||||||
Curtailment gain - recognition of net prior service credit | — | — | — | — | 22 | — | |||||||||||||||||
Total Recognized in Other Comprehensive Loss(2) | (164 | ) | 82 | (21 | ) | (14 | ) | (29 | ) | 10 | |||||||||||||
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive Loss | $ | (124 | ) | $ | 114 | $ | (3 | ) | $ | (2 | ) | $ | (48 | ) | $ | 11 |
Six Months Ended June 30, | |||||||||||||||||||||||
Pension Benefits | |||||||||||||||||||||||
U.S. Plans | Non-U.S. Plans | Retiree Health | |||||||||||||||||||||
Components of Net Periodic Benefit Costs: | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||
Service cost | $ | 2 | $ | 5 | $ | 17 | $ | 17 | $ | 4 | $ | 4 | |||||||||||
Interest cost | 76 | 78 | 106 | 136 | 17 | 18 | |||||||||||||||||
Expected return on plan assets | (76 | ) | (80 | ) | (147 | ) | (172 | ) | — | — | |||||||||||||
Recognized net actuarial loss | 13 | 8 | 40 | 28 | 1 | — | |||||||||||||||||
Amortization of prior service credit | (1 | ) | (1 | ) | (2 | ) | (1 | ) | (15 | ) | (21 | ) | |||||||||||
Recognized settlement loss | 45 | 25 | — | — | — | — | |||||||||||||||||
Recognized curtailment gain | — | — | — | — | (22 | ) | — | ||||||||||||||||
Defined Benefit Plans | 59 | 35 | 14 | 8 | (15 | ) | 1 | ||||||||||||||||
Defined contribution plans (3) | 31 | 30 | 20 | 18 | — | — | |||||||||||||||||
Net Periodic Benefit Cost | 90 | 65 | 34 | 26 | (15 | ) | 1 | ||||||||||||||||
Other changes in plan assets and benefit obligations recognized in Other Comprehensive Loss: | |||||||||||||||||||||||
Net actuarial (gain) loss(1) | (52 | ) | 297 | (2 | ) | — | (58 | ) | — | ||||||||||||||
Amortization of prior service credit | 1 | 1 | 2 | 1 | 15 | 21 | |||||||||||||||||
Amortization of net actuarial loss | (58 | ) | (33 | ) | (40 | ) | (28 | ) | (1 | ) | — | ||||||||||||
Curtailment gain - recognition of net prior service credit | — | — | — | — | 22 | — | |||||||||||||||||
Total Recognized in Other Comprehensive Loss(2) | (109 | ) | 265 | (40 | ) | (27 | ) | (22 | ) | 21 | |||||||||||||
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive Loss | $ | (19 | ) | $ | 330 | $ | (6 | ) | $ | (1 | ) | $ | (37 | ) | $ | 22 |
(1) | The net actuarial (gain) loss 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 (loss). Refer to Note 16 - Other Comprehensive Income (Loss) for related tax effects and the after-tax amounts. |
(3) | The six months ended June 30, 2015 and 2014, exclude defined contribution expense of $4 and $4, respectively, related to our ITO business, which was reported as a discontinued operation up to its sale on June 30, 2015. Refer to Note 5 - Divestitures for additional information regarding this sale. |
Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings (4) | AOCL(1) | Xerox Shareholders’ Equity | Non-controlling Interests | Total Equity | ||||||||||||||||||||||||
Balance at December 31, 2014 | $ | 1,124 | $ | 4,283 | $ | (105 | ) | $ | 9,535 | $ | (4,159 | ) | $ | 10,678 | $ | 75 | $ | 10,753 | |||||||||||||
Comprehensive income (loss), net | — | — | — | 237 | (140 | ) | 97 | 10 | 107 | ||||||||||||||||||||||
Cash dividends declared- common(2) | — | — | — | (155 | ) | — | (155 | ) | — | (155 | ) | ||||||||||||||||||||
Cash dividends declared - preferred(3) | — | — | — | (12 | ) | — | (12 | ) | — | (12 | ) | ||||||||||||||||||||
Stock option and incentive plans, net | 3 | 54 | — | — | — | 57 | — | 57 | |||||||||||||||||||||||
Payments to acquire treasury stock, including fees | — | — | (611 | ) | — | — | (611 | ) | — | (611 | ) | ||||||||||||||||||||
Cancellation of treasury stock | (30 | ) | (370 | ) | 400 | — | — | — | — | — | |||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | (42 | ) | (42 | ) | |||||||||||||||||||||
Balance at June 30, 2015 | $ | 1,097 | $ | 3,967 | $ | (316 | ) | $ | 9,605 | $ | (4,299 | ) | $ | 10,054 | $ | 43 | $ | 10,097 |
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 | — | — | — | 547 | (23 | ) | 524 | 12 | 536 | ||||||||||||||||||||||
Cash dividends declared-common(2) | — | — | — | (148 | ) | — | (148 | ) | — | (148 | ) | ||||||||||||||||||||
Cash dividends declared-preferred(3) | — | — | — | (12 | ) | — | (12 | ) | — | (12 | ) | ||||||||||||||||||||
Conversion of notes to common stock | 1 | 8 | — | — | — | 9 | — | 9 | |||||||||||||||||||||||
Stock option and incentive plans, net | 6 | 87 | — | — | — | 93 | — | 93 | |||||||||||||||||||||||
Payments to acquire treasury stock, including fees | — | — | (479 | ) | — | — | (479 | ) | — | (479 | ) | ||||||||||||||||||||
Cancellation of treasury stock | (52 | ) | (531 | ) | 583 | — | — | — | — | — | |||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | (13 | ) | (13 | ) | |||||||||||||||||||||
Balance at June 30, 2014 | $ | 1,165 | $ | 4,846 | $ | (148 | ) | $ | 9,226 | $ | (2,802 | ) | $ | 12,287 | $ | 118 | $ | 12,405 |
(1) | Refer to Note 16 - Other Comprehensive Income (Loss) for components of AOCL. |
(2) | Cash dividends declared on common stock of $0.07 per share in each quarter of 2015 and $0.0625 per share in each quarter of 2014. |
(3) | Cash dividends declared on preferred stock of $20.00 per share in each quarter of 2015 and 2014. |
(4) | Balance at December 31, 2014 was revised - Refer to Note 1 - Basis of Presentation for additional information regarding this revision. |
Shares | Amount | ||||||
December 31, 2014 | 7,609 | $ | 105 | ||||
Purchases (1) | 50,081 | 611 | |||||
Cancellations | (29,862 | ) | (400 | ) | |||
June 30, 2015 | 27,828 | $ | 316 |
(1) | Includes associated fees. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||||||||||
Pre-tax | Net of Tax | Pre-tax | Net of Tax | Pre-tax | Net of Tax | Pre-tax | Net of Tax | |||||||||||||||||||||||||
Translation Adjustments Gains (Losses) | $ | 191 | $ | 194 | $ | 92 | $ | 92 | $ | (315 | ) | $ | (315 | ) | $ | 94 | $ | 91 | ||||||||||||||
Unrealized (Losses) Gains: | ||||||||||||||||||||||||||||||||
Changes in fair value of cash flow hedges - (losses) gains | (24 | ) | (18 | ) | 11 | 7 | 7 | 7 | 29 | 20 | ||||||||||||||||||||||
Changes in cash flow hedges reclassed to earnings(1) | — | (1 | ) | 8 | 7 | 10 | 4 | 29 | 21 | |||||||||||||||||||||||
Other gains (losses) | 1 | — | 1 | 1 | — | (1 | ) | — | — | |||||||||||||||||||||||
Net Unrealized (Losses) Gains | (23 | ) | (19 | ) | 20 | 15 | 17 | 10 | 58 | 41 | ||||||||||||||||||||||
Defined Benefit Plans Gains (Losses): | ||||||||||||||||||||||||||||||||
Net actuarial gains (losses) | 200 | 123 | (100 | ) | (61 | ) | 112 | 69 | (297 | ) | (183 | ) | ||||||||||||||||||||
Prior service amortization/curtailment(2) | (32 | ) | (19 | ) | (11 | ) | (7 | ) | (40 | ) | (24 | ) | (23 | ) | (14 | ) | ||||||||||||||||
Actuarial loss amortization/settlements(2) | 46 | 32 | 33 | 22 | 99 | 67 | 61 | 41 | ||||||||||||||||||||||||
Fuji Xerox changes in defined benefit plans, net(3) | 8 | 8 | 3 | 3 | 27 | 27 | 30 | 30 | ||||||||||||||||||||||||
Other (losses) gains(4) | (76 | ) | (77 | ) | (27 | ) | (27 | ) | 27 | 26 | (28 | ) | (28 | ) | ||||||||||||||||||
Changes in Defined Benefit Plans Gains (Losses) | 146 | 67 | (102 | ) | (70 | ) | 225 | 165 | (257 | ) | (154 | ) | ||||||||||||||||||||
Other Comprehensive Income (Loss) | 314 | 242 | 10 | 37 | (73 | ) | (140 | ) | (105 | ) | (22 | ) | ||||||||||||||||||||
Less: Other comprehensive income attributable to noncontrolling interests | 1 | 1 | 1 | 1 | — | — | 1 | 1 | ||||||||||||||||||||||||
Other Comprehensive Income (Loss) Attributable to Xerox | $ | 313 | $ | 241 | $ | 9 | $ | 36 | $ | (73 | ) | $ | (140 | ) | $ | (106 | ) | $ | (23 | ) |
(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 losses and prior service credits in AOCL. |
June 30, 2015 | December 31, 2014 | |||||||
Cumulative translation adjustments | $ | (2,058 | ) | $ | (1,743 | ) | ||
Other unrealized losses, net | (12 | ) | (22 | ) | ||||
Benefit plans net actuarial losses and prior service credits(1) | (2,229 | ) | (2,394 | ) | ||||
Total Accumulated Other Comprehensive Loss Attributable to Xerox | $ | (4,299 | ) | $ | (4,159 | ) |
(1) | Includes our share of Fuji Xerox. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Basic Earnings per Share: | |||||||||||||||
Net income from continuing operations attributable to Xerox | $ | 107 | $ | 255 | $ | 298 | $ | 521 | |||||||
Accrued dividends on preferred stock | (6 | ) | (6 | ) | (12 | ) | (12 | ) | |||||||
Adjusted Net Income From Continuing Operations Available to Common Shareholders | 101 | 249 | 286 | 509 | |||||||||||
Net (Loss) income from discontinued operations attributable to Xerox | (95 | ) | 11 | (61 | ) | 26 | |||||||||
Adjusted Net Income Available to Common Shareholders | $ | 6 | $ | 260 | $ | 225 | $ | 535 | |||||||
Weighted average common shares outstanding | 1,087,720 | 1,160,842 | 1,098,370 | 1,170,177 | |||||||||||
Basic Earnings per Share: | |||||||||||||||
Continuing operations | $ | 0.09 | $ | 0.21 | $ | 0.26 | $ | 0.43 | |||||||
Discontinued operations | (0.08 | ) | 0.01 | (0.06 | ) | 0.03 | |||||||||
Total | $ | 0.01 | $ | 0.22 | $ | 0.20 | $ | 0.46 | |||||||
Diluted Earnings per Share: | |||||||||||||||
Net income from continuing operations attributable to Xerox | $ | 107 | $ | 255 | $ | 298 | $ | 521 | |||||||
Accrued dividends on preferred stock | (6 | ) | (6 | ) | (12 | ) | (12 | ) | |||||||
Adjusted Net Income From Continuing Operations Available to Common Shareholders | $ | 101 | $ | 249 | $ | 286 | $ | 509 | |||||||
Net (Loss) income from discontinued operations attributable to Xerox | (95 | ) | 11 | (61 | ) | 26 | |||||||||
Adjusted Net Income Available to Common Shareholders | $ | 6 | $ | 260 | $ | 225 | $ | 535 | |||||||
Weighted average common shares outstanding | 1,087,720 | 1,160,842 | 1,098,370 | 1,170,177 | |||||||||||
Common shares issuable with respect to: | |||||||||||||||
Stock options | 1,409 | 3,116 | 1,615 | 3,369 | |||||||||||
Restricted stock and performance shares | 16,140 | 16,801 | 15,300 | 15,792 | |||||||||||
Convertible preferred stock | — | — | — | — | |||||||||||
Adjusted Weighted Average Common Shares Outstanding | 1,105,269 | 1,180,759 | 1,115,285 | 1,189,338 | |||||||||||
Diluted Earnings per Share: | |||||||||||||||
Continuing operations | $ | 0.09 | $ | 0.21 | $ | 0.26 | $ | 0.43 | |||||||
Discontinued operations | (0.08 | ) | 0.01 | (0.06 | ) | 0.02 | |||||||||
Total | $ | 0.01 | $ | 0.22 | $ | 0.20 | $ | 0.45 | |||||||
The following securities were not included in the computation of diluted earnings per share as they were either contingently issuable shares or shares that if included would have been anti-dilutive: | |||||||||||||||
Stock options | 2,590 | 5,566 | 2,384 | 5,313 | |||||||||||
Restricted stock and performance shares | 13,981 | 15,896 | 14,820 | 16,905 | |||||||||||
Convertible preferred stock | 26,966 | 26,966 | 26,966 | 26,966 | |||||||||||
Total Anti-Dilutive Securities | 43,537 | 48,428 | 44,170 | 49,184 | |||||||||||
Dividends per Common Share | $ | 0.0700 | $ | 0.0625 | $ | 0.1400 | $ | 0.1250 |
• | $426 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. |
• | $656 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. |
Three Months Ended June 30, | Six Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||
(in millions) | 2015 | 2014 | % Change | CC % Change | 2015 | 2014 | % Change | CC % Change | % of Total Revenue 2015 | % of Total Revenue 2014 | ||||||||||||||||||||||||
Equipment sales | $ | 719 | $ | 781 | (8 | )% | (3 | )% | $ | 1,343 | $ | 1,496 | (10 | )% | (6 | )% | 15 | % | 15 | % | ||||||||||||||
Annuity revenue | 3,871 | 4,160 | (7 | )% | (3 | )% | 7,716 | 8,216 | (6 | )% | (2 | )% | 85 | % | 85 | % | ||||||||||||||||||
Total Revenue | $ | 4,590 | $ | 4,941 | (7 | )% | (3 | )% | $ | 9,059 | $ | 9,712 | (7 | )% | (3 | )% | 100 | % | 100 | % | ||||||||||||||
Reconciliation to Condensed Consolidated Statements of Income: | ||||||||||||||||||||||||||||||||||
Sales | $ | 1,224 | $ | 1,342 | (9 | )% | (5 | )% | $ | 2,350 | $ | 2,599 | (10 | )% | (6 | )% | ||||||||||||||||||
Less: Supplies, paper and other sales | (505 | ) | (561 | ) | (10 | )% | (8 | )% | (1,007 | ) | (1,103 | ) | (9 | )% | (7 | )% | ||||||||||||||||||
Equipment Sales | $ | 719 | $ | 781 | (8 | )% | (3 | )% | $ | 1,343 | $ | 1,496 | (10 | )% | (6 | )% | ||||||||||||||||||
Outsourcing, maintenance and rentals | $ | 3,279 | $ | 3,501 | (6 | )% | (2 | )% | $ | 6,532 | $ | 6,915 | (6 | )% | (1 | )% | ||||||||||||||||||
Add: Supplies, paper and other sales | 505 | 561 | (10 | )% | (8 | )% | 1,007 | 1,103 | (9 | )% | (7 | )% | ||||||||||||||||||||||
Add: Financing | 87 | 98 | (11 | )% | (5 | )% | 177 | 198 | (11 | )% | (4 | )% | ||||||||||||||||||||||
Annuity Revenue | $ | 3,871 | $ | 4,160 | (7 | )% | (3 | )% | $ | 7,716 | $ | 8,216 | (6 | )% | (2 | )% |
• | Annuity revenue decreased 7% as compared to second quarter 2014, with a 4-percentage point negative impact from currency. Annuity revenue is comprised of the following: |
◦ | Outsourcing, maintenance and rentals revenue of $3,279 million includes outsourcing revenue within our Services segment, and maintenance revenue (including bundled supplies) and rental revenue both primarily within our Document Technology segment. The decrease of 6% was primarily due to a 4-percentage point negative impact from currency, and a decline in the Document Technology segment. |
◦ | Supplies, paper and other sales of $505 million includes unbundled supplies and other sales, primarily within our Document Technology segment. The decrease of 10% was primarily due to a 2-percentage point negative impact from currency and reduced supplies demand primarily due to lower equipment sales in prior periods, continued weakness in developing markets, and lower OEM sales. |
◦ | Financing revenue is generated from financed equipment sale transactions primarily within our Document Technology segment. The decrease of 11% reflects a 6-percentage point negative impact from currency and a declining finance receivables balance as a result of lower prior period equipment sales. |
• | 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 second quarter 2014, with a 5-percentage point negative impact from currency. The decline reflects lower entry product sales, particularly in Eurasia and other developing market countries, and overall price declines that continue to be within our historical range of 5% to 10%, partially offset by increased Document Outsourcing and High-end product sales. |
• | Annuity revenue for the six months ended June 30, 2015 decreased 6% as compared to the prior year period, with a 4-percentage point negative impact from currency. Annuity revenue is comprised of the following: |
◦ | Outsourcing, maintenance and rentals revenue of $6,532 million includes outsourcing revenue within our Services segment, and maintenance revenue (including bundled supplies) and rental revenue, both primarily within our Document Technology segment. The decrease of 6% was primarily due to a 5-percentage point negative impact from currency, and a decline in the Document Technology segment partially offset by growth in the Services segment. |
◦ | Supplies, paper and other sales of $1,007 million includes unbundled supplies and other sales, primarily within our Document Technology segment. The decrease of 9% was primarily due to a 2-percentage point negative impact from currency and reduced supplies demand primarily due to lower equipment sales in prior periods, continued weakness in developing markets, and lower OEM sales. |
◦ | Financing revenue is generated from financed sale transactions primarily within our Document Technology segment. The decrease of 11% reflects a 7-percentage point negative impact from currency and a declining finance receivables balance as a result of lower prior period equipment sales. |
• | Equipment sales revenue is reported primarily within our Document Technology segment and the Document Outsourcing business within our Services segment. Equipment sales revenue decreased 10% as compared to the prior year period, with a 4-percentage point negative impact from currency. The decline reflects lower entry product sales, particularly in Eurasia and other developing market countries, lower production equipment sales, and overall price declines that continue to be within our historical range of 5% to 10%. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||||||
Total Gross Margin | 31.1 | % | 32.1 | % | (1.0) pts | 31.1 | % | 31.8 | % | (0.7) pts | ||||||||
RD&E as a % of Revenue | 3.1 | % | 2.9 | % | 0.2 pts | 3.1 | % | 3.0 | % | 0.1 pts | ||||||||
SAG as a % of Revenue | 19.7 | % | 19.4 | % | 0.3 pts | 20.1 | % | 19.6 | % | 0.5 pts | ||||||||
Operating Margin(1) | 8.2 | % | 9.8 | % | (1.6) pts | 7.9 | % | 9.2 | % | (1.3) pts | ||||||||
Pre-tax Income Margin | 1.6 | % | 6.1 | % | (4.5) pts | 3.0 | % | 5.9 | % | (2.9) pts |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
(in millions) | 2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||||||||||
R&D | $ | 112 | $ | 113 | $ | (1 | ) | $ | 221 | $ | 226 | $ | (5 | ) | |||||||||
Sustaining engineering | 30 | 30 | — | 62 | 62 | — | |||||||||||||||||
Total RD&E Expenses | $ | 142 | $ | 143 | $ | (1 | ) | $ | 283 | $ | 288 | $ | (5 | ) |
• | $27 million decrease in selling expenses. |
• | $19 million decrease in general and administrative expenses. |
• | $7 million decrease in bad debt expense. Second quarter 2015 bad debt expense remained at less than one percent of receivables. |
• | $61 million decrease in selling expenses. |
• | $21 million decrease in general and administrative expenses. |
• | $1 million decrease in bad debt expense. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in millions) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Non-financing interest expense | $ | 56 | $ | 60 | $ | 112 | $ | 123 | |||||||
Interest income | (2 | ) | (3 | ) | (4 | ) | (5 | ) | |||||||
Losses (gains) on sales of businesses and assets (1) | 6 | — | (10 | ) | (30 | ) | |||||||||
Currency (gains) losses, net | (5 | ) | (1 | ) | 1 | — | |||||||||
Litigation matters | 3 | (1 | ) | 2 | (2 | ) | |||||||||
Loss on sales of accounts receivable | 3 | 4 | 6 | 8 | |||||||||||
Deferred compensation investment gains | — | (3 | ) | (4 | ) | (5 | ) | ||||||||
All other expenses, net | 7 | 9 | 11 | 15 | |||||||||||
Total Other Expenses, Net | $ | 68 | $ | 65 | $ | 114 | $ | 104 |
(1) | Refer to the Effective Tax reconciliation table in the Non-GAAP Financial Measures section. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in millions) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Total equity in net income of unconsolidated affiliates | $ | 29 | $ | 33 | $ | 63 | $ | 75 | ||||||||
Fuji Xerox after-tax restructuring costs included in equity income | 1 | (1 | ) | 2 | 2 |
(1) | Refer to the Net Income and EPS reconciliation table in the Non-GAAP Financial Measures section. |
Three Months Ended June 30, | |||||||||||||||||||||
(in millions) | Equipment Sales Revenue | Annuity Revenue | Total Revenue | % of Total Revenue | Segment Profit (Loss) | Segment Margin | |||||||||||||||
2015 | |||||||||||||||||||||
Services | $ | 134 | $ | 2,435 | $ | 2,569 | 56 | % | $ | 192 | 7.5 | % | |||||||||
Document Technology | 550 | 1,330 | 1,880 | 41 | % | 228 | 12.1 | % | |||||||||||||
Other | 35 | 106 | 141 | 3 | % | (76 | ) | (53.9 | )% | ||||||||||||
Total | $ | 719 | $ | 3,871 | $ | 4,590 | 100 | % | $ | 344 | 7.5 | % | |||||||||
2014 | |||||||||||||||||||||
Services | $ | 128 | $ | 2,523 | $ | 2,651 | 54 | % | $ | 226 | 8.5 | % | |||||||||
Document Technology | 613 | 1,513 | 2,126 | 43 | % | 306 | 14.4 | % | |||||||||||||
Other | 40 | 124 | 164 | 3 | % | (75 | ) | (45.7 | )% | ||||||||||||
Total | $ | 781 | $ | 4,160 | $ | 4,941 | 100 | % | $ | 457 | 9.2 | % |
Six Months Ended June 30, | |||||||||||||||||||||
(in millions) | Equipment Sales Revenue | Annuity Revenue | Total Revenue | % of Total Revenue | Segment Profit (Loss) | Segment Margin | |||||||||||||||
2015 | |||||||||||||||||||||
Services | $ | 231 | $ | 4,852 | $ | 5,083 | 56 | % | $ | 381 | 7.5 | % | |||||||||
Document Technology | 1,059 | 2,651 | 3,710 | 41 | % | 431 | 11.6 | % | |||||||||||||
Other | 53 | 213 | 266 | 3 | % | (138 | ) | (51.9 | )% | ||||||||||||
Total | $ | 1,343 | $ | 7,716 | $ | 9,059 | 100 | % | $ | 674 | 7.4 | % | |||||||||
2014 | |||||||||||||||||||||
Services | $ | 244 | $ | 4,992 | $ | 5,236 | 54 | % | $ | 448 | 8.6 | % | |||||||||
Document Technology | 1,189 | 2,981 | 4,170 | 43 | % | 555 | 13.3 | % | |||||||||||||
Other | 63 | 243 | 306 | 3 | % | (125 | ) | (40.8 | )% | ||||||||||||
Total | $ | 1,496 | $ | 8,216 | $ | 9,712 | 100 | % | $ | 878 | 9.0 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||
(in millions) | 2015 | 2014 | % Change | CC % Change | 2015 | 2014 | % Change | CC % Change | ||||||||||||||||||||
Business Processing Outsourcing | $ | 1,736 | $ | 1,796 | (3 | )% | (1 | )% | $ | 3,470 | $ | 3,563 | (3 | )% | — | % | ||||||||||||
Document Outsourcing | 833 | 855 | (3 | )% | 4 | % | 1,613 | 1,673 | (4 | )% | 3 | % | ||||||||||||||||
Total Services Revenue | $ | 2,569 | $ | 2,651 | (3 | )% | 1 | % | $ | 5,083 | $ | 5,236 | (3 | )% | 1 | % |
• | BPO revenue decreased 3% with a 2-percentage point negative impact from currency, and represented 68% of total Services revenue. The decline was primarily driven by the anticipated run-off of the student loan business and the Texas Medicaid contract, which combined had a 3.5-percentage point negative impact on BPO revenue growth and a 2.4-percentage point negative impact on total Services revenue growth. Partially offsetting this decline during the quarter was moderating acquisition growth and organic growth in several lines of business net of lost business and pricing impacts that were consistent with prior trends. |
◦ | In second quarter 2015, BPO revenue mix across the major business areas was as follows: commercial business groups (excluding healthcare) - 45%; public sector - 28%; commercial healthcare - 14%; and government healthcare - 13%. |
• | DO revenue decreased 3% with a 7-percentage point negative impact from currency, and represented 32% of total Services revenue. Growth from our partner print services offerings and from equipment sales due to higher signings was partially offset by declines in developing markets. |
• | BPO revenue decreased 3% with a 3-percentage point negative impact from currency, and represented 68% of total Services revenue. Growth from acquisitions and organic growth in several lines of business was offset by the decline from the anticipated run-off of the student loan business and the Texas Medicaid contract, which combined had a 3.8 percentage point negative impact on BPO revenue growth and a 2.6-percentage point negative impact on total Services revenue growth. In addition, revenue also reflected lost business and pricing that were consistent with prior trends. The negative year-over-year impact from the student loan business and Texas Medicaid contract will dissipate in the second half of 2015. |
◦ | BPO revenue mix for the six months ended June 30, 2015, across the major business areas was as follows: commercial business groups (excluding healthcare) - 45%; public sector - 27%; commercial healthcare - 15%; and government healthcare - 13%. |
• | DO revenue decreased 4% with a 7-percentage point negative impact from currency, and represented 32% of total Services revenue. Growth from our partner print services offerings was partially offset by declines in developing markets. |
(in billions) | Three Months Ended June 30, 2015 | Six Months Ended June 30, 2015 | ||||||
BPO | $ | 2.4 | $ | 4.1 | ||||
DO | 0.8 | 1.5 | ||||||
Total Signings | $ | 3.2 | $ | 5.6 |
Three Months Ended June 30, | % Change | CC % Change | Six Months Ended June 30, | % Change | CC % Change | |||||||||||||||||||||||
(in millions) | 2015 | 2014 | 2015 | 2014 | ||||||||||||||||||||||||
Equipment sales | $ | 550 | $ | 613 | (10 | )% | (6 | )% | $ | 1,059 | $ | 1,189 | (11 | )% | (7 | )% | ||||||||||||
Annuity revenue | 1,330 | 1,513 | (12 | )% | (7 | )% | 2,651 | 2,981 | (11 | )% | (6 | )% | ||||||||||||||||
Total Revenue | $ | 1,880 | $ | 2,126 | (12 | )% | (7 | )% | $ | 3,710 | $ | 4,170 | (11 | )% | (7 | )% |
• | Equipment sales revenue decreased by 10% from second quarter 2014 with a 4-percentage point negative impact from currency. The decrease in equipment sales reflects lower sales of entry products particularly in Eurasia and other developing market countries, and overall price declines that were within our historical range of 5% to 10%. Increased high-end product sales partially offset these declines. |
• | Annuity revenue decreased by 12% from second quarter 2014, including a 5-percentage point negative impact from currency. The annuity revenue decrease reflects a modest decline in total pages, continued migration of customers to our partner print services offering (included in our Services segment), lower supplies demand and reduced financing revenue reflecting a lower finance receivables balance due to lower prior period equipment sales. |
• | Equipment sales revenue decreased by 11% from the prior year period with a 4-percentage point negative impact from currency. The decrease in equipment sales reflects lower sales of entry products particularly in Eurasia and other developing market countries, lower sales of production products, and overall price declines that were within our historical range of 5% to 10%. |
• | Annuity revenue decreased by 11% from the prior year period, including a 5-percentage point negative impact from currency. The annuity revenue reflects a modest decline in total pages, continued migration of customers to our partner print services offering (included in our Services segment), lower supplies demand and reduced financing revenue reflecting a lower finance receivable balance due to lower equipment sales. |
• | 24% decrease in color printers reflecting lower OEM sales. |
• | 9% increase in color multifunction devices including higher demand for new products. |
• | 12% decrease in black-and-white multifunction devices reflecting continued higher declines in developing markets including Eurasia. |
• | 4% increase in mid-range color including higher demand for new products. |
• | 2% decrease in mid-range black-and-white consistent with recent quarters. |
• | 16% increase in high-end color systems is driven primarily by the new Versant and Color Press products. Excluding Fuji Xerox digital front-end sales, high-end color installs increased 12%. |
• | 4% increase in high-end black-and-white systems. |
• | 12% decrease in color printers reflecting lower OEM sales. |
• | 12% decrease in color multifunction devices including higher demand for new products. |
• | 18% decrease in black-and-white multifunction devices. |
• | 2% increase in mid-range color including higher demand for new products. |
• | 1% decrease in mid-range black-and-white consistent with recent quarters. |
• | 12% increase in high-end color systems is driven primarily by the new Versant product. Excluding Fuji Xerox digital front-end sales, high-end color installs decreased 7%. |
• | High-end black-and-white systems remained flat. |
(1) | Revenues from DO installations are reported in our Services segment. |
Six Months Ended June 30, | Change | ||||||||||
(in millions) | 2015 | 2014 | |||||||||
Net cash provided by operating activities | $ | 462 | $ | 611 | $ | (149 | ) | ||||
Net cash provided by (used in) investing activities | 733 | (446 | ) | 1,179 | |||||||
Net cash used in financing activities | (908 | ) | (910 | ) | 2 | ||||||
Effect of exchange rate changes on cash and cash equivalents | (57 | ) | (12 | ) | (45 | ) | |||||
Increase (decrease) in cash and cash equivalents | 230 | (757 | ) | 987 | |||||||
Cash and cash equivalents at beginning of period | 1,411 | 1,764 | (353 | ) | |||||||
Cash and Cash Equivalents at End of Period | $ | 1,641 | $ | 1,007 | $ | 634 |
• | $239 million decrease in pre-tax income before depreciation and amortization, gain on sales of businesses and assets and restructuring. |
• | $90 million decrease primarily due to higher levels of inventory from lower supplies demand. |
• | $52 million increase from accounts receivable primarily due to lower revenues and the timing of collections. |
• | $50 million increase from accounts payable and accrued compensation primarily related to the timing of supplier payments. |
• | $20 million increase from lower spending for product software and up-front costs for outsourcing service contracts. |
• | $18 million increase due to lower pension contributions and restructuring payments primarily due to timing. |
• | $9 million increase from finance receivables primarily related to less of an impact from prior period sales of receivables partially offset by a lower net run-off. See “Sales of Finance Receivables” for further discussion. |
• | $930 million of net proceeds from the sale of the ITO business. See Note 5 - Divestitures, for additional information. |
• | $233 million change from acquisitions. 2015 reflects the acquisition of Intrepid Learning Solutions, Inc. for $28 million and $20 million for other acquisitions while 2014 acquisitions include ISG Holdings, Inc. for $225 million and Invoco Holding Gmbh for $54 million. |
• | $29 million due to lower capital expenditures (including internal use software). |
• | $198 million decrease from net debt activity. 2015 reflects payment of $1,250 million on Senior Notes offset by net proceeds of $648 million from the issuance of Senior Notes and an increase of $511 million in Commercial Paper. 2014 reflects payments of $1 billion on Senior Notes offset by net proceeds of $700 million from the issuance of Senior Notes and an increase of $50 million in Commercial Paper. |
• | $132 million increase in share repurchases. |
• | $39 million increase due to higher distributions to noncontrolling interests. |
• | $25 million increase due to lower proceeds from the issuance of common stock under our stock option plans. |
(in millions) | June 30, 2015 | December 31, 2014 | ||||||
Total finance receivables, net(1) | $ | 4,022 | $ | 4,254 | ||||
Equipment on operating leases, net | 500 | 525 | ||||||
Total Finance Assets, net(2) | $ | 4,522 | $ | 4,779 |
(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, 2014 includes a decrease of $137 million due to currency across all Finance Assets. |
(in millions) | June 30, 2015 | December 31, 2014 | ||||||
Financing debt(1) | $ | 3,957 | $ | 4,182 | ||||
Core debt | 3,689 | 3,559 | ||||||
Total Debt | $ | 7,646 | $ | 7,741 |
(1) | Financing debt includes $3,519 million and $3,722 million as of June 30, 2015 and December 31, 2014, 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) | June 30, 2015 | December 31, 2014 | ||||||
Principal debt balance(1) | $ | 7,636 | $ | 7,722 | ||||
Net unamortized discount | (52 | ) | (54 | ) | ||||
Fair value adjustments(2) | ||||||||
- terminated swaps | 57 | 68 | ||||||
- current swaps | 5 | 5 | ||||||
Total Debt | $ | 7,646 | $ | 7,741 |
(1) | Includes Notes Payable of $3 million and $1 million and Commercial Paper of $661 million and $150 million as of June 30, 2015 and December 31, 2014, respectively. |
(2) | Fair value adjustments include the following - (i) fair value adjustments to debt associated with terminated interest rate swaps, which are being amortized to interest expense over the remaining term of the related notes; and (ii) changes in fair value of hedged debt obligations attributable to movements in benchmark interest rates. Hedge accounting requires hedged debt instruments to be reported inclusive of any fair value adjustment. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in millions) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Accounts receivable sales | $ | 586 | $ | 726 | $ | 1,188 | $ | 1,548 | ||||||||
Deferred proceeds | 57 | 96 | 119 | 220 | ||||||||||||
Loss on sales of accounts receivable | 3 | 4 | 6 | 8 | ||||||||||||
Estimated decrease to operating cash flows(1) | (27 | ) | (31 | ) | (10 | ) | (20 | ) |
(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 June 30, | Six Months Ended June 30, | |||||||||||||||
(in millions) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Impact from prior sales of finance receivables(1) | $ | (89 | ) | $ | (137 | ) | $ | (194 | ) | $ | (286 | ) | ||||
Collections on beneficial interest | 15 | 25 | 33 | 51 | ||||||||||||
Estimated Decrease to Operating Cash Flows | $ | (74 | ) | $ | (112 | ) | $ | (161 | ) | $ | (235 | ) |
(1) | Represents cash that would have been collected had we not sold finance receivables. |
(in millions) | Amount | |||
2015 Q3 | $ | 672 | ||
2015 Q4 | 8 | |||
2016 | 977 | |||
2017 | 1,026 | |||
2018 | 1,019 | |||
2019 | 1,160 | |||
2020 | 807 | |||
2021 | 1,067 | |||
2022 | — | |||
2023 | — | |||
2024 and thereafter | 900 | |||
Total | $ | 7,636 |
• | Net income and Earnings per share (EPS) |
• | Effective tax rate |
Three Months Ended June 30, 2015 | Three Months Ended June 30, 2014 | Six Months Ended June 30, 2015 | Six Months Ended June 30, 2014 | |||||||||||||||||||||||||||||
(in millions; except per share amounts) | Net Income | EPS | Net Income | EPS | Net Income | EPS | Net Income | EPS | ||||||||||||||||||||||||
As Reported(1) | $ | 107 | $ | 0.09 | $ | 255 | $ | 0.21 | $ | 298 | $ | 0.26 | $ | 521 | $ | 0.43 | ||||||||||||||||
Adjustments: | ||||||||||||||||||||||||||||||||
Amortization of intangible assets | 49 | 0.05 | 48 | 0.04 | 97 | 0.08 | 96 | 0.08 | ||||||||||||||||||||||||
Software Impairment | 90 | 0.08 | — | — | 90 | 0.08 | — | — | ||||||||||||||||||||||||
Adjusted | $ | 246 | $ | 0.22 | $ | 303 | $ | 0.25 | $ | 485 | $ | 0.42 | $ | 617 | $ | 0.51 | ||||||||||||||||
Weighted average shares for adjusted EPS(2) | 1,105 | 1,208 | 1,115 | 1,216 | ||||||||||||||||||||||||||||
Fully diluted shares at end of period(3) | 1,113 | 1,113 |
(1) | Net income and EPS from continuing operations attributable to Xerox. |
(2) | Average shares for the 2015 calculations of adjusted EPS exclude 27 million of shares associated with the Series A convertible preferred stock and therefore the related quarterly dividend was included. Average shares for 2014 calculations 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 June 30, 2015, 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 second quarter 2015. |
Three Months Ended June 30, 2015 | Three Months Ended June 30, 2014 | Six Months Ended June 30, 2015 | Six Months Ended June 30, 2014 | ||||||||||||||||||||||||||||||||||||||||
(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) | $ | 74 | $ | (9 | ) | (12.2 | )% | $ | 301 | $ | 73 | 24.3 | % | $ | 275 | $ | 30 | 10.9 | % | $ | 572 | $ | 115 | 20.1 | % | ||||||||||||||||||
Adjustments: | |||||||||||||||||||||||||||||||||||||||||||
Amortization of intangible assets | 79 | 30 | 78 | 30 | 156 | 59 | 155 | 59 | |||||||||||||||||||||||||||||||||||
Software Impairment | 146 | 56 | — | — | 146 | 56 | — | — | |||||||||||||||||||||||||||||||||||
Adjusted | $ | 299 | $ | 77 | 25.8 | % | $ | 379 | $ | 103 | 27.2 | % | $ | 577 | $ | 145 | 25.1 | % | $ | 727 | $ | 174 | 23.9 | % |
(1) | Pre-tax income and Income tax expense from continuing operations attributable to Xerox. |
Three Months Ended June 30, 2015 | Three Months Ended June 30, 2014 | Six Months Ended June 30, 2015 | Six Months Ended June 30, 2014 | ||||||||||||||||||||||||||||||||||||||||
(in millions) | Profit | Revenue | Margin | Profit | Revenue | Margin | Profit | Revenue | Margin | Profit | Revenue | Margin | |||||||||||||||||||||||||||||||
Reported Pre-tax Income(1) | $ | 74 | $ | 4,590 | 1.6 | % | $ | 301 | $ | 4,941 | 6.1 | % | $ | 275 | $ | 9,059 | 3.0 | % | $ | 572 | $ | 9,712 | 5.9 | % | |||||||||||||||||||
Adjustments: | |||||||||||||||||||||||||||||||||||||||||||
Amortization of intangible assets | 79 | 78 | 156 | 155 | |||||||||||||||||||||||||||||||||||||||
Restructuring and asset impairment charges | 157 | 39 | 171 | 65 | |||||||||||||||||||||||||||||||||||||||
Other expenses, net | 68 | 65 | 114 | 104 | |||||||||||||||||||||||||||||||||||||||
Adjusted Operating Income/Margin | $ | 378 | $ | 4,590 | 8.2 | % | $ | 483 | $ | 4,941 | 9.8 | % | $ | 716 | $ | 9,059 | 7.9 | % | $ | 896 | $ | 9,712 | 9.2 | % | |||||||||||||||||||
Equity in net income of unconsolidated affiliates | 29 | 33 | 63 | 75 | |||||||||||||||||||||||||||||||||||||||
Business transformation costs | 3 | 7 | 7 | 10 | |||||||||||||||||||||||||||||||||||||||
Fuji Xerox restructuring charge | 1 | (1 | ) | 2 | 2 | ||||||||||||||||||||||||||||||||||||||
Other expenses, net* | (67 | ) | (65 | ) | (114 | ) | (105 | ) | |||||||||||||||||||||||||||||||||||
Segment Profit / Revenue | $ | 344 | $ | 4,590 | 7.5 | % | $ | 457 | $ | 4,941 | 9.2 | % | $ | 674 | $ | 9,059 | 7.4 | % | $ | 878 | $ | 9,712 | 9.0 | % |
(1) | Profit and revenue from continuing operations attributable to Xerox. |
(a) | Sales of Unregistered Securities during the Quarter ended June 30, 2015 |
a. | Securities issued on April 30, 2015: Registrant issued 3,788 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, Charles Prince, Ann N. Reese, Sara Martinez Tucker and Mary Agnes Wilderotter. |
c. | The DSUs were issued at a deemed purchase price of $12.885 per DSU (aggregate price $48,808), 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 June 30, 2015 |
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) | ||||||||||
April 1 through 30 | 6,135,100 | $ | 12.84 | 6,135,100 | $ | 1,249,769,448 | |||||||
May 1 through 31 | 13,300,850 | 11.42 | 13,300,850 | 1,097,836,023 | |||||||||
June 1 through 30 | 14,527,282 | 11.24 | 14,527,282 | 934,622,136 | |||||||||
Total | 33,963,232 | 33,963,232 |
(1) | Exclusive of fees and costs. |
(2) | Of the cumulative $8.0 billion of share repurchase authority previously granted by our Board of Directors, exclusive of fees and expenses, approximately $7.1 billion has been used through June 30, 2015. 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 | |||||||
April 1 through 30 | 53,264 | $ | 12.72 | n/a | n/a | |||||
May 1 through 31 | — | — | n/a | n/a | ||||||
June 1 through 30 | 211 | 10.98 | n/a | n/a | ||||||
Total | 53,475 |
(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 June 30, | Six Months Ended June 30, | |||||||||||||||
(in millions) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Fixed Charges: | ||||||||||||||||
Interest expense | $ | 89 | $ | 96 | $ | 179 | $ | 196 | ||||||||
Capitalized interest | — | 1 | — | 2 | ||||||||||||
Portion of rental expense which represents interest factor | 68 | 69 | 136 | 135 | ||||||||||||
Total Fixed Charges | $ | 157 | $ | 166 | $ | 315 | $ | 333 | ||||||||
Earnings Available for Fixed Charges: | ||||||||||||||||
Pre-tax income | $ | 74 | $ | 301 | $ | 275 | $ | 572 | ||||||||
Add: Distributed equity income of affiliated companies | 26 | 35 | 29 | 35 | ||||||||||||
Add: Fixed charges | 157 | 166 | 315 | 333 | ||||||||||||
Less: Capitalized interest | — | (1 | ) | — | (2 | ) | ||||||||||
Less: Net income-noncontrolling interests | (5 | ) | (6 | ) | (10 | ) | (11 | ) | ||||||||
Total Earnings Available for Fixed Charges | $ | 252 | $ | 495 | $ | 609 | $ | 927 | ||||||||
Ratio of Earnings to Fixed Charges | 1.61 | 2.98 | 1.93 | 2.78 | ||||||||||||
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends: | ||||||||||||||||
Fixed Charges: | ||||||||||||||||
Interest expense | $ | 89 | $ | 96 | $ | 179 | $ | 196 | ||||||||
Capitalized interest | — | 1 | — | 2 | ||||||||||||
Portion of rental expense which represents interest factor | 68 | 69 | 136 | 135 | ||||||||||||
Total Fixed Charges before preferred stock dividends pre-tax income requirements | 157 | 166 | 315 | 333 | ||||||||||||
Preferred stock dividends pre-tax income requirements | 9 | 9 | 19 | 19 | ||||||||||||
Total Combined Fixed Charges and Preferred Stock Dividends | $ | 166 | $ | 175 | $ | 334 | $ | 352 | ||||||||
Earnings Available for Fixed Charges: | ||||||||||||||||
Pre-tax income | $ | 74 | $ | 301 | $ | 275 | $ | 572 | ||||||||
Add: Distributed equity income of affiliated companies | 26 | 35 | 29 | 35 | ||||||||||||
Add: Fixed charges before preferred stock dividends | 157 | 166 | 315 | 333 | ||||||||||||
Less: Capitalized interest | — | (1 | ) | — | (2 | ) | ||||||||||
Less: Net income-noncontrolling interests | (5 | ) | (6 | ) | (10 | ) | (11 | ) | ||||||||
Total Earnings Available for Fixed Charges and Preferred Stock Dividends | $ | 252 | $ | 495 | $ | 609 | $ | 927 | ||||||||
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends | 1.52 | 2.83 | 1.82 | 2.63 |
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. |
/S/ KATHRYN A. MIKELLS | |
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. |
/S/ URSULA M. BURNS | |
Ursula M. Burns Chief Executive Officer | |
July 31, 2015 | |
/S/ KATHRYN A. MIKELLS | |
Kathryn A. Mikells Chief Financial Officer | |
July 31, 2015 |
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Debt, Interest Income and Expense (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2015 |
Jun. 30, 2014 |
Jun. 30, 2015 |
Jun. 30, 2014 |
||||||||
Debt Disclosure [Abstract] | |||||||||||
Interest expense(1),(2) | [1],[2] | $ 88 | $ 96 | $ 177 | $ 195 | ||||||
Interest income(3) | [3] | $ 89 | $ 101 | 181 | 203 | ||||||
ITO [Member] | |||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||||||
Disposal Group, Including Discontinued Operation, Interest Expense | $ 2 | $ 1 | |||||||||
|
Finance Receivables, Net, Credit Quality Indicators (Details) - USD ($) $ in Millions |
6 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2015 |
Dec. 31, 2014 |
||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Loss Rates Of Customers With Investment Grade Credit Quality | 1.00% | ||||||||||
Loss Rates Of Customers With Non Investment Grade Credit Quality Low Range | 2.00% | ||||||||||
Loss Rates Of Customers With Non Investment Grade Credit Quality High Range | 4.00% | ||||||||||
Loss Rates Of Customers With Substandard Doubtful Credit Quality | 10.00% | ||||||||||
Financing Receivable, Net | $ 4,156 | $ 4,385 | |||||||||
United States | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 1,710 | 1,728 | |||||||||
United States | Finance and other services | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 427 | 409 | |||||||||
United States | Government and education | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 573 | 605 | |||||||||
United States | Graphic arts | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 314 | 317 | |||||||||
United States | Industrial | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 148 | 151 | |||||||||
United States | Healthcare | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 126 | 124 | |||||||||
United States | Other | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 122 | 122 | |||||||||
Canada | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 397 | 424 | |||||||||
Canada | Finance and other services | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 100 | 97 | |||||||||
Canada | Government and education | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 77 | 86 | |||||||||
Canada | Graphic arts | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 121 | 143 | |||||||||
Canada | Industrial | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 41 | 41 | |||||||||
Canada | Other | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 58 | 57 | |||||||||
Europe | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 1,619 | 1,835 | |||||||||
France | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 541 | 616 | |||||||||
U.K./Ireland | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 345 | 362 | |||||||||
Central | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | [1],[2] | 461 | 538 | ||||||||
Southern | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | [3] | 206 | 244 | ||||||||
Nordics | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | [4] | 66 | 75 | ||||||||
Other | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 430 | 398 | |||||||||
Investment Grade | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 2,270 | 2,427 | |||||||||
Investment Grade | United States | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 1,130 | 1,163 | |||||||||
Investment Grade | United States | Finance and other services | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 191 | 195 | |||||||||
Investment Grade | United States | Government and education | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 556 | 589 | |||||||||
Investment Grade | United States | Graphic arts | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 150 | 148 | |||||||||
Investment Grade | United States | Industrial | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 91 | 92 | |||||||||
Investment Grade | United States | Healthcare | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 87 | 84 | |||||||||
Investment Grade | United States | Other | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 55 | 55 | |||||||||
Investment Grade | Canada | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 232 | 246 | |||||||||
Investment Grade | Canada | Finance and other services | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 55 | 54 | |||||||||
Investment Grade | Canada | Government and education | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 67 | 76 | |||||||||
Investment Grade | Canada | Graphic arts | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 51 | 58 | |||||||||
Investment Grade | Canada | Industrial | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 24 | 24 | |||||||||
Investment Grade | Canada | Other | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 35 | 34 | |||||||||
Investment Grade | Europe | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 741 | 823 | |||||||||
Investment Grade | France | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 224 | 253 | |||||||||
Investment Grade | U.K./Ireland | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 246 | 255 | |||||||||
Investment Grade | Central | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | [2] | 217 | 230 | ||||||||
Investment Grade | Southern | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | [3] | 31 | 60 | ||||||||
Investment Grade | Nordics | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | [4] | 23 | 25 | ||||||||
Investment Grade | Other | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 167 | 195 | |||||||||
Non-investment Grade | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 1,405 | 1,449 | |||||||||
Non-investment Grade | United States | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 377 | 356 | |||||||||
Non-investment Grade | United States | Finance and other services | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 177 | 159 | |||||||||
Non-investment Grade | United States | Government and education | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 13 | 13 | |||||||||
Non-investment Grade | United States | Graphic arts | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 81 | 79 | |||||||||
Non-investment Grade | United States | Industrial | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 41 | 41 | |||||||||
Non-investment Grade | United States | Healthcare | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 25 | 26 | |||||||||
Non-investment Grade | United States | Other | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 40 | 38 | |||||||||
Non-investment Grade | Canada | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 116 | 120 | |||||||||
Non-investment Grade | Canada | Finance and other services | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 34 | 31 | |||||||||
Non-investment Grade | Canada | Government and education | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 8 | 8 | |||||||||
Non-investment Grade | Canada | Graphic arts | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 41 | 49 | |||||||||
Non-investment Grade | Canada | Industrial | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 13 | 13 | |||||||||
Non-investment Grade | Canada | Other | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 20 | 19 | |||||||||
Non-investment Grade | Europe | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 707 | 810 | |||||||||
Non-investment Grade | France | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 208 | 234 | |||||||||
Non-investment Grade | U.K./Ireland | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 95 | 101 | |||||||||
Non-investment Grade | Central | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | [2] | 216 | 278 | ||||||||
Non-investment Grade | Southern | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | [3] | 145 | 148 | ||||||||
Non-investment Grade | Nordics | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | [4] | 43 | 49 | ||||||||
Non-investment Grade | Other | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 205 | 163 | |||||||||
Substandard | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 481 | 509 | |||||||||
Substandard | United States | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 203 | 209 | |||||||||
Substandard | United States | Finance and other services | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 59 | 55 | |||||||||
Substandard | United States | Government and education | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 4 | 3 | |||||||||
Substandard | United States | Graphic arts | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 83 | 90 | |||||||||
Substandard | United States | Industrial | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 16 | 18 | |||||||||
Substandard | United States | Healthcare | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 14 | 14 | |||||||||
Substandard | United States | Other | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 27 | 29 | |||||||||
Substandard | Canada | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 49 | 58 | |||||||||
Substandard | Canada | Finance and other services | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 11 | 12 | |||||||||
Substandard | Canada | Government and education | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 2 | 2 | |||||||||
Substandard | Canada | Graphic arts | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 29 | 36 | |||||||||
Substandard | Canada | Industrial | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 4 | 4 | |||||||||
Substandard | Canada | Other | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 3 | 4 | |||||||||
Substandard | Europe | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 171 | 202 | |||||||||
Substandard | France | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 109 | 129 | |||||||||
Substandard | U.K./Ireland | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | 4 | 6 | |||||||||
Substandard | Central | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | [2] | 28 | 30 | ||||||||
Substandard | Southern | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | [3] | 30 | 36 | ||||||||
Substandard | Nordics | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | [4] | 0 | 1 | ||||||||
Substandard | Other | |||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||
Financing Receivable, Net | $ 58 | $ 40 | |||||||||
|
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