Divestitures

12 Months Ended

Dec. 31, 2019

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Sales of Ownership Interests in Fuji Xerox Co., Ltd. and Xerox International Partners

In November 2019, Xerox Holdings completed a series of transactions to restructure its relationship with FUJIFILM Holdings Corporation (FH), including the sale of its indirect 25% equity interest in Fuji Xerox (FX) for approximately $2.2 billion as well as the sale of its indirect 51% partnership interest in Xerox International Partners (XIP) for approximately $23 (collectively the Sales).

As a result of the Sales and the related strategic shift in our business, the historical financial results of our equity method investment in FX and our XIP business (which was consolidated) for the periods prior to the Sales are reflected as a discontinued operation and as such, their impact is excluded from continuing operations for all periods presented.

The Sales resulted in a pre-tax gain of $629 ($539 after-tax), and included a reclassification from Accumulated other comprehensive loss of $165 (Refer to Note 25 - Other Comprehensive (Loss) Income) as well as approximately $9 of transaction costs and $9 of allocated goodwill associated with our XIP business (Refer to Note 13 - Goodwill and Intangible Assets, Net). The XIP allocated goodwill was based on the relative fair value of our XIP business, as evidenced by the sales price, as compared to the total estimated fair value of Xerox. No Goodwill was allocated for our investment in FX based on consideration of the guidance in ASC 350-20-40-2 and the fact that an equity investment is not considered a business in accordance with ASC 805-10-55, as it was not controlled by Xerox.

The transactions with FH also included an OEM license agreement by and between FX and Xerox, granting FX the right to use specific Xerox Intellectual Property (IP) in providing certain named original equipment manufacturers (OEM’s) with products (such as printer engines) in exchange for a one-time upfront license fee of $77. The license fee is recorded within Rental and other revenues. In addition, arrangements with FX whereby we purchase inventory from and sell inventory to FX, will continue after the Sales and, as a result of our Technology Agreement with Fuji Xerox which remains in effect after the Sales through March 2021, we will continue to receive royalty payments for FX’s use of our Xerox brand trademark, as well as rights to access our patent portfolio in exchange for access to their patent portfolio.

Refer to Note 12 - Investment in Affiliates, at Equity, for additional information on transactions with FX as well as Note 27 - Subsequent Events for additional information regarding our Technology Agreement with FX.

Business Process Outsourcing (BPO)

On December 31, 2016, Xerox completed the Separation of its BPO business through the Distribution of all of the issued and outstanding stock of Conduent Incorporated to Xerox Corporation stockholders. As a result of the Separation and Distribution, the financial position and results of operations of the BPO Business were presented as Discontinued Operations. Discontinued Operations for the year ended December 31, 2017 include immaterial follow-on impacts from the BPO separation - see note (1) to table below.

In connection with the Separation, Conduent made a net cash distribution to Xerox of approximately $1.8 billion prior to the Distribution Date. Xerox used a portion of the cash distribution proceeds to repay the $1.0 billion Senior Unsecured Term Facility in January 2017, which was required to be repaid upon completion of the Separation.

Summarized financial information for our Discontinued Operations is as follows:



	Year Ended December 31,
	2019		2018		2017
Revenue	$	79	$	168	$	274

Income from operations⁽¹⁾	$	176	$	74	$	138
Gain on disposal	629		—		—
Income before income taxes	805		74		138
Income tax expense⁽¹⁾	95		10		1
Income from discontinued operations, net of tax	710		64		137
Income from discontinued operations attributable to noncontrolling interests, net of tax	5		9		8
Income from discontinued operations, attributable to Xerox, net of tax⁽¹⁾	$	705	$	55	$	129

_____________


(1)	2017 Income from discontinued operations, net of tax, attributable to Xerox includes $3 related to the BPO separation, that includes a loss from operations of $(9) and income tax benefit of $12 with both amounts primarily related to changes in estimated amounts recorded in 2016.

The following is a summary of selected financial information for our Discontinued Operations:



	Year Ended December 31,
	2019		2018		2017
Cost and Expenses:
Cost of revenues	$	44	$	110	$	218
Other expenses	6		9		20
Total Costs and Expenses	$	50	$	119	$	238
Selected amounts included in Costs and Expenses:
Depreciation and amortization	$	—	$	—	$	1
Restructuring and related costs	—		1		—
Other:
Equity in net income of FX	$	147	$	25	$	102
Net income attributable to noncontrolling interest - XIP	5		9		8
Capital expenditures	—		—		—

The following is a summary of the major categories of assets and liabilities of XIP and our Investment in FX as of the date of sale. The balances as of December 31, 2018 are included in Assets and Liabilities of discontinued operations in the Consolidated Balance Sheets:



	At Date of Sale		December 31, 2018
Assets
Cash and cash equivalents	$	1	$	3
Accounts receivable, net	3		6
Inventories	5		7
Other current assets	—		3
Total current assets	9		19
Land, building and equipment, net	1		1
Goodwill	9		9
Other long-term assets	1,471		1,342
Total Assets of discontinued operations	$	1,490	$	1,371

Liabilities
Accounts payable	$	8	$	18
Accrued compensation and benefits costs	1		1
Accrued expenses and other current liabilities	2		2
Total current liabilities	11		21
Other long-term liabilities	1		—
Total Liabilities of discontinued operations	$	12	$	21

XIP had noncontrolling interests of $32 at the date of sale and $36 at December 31, 2018. Refer to Note 12 - Investments in Affiliates, at Equity for additional information regarding FX, including summarized financial information of FX.

Other Divestitures

Xerox Research Centre Europe in Grenoble

In August 2017, we completed the sale of the Xerox Research Centre Europe in Grenoble, France to Naver Corporation (Naver). The selling price was approximately $23 and resulted in a pre-tax gain of $13 ($4 after-tax), which is included in Other expenses, net in the Consolidated Statements of Income for the year ended December 31, 2017. The sale included the transfer of approximately 80 researchers and administrative staff who became part of Naver.