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What changed in Xerox Holdings Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Xerox Holdings Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+580 added−682 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-23)

Top changes in Xerox Holdings Corp's 2023 10-K

580 paragraphs added · 682 removed · 414 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

64 edited+36 added−64 removed27 unchanged
Biggest changeThe majority of spent toner cartridges and other consumables returned through Green World Alliance, Xerox's customer recycling program, are recycled, reused or remanufactured. We continue to make progress towards increasing the post-consumer recycled content in our eco-label eligible devices.
Biggest changeWe have developed several collection and waste reduction programs, while also designing technology to align with the circular economy’s key elements. Based on data from 2022 (the latest full year data is available), approximately 93% of spent toner cartridges and other consumables, returned through Green World Alliance (Xerox's customer recycling program), are recycled, reused or remanufactured.
Xerox® Workflow Central extends the document workflow solutions available through our ConnectKey® technologies to all devices, including PCs and smartphones, for easier access to workflow solutions in hybrid workplace environments. • Capture & Content Services (CCS) enables content digitization and management, workflow automation and intelligent document processing and includes offerings such as Xerox® Digital Mailroom , where we use scanning and capture technology combined with AI to extract printed and digital information into usable data that is routed into business workflows (such as accounts payable) or into archives, integrating with cloud-based content management systems such as our DocuShare® software. • Customer Engagement Services (CES) enable the integration of Xerox technology, software and services to securely design and manage our clients’ personalization and customization of targeted communications.
Xerox® Workflow Central extends the document workflow solutions available through our ConnectKey® technologies to all devices, including PCs and smartphones, for easier access to workflow solutions in hybrid workplace environments. • Capture & Content Services (CCS) enables content digitization, management, workflow automation, and intelligent document processing and includes offerings such as Xerox® Digital Mailroom , where we use scanning and capture technology combined with AI to extract printed and digital information into usable data that is routed into business workflows (such as accounts payable) or into archives, integrating with cloud-based content management systems such as our DocuShare® software. • Customer Engagement Services (CES) enable the integration of Xerox technology, software, and services to securely design and manage our clients’ personalization and customization of targeted communications.
Revenues We have a broad and diverse base of customers by both geography and industry, ranging from small and mid-sized market clients to printing production companies, governmental entities, educational institutions and Fortune 1000 corporations. Our business does not depend upon a single customer, or a few customers, the loss of which would have a material adverse effect on our business.
Revenues We have a broad and diverse base of customers by both geography and industry, ranging from small and mid-sized clients to printing production companies, governmental entities, educational institutions and Fortune 1000 corporations. Our business does not depend upon a single customer, or a few customers, the loss of which would have a material adverse effect on our business.
We provide the most comprehensive portfolio of MPS services in the industry and are recognized as an industry leader by major analyst firms including IDC and Quocirca. Our MPS offering targets clients ranging from global enterprises to governmental entities to small and mid-sized markets businesses, including those served via our channel partners.
We provide the most comprehensive portfolio of MPS services in the industry and are recognized as an industry leader by major analyst firms including IDC and Quocirca. Our MPS offering targets clients ranging from global enterprises to governmental entities and small and mid-sized businesses, including those served via our channel partners.
As we continue our strategy to diversify and grow other businesses, there may be additional non-print competitors. With respect to our financing/FITTLE business, our main competitors vary considerably from equipment manufacturers with a captive leasing group to third-party independent leasing entities and financial institutions.
As we continue our strategy to diversify and grow other businesses, there may be additional non-print competitors. With respect to our financing business, our main competitors vary considerably from equipment manufacturers with a captive leasing group to third-party independent leasing entities and financial institutions.
Competition Although we encounter competition in all areas of our business, we are the leader - or among the leaders - in our core mid-range and high-end product groups. We compete on the basis of technology, performance, price, quality, reliability, brand reputation, distribution, and customer service and support.
Competition Although we encounter competition in all areas of our business, we are the leader - or among the leaders - in our core mid-range and high-end product groups. We compete on the basis of technology, performance, price, quality, reliability, brand reputation, distribution, service and support.
The larger competitors in our print business include Canon, FUJIFILM Business Innovations Corp., HP Inc., Konica Minolta and Ricoh. Our brand recognition, reputation for document management expertise, innovative technology and service delivery excellence are our competitive advantages. These advantages, combined with our breadth of product offerings, global distribution channels and customer relationships, position us as a strong competitor going forward.
The larger competitors in our print business include Canon, FUJIFILM Business Innovations Corp., HP Inc., Konica Minolta, and Ricoh. Our brand recognition, reputation for document management expertise, innovative technology and service delivery excellence are our competitive advantages. These advantages, combined with our breadth of product offerings, global distribution channels and client relationships, position us as a strong competitor going forward.
We generally compete based on relationships with dealers and partners and by offering a better service experience. Customer Financing (FITTLE) We finance a large portion of our direct channel customer purchases of Xerox equipment through bundled lease agreements. We also provide lease financing to end-user customers who purchase Xerox equipment through our indirect channels.
We generally compete based on relationships with customers, dealers and partners and by offering a better integrated service experience. Customer Financing (FITTLE) We finance a large portion of our direct channel customer purchases of Xerox equipment through bundled lease agreements. We also provide lease financing to end-user customers who purchase Xerox equipment and solutions through our indirect channels.
In addition, any of our proprietary rights could be challenged, invalidated or circumvented, or may not provide significant competitive advantages. In 2022, we were party to multiple patent-related agreements in which we licensed or assigned our patents to others in return for revenue and/or access to their patents or to further our business goals.
In addition, any of our proprietary rights could be challenged, invalidated, or circumvented, or may not provide significant competitive advantages. In 2023, we were party to multiple patent-related agreements in which we licensed or assigned our patents to others in return for revenue and/or access to their patents or to further our business goals.
(formerly Fuji Xerox Co., Ltd.) is our largest partner with whom we maintain product sourcing agreements for specific products across our entry, mid-range and high-end portfolios. We also acquire products from various third parties to increase the breadth of our product portfolio and meet channel requirements.
(formerly Fuji Xerox Co., Ltd.) is our largest partner with whom we maintain product sourcing agreements for specific products primarily across our mid-range and high-end portfolios. We also acquire products from various third parties to increase the breadth of our product portfolio and meet channel requirements.
To ensure we are responsive to all stakeholders, Xerox has also been reporting in accordance with the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate Change Related Disclosures (TCFD). (The 2022 CSR Report, SASB report and TCFD report are accessible at www.xerox.com/CSR.
To ensure we are responsive to all stakeholders, Xerox has also been reporting in accordance with the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate Change Related Disclosures (TCFD). (The 2023 CSR Report, SASB report, and TCFD report are accessible at www.xerox.com/CSR.
Strategic Priorities Our long-term strategic objective is to grow the share of our customer's technology spending as well as the Total Addressable Market (TAM) through expanded penetration of existing solutions and the development of new, data-driven solutions.
Strategic Priorities Our long-term strategic objective is to grow the share of our customer's technology spending as well as the Total Addressable Market (TAM) through expanded penetration of existing solutions and the development of new, content-driven solutions.
In addition, we continue to focus on broadening our footprint to sell offerings to the small and mid-sized markets primarily in the U.S., U.K. and Canada through XBS which is comprised of regional core companies that provide office technology and services, including Managed IT Services, to small and mid-sized markets clients, and through the acquisitions of dealers and IT Services providers internationally.
In addition, we continue to focus on broadening our footprint to sell offerings to the small and mid-sized markets primarily in the U.S., U.K., and Canada through Xerox Business Solutions (XBS) which is comprised of regional core companies that provide office technology and services, including Managed IT Services, to small and mid-sized markets clients, and through the acquisitions of dealers and IT Services providers internationally.
Refer to "Debt and Customer Financing Activities" in the Capital Resources and Liquidity section of Management's Discussion and Analysis, included in Item 7 of this combined Form 10-K, for additional information. Manufacturing and Supply Our manufacturing and distribution facilities are located around the world.
Refer to "Debt and Customer Financing Activities" and "Finance Assets and Related Debt" in the Capital Resources and Liquidity section of Management's Discussion and Analysis, included in Item 7 of this combined Form 10-K, for additional information. Manufacturing and Supply Our manufacturing and distribution facilities are located around the world.
International Operations The financial measures, by geographical area for 2022, 2021 and 2020, are included in Note 4 - Segment and Geographic Area Reporting in the Consolidated Financial Statements for additional information.
International Operations The financial measures, by geographical area for 2023, 2022 and 2021, are included in Note 4 - Segment and Geographic Area Reporting in the Consolidated Financial Statements for additional information.
This commitment stems from our corporate values established over sixty years ago, which include: succeeding through satisfied customers; delivering quality and excellence in all we do; requiring a premium return on assets; using technology to develop market leaders; valuing and empowering our employees; and behaving responsibly as a corporate citizen.
This commitment stems from our corporate values established over sixty years ago, which include: succeeding through satisfied clients; delivering quality and excellence in all we do; requiring a premium return on assets; using technology to develop market leadership; valuing and empowering our employees; and behaving responsibly as a corporate citizen.
Additional details can be found in Note 4 - Segment and Geographic Area Reporting in the Consolidated Financial Statements. Patents, Trademarks and Licenses In 2022, Xerox and its subsidiaries were awarded 266 U.S. utility and design patents. Our patent portfolio evolves as new patents are awarded to us and older patents expire.
Additional details can be found in Note 4 - Segment and Geographic Area Reporting in the Consolidated Financial Statements. Patents, Trademarks and Licenses In 2023, Xerox and its subsidiaries were awarded 300 U.S. utility and design patents. Our patent portfolio evolves as new patents are awarded to us and older patents expire.
The COVID-19 pandemic shifted our customers’ focus toward secure, efficient and flexible solutions to operate in a hybrid work environment.
The pandemic shifted our customers’ focus toward secure, efficient, and flexible solutions to operate in a hybrid work environment.
We fund our customer financing activity through a combination of cash generated from operations, cash on hand and proceeds from capital market offerings and securitizations through secured borrowing arrangements and sales of receivables.
We fund our customer financing activity through a combination of cash generated from operations, cash on hand and proceeds from capital market offerings as well as secured borrowing arrangements and sales of receivables.
Other Information Xerox Holdings Corporation Xerox Holdings is a New York corporation, organized in 2019 and our principal executive offices are located at 201 Merritt 7, P.O. Box 4505, Norwalk, Connecticut 06851-1056. Our telephone number is 203-849-5216. Xerox Corporation Xerox is a New York corporation, organized in 1906 and our principal executive offices are located at 201 Merritt 7, P.O.
Xerox Corporation Xerox is a New York corporation, organized in 1906 and our principal executive offices are located at 201 Merritt 7, P.O. Box 4505, Norwalk, Connecticut 06851-1056. Our telephone number is 203-849-5216.
Our Customer Communications Management and Campaigns on Demand solutions, such as those provided by recently acquired Go Inspire, help drive personalized and meaningful communications and touchpoints. • IT Services , provides small and mid-sized markets clients with cost efficient and secure solutions, including end user computing devices, network infrastructure, communications technology, and a range of managed IT solutions, such as technology product support, professional engineering and commercial RPA.
Our Customer Communications Management and Campaigns on Demand solutions, such as those provided through our acquisition of Go Inspire, help drive personalized and meaningful communications and touchpoints. • IT Services provides small and mid-sized clients with cost efficient and secure solutions, including end user computing devices, network infrastructure, communications technology, and a range of managed IT solutions, such as technology product support, professional engineering, and commercial RPA.
As of December 31, 2022, Xerox held 7,105 U.S. utility and design patents. These patents expire at various dates up to 20 years or more from their original filing dates. While we believe that our portfolio of patents and applications has value, in general no single patent is essential to our business.
As of December 31, 2023, Xerox held 6,471 U.S. utility and design patents. These patents expire at various dates up to 20 years or more from their original filing dates. While we believe that our portfolio of patents and applications has value, in general no single patent is essential to our business.
In addition, we outsource certain specialized manufacturing activities to partners, such as Flex Ltd. and Jabil Inc., which are global contract manufacturers with whom we have long-standing relationships. Xerox 2022 Annual Report 9 Table of Contents Our supply chain operations utilize a network of world-class logistics partners who offer warehousing and transportation services.
In addition, we outsource certain specialized manufacturing activities to partners, such as Flex Ltd. and Jabil Inc., which are global contract manufacturers with whom we have long-standing relationships. Our supply chain operations utilize a network of world-class logistics partners who offer warehousing and transportation services.
Marketing and Distribution We go to market with a customer-centric, market-informed and services-led approach, selling workplace products and services that support the new hybrid and distributed workforce. We sell directly to customers through our direct sales force or indirectly through distributors, independent agents, dealers, value-added resellers, systems integrators and e-commerce marketplaces.
Marketing and Distribution We go to market with a client-centric, market-informed, and services-led approach, selling workplace products and services that support the new hybrid workplace and distributed workforce. We service our clients through our direct sales force or indirectly through distributors, independent agents, dealers, value-added resellers, systems integrators, and e-commerce marketplaces.
We offer our ConnectKey® system of digital workflow and applications across a large portion of these devices. Xerox 2022 Annual Report 2 Table of Contents • Mid-Range are primarily A3 devices that have more features and can handle higher print volumes and larger paper sizes than entry devices.
We offer our ConnectKey® system of digital workflow and applications across a large portion of these devices. • Mid-Range are primarily A3 devices that have more features and can handle higher print volumes and larger paper sizes than entry devices.
Refer to "Contractual Cash Obligations and Other Commercial Commitments and Contingencies" in the Capital Resources and Liquidity section of Management's Discussion and Analysis, included in Item 7 of this combined Form 10-K for additional information regarding our relationship with FUJIFILM Business Innovation Corp.
Refer to the Capital Resources and Liquidity section of Management's Discussion and Analysis, included in Item 7 of this combined Form 10-K for additional information regarding our relationship with FUJIFILM Business Innovation Corp.
FITTLE is a global financing solutions business and currently offers financing for direct channel customer purchases of Xerox equipment through bundled lease agreements, lease financing to end-user customers who purchase Xerox and non-Xerox equipment through our indirect channels and leasing solutions for OEMs of print and non-print related office equipment and IT services equipment.
FITTLE is a global financing solutions business and currently offers lease financing for direct channel customer purchases of Xerox equipment and solutions through bundled lease agreements and lease financing to end-user customers who purchase Xerox equipment and solutions through our indirect channels.
We compete with other third-party leasing companies with respect to the lease financing provided to these end-user customers. In both instances, financing facilitates customer acquisition of Xerox technology and enhances our value proposition, while providing Xerox a reasonable return on our investment in this business. We also provide financing solutions for non-Xerox office equipment and IT services equipment.
We compete with other third-party leasing companies and financial institutions with respect to the lease financing provided to these end-user customers. In both instances, financing facilitates customer acquisition of Xerox technology and enhances our value proposition, while providing Xerox a reasonable return on our investment in this business.
All rights reserved. Xerox®, ConnectKey®, FreeFlow®, Gen3®, Xerox Nuvera®, Baltoro® and any other trademarks that are used here are trademarks of Xerox Corporation in the United States and/or other countries. Xerox 2022 Annual Report 10 Table of Contents
Xerox®, ConnectKey®, FreeFlow®, Gen3®, Xerox Nuvera®, Baltoro® and any other trademarks that are used here are trademarks of Xerox Corporation in the United States and/or other countries. Xerox 2023 Annual Report 9 Table of Contents
On a geographic basis, approximately 10,300 employees were located in the U.S. and approximately 10,200 employees were located outside the U.S. We had approximately 11,900 employees or approximately 60% of our employees engaged in providing services to customers (direct service and managed services) and approximately 3,000 engaged in direct sales.
On a geographic basis, approximately 10,200 employees were located in the U.S. and approximately 9,900 employees were located outside the U.S. We had approximately 10,400 employees or approximately 50% of our employees engaged in providing services to customers (direct service and managed services) and approximately 2,400 employees engaged in direct sales.
We believe Xerox’s globally recognizable brand, our deep understanding of clients’ industries and businesses and client trust have afforded us a path to win in IT and digital services – markets where we already have leading solutions and where we are actively investing to develop more. Our strategic priorities for 2023 are: Customer Success, Focus on Profitability and Shareholder Returns.
We believe Xerox’s globally recognizable brand, our deep understanding of clients’ industries and businesses, and clients' trust have afforded us a path to win in IT and Digital Services – markets where we already have leading solutions and where we are actively investing to develop more.
We maintain an assumed 7:1 leverage ratio of debt to equity as compared to our Finance assets, which results in approximately $2.9 billion of our $3.7 billion of debt being allocated to FITTLE.
We maintain an assumed 7:1 leverage ratio of debt to equity as Xerox 2023 Annual Report 7 Table of Contents compared to our Finance assets, which results in approximately $2.4 billion of our $3.3 billion of debt being allocated to our financing business.
We are a leader in this area of the market and offer a wide range of MFPs, digital printing presses and light production devices, as well as solutions that deliver flexibility and advanced features. Production Solutions (High-End) are designed for customers in the graphic communications, in-plant and production print environments with high-volume printing requirements.
We are a leader in this area of the market and offer a wide range of MFPs, digital printing presses and light production devices, as well as solutions that deliver flexibility and advanced features.
At December 31, 2022, we had approximately $3.1 billion of finance receivables and $235 million of Equipment on operating leases, net, or Total Finance assets of approximately $3.3 billion.
At December 31, 2023, we had approximately $2.5 billion of finance receivables and $265 million of Equipment on operating leases, net, or Total Finance assets of approximately $2.8 billion.
In the U.S., we own approximately 161 U.S. trademarks, either registered or applied for. These trademarks have a perpetual life, subject to renewal every 10 years. We vigorously enforce and protect our trademarks.
In the U.S., we own 155 trademarks, either registered or applied for. Outside of the U.S., we own 3,740 trademarks, either registered or applied for. These trademarks have a perpetual life, subject to periodic renewal requirements. We vigorously enforce and protect our trademarks.
Further details about our acquisitions and investments can be found in Note 6 - Acquisitions and Investments, in the Consolidated Financial Statements. Reportable Segments and Geographic Sales Channels Our business is organized to ensure we focus on efficiently managing operations while serving our customers and the markets in which we operate.
Reportable Segments and Geographic Sales Channels Our business is organized to ensure we focus on efficiently managing operations while serving our customers and the markets in which we operate.
In December 2022, the Company entered into a Receivables Funding Agreement pursuant to which the Company agreed to offer for sale, and the purchaser agreed to purchase certain eligible pools of finance receivables on a monthly basis in transactions intended to be true sales.
In December 2022, the Company entered into a finance receivables funding agreement with an affiliate of HPS Investment Partners (HPS) pursuant to which the Company agreed to offer for sale, and HPS agreed to purchase, certain eligible pools of finance receivables on a monthly basis in transactions structured as "true sales at law" and bankruptcy remote transfers.
Production Solutions revenues include the sale of products (captured primarily in equipment sales) as well as, software, supplies and the associated technical service and financing of those products (captured as post sale revenue).
Our portfolio spans a variety of print speeds, image quality, feeding, finishing and media options. Production Solutions revenues include the sale of products (captured primarily in equipment sales) as well as, software, supplies and the associated technical service and financing of those products (captured as post sale revenue).
Approximately 20% of our employees are represented by unions or similar organizations, such as worker’s councils with approximately 90% located outside the U.S. As of December 31, 2022, approximately 25% of our employees were women and 30% of our U.S. employees self-identified as diverse. Employee Safety At Xerox, we are committed to maintaining a safe workplace environment for our people.
Approximately 20% of our employees are represented by unions or similar organizations, such as worker’s councils with approximately 87% located outside the U.S. As of December 31, 2023, approximately 25% of our employees were women and approximately 30% of our U.S. employees self-identified as diverse.
A Long-Term Incentive (LTI) equity-based program reinforces alignment of our leaders and key talent with shareholders. Our benefit offerings provide our employees with choice and flexibility to help them reach their health and financial goals. Our offerings include the following core programs: health care, wellness, retirement, paid time off, life and disability insurance, and access to voluntary benefits.
In 2023, approximately 35% of Xerox's employees were eligible to participate in our LTI program. Our benefit offerings provide our employees with choice and flexibility to help them reach their health and financial goals. Our offerings include the following core programs: health, wellness, retirement, paid time off, life and disability insurance, and access to voluntary benefits.
Xerox 2022 Annual Report 3 Table of Contents In addition to our four primary offering areas described above, a smaller but growing portion of our revenues comes from non-core streams including paper sales in our developing market countries, wide-format systems, licensing revenue, as well as standalone software such as CareAR, DocuShare® and XMPie.
In addition to our four primary offering areas described above, a small portion of our revenues comes from non-core streams including paper sales in our developing market countries, and standalone software such as CareAR, DocuShare®, and XMPie. Xerox 2023 Annual Report 3 Table of Contents Geographic Information Overall, approximately 45% of our revenue is generated by customers outside the U.S.
We have two operating and reportable segments – Print and Other and Financing (FITTLE) . • Print and Other – the design, development and sale of document management systems, solutions, and services as well as associated technology offerings including IT and software products and services. • Financing (FITTLE) – a financing solutions business primarily providing financing for the sales of Xerox equipment and also non-Xerox office equipment and IT services equipment.
During 2023 we had two operating and reportable segments – Print and Other and FITTLE . • Print and Other – the design, development and sale of document systems, solutions, and services, as well as associated technology offerings including IT and software products and services. • FITTLE – a financing solutions business for direct channel customer purchases of Xerox equipment and solutions, and lease financing to end-user customers who purchase Xerox equipment and solutions.
Learning is delivered to our staff using an appropriate modality to support professional development and build capabilities across the company, on time, and in a cost-effective manner. Our Learning and Development (L&D) function is focused on business agility and driving digital transformation across our workforce.
We adopt a blended technology-led learning model to drive the Xerox business and talent strategies. The Xerox workforce has access to learning in various modalities that support professional development and build capabilities across the Company, on time, and in a cost-effective manner. Our Learning and Development (L&D) function is focused on business agility and driving digital transformation across our workforce.
Xerox 2022 Annual Report 6 Table of Contents Total Rewards Our success depends on attracting, retaining, and motivating a highly productive, global workforce. To achieve this, we take pride in offering our employees a comprehensive Total Rewards program that includes various compensation, benefits, and work-life programs.
To achieve this, we take pride in offering our employees a comprehensive Total Rewards program that includes various compensation, benefits, and work-life programs.
At Xerox, we believe in continuously improving, and we apply this mentality to ensuring we are always finding ways to improve the sustainability of our operations. The Xerox 2022 Corporate Social Responsibility (CSR) Report describes our management approach related to ESG.
At Xerox, we believe in continuously improving, and we apply this mentality to ensuring we are finding ways to improve the sustainability of our operations. From our earliest days as a company, Xerox has demonstrated a steadfast commitment to corporate social responsibility.
Our broad portfolio of presses and solutions provides full-color, on-demand printing of a wide range of applications. Our xerographic and ink jet presses provide high-speed, high-volume cut-sheet printing, ideal for publishing, and transactional printing, including variable data for personalized content and one-to-one marketing, to the highest quality of color and embellishment requirements.
Our xerographic and ink jet presses provide high-speed, high-volume cut-sheet printing, ideal for publishing, and transactional printing, including variable data for personalized content and one-to-one marketing, to the highest quality of color and embellishment requirements. Our cut-sheet inkjet press enables new applications in true high-definition resolution with high fusion ink, AI Powered image quality and advanced productivity technologies.
We make these documents available timely after we have filed them with, or furnished them to, the U.S. Securities and Exchange Commission (the SEC). The SEC's Internet address is www.sec.gov. Our Internet address is www.xerox.com . The content of our website is not incorporated by reference in this combined Form 10-K unless expressly noted. © 2022 Xerox Corporation.
The SEC's Internet address is www.sec.gov. Our Internet address is www.xerox.com . The content of our website is not incorporated by reference in this combined Form 10-K unless expressly noted. © 2022 Xerox Corporation. All rights reserved.
Our short-term programs include: a Management Incentive Plan (MIP), designed to drive Xerox’s pay for performance culture and incentivize our leaders to help Xerox achieve sustainable growth; sales compensation programs to tightly align our sales force with business goals; and a Profit Share Plan (PSP), designed to give a broad population of our employees an opportunity to share in the organization’s success.
Our short-term programs include: a management incentive plan (MIP), designed to drive Xerox’s annual pay for performance culture and incentivize our leaders to help Xerox achieve sustainable growth and profitability; and a sales compensation program that tightly aligns our sales force with business goals. A Long-Term Incentive (LTI) equity-based program reinforces alignment of our leaders and key talent with shareholders.
Reverse Logistics is an integral part of our sustainability mission, and we perform these operations at our facility in Cincinnati, OH, and with a network of various partners worldwide.
Reverse Logistics is an integral part of our sustainability mission, and in the U.S. we perform these operations at our facility in Cincinnati, OH, and globally with a network of various partners. FUJIFILM Business Innovation Corp. continues to be one of our strategic suppliers, and in 2023 we renewed our multi-year contract with them.
Material Government Regulations Our business activities are worldwide and are subject to various federal, state, local, and foreign laws and our products and services are governed by a number of rules and regulations. Currently costs incurred to comply with these governmental regulations are not material to our capital expenditures, results of operations and competitive position.
Currently, costs incurred to comply with these governmental regulations are not material to our capital expenditures, results of operations and competitive position.
We share our roadmap to reach net zero in our 2022 CSR Report. Our roadmap covers our full value chain and focuses on improving processes and energy efficiency as well as designing environmentally responsible products and clean technologies that extend beyond print.
We share our roadmap to reach net zero in our 2023 CSR Report. Our roadmap covers our full value chain and focuses on improving processes and energy efficiency as well as designing environmentally responsible products. Our interim goal is to reduce our Scope 1 and Scope 2 GHG emissions at least 60% by 2030, against the Company’s 2016 baseline.
We are structured to serve our customers globally through two primary go-to-market units: the Americas, comprised of the U.S. and Canada along with Mexico, Brazil, Central and South America; and EMEA, which includes Europe, the Middle East, Africa and India. We have an industry leading and common global delivery model that provides a consistent customer experience worldwide.
We are structured to serve our clients globally through our business-unit led operating model and organizational structure which covers direct and indirect routes to market in the Americas (comprised of the U.S. and Canada along with Mexico, Brazil, Central and South America) and EMEA (comprised of Europe, the Middle East, Africa and India).
Box 4505, Norwalk, Connecticut 06851-1056. Our telephone number is 203-849-5216. Within the Investor Relations section of Xerox Holdings' website, you will find our combined Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports.
Within the Investor Relations section of Xerox Holdings' website, you will find our combined Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports. We make these documents available timely after we have filed them with, or furnished them to, the U.S. Securities and Exchange Commission (the SEC).
We have an incident reporting process, workplace safety inspections and hazard analysis that allows improvements in areas where we can reduce or prevent incidents. Several methods are also used to raise employee safety awareness including site-specific hazard management, off-the-job safety information and communications regarding safety concerns.
Employee Safety At Xerox, we are committed to maintaining a safe workplace environment for our people. We have an incident reporting process, workplace safety inspections and hazard analysis that allows improvements in areas where we can reduce or prevent incidents.
As our business evolves, we will continue to leverage technology to identify new skills or capabilities required to ensure we remain competitive in the global market. Our L&D function partners with Xerox business leaders to design capability-building programs and the Xerox senior leadership champions a long-term vision to continually develop the skills of our employees.
Our L&D function partners with Xerox business leaders to design capability-building programs and Xerox's senior leadership champions a long-term vision to continually develop the skills of our employees. During 2023, approximately 95% of Xerox employees completed at least one or more formal learning offering, which includes both required and voluntary training.
Joseph Wilson’s vision is still reflected today in our DIB roadmap through the development and execution of ESG targets. Our DIB roadmap continues to enable us to have a bigger impact on employees and society.
His call for social responsibility, diversity and inclusiveness is a Xerox core value and part of our company DNA. Joseph Wilson’s vision is still reflected today in our diversity, inclusion and belonging (DIB) roadmap through the development and execution of ESG targets.
We believe that this structure creates a leaner and more effective go-to-market model that streamlines our supply chain and provides our customers with best-in-class services. The Technology Agreement (TA) between FUJIFILM Business Innovation Corp. (formerly Fuji Xerox Co. Ltd, or Fuji Xerox) and Xerox was terminated on March 31, 2021.
We have an industry leading and common global delivery model that provides a consistent client experience worldwide. We believe that this structure creates a leaner and more effective go-to-market model that streamlines our supply chain and provides our client with best-in-class services.
Philanthropy and Community Involvement From our earliest days as a company, Xerox has demonstrated a steadfast commitment to corporate social responsibility. Our greatest goal is to facilitate employee-driven philanthropy. Together, Xerox and our employees are creating real impact and sustainable change for the greater good. In 2022, Xerox employees volunteered for approximately 24,400 hours.
Our greatest goal is to facilitate employee-driven philanthropy, with a focus on strengthening our communities, sustainability, diversity, inclusion and belonging, education, and disaster relief. Together, Xerox and our employees are creating real impact and sustainable change for the greater good.
Our employees have access to a global learning platform that includes an extensive portfolio of online courses, virtual classroom events, simulations, job aids, and other learning and development resources. Learning topics include critical job-specific information and technical upskilling, management development and professional effectiveness, productivity tools for project management, client service, negotiations, technology solutions, ethics, diversity and inclusion, and information security.
Our employees have access to a global learning platform that includes an extensive portfolio of online courses, virtual classroom events, simulations, job aids, and other learning and development resources. As our business evolves, we continue to leverage technology to identify new skills and capabilities required to ensure we remain competitive in the global market.
Social Our Employees As of December 31, 2022, we had approximately 20,500 employees; a reduction of approximately 2,800 (12.0%) employees since December 31, 2021. The reduction in headcount resulted from net attrition (attrition net of gross hires), restructuring, as well as the impact of organizational changes including employee transfers associated with shared services arrangements.
We continue to make progress towards increasing the post-consumer recycled content in our eco-label eligible devices. Human Capital Our Employees As of December 31, 2023, we had approximately 20,100 employees; a reduction of approximately 400 employees, or 2.0%, since December 31, 2022. The reduction in headcount resulted from net attrition (attrition net of gross hires) and restructuring.
Our GHG emissions are Xerox 2022 Annual Report 4 Table of Contents third-party assured in accordance with ISO 14064-3:2019 and are updated in our progress summary as new data becomes available. In 2022, Xerox was named to CDP’s Annual "A List” for climate change transparency and performance.
This is in line with the ambitious science-based global warming target, validated and approved by the Science Based Targets initiative (SBTi). Our GHG emissions are third-party assured in accordance with the International Organization for Standardization (ISO) 14064-3:2019 and are updated in our progress summary as new data becomes available.
Acquisitions and Investments We maintain a broad M&A pipeline that includes targets within the print industry and adjacent markets. In 2022, Xerox acquired Powerland, an IT service provider in Canada, and Go Inspire, a print and digital marketing and communication services provider in the U.K.
Acquisitions and Investments We maintain a broad M&A pipeline that includes targets within the print industry and adjacent markets. Further information about our acquisitions and investments can be found in Note 6 - Acquisitions and Divestitures in the Consolidated Financial Statements.
Additional specialized training is required for certain roles and numerous training programs are available for employees to take on their own initiative. A variety of proprietary and leading industry security features are also used to protect Xerox® devices from malicious attacks.
Employee Training All employees are required to complete annual training in ethics, privacy, DIB, and security. Certain employees are required to complete additional specialized training pertaining to their role within the organization. Additionally, numerous training programs are available for employees to take on their own initiative.
CDP is a nonprofit organization that runs the global disclosure system for investors, companies, and regions to manage their environmental impacts. Xerox has long paired its technology with sustainability, influencing not just our industry but others. Serving as an ENERGY STAR Charter Partner, Xerox helped the U.S.
In 2023, Xerox was named to CDP’s Annual "A List” for climate change transparency and performance. CDP is a nonprofit organization that runs the global disclosure system for investors, companies, and regions to manage their environmental impacts. Circular economy initiatives remain a part of our business strategy.
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Recent Changes and Developments In 2022, we made progress in our efforts to monetize or improve and broaden the financial profile of two of the businesses we stood up in 2021: FITTLE (formerly known as Xerox Financial Services) and Innovation (PARC).
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Recent Changes and Developments Reinvention 2023 was the first full year of our Reinvention, which is expected to transform the way we operate, strengthening our core business and improving our financial flexibility so we can invest in solutions, initiatives, and capabilities that will position Xerox as a leading services-led, software-enabled technology solutions provider and deliver long-term, sustainable growth.
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FITTLE focused its strategy in 2022 to broaden its portfolio of financed assets to include growth opportunities independent of Xerox equipment and services, such as the expansion of its dealer relationships to include an increasing number of non-Xerox dealers, leveraging its existing dealer relationships to finance a wider breadth of products and forming relationships with new vendors.
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In January 2024, we announced a significant reorganization of our business, including the adoption of a business unit-led operating model, a greater focus on partner-led distribution and the establishment of a Global Business Services (GBS) organization to enable enterprise-wide efficiencies and productivity gains.
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In 2022, FITTLE’s non-captive (i.e., indirect) originations grew more than 20%. In December, FITTLE entered into a receivables funding solution (the Receivables Funding Agreement) with an affiliate of HPS Investment Partners to sell pools of future lease receivables, primarily covering U.S. direct leases (including leases originated through XBS) through January 2024.
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These changes are expected to both strengthen our core business and position us to capture new, ancillary revenue opportunities over time.
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The Receivables Funding Agreement, which anticipates sales of approximately $600 million in 2023, represents a strategic shift in the Company’s approach to funding FITTLE’s growth, allowing FITTLE to focus on being an asset-light, best-in-class provider and servicer of equipment leases while freeing up Xerox’s operating cash.
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Reinvention is expected to deliver $300 million of annual net adjusted 1 operating income improvement above 2023 levels through 2026, and we expect to achieve more than one-third of that improvement in 2024, due in large part to organizational cost savings associated with the restructuring action that was announced in January 2024.
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We also spun out two businesses incubated at PARC: Mojave, an energy efficient HVAC technology development business, and Novity, an industrial predictive maintenance business. Both companies were spun out as separate, independent businesses, with Xerox continuing to hold a noncontrolling minority share.
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Operating profit improvement will be driven by three concurrent efforts over the next three years: • Operating Model Simplification – Continuous, tech-driven operating efficiencies enabled by GBS. • Geographic and Offering Simplification: – Replace direct to end-customer with partner-led distribution model in current markets with lower levels of profitability; and – Narrowed product and service offering focus to areas where we have strategic differentiation. • Reposition for Growth: – Tactical investments in Digital and IT Services, driving expanded services penetration among existing and new clients. _____________ (1) Refer to the "Non-GAAP Financial Measures" section for an explanation of this non-GAAP financial measure.
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The transactions allow Xerox to preserve free cash flow as Mojave and Novity invest for growth, all while maintaining the opportunity to realize value from their future success.
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Divestitures and Other Strategic Changes We divested certain businesses that are non-core to Print, Digital and IT Services, including PARC, Xerox Research Center of Canada (XRCC), and Elem, our 3D printing business.
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Due to recent adverse changes in macroeconomic and other operating conditions, we have recently taken a more focused approach to the way in which we allocate R&D spending, placing greater emphasis on margin-accretive growth opportunities with near-term returns.
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We expanded our partnership with PEAC Solutions, an affiliate of HPS Investment Partners, allowing FITTLE to focus exclusively on financial solutions that support the direct sales of Xerox equipment and services. We also reduced our presence in certain non-strategic markets with lower levels of profitability, such as paper and certain types of IT hardware.
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In 2022, we took actions to reduce and reallocate R&D spend toward projects and partnerships that augment our existing strengths and opportunities within Print, IT Services and Digital Services. As a result, we paused growth investments at Elem, our 3D printing business, we exited our infrastructure-monitoring joint venture, Eloque, and rationalized spending at PARC’s research facilities.
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Our strategic priorities for 2024 are: Strengthen Core Businesses, Structural Cost Improvements, and Balanced Capital Allocation. Xerox 2023 Annual Report 1 Table of Contents Strengthen Core Businesses: Our Print, Digital and IT Services businesses form the bedrock of our strategic repositioning, from which new capabilities and our client-centric mindset will be leveraged to drive incremental services opportunities and revenue diversification.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeChanges in the market, including inflation, foreign currency exchange movements, and global supply chain disruptions due to the COVID-19 pandemic, may exert pressure on the Xerox 2022 Annual Report 13 Table of Contents margins we obtain for our products and services. Cost-reduction and pricing actions we undertake may not prove sufficient to offset the adverse impacts of such market conditions.
Biggest changeOur success depends on our ability to obtain adequate pricing for our products and services that will provide a reasonable return to our shareholders. Changes in the market, including inflation, interest rates, foreign currency exchange movements, and global supply chain disruptions, may exert pressure on the margins we obtain for our products and services.
Factors that may influence contract termination, non-renewal, or reduction include business downturns, dissatisfaction with our services or products, our retirement or lack of support for our services, our customers selecting alternative technologies, and the cost of our services as compared to our competitors.
Factors that may influence contract termination, non-renewal, or reduction include business downturns, dissatisfaction with our services or products, our retirement or lack of support for our products and services, our customers selecting alternative technologies, and the cost of our services as compared to our competitors.
We engage in restructuring actions, as well as other transformation efforts, in order to reduce our cost structure, manage cash flow, achieve operating efficiencies, and align our business to fit with our plan. In addition, these actions are expected to simplify our organizational structure, upgrade our IT infrastructure and redesign our business processes.
We engage in restructuring actions, as well as other transformation efforts, in order to reduce our cost structure, manage cash flow, achieve operating efficiencies, and align our business to fit with our operating plan. In addition, these actions are expected to simplify our organizational structure, upgrade our IT infrastructure and redesign our business processes.
While we do not believe cybersecurity incidents have resulted in any material impact on our business, operations or financial results or on our ability to service our customers or run our business, past and future incidents resulting in unauthorized access to our facilities or information systems, or those of our suppliers, or accidental loss or disclosure of proprietary or confidential information about us, our clients or our customers could result in, among other things, a total shutdown of our systems that would disrupt our ability to conduct business or pay vendors and employees, violations of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, and a loss of investor confidence in our security measures.
While we do not believe cybersecurity incidents have resulted in any material impact on our business, operations or financial results or our ability to service our customers or run our business, past and future incidents resulting in unauthorized access to our facilities or information systems, or those of our suppliers, or accidental loss or disclosure of proprietary or confidential information about us, our clients or our customers could result in, among other things, a total shutdown of our systems that would disrupt our ability to conduct business or pay vendors and employees, violations of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, and a loss of investor confidence in our security measures.
As a result of the global nature of our operations, our business performance and results of operations may be adversely affected by a number of factors, including: • uncertain global economic and political developments that may impact business conditions and demands; • global trade issues including changes in, and uncertainties with respect to, trade and export regulatory requirements, trade policies and sanctions restrictions, tariffs, and international trade disputes; • evolving positions taken by governmental agencies regarding possible national economic and/or security issues posed by the development, sale, or export of certain products and technologies; • political instability, natural disasters, regional or global health epidemics, social unrest, terrorism, acts of war or other geopolitical turmoil; • variations among, and weakness and/or changes in, local, regional, national or international laws and regulations, including contract, intellectual property, cybersecurity, data privacy, labor, tax, and import/export laws, and the interpretation and application of such laws and regulations; • challenges to effective management of a diverse workforce with different experience levels, languages, cultures, customs, business practices and worker expectations, and differing employment practices and labor issues across multiple countries around the world; • impacts of climate change on our operations and those of our customers and suppliers; • challenges in hiring, retention, and integration of workers in multiple countries around the world; and • the increasing need for a mobile workforce to work in or travel to different regions.
As a result of the global nature of our operations, our business performance and results of operations may be adversely affected by a number of factors, including: • uncertain global economic and political developments that may impact business conditions and demands; • global trade issues including changes in, and uncertainties with respect to, trade and export regulatory requirements, trade policies and sanctions restrictions, tariffs, and international trade disputes; • evolving positions taken by governmental agencies regarding possible national economic and/or security issues posed by the development, sale, or export of certain products and technologies; • political instability, natural disasters, regional or global health epidemics, social unrest, terrorism, acts of war or other geopolitical turmoil; • variations among, and weakness and/or changes in, local, regional, national or international laws and regulations, including contract, intellectual property, data privacy, data protection and cybersecurity, labor, tax, and import/export laws, and the interpretation and application of such laws and regulations; • challenges to effective management of a diverse workforce with different experience levels, languages, cultures, customs, business practices and worker expectations, and differing employment practices and labor issues across multiple countries around the world; • impacts of climate change on our operations and those of our customers and suppliers; • challenges in hiring, retention, and integration of workers in multiple countries around the world; and • the increasing need for a mobile workforce to work in or travel to different regions.
Additional impacts from cybersecurity incidents could include remediation costs to our customers or business partners, such as liability for stolen assets or information, repairs of system damage, and incentives for continued business; increased cybersecurity protection costs, which may include the costs of making organizational changes, deploying additional personnel and security technologies, training employees, and engaging third-party experts and consultants; lost revenue resulting from the unauthorized use of proprietary information or the failure to retain or attract business partners following an incident; increased insurance premiums; and damage to the Company’s competitiveness, stock price, and long-term shareholder value.
Additional impacts from cybersecurity incidents could include remediation costs to our customers or business partners, such as liability for stolen assets or information, repairs of system damage, and incentives for continued business; increased cybersecurity protection costs, which may include the costs of making organizational changes, deploying additional personnel, resources and security technologies, training employees, and engaging third-party experts and consultants; lost revenue resulting from the unauthorized use of proprietary information or the failure to retain or attract business partners following an incident; increased insurance premiums; and damage to the Company’s competitiveness, stock price, and long-term shareholder value.
Damage to our reputation and loss of brand equity may cause customers and consumers to choose to stop purchasing our products and services, purchase products and services from another company or a competitor, or refuse to renew existing contracts, ultimately reducing demand for our products and services and thus have an adverse effect on our future financial results and stock price, as well as require additional resources to rebuild our reputation.
Damage to our reputation and loss of brand equity may cause customers to choose to stop purchasing our products and services, purchase products and services from another company or a competitor, or refuse to renew existing contracts, ultimately reducing demand for our products and services and thus have an adverse effect on our future financial results and stock price, as well as require additional resources to rebuild our reputation.
Other mandatory ESG -related disclosures include the Conflict Minerals Reporting in U.S., Transparency in Supply Chain Act in California, the Modern Slavery Act in the UK, and the Law on Child Labour Due Diligence in The Netherlands. There are also a number of voluntary reporting schemes that provide a framework to report ESG-related information.
Other mandatory ESG-related disclosures include the Conflict Minerals Reporting in the U.S., Transparency in Supply Chain Act in California, the Modern Slavery Act in the UK and Canada, and the Law on Child Labour Due Diligence in The Netherlands. There are also a number of voluntary reporting schemes that provide a framework to report ESG-related information.
Additionally, as a result of our restructuring initiatives, we may experience a loss of continuity, loss of accumulated knowledge and/or inefficiency during transitional periods. Transformation and restructuring may require a significant amount of time and focus from both management and other employees, which may divert attention from operating and growing our business.
As a result of our restructuring initiatives, we may experience a loss of continuity, loss of accumulated knowledge and/or inefficiency during transitional periods. Transformation and restructuring may require a significant amount of time and focus from both management and other employees, which may divert attention from operating and growing our business.
The techniques used to obtain unauthorized access are constantly changing, are becoming increasingly more sophisticated and often are not recognized until after an exploitation of information has occurred. Therefore, we may be unable to anticipate these techniques or implement sufficient preventative measures.
The techniques used to obtain unauthorized access are constantly changing, are becoming increasingly sophisticated and often are not recognized until after an exploitation of information has occurred. Therefore, we may be unable to anticipate these techniques or implement sufficient preventative measures.
Changes to existing laws, introduction of new laws in this area, or failure to comply with existing laws that are applicable to us may subject us to, among other things, additional costs or changes to our business practices, liability for monetary damages, fines and/or criminal prosecution, unfavorable publicity, restrictions on our ability to obtain and process information and allegations by our customers and clients that we have not performed our contractual obligations, any of which may have a material adverse effect on our profitability and cash flow.
Changes to existing laws, introduction of new laws in this area, or failure to comply with existing laws that are applicable to us may subject us to, among other things, additional costs or changes to our business practices, liability for monetary damages, fines and/or criminal prosecution, unfavorable publicity or other reputational harm, restrictions on our ability to obtain and process information and allegations by our customers and clients that we have not performed our contractual obligations, any of which may have a material adverse effect on our profitability and cash flow.
We maintained effective internal control over financial reporting as of December 31, 2022, as further described in Part II “Item 9A—Controls and Procedures.” Our efforts to develop and maintain our internal controls and to remediate any material weaknesses in our controls may not be successful, and we may be unable to maintain adequate controls over our financial processes and reporting in the future, including future compliance with the obligations under Section 404 of the Sarbanes-Oxley Act of 2002.
We maintained effective internal control over financial reporting as of December 31, 2023, as further described in Part II “Item 9A—Controls and Procedures.” Our efforts to develop and maintain our internal controls and to remediate any material weaknesses in our controls may not be successful, and we may be unable to maintain adequate controls over our financial processes and reporting in the future, including future compliance with the obligations under Section 404 of the Sarbanes-Oxley Act of 2002.
For example, on March 21, 2022, the SEC released its Proposed Rules to Enhance and Standardize Climate-Related Disclosures for Investors, which, if adopted as a final rule, would require companies to include certain climate-related disclosures in their registration statements and periodic reports, including disclosure of their direct and indirect greenhouse gas emissions.
Additionally, on March 21, 2022, the SEC released its Proposed Rules to Enhance and Standardize Climate-Related Disclosures for Investors, which, if adopted as a final rule, would require companies to include certain climate-related disclosures in their registration statements and periodic reports, including disclosure of their direct and indirect greenhouse gas emissions.
Non-compliance with the GDPR can trigger steep fines of up to the greater of €20 million or 4% of total worldwide annual revenue.
Non-compliance with the GDPR can trigger steep fines of up to the greater of EUR 20 million or 4% of total worldwide annual revenue.
This practice is intended to mitigate or reduce volatility in the results of our foreign operations but does not completely eliminate it. We do not hedge the translation effect of international revenues and expenses that are denominated in currencies other than the U.S. dollar.
This practice is intended to mitigate or reduce volatility in the results of our foreign operations but does not completely eliminate such volatility. We do not hedge the translation effect of international revenues and expenses that are denominated in currencies other than the U.S. dollar.
Our ability to continue to offer customer financing and be successful in the placement of equipment, software, and IT services with customers seeking to finance those transactions is largely dependent on our ability to obtain funding at a reasonable cost.
Our ability to continue to offer customer financing and be successful in the placement of equipment, software, and IT services with customers seeking to finance those transactions through Xerox is largely dependent on our ability to obtain funding at a reasonable cost.
Shortages of parts, materials, and services needed to manufacture our products, as well as delays in and unpredictability of shipments due to transportation interruptions, have adversely impacted, and may continue to adversely impact, our suppliers’ ability to meet our demand requirements, and in turn our ability to meet our customers’ needs.
Shortages of parts, materials, and services needed to manufacture and service our products, as well as delays and unpredictability of shipments due to transportation interruptions, have adversely impacted, and may continue to adversely impact, our suppliers’ ability to meet our requirements, and in turn our ability to meet our customers’ needs.
If we fail to achieve some or all of the expected benefits of restructuring, it could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.
If we fail to achieve some or all of the expected benefits of our restructuring and transformation plans, it could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.
Although most of our major defined benefit plans have been amended to freeze current benefits and eliminate benefit accruals for future service, several plans remain unfunded (by design) or are under-funded. The projected benefit obligations for these benefit plans at December 31, 2022 exceeded the value of the assets of those plans by approximately $1.1 billion.
Although most of our major defined benefit plans have been amended to freeze current benefits and eliminate benefit accruals for future service, several plans remain unfunded (by design) or are under-funded. The projected benefit obligations for these benefit plans at December 31, 2023 exceeded the value of the assets of those plans by approximately $1.2 billion.
The departure of existing key employees or the failure of potential key employees to accept employment with Xerox, despite our recruiting efforts, could have a material adverse impact on our business, financial condition, and operating results. We may not achieve the expected benefits of our restructuring and transformation plans and such plans may adversely affect our business.
The departure of existing key employees or the failure of potential key employees to accept employment with Xerox, despite our recruiting efforts, could have a material adverse impact on our business, financial condition, and operating results. We may not achieve the expected benefits of our restructuring and transformation plans, including Reinvention, and may adversely affect our business.
Our level of indebtedness could affect our flexibility and operations in several ways, including the following: • a significant portion of our cash flows could be used to service our indebtedness; • the covenants contained in the agreements governing our outstanding indebtedness may limit our ability to borrow additional funds, dispose of assets, pay dividends, and make certain investments; • our debt covenants may also affect our flexibility in planning for, and reacting to, changes in the economy and in our industry; • a high level of debt would increase our vulnerability to general adverse economic and industry conditions; • a high level of debt may place us at a competitive disadvantage compared to our competitors that may be less leveraged and therefore may be able to take advantage of opportunities that our indebtedness would prevent us from pursuing; and • a high level of debt may impair our ability to obtain additional financing in the future for working capital, capital expenditures, debt service requirements, acquisitions, or general corporate or other purposes.
Our level of indebtedness could affect our flexibility and operations in several ways, including the following: • a significant portion of our cash flows could be used to service our indebtedness; • the covenants contained in the agreements governing our outstanding indebtedness may limit our ability to borrow additional funds, dispose of assets, pay dividends, and make certain investments; • our debt covenants may also affect our flexibility in planning for, and reacting to, changes in the economy and in our industry; • a high level of debt would increase our vulnerability to general adverse economic and industry conditions; Xerox 2023 Annual Report 14 Table of Contents • a high level of debt may place us at a competitive disadvantage compared to our competitors that may be less leveraged and therefore may be able to take advantage of opportunities that our indebtedness would prevent us from pursuing; and • a high level of debt may impair our ability to obtain additional financing in the future for working capital, capital expenditures, debt service requirements, acquisitions, or general corporate or other purposes.
A default under certain of our debt agreements may allow our creditors to accelerate the applicable obligations and result in the acceleration of other obligations to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the Credit Facility would permit the lenders thereunder to terminate all commitments to extend credit.
A default under certain of our debt agreements may allow our creditors to accelerate the applicable obligations and result in the acceleration of other obligations to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the ABL and the TLB would permit the lenders thereunder to terminate all commitments to extend credit.
Any failure to develop or maintain effective controls, or difficulties encountered in their implementation, including those related to acquired businesses, or other effective improvement of our internal controls could harm our operating results. Ineffective internal controls could also cause investors to lose confidence in our reported financial information. Xerox 2022 Annual Report 24 Table of Contents Item 1B.
Any failure to develop or maintain effective controls, or difficulties encountered in their implementation, including those related to acquired businesses, or other effective improvement of our internal controls could harm our operating results. Ineffective internal controls could also cause investors to lose confidence in our reported financial information. Xerox 2023 Annual Report 22 Table of Contents Item 1B.
The Credit Facility also imposes significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our best interest, including restrictions on our ability to: pay dividends, make other distributions in respect of, or repurchase or redeem capital stock; incur additional indebtedness and guarantee indebtedness; prepay, redeem, or repurchase certain debt; make loans, investments, and other restricted payments; sell or otherwise dispose of assets; incur liens; enter into agreements restricting our subsidiaries’ ability to pay dividends; consolidate, merge, or sell all or substantially all of our assets; make strategic acquisitions or investments; or enter into joint ventures.
The ABL and the TLB also impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our best interest, including restrictions on our ability to: pay dividends, make other distributions in respect of, or repurchase or redeem capital stock; incur additional indebtedness and guarantee indebtedness; prepay, redeem, or repurchase certain debt; make loans, investments, and other restricted payments; sell or otherwise dispose of assets; incur liens; enter into agreements restricting our subsidiaries’ ability to pay dividends; consolidate, merge, or sell all or substantially all of our assets; make strategic acquisitions or investments; or enter into joint ventures.
Our ability to sustain and improve profit margins is dependent on a number of factors, including our ability to continue to improve the cost efficiency of our operations, our ability to sustain pricing increases across our portfolio of products and services in a competitive environment, the additional costs imposed by ongoing supply chain disruptions, the proportion of high-end, mid and entry-level equipment sales, and IT services equipment (product and services mix), the trend in our post-sale revenue growth and our ability to successfully complete information technology initiatives.
Our ability to sustain and improve profit margins is dependent on a number of factors, including geography mix, our ability to continue to improve the cost efficiency of our operations, our ability to sustain pricing increases across our portfolio of products and services in a competitive and inflationary environment, our success in diversifying our suite of products and services, the additional costs imposed by supply chain disruptions, the proportion of high-end, mid and entry-level equipment sales, and IT services equipment (product and services mix), the trend in our post-sale revenue growth and our ability to successfully complete information technology initiatives.
Depending on the types, applications, forms and uses of chemical substances in various products, REACH and similar regulatory programs in other jurisdictions could lead to restrictions and/or bans on certain chemical usage. In the United States, the Toxics Substances Control Act (TSCA) was revised in 2016, which authorizes the U.S.
Depending on the types, applications, forms and uses of chemical substances in various products, REACH and similar regulatory programs in other jurisdictions could lead to restrictions and/or bans on certain chemical usage. In the United States, the Toxics Substances Control Act (TSCA) authorizes the U.S.
Changes in government or political developments, including budget deficits, shortfalls or uncertainties, government spending reductions (e.g., Congressional sequestration of funds under the Budget Control Act of 2011), government shutdowns, or other debt or funding constraints, could result in lower governmental sales and in our projects being reduced in price or scope or terminated altogether, which also could limit our recovery of incurred costs, reimbursable expenses and profits on work completed prior to the termination.
Changes in government or political developments, including budget deficits, Xerox 2023 Annual Report 13 Table of Contents shortfalls or uncertainties, government spending reductions (e.g., Congressional sequestration of funds under the Budget Control Act of 2011), government shutdowns, or other debt or funding constraints, could result in lower governmental sales and in our projects being reduced in price or scope or terminated altogether, which also could limit our recovery of incurred costs, reimbursable expenses and profits on work completed prior to the termination.
Our business, results of operations and financial condition may be negatively impacted by a potential increase in the cost of our products as a result of new or incremental trade protection measures, such as increased import tariffs or import or export restrictions; restrictions put in place as a result of the COVID-19 pandemic; or, the revocation or material modification of trade agreements.
Our business, results of operations and financial condition may be negatively impacted by a potential increase in the cost of our products as a result of new or incremental trade protection measures, such as increased import tariffs or import or export restrictions; or, the revocation or material modification of trade agreements.
Our ability to fund our customer financing activities at economically competitive levels depends on our ability to borrow and the cost of borrowing in the credit markets. The long-term viability and profitability of our financing business is dependent, in part, on our ability to borrow and the cost of borrowing in the credit markets.
Our ability to fund our customer financing activities at economically competitive levels depends on our ability to borrow and the cost of borrowing in the credit markets. The long-term viability and profitability of our financing business is dependent, in part, on our ability to borrow against or sell leases and the cost of borrowing in the credit markets.
The effect of inflation on interest rates could increase our financing costs over time, either through near-term borrowings on our Credit Facility, refinancing of our existing borrowings, or the issuance of new debt. In addition to our debt service obligations, our operations require substantial expenditures on a continuing basis.
The effect of inflation on interest rates could increase our financing costs over time, either through near-term borrowings on our ABL and TLB, refinancing of our existing borrowings, or the issuance of new debt In addition to our debt service obligations, our operations require substantial expenditures on a continuing basis.
Failure to comply with material provisions or covenants in the Credit Facility or our other debt agreements, including our secured financing agreements in connection with our FITTLE securitization transactions and the indentures governing our outstanding notes, could have a material adverse effect on our liquidity, results of operations, and financial condition.
Failure to comply with material provisions or covenants in the ABL and the TLB or our other debt agreements, including our secured financing agreements in connection with our securitization transactions and the indentures governing our outstanding notes, could have a material adverse effect on our liquidity, results of operations, and financial condition.
Due to the international scope of our operations, we are subject to a complex system of commercial and trade regulations around the world. With respect to the war in Ukraine, in the first quarter 2022, we halted shipments to Russia and Belarus when sanctions were imposed.
Due to the international scope of our operations, we are subject to a complex system of commercial and trade regulations around the world. With respect to the war in Ukraine, in the first quarter 2022, we halted shipments to Russia and Belarus when sanctions were imposed, and we completed the sale of all Russian operations in 2023.
In addition, in the normal course of business and exacerbated by supply chain disruptions resulting from the COVID-19 pandemic, our partners may experience labor shortages and/or disruptions, transportation cost increases, materials cost increases, and/or manufacturing cost increases that could lead to higher prices for our products and/or lower reliability of our products.
In addition, in the normal course of business and exacerbated by supply chain disruptions, our partners may experience labor shortages and/or disruptions, transportation cost increases, materials cost increases, and/or manufacturing cost increases that could lead to higher prices for our products and/or lower reliability of our products.
Threat actors regularly attempt and, from time to time, have been successful in breaching our security systems, to gain access to our information and infrastructure through various techniques, including phishing, ransomware and other targeted attacks.
Threat actors regularly attempt and, from time to time, have been successful in breaching our security controls, to gain access to our information and infrastructure through various techniques, including phishing, ransomware, account compromise, and other targeted attacks.
The implementation of the CEAP is expected to impact the materials used, including chemicals and plastics, in products that are placed in the EU market. Environmentally driven procurement requirements also voluntarily adopted by customers in the marketplace (e.g., U.S.
The implementation of the CEAP is expected to impact how companies prove environmental claims and the materials used, including chemicals and plastics, in products that are placed in the EU market. Environmentally driven procurement requirements also voluntarily adopted by customers in the marketplace (e.g., U.S.
We believe our liquidity (including operating and other cash flows that we expect to generate) will be sufficient to meet operating requirements as they Xerox 2022 Annual Report 16 Table of Contents arise; however, our ability to maintain sufficient liquidity going forward will be subject to the general liquidity of and on-going changes in the credit markets as well as general economic, financial, competitive, legislative, regulatory, and other market factors that are beyond our control.
We believe our liquidity (including operating and other cash flows that we expect to generate) will be sufficient to meet operating requirements as they arise; however, our ability to maintain sufficient liquidity going forward will be subject to the general liquidity of and on-going changes in the credit markets as well as general economic, financial, competitive, legislative, regulatory, and other market factors that are beyond our control.
Continuing to maintain compliance with the requirements of the GDPR and other similar foreign laws, including monitoring and adjusting to rulings and interpretations that affect our approach to compliance, requires significant time, resources and expense, as will the effort to monitor whether additional changes to our business practices and our backend configuration are needed, all of which may increase operating costs, or limit our ability to operate or expand our business.
Continuing to maintain compliance with the requirements of the GDPR and other similar foreign laws, including monitoring and adjusting to rulings and interpretations by supervisory authorities and/or courts of competent jurisdiction, may affect our approach to compliance and requires significant ongoing time, resources and expense, as will the effort to monitor whether additional changes to our business practices and our backend configuration are needed, all of which may increase operating costs, or limit our ability to operate or expand our business.
Our future revenues, costs and results of operations could be significantly affected by changes in foreign currency exchange rates - particularly the Japanese yen, the euro, and the British pound. We use currency derivative contracts to hedge foreign currency-denominated assets, liabilities, and anticipated transactions.
We are subject to foreign currency exchange and interest rate volatility in our business. Our future revenues, costs and results of operations could be significantly affected by changes in foreign currency exchange rates - particularly the euro, the British pound, and the Japanese yen. We use currency derivative contracts to hedge foreign currency-denominated assets, liabilities, and anticipated transactions.
Further, the negative publicity that arises from findings in such audits or investigations could have an adverse effect on our Xerox 2022 Annual Report 15 Table of Contents reputation and reduce our ability to compete for new contracts and could also have a material adverse effect on our business, financial condition, results of operations and cash flow.
Further, the negative publicity that arises from findings in such audits or investigations could have an adverse effect on our reputation and reduce our ability to compete for new contracts and could also have a material adverse effect on our business, financial condition, results of operations and cash flow.
We are or may become subject to similar laws related to data protection in other jurisdictions, such as the Personal Information Protection and Electronic Documents Act (PIPEDA) in Canada, and the General Data Protection Law (LGDP) in Brazil.
Furthermore, we are also subject to similar laws related to data protection in other jurisdictions, such as the Personal Information Protection and Electronic Documents Act (PIPEDA) in Canada, and the General Data Protection Law (LGDP) in Brazil.
If any of these factors adversely materialize or if we are unable to achieve and maintain productivity improvements through design efficiency, supplier and manufacturing cost improvements and information technology initiatives, our ability to offset labor cost inflation, potential materials cost increases and competitive price pressures would be impaired, all of which could materially adversely affect our results of operations and financial condition.
If any of these factors adversely materialize or if we are unable to achieve and maintain productivity or efficiency improvements, our ability to offset labor cost inflation, potential materials cost increases and competitive price pressures would be impaired, all of which could adversely affect our results of operations and financial condition.
Laws, regulatory actions, international agreements, and other initiatives to address concerns about climate change and greenhouse gas emissions could negatively impact our business, results of operations, and financial condition, including, among other things, by limiting the availability of our products, increasing the cost to obtain or sell those products, and increasing our reporting and disclosure expenses.
Laws, regulatory actions, international agreements, such as the Paris Agreement, and other initiatives to address concerns about climate change and greenhouse gas emissions could negatively impact our business, results of operations, and financial condition, including, among other things, by limiting the availability of our products, increasing the cost to obtain or sell those products, and increasing our reporting and disclosure expenses, or imposing taxes on us or our customers.
In the European Union, we are subject to “REACH” Regulation (Registration, Evaluation, Authorization and Restriction of Chemicals), a broad initiative that Xerox 2022 Annual Report 22 Table of Contents requires parties throughout the supply chain to register, assess and disclose information regarding many chemicals in their products.
In the European Union, we are subject to “REACH” Regulation (Registration, Evaluation, Authorization and Restriction of Chemicals), a broad initiative that requires parties throughout the supply chain to register, assess and disclose information regarding many chemicals in their products.
The CCPA establishes a new privacy framework for covered businesses by, among other requirements, establishing new data privacy rights for consumers in California (including rights to deletion of and access to personal information), imposing special rules on the collection of consumer data from minors, creating new notice obligations and new limits on the “sale” of personal information, and creating a new and potentially severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches.
The CCPA, which went into effect on January 1, 2020, instituted a new privacy framework for covered businesses by, among other requirements, establishing certain rights for consumers in California to protect their personal information (including rights of deletion of and access to personal information), imposing special rules on the collection of consumer data from minors, creating new notice obligations and new limits on the “sale” of personal information, and creating a new and potentially severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches.
Various countries and jurisdictions have adopted or are expected to adopt requirements clarifying manufacturer roles and responsibilities related to the recovery of products that were placed on the market and remediation of by-products of the manufacturing process.
Xerox 2023 Annual Report 21 Table of Contents Various countries and jurisdictions have adopted or are expected to adopt requirements clarifying manufacturer roles and responsibilities related to the recovery of products that were placed on the market and remediation of by-products of the manufacturing process.
Our future success is largely dependent Xerox 2022 Annual Report 12 Table of Contents upon our ability to compete in the markets we currently serve, to promptly and effectively react to changing technologies and customer expectations, and to expand into additional market segments. To remain competitive, we must develop new services, applications and products and periodically enhance our existing offerings.
Our future success is largely dependent upon our ability to compete in the markets we currently serve, to promptly and effectively react to changing technologies and customer expectations, and to expand into additional market segments. To remain competitive, we must develop or acquire new services, applications and products and periodically enhance our existing offerings.
In addition, revolving borrowings under our senior secured revolving credit facility bear, and potentially other credit facilities we or our subsidiaries may enter into in the future will bear, interest at variable rates. Increases in market interest rates could lead to higher debt service requirements associated with our variable‑rate borrowings, if any.
In addition, revolving borrowings under our ABL (as defined below) and the term loans under our TLB (as defined below), and potentially other credit facilities we or our subsidiaries may enter into in the future, will bear interest at variable rates. Increases in market interest rates could lead to higher debt service requirements associated with our variable‑rate borrowings, if any.
Regulatory Risk Factors The international nature of our business subjects us to a number of risks, including foreign exchange and interest rate risk and unfavorable political, regulatory, and tax conditions in foreign countries.
Xerox 2023 Annual Report 17 Table of Contents Regulatory Risk Factors The international nature of our business subjects us to a number of risks, including foreign exchange and interest rate risk and unfavorable political, regulatory, and tax conditions in foreign countries.
This ability and cost, in turn, is dependent on (i) our credit rating, which is currently non-investment grade according to credit rating agency assessments that are subject to periodic reviews and can change following a review and (ii) credit market volatility, which has increased as a result of the COVID-19 pandemic, the war in Ukraine, and other global macroeconomic developments.
This ability and cost, in turn, is dependent on (i) our credit rating, which is currently non-investment grade according to credit rating agency assessments that are subject to periodic reviews and can change following a review and (ii) credit market volatility, the war in Ukraine, conflicts in the Middle East, and other global macroeconomic developments.
Weak economic conditions, including the negative impacts from the COVID-19 pandemic, and related under-performance of asset markets could also lead to increases in our funding requirements. Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services, and brand.
Weak macroeconomic conditions and related under-performance of asset markets could also lead to increases in our funding requirements. Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services, and brand.
The laws of certain countries may not protect our proprietary rights to the same extent as the laws of the United States and we may be unable to protect our proprietary technology adequately against unauthorized third-party copying or use, which could adversely affect our competitive position. In addition, some of our products rely on technologies developed by third parties.
The laws of certain countries may not protect our proprietary rights to the same extent as the laws of the United States and we may be unable to protect our proprietary technology adequately against unauthorized third-party copying or use, which could adversely affect our competitive position.
Any action against our Company relating to our intellectual property rights, regardless of the outcome, could generate substantial costs and require significant involvement from our management team, which could adversely impact our results of operations and financial condition. Negative publicity generated from intellectual property disputes could also harm our reputation and brand image.
Any action against our Company relating to our intellectual property rights, regardless of the outcome, could generate substantial costs and require significant involvement from our management team, which could adversely impact our results of operations and financial condition.
For example, the General Data Protection Regulation (GDPR) that came into force in the European Union in May 2018 enhances data protection obligations for controllers of such data and for service providers processing the data. It also provides certain rights, such as access and deletion, to the individuals about whom the personal data relates.
For example, the General Data Protection Regulation (GDPR) enhances data protection obligations for controllers of such data and for service providers processing the data. It also provides certain rights, such as access and deletion, to the individuals about whom the personal data relates.
The U.S. government has and could in the future impose trade barriers including tariffs, quotas, duties, or other restrictions on foreign imports, or restrictions Xerox 2022 Annual Report 21 Table of Contents on U.S. exports.
The U.S. government has and could in the future impose trade barriers including tariffs, quotas, duties, or other restrictions on foreign imports, or restrictions on U.S. exports.
In addition, our sales strategy requires us to simplify our coverage model and expand into adjacent markets with new products, services, and technology such as AI Workflow Assistants for Knowledge Workers, IT Services, and other workplace productivity solutions.
In addition, our sales strategy requires us to simplify our coverage model and expand into adjacent markets with new products, services, and technology such as Intelligent Document Processing, managed IT Services, and other workplace productivity solutions.
Inability, or a perception of inability, to achieve progress toward our environmental goals could adversely impact our business or damage our reputation. Given our commitment to ESG, we actively engage external and internal stakeholders to manage these issues and have established and publicly announced certain goals, commitments, and targets which we may refine or even expand further in the future.
Given our commitment to ESG, we actively engage external and internal stakeholders to manage these issues and have established and publicly announced certain goals, commitments, and targets which we may refine or even expand further in the future.
Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition, or results of operations.
Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition, or results of operations. Company-Specific Risk Factors Our business, results of operations, cash flow, and financial condition are affected by global macroeconomic conditions.
Our business and financial performance could suffer if we do not manage the risks associated with our services businesses properly. The success of our services business (such as our managed print services, digital services, and other workforce and IT Services solutions) depends to a significant degree on attracting, retaining, and maintaining or increasing the level of revenues from our customers.
The success of our services business (such as our managed print services, digital services, and other workforce and IT Services solutions) depends to a significant degree on attracting, retaining, and maintaining or increasing the level of revenues from our customers.
In addition, in our services business, we may partner with other parties, including software and hardware vendors, to provide the complex solutions required by our customers. Therefore, our ability to deliver the solutions and provide the services required by our customers is dependent on both our and our partners' ability to meet our customers' requirements and schedules.
In addition, in our services business, we may partner with other parties, including software and hardware vendors, to provide the complex solutions required by our customers.
As of December 31, 2022, our total debt was $3.7 billion, which primarily consisted of $2.7 billion of Senior Unsecured Debt and $1.0 billion of Secured Borrowings. In the future, we may incur additional indebtedness for organic or inorganic growth or otherwise.
Our level of indebtedness could adversely affect our financial condition and reduce our financial flexibility. As of December 31, 2023, our total debt was $3.3 billion, which primarily consisted of $2.4 billion of Senior and Unsecured Debt and approximately $900 million of Secured Borrowings. In the future, we may incur additional indebtedness for organic or inorganic growth or otherwise.
We may not be able to obtain or to continue to obtain licenses and technologies from these third parties at all or on reasonable terms, or such third parties may demand cross-licenses to our intellectual property.
In addition, some of our products rely on Xerox 2023 Annual Report 16 Table of Contents technologies developed by third parties. We may not be able to obtain or to continue to obtain licenses and technologies from these third parties at all or on reasonable terms, or such third parties may demand cross-licenses to our intellectual property.
If our credit rating changes, the credit market becomes more volatile, or other events occur that reduce the demand for, or our ability to provide at attractive rates, customer financing, it may adversely impact our business and results of operations. Our level of indebtedness could adversely affect our financial condition and reduce our financial flexibility.
If our credit rating changes, the credit market becomes more volatile, or other events occur that reduce the demand for, or our ability to provide at attractive rates on, customer financing, it may adversely impact our finance business and results of operations, however, there are alternative sources of funding available to the majority of our customers, which could reduce the overall impact to the broader Xerox business.
We also expect to extend our IT and digital services presence in the mid- market 1 through organic and inorganic investments. Our future success depends on our ability to make the investments and commit the necessary resources to execute on our business strategy in this highly competitive market.
Our future success depends on our ability to make the investments and commit the necessary resources to execute on our business strategy in this highly competitive market.
In addition, substantial supply chain disruption caused by the COVID-19 pandemic has increased the cost of materials and components required to manufacture our products, transportation of components and products, and labor associated with all steps of the supply chain.
In addition, supply chain disruptions and interest rate increases have increased the cost of materials and components required to manufacture our products, transportation of components and products, and labor associated with all steps of the supply chain.
Our operations and our products are subject to environmental regulations in each of the jurisdictions in which we conduct our business and sell our products. Various countries and jurisdictions have adopted, or are expected to adopt, restrictions on the types and amounts of chemicals that may be present in electronic equipment or other items that we use or sell.
Various countries and jurisdictions have adopted, or are expected to adopt, restrictions on the types and amounts of chemicals that may be present in electronic equipment or other items that we use or sell. Ongoing research and review of chemicals used in our products could lead to further restriction of common chemicals in office equipment and supplies.
Despite such efforts, we may be subject to breaches of our security systems resulting in unauthorized access to our facilities or information systems and the information we are trying to protect. Moreover, the risk of such attacks includes attempted breaches not only of our systems, but also those of our customers, clients and suppliers.
Despite such efforts, our safeguards may fail or we may be subject to breaches of our security resulting in unauthorized access to our facilities or information systems and the information we are trying to protect.
Tariffs or other restrictions on foreign imports could negatively impact our financial performance.
Xerox 2023 Annual Report 20 Table of Contents Tariffs or other restrictions on foreign imports could negatively impact our financial performance.
Though the ultimate impact of these and similar initiatives is not yet fully known, compliance with such proposed or newly adopted disclosure initiatives may incur significant costs.
Though the ultimate impact of these and similar initiatives is not yet fully known, compliance with such proposed or newly adopted disclosure initiatives may incur significant costs. Our operations and our products are subject to environmental regulations in each of the jurisdictions in which we conduct our business and sell our products.
(federal and state) and foreign governments have enacted, and are considering further enacting, legislation related to privacy Xerox 2022 Annual Report 20 Table of Contents and data protection and we expect to see an increase in, or changes to, legislation and regulation in this area.
The global regulatory landscape regarding the protection of personal information is evolving, and U.S. (federal and state) and foreign governments have enacted, and are considering further enacting, legislation and regulations related to privacy and data protection, we expect to see an increase in, or changes to, legislation and regulation in this area.
We have programs, processes, and technologies in place to attempt to prevent, detect, contain, respond to, and mitigate security-related threats and potential incidents. We undertake ongoing improvements to our systems, connected devices, and information-sharing products in order to minimize vulnerabilities, in accordance with industry and regulatory standards.
We undertake ongoing improvements to the security of our systems, connected devices, and information-sharing products in order to minimize potential vulnerabilities, in accordance with industry and regulatory standards.
Xerox is undergoing significant changes in our business model and, accordingly, current and prospective employees may experience uncertainty about their future and may have other opportunities available to them given the Xerox 2022 Annual Report 14 Table of Contents competitive labor market.
Xerox is undergoing significant changes in our business model and, accordingly, current and prospective employees may experience uncertainty about their future and may have other opportunities available to them given the competitive labor market. That uncertainty was further increased by Xerox's recently announced a 15 percent targeted workforce reduction.
Further, we routinely apply for patents to protect innovative ideas in our technology, but we may not always be successful in obtaining patent grants from these applications. We also pursue registration of copyrights, trademarks, and domain names in numerous jurisdictions, but doing so may not always be successful or cost-effective.
We also pursue registration of copyrights, trademarks, and domain names in numerous jurisdictions, but doing so may not always be successful or cost-effective.
Our credit rating or macroeconomic conditions, including the interest rate environment, could impact our ability to continue to enter into receivables financing transactions at attractive prices or at all.
If any of our creditors accelerate the repayment of applicable indebtedness, we and our subsidiaries may not have sufficient assets to repay that indebtedness. Our credit rating or macroeconomic conditions, including the interest rate environment, could impact our ability to continue to enter into receivables financing transactions at attractive prices or at all.
Prolonged or more severe economic weakness and uncertainty, including an economic slowdown or recession, uncertainty in markets throughout the world, and other adverse economic conditions, may among other things result in decreased demand for our products and services, logistical and inventory-related challenges, and increased difficulty with financial forecasting.
Prolonged or more severe economic weakness and uncertainty, including economic slowdowns or recessions, global market volatility, rising inflation and interest rates, employment, and other adverse economic conditions, may result in decreased demand for our products and services, logistical and supply-related challenges, and increased difficulty with financial forecasting.
We are subject to laws of the United States and foreign jurisdictions relating to individually identifiable information, and failure to comply with those laws could subject us to legal actions and negatively impact our operations. We receive, process, transmit and store information relating to identifiable individuals, both in our role as a technology provider and as an employer.
We receive, process, transmit and store information relating to identifiable individuals, both in our role as a technology provider and as an employer. As a result, we are subject to numerous privacy and data protection laws and regulations in the United States (both federal and state) and foreign jurisdictions.
Violations of these Xerox 2022 Annual Report 23 Table of Contents laws may result in severe criminal or civil sanctions, could disrupt our business, and result in an adverse effect on our reputation, business and results of operations or financial condition.
The activities of these entities may not comply with U.S. or foreign laws or business practices or our Code of Business Conduct. Violations of these laws may result in severe criminal or civil sanctions, could disrupt our business, and result in an adverse effect on our reputation, business and results of operations or financial condition.
Our business depends on its timely supply of equipment, services, and related products to meet the technical and volume requirements of our customers.
The global supply chain has experienced and may continue to experience pronounced disruptions impacting service providers, logistics, and the flow, cost, and availability of supplies and products. Our business depends on its timely supply of equipment, services, and related products to meet the technical and volume requirements of our customers.
Our reputation also may be harmed by the perceptions that our stakeholders have about our action or inaction with regards to ESG-related issues.
Increased focus and activism on ESG topics may hinder our access to capital, as investors may reconsider their capital investment as a result of their assessment of our ESG practices. Our reputation also may be harmed by the perceptions that our stakeholders have about our action or inaction with regards to ESG-related issues.
Taxation at the country, state, provincial or municipal level Xerox 2022 Annual Report 19 Table of Contents also may be subject to review and potential override by regional, federal, national, or other government authorities.
Taxation at the country, state, provincial or municipal level also may be subject to review and potential override by regional, federal, national, or other government authorities. In addition, we continue to be subject to examination of our income tax returns by the United States Internal Revenue Service and other tax authorities around the world.
In addition, we are subject to the continuous examination of our income tax returns by the United States Internal Revenue Service and other tax authorities around the world. We currently are, and expect to continue to be, subject to numerous federal, state, local and foreign taxes relating to income, sales & use, value-added (VAT), and other tax liabilities.
We currently are, and expect to Xerox 2023 Annual Report 18 Table of Contents continue to be, subject to numerous federal, state, local and foreign taxes relating to income, sales & use, value-added (VAT), and other tax liabilities.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties We own several manufacturing, engineering and research facilities, and lease other facilities. Our principal manufacturing and engineering facilities are located in New York, California, Oklahoma, Oregon, Canada, Ireland, and the Netherlands. Our principal research facilities are located in California, New York, and Canada. Our Corporate Headquarters is a leased facility located in Norwalk, Connecticut.
Biggest changeItem 2. Properties We own or lease several manufacturing, engineering and research facilities. Our principal owned manufacturing and engineering facilities are located in New York, Oklahoma, Oregon and Ireland, and our principal owned research facility is located in New York. We also lease manufacturing facilities in the Netherlands and Ontario, Canada.
Our properties are primarily managed by and in support of the Print and Other segment. The Financing (FITTLE) segment does share in the use of certain facilities for which they are allocated occupancy costs. We believe that our current facilities are suitable and adequate for our current businesses.
Our properties are primarily managed by, and are in support of, the Print and Other segment. The FITTLE segment does share in the use of certain facilities for which they are allocated occupancy costs. We believe that our current facilities are suitable and adequate for our current businesses.
We occupied approximately 8.9 million square feet, 1.7 million square feet were surplus, and approximately 264 thousand square feet was sublet to third parties. It is our opinion that our properties have been well maintained, are in sound operating condition and contain all the necessary equipment and facilities to perform their functions.
We occupied approximately 8.6 million square feet, 1.6 million square feet were surplus, and approximately 91 thousand square feet was sublet to third parties. It is our opinion that our properties have been well maintained, are in sound operating condition and contain all the necessary equipment and facilities to perform their functions.
The size of our property portfolio at December 31, 2022 was approximately 10.9 million square feet, which was comprised of 308 leased facilities and 14 owned properties with 63 buildings (of which 45 are located on our Webster, New York campus).
The size of our property portfolio at December 31, 2023 was approximately 10.3 million square feet, which was comprised of 273 leased facilities and 11 owned properties with 59 buildings (of which 45 are located on our Webster, New York campus).
In 2022, we owned or leased facilities globally which include general offices, sales offices, service locations, data centers, call centers, manufacturing facilities, warehouses and distribution centers.
Our Corporate Headquarters is a leased facility located in Norwalk, Connecticut. In 2023, we owned or leased facilities globally which include general offices, sales offices, service locations, data centers, call centers, manufacturing facilities, warehouses and distribution centers.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings Refer to the information set forth under Note 20 - Contingencies and Litigation in the Consolidated Financial Statements - Litigation Against the Company.
Biggest changeItem 3. Legal Proceedings Refer to the information set forth under Note 20 - Contingencies and Litigation in the Consolidated Financial Statements - Litigation Matters.
Item 4. Mine Safety Disclosures Not applicable. Xerox 2022 Annual Report 25 Table of Contents Part II
Item 4. Mine Safety Disclosures Not applicable. Xerox 2023 Annual Report 24 Table of Contents Part II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 25 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 26 Item 6. [Reserved] 27 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 28 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 67 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 24 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 25 Item 6. [Reserved] 26 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 27 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 62 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePerformance Graph Total Return to Shareholders Year Ended December 31, (Includes reinvestment of dividends) 2017 2018 2019 2020 2021 2022 Xerox Holdings Corporation $ 100.00 $ 70.61 $ 135.76 $ 90.13 $ 91.92 $ 63.13 S&P 500 Index 100.00 95.62 125.72 148.85 191.58 156.88 S&P 500 Information Technology Index 100.00 99.71 149.86 215.63 290.08 208.30 _____________ Source: Standard & Poor's Investment Services Notes: Graph assumes $100 invested on December 31, 2017 in Xerox Holdings, the S&P 500 Index and the S&P 500 Information Technology Index, respectively, and assumes dividends are reinvested.
Biggest changePerformance Graph (1)(2) Total Return to Shareholders Year Ended December 31, 2018 2019 2020 2021 2022 2023 Xerox Holdings Corporation $ 100.00 $ 192.27 $ 127.65 $ 130.17 $ 89.40 $ 119.63 S&P 500 Index 100.00 131.49 155.68 200.37 164.08 207.21 S&P 500 Information Technology Index 100.00 150.29 216.25 290.92 208.90 329.73 S&P 600 Index 100.00 122.78 136.64 173.29 145.39 168.73 S&P 600 Information Technology Index 100.00 139.59 178.41 226.31 175.70 212.50 _____________ Source: Standard & Poor's Investment Services (1) Graph assumes $100 invested on December 31, 2018 in Xerox Holdings, the S&P 500 Index, the S&P 500 Information Technology Index, S&P 600 Index and the S&P 600 Information Technology Index, respectively, and assumes dividends are reinvested.
Issuer Purchases of Equity Securities During the Quarter Ended December 31, 2022 There were no repurchases of Xerox Holdings Corporation's Common Stock for the quarter ended December 31, 2022 pursuant to share repurchase programs authorized by Xerox Holdings' Board of Directors.
Issuer Purchases of Equity Securities During the Quarter Ended December 31, 2023 There were no repurchases of Xerox Holdings Corporation's Common Stock for the quarter ended December 31, 2023 pursuant to share repurchase programs authorized by Xerox Holdings' Board of Directors.
Xerox 2022 Annual Report 26 Table of Contents Sales Of Unregistered Securities During the Quarter Ended December 31, 2022 There were no unregistered sales of securities for the quarter ended December 31, 2022.
Xerox 2023 Annual Report 25 Table of Contents Sales Of Unregistered Securities During the Quarter Ended December 31, 2023 There were no unregistered sales of securities for the quarter ended December 31, 2023.
There is no established public trading market for Xerox Corporation's common stock, as all of the outstanding Xerox common stock is held solely by Xerox Holdings. Common Shareholders of Record As of December 31, 2022, Xerox Holdings Corporation had approximately 19,952 shareholders of record.
There is no established public trading market for Xerox Corporation's common stock, as all of the outstanding Xerox common stock is held solely by Xerox Holdings. Common Shareholders of Record As of December 31, 2023, Xerox Holdings Corporation had approximately 18,741 shareholders of record.
Repurchases Related to Stock Compensation Programs (1) : 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 Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs October 1 through 31 15,712 $ 13.12 n/a n/a November 1 through 30 — — n/a n/a December 1 through 31 110,325 15.75 n/a n/a Total 126,037 _____________ (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.
Repurchases Related to Stock Compensation Programs (1) : 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 Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs October 1 through 31 14,201 $ 15.56 n/a n/a November 1 through 30 27,411 13.77 n/a n/a December 1 through 31 — — n/a n/a Total 41,612 _____________ (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.
Removed
Of the $500 million of share repurchase authority previously granted by the board, exclusive of fees and expenses, approximately $500 million has been used through December 31, 2022.
Added
(2) Beginning with the 2023 Form 10-K, the Company changed its benchmark indexes to the S&P 600 Index and the S&P 600 Information Technology Index, from the S&P 500 Index and the S&P 500 Information Technology Index, as the Company became part of the S&P 600 Index during the year ended December 31, 2023.
Added
The Company believes that the S&P 600 Indexes are more representative of the Company's market capitalization and peer group. Data for the S&P 500 Indexes are provided for comparison purposes only as we transition to use of the S&P 600 Indexes.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeXerox 2022 Annual Report 39 Table of Contents Revenue Results Summary Total Revenue Revenue for the three years ended December 31, 2022, 2021 and 2020 was as follows: Revenue % Change CC % Change % of Total Revenue (in millions) 2022 2021 2020 2022 2021 2022 2021 2022 2021 2020 Equipment sales $ 1,624 $ 1,581 $ 1,564 2.7 % 1.1 % 6.6 % (0.4) % 23 % 22 % 22 % Post sale revenue 5,483 5,457 5,458 0.5 % — % 4.2 % (1.7) % 77 % 78 % 78 % Total Revenue $ 7,107 $ 7,038 $ 7,022 1.0 % 0.2 % 4.8 % (1.4) % 100 % 100 % 100 % Reconciliation to Consolidated Statements of (Loss) Income: Sales $ 2,800 $ 2,582 $ 2,449 8.4 % 5.4 % 12.2 % 3.9 % Less: Supplies, paper and other sales (1,176) (1,001) (885) 17.5 % 13.1 % 21.0 % 11.5 % Equipment sales $ 1,624 $ 1,581 $ 1,564 2.7 % 1.1 % 6.6 % (0.4) % Services, maintenance and rentals $ 4,100 $ 4,235 $ 4,347 (3.2) % (2.6) % 0.6 % (4.3) % Add: Supplies, paper and other sales 1,176 1,001 885 17.5 % 13.1 % 21.0 % 11.5 % Add: Financing 207 221 226 (6.3) % (2.2) % (2.9) % (4.1) % Post sale revenue $ 5,483 $ 5,457 $ 5,458 0.5 % — % 4.2 % (1.7) % Segments Print and Other $ 6,667 $ 6,548 $ 6,489 1.8 % 0.9 % 94 % 93 % 92 % Financing (FITTLE) 610 695 744 (12.2) % (6.6) % 8 % 10 % 11 % Intersegment elimination (170) (205) (211) (17.1) % (2.8) % (2) % (3) % (3) % Total Revenue (1) $ 7,107 $ 7,038 $ 7,022 1.0 % 0.2 % 100 % 100 % 100 % Americas $ 4,638 $ 4,432 $ 4,589 4.6 % (3.4) % 5.1 % (4.1) % 65 % 63 % 65 % EMEA 2,291 2,434 2,246 (5.9) % 8.4 % 4.1 % 4.6 % 32 % 35 % 32 % Other 178 172 187 3.5 % (8.0) % 3.5 % (8.0) % 3 % 2 % 3 % Total Revenue (2) $ 7,107 $ 7,038 $ 7,022 1.0 % 0.2 % 4.8 % (1.4) % 100 % 100 % 100 % _____________ CC - See "Currency Impact" section for description of constant currency.
Biggest changeXerox 2023 Annual Report 36 Table of Contents Revenue Results Summary Total Revenue Revenue for the three years ended December 31, 2023, 2022 and 2021 was as follows: Revenue % Change CC % Change % of Total Revenue (in millions) 2023 2022 2021 2023 2022 2023 2022 2023 2022 2021 Equipment sales $ 1,655 $ 1,624 $ 1,581 1.9 % 2.7 % 1.7 % 6.6 % 24 % 23 % 22 % Post sale revenue 5,231 5,483 5,457 (4.6) % 0.5 % (4.8) % 4.2 % 76 % 77 % 78 % Total Revenue $ 6,886 $ 7,107 $ 7,038 (3.1) % 1.0 % (3.3) % 4.8 % 100 % 100 % 100 % Reconciliation to Consolidated Statements of Income (Loss): Sales $ 2,720 $ 2,800 $ 2,582 (2.9) % 8.4 % (3.4) % 12.2 % Less: Supplies, paper and other sales (1,065) (1,176) (1,001) (9.4) % 17.5 % (10.5) % 21.0 % Equipment sales $ 1,655 $ 1,624 $ 1,581 1.9 % 2.7 % 1.7 % 6.6 % Services, maintenance and rentals $ 3,975 $ 4,100 $ 4,235 (3.0) % (3.2) % (3.0) % 0.6 % Add: Supplies, paper and other sales 1,065 1,176 1,001 (9.4) % 17.5 % (10.5) % 21.0 % Add: Financing 191 207 221 (7.7) % (6.3) % (8.0) % (2.9) % Post sale revenue $ 5,231 $ 5,483 $ 5,457 (4.6) % 0.5 % (4.8) % 4.2 % Segments Print and Other $ 6,571 $ 6,804 $ 6,729 (3.4) % 1.1 % 95 % 96 % 95 % FITTLE 401 393 401 2.0 % (2.0) % 6 % 5 % 6 % Intersegment elimination (1) (86) (90) (92) (4.4) % (2.2) % (1) % (1) % (1) % Total Revenue (2) $ 6,886 $ 7,107 $ 7,038 (3.1) % 1.0 % 100 % 100 % 100 % Americas $ 4,524 $ 4,638 $ 4,432 (2.5) % 4.6 % (2.4) % 5.1 % 66 % 65 % 63 % EMEA 2,241 2,291 2,434 (2.2) % (5.9) % (2.9) % 4.1 % 32 % 32 % 35 % Other 121 178 172 (32.0) % 3.5 % (32.0) % 3.5 % 2 % 3 % 2 % Total Revenue (3) $ 6,886 $ 7,107 $ 7,038 (3.1) % 1.0 % (3.3) % 4.8 % 100 % 100 % 100 % _____________ CC - See "Currency Impact" section for description of constant currency.
We assess Goodwill for impairment at least annually, during the fourth quarter based on balances as of October 1st, and more frequently on an interim basis if we believe indicators of impairment exist. The application of an interim or the annual Goodwill impairment test begins with the identification of reporting units, which requires judgment.
We assess Goodwill for impairment at least annually, during the fourth quarter based on balances as of October 1st, and more frequently on an interim basis if we believe indicators of an impairment exist. The application of an interim or the annual Goodwill impairment test begins with the identification of reporting units, which requires judgment.
The increase at constant currency 1 was primarily due to increases in contracted price per page and the acquisition of Go Inspire during the third quarter 2022. Contractual Print Services 2 grew modestly compared to 2021, including benefits of Go Inspire, despite a slower-than expected return of employees to offices and ongoing macroeconomic concerns.
The increase at constant currency 2 was primarily due to increases in contracted price per page and the acquisition of Go Inspire during the third quarter 2022. Contractual print services 1 grew modestly compared to 2021, including benefits of Go Inspire, despite a slower-than expected return of employees to offices and ongoing macroeconomic concerns.
Adjusted 1 Operating Margin Adjusted 1 operating margin for the year ended December 31, 2022 of 3.9% decreased 1.4-percentage points as compared to 2021.
Adjusted 1 operating margin for the year ended December 31, 2022 of 3.9% decreased 1.4-percentage points as compared to 2021.
Gross Margin Total gross margin for the year ended December 31, 2022 of 32.6% decreased 1.5-percentage points compared to 2021, primarily reflecting approximately 0.9-percentage points associated with the adverse impacts of higher supply chain costs and capacity restrictions as well as unfavorable product and service mix.
Total gross margin for the year ended December 31, 2022 of 32.6% decreased 1.5-percentage points compared to 2021, primarily reflecting approximately 0.9-percentage points associated with the adverse impacts of higher supply chain costs and capacity restrictions as well as unfavorable product and service mix.
Cash, Cash Equivalents and Restricted Cash Refer to Note 14 - Supplementary Financial Information in the Consolidated Financial Statements for additional information regarding Cash, cash equivalents and restricted cash. Operating Leases We have operating leases for real estate and vehicles in our domestic and international operations and for certain equipment in our domestic operations.
Cash, Cash Equivalents and Restricted Cash Refer to Note 14 - Supplementary Financial Information in the Consolidated Financial Statements for additional information regarding restricted cash. Operating Leases We have operating leases for real estate and vehicles in our domestic and international operations and for certain equipment in our domestic operations.
(2) Refer to Net (Loss) Income and EPS reconciliation for details. (3) The tax impact on Adjusted Pre-Tax Income is calculated under the same accounting principles applied to the Reported Pre-Tax (Loss) Income under ASC 740, which employs an annual effective tax rate method to the results.
(2) Refer to Adjusted Net Income and EPS reconciliation for details. (3) The tax impact on Adjusted Pre-Tax Income is calculated under the same accounting principles applied to the Reported Pre-Tax (Loss) under ASC 740, which employs an annual effective tax rate method to the results.
Selling, Administrative and General Expenses (SAG) SAG as a percentage of revenue of 24.8% increased 0.4-percentage points for the year ended December 31, 2022 compared to 2021 primarily due to higher administrative and bad debt expenses, partially offset by lower selling expenses as a result of the favorable impact from currency as well as productivity and cost savings associated with our Project Own It transformation actions, and the impact of higher revenues.
SAG as a percentage of revenue of 24.8% increased 0.4-percentage points for the year ended December 31, 2022 compared to 2021 primarily due to higher administrative and bad debt expenses, partially offset by lower selling expenses as a result of the favorable impact from currency as well as productivity and cost savings associated with our Project Own It transformation actions, and the impact of higher revenues.
On an adjusted 1 basis, the 2022 effective tax rate was 21.8% and was higher than the U.S. federal statutory tax rate of 21% primarily due to tax expense associated with changes in elections made to certain tax positions for recently filed returns, offset by benefits from additional tax incentives. The 2021 effective tax rate was 3.6%.
On an adjusted 1 basis, the 2022 effective tax rate was 21.6% and was higher than the U.S. federal statutory tax rate of 21% primarily due to tax expense associated with changes in elections made to certain tax positions for recently filed returns, offset by benefits from additional tax incentives. The 2021 effective tax rate was 3.6%.
Equipment gross margin for the year ended December 31, 2022 of 25.1% increased 0.9-percentage points compared to 2021, primarily reflecting the benefits of price increases, lower freight costs, and favorable mix of products, partially offset by the impact of continued product supply constraints and higher product costs.
Equipment gross margin for the year ended December 31, 2022 of 25.1% increased 0.9-percentage points as compared to 2021, primarily reflecting the benefits of price increases, lower freight costs, and favorable mix of products, partially offset by the impact of continued product supply constraints and higher product costs.
We refer to this analysis as "constant currency", “currency impact” or “the impact from currency.” This impact is calculated by translating current period activity in local currency using the comparable prior year period's currency translation rate and is calculated for all countries where the functional currency is the local country currency.
We refer to this analysis as "constant currency", “currency impact” or “the impact from currency.” This impact is calculated by translating current period activity in local currency using the comparable prior year period's currency translation rate. This impact is calculated for all countries where the functional currency is the local country currency.
Adjusted Earnings Measures • Adjusted Net (Loss) Income and Earnings per share ( Adjusted EPS) • Adjusted Effective Tax Rate The above measures were adjusted for the following items: Restructuring and related costs, net: Restructuring and related costs, net include restructuring and asset impairment charges as well as costs associated with our transformation programs beyond those normally included in restructuring and asset impairment charges.
Adjusted Earnings Measures • Adjusted Net Income and Earnings per share ( Adjusted EPS) • Adjusted Effective Tax Rate The above measures were adjusted for the following items: Restructuring and related costs, net: Restructuring and related costs, net include restructuring and asset impairment charges as well as costs associated with our transformation programs beyond those normally included in restructuring and asset impairment charges.
In addition to the costs and expenses noted above as adjustments for our adjusted earnings measures, adjusted operating income and margin also exclude the remaining amounts included in Other expenses, net, which are primarily non-financing interest expense and certain other non-operating costs and expenses.
In addition to the costs and expenses noted as adjustments for our adjusted earnings measures, adjusted operating income and margin also exclude the remaining amounts included in Other expenses, net, which are primarily non-financing interest expense and certain other non-operating costs and expenses.
Currently, Xerox Holdings' primary direct operating subsidiary is Xerox and Xerox reflects nearly all of Xerox Holdings' operations. Accordingly, the following MD&A primarily focuses on the operations of Xerox and is intended to help the reader understand Xerox's business and its results of operations and financial condition.
Xerox Holdings' primary direct operating subsidiary is Xerox and Xerox reflects nearly all of Xerox Holdings' operations. Accordingly, the following MD&A primarily focuses on the operations of Xerox and is intended to help the reader understand Xerox's business and its results of operations and financial condition.
In addition, our effective tax rate will change based on discrete or other nonrecurring events that may not be predictable. _____________ (1) Refer to the Effective Tax Rate reconciliation table in the "Non-GAAP Financial Measures" section.
In addition, our effective tax rate will change based on discrete or other nonrecurring events that may not be predictable. _____________ (1) Refer to the Adjusted Effective Tax Rate reconciliation table in the "Non-GAAP Financial Measures" section.
Although most of our major defined benefit plans have been amended to freeze current benefits and eliminate benefit accruals for future service, several plans remain unfunded (by design) or are under-funded.
Although most of our major defined benefit plans have been amended to freeze current benefits and eliminate benefit accruals for future service, several plans remain under-funded or unfunded by design.
Other comprehensive income attributable to Xerox was $344 million in 2021 and included the following: i) $489 million of net gains from the changes in defined benefit plans primarily due to remeasurement and net actuarial gains as a result of higher discount rates, as well as the favorable impact of currency; ii) $141 million of net translation adjustment losses reflecting the weakening of our major foreign currencies against the U.S.
Other comprehensive income was $344 million in 2021 and included the following: i) $489 million of net gains from the changes in defined benefit plans primarily due to remeasurement and net actuarial gains as a result of higher discount rates, as well as the favorable impact of currency; ii) $141 million of net translation adjustment losses reflecting the weakening of our major foreign currencies against the U.S.
Loss on early extinguishment of debt During 2022, we recorded a loss of $1 million related to the write-off of deferred debt issuance costs as a result of the reduction in the Company's Credit Facility from $500 million to $250 million and $4 million related to the early redemption of $700 million of the $1 billion of Xerox Corporation's 4.625% Senior Notes due March 2023.
During 2022, we recorded a loss of $1 million related to the write-off of deferred debt issuance costs as a result of the reduction in the Company's Credit Facility from $500 million to $250 million and $4 million related to the early redemption of $700 million of the $1 billion of Xerox Corporation's 4.625% Senior Notes due March 2023.
Refer to Note 15 - Debt in the Consolidated Financial Statements for additional information regarding our Senior Notes and Credit Facility. Contract termination costs For the year ended December 31, 2022, we recorded contract termination costs of $33 million ($25 million after-tax) associated with the early termination of a product supply agreement.
Refer to Note 15 - Debt in the Consolidated Financial Statements for additional information regarding our Senior Notes and Credit Facilities. Contract Termination Costs For the year ended December 31, 2022, we recorded contract termination costs of $33 million ($25 million after-tax) associated with the early termination of a product supply agreement.
Workplace Solutions revenues include the sale of products (captured primarily as equipment sales) as well as the supplies and associated technical services and the financing of those products through FITTLE (captured as post sale revenue). • Production Solutions are designed for customers in the graphic communications, in-plant and production print environments with high-volume printing requirements.
Workplace Solutions revenues include the sale of products (captured primarily as equipment sales) as well as the supplies and associated maintenance services and the financing of those products through FITTLE (captured as post sale revenue). • Production Solutions are designed for customers in the graphic communications, in-plant and production print environments with high-volume printing requirements.
The allocation of revenue among the elements – equipment vs. post sale (service, supplies and financing) – has remained fairly consistent at approximately 25% and 75%, respectively, over the past three years. Sales to Distributors and Resellers : We utilize distributors and resellers to sell many of our products, supplies and parts to end-user customers.
The allocation of revenue among the elements – equipment versus post sale (service, supplies and financing) – has remained fairly consistent at approximately 25% and 75%, respectively, over the past three years. Sales to Distributors and Resellers : We utilize distributors and resellers to sell many of our products, supplies and parts to end-user customers.
As of December 31, 2022, we do not believe we have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
As of December 31, 2023, we do not believe we have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
When estimating the 2023 expected rate of return, in addition to assessing recent performance, we considered the historical returns earned on plan assets, the rates of return expected in the future, particularly in light of current economic conditions, and our investment strategy and mix with respect to the plans' assets.
When estimating the 2024 expected rate of return, in addition to assessing recent performance, we considered the historical returns earned on plan assets, the rates of return expected in the future, particularly in light of current economic conditions, and our investment strategy and mix with respect to the plans' assets.
The decline at constant currency 1 reflected a lower average finance receivables balance, due to a decrease in equipment sales in prior periods and declines in Xerox channel originations, due primarily to supply constraints, as well as lower interest rates due to an increase in indirect originations.
The decline at constant currency 2 reflected a lower average finance receivables balance, due to a decrease in equipment sales in prior periods and declines in Xerox channel originations, due primarily to supply constraints, as well as lower interest rates due to an increase in indirect originations.
Our business does not depend upon a single customer or a few customers, the loss of which, individually or collectively, would have a material adverse effect on our business. In 2022, approximately 45% of our revenue was generated outside the United States.
Our business does not depend upon a single customer or a few customers, the loss of which, individually or collectively, would have a material adverse effect on our business. In 2023, approximately 45% of our revenue was generated outside the United States.
The total actuarial loss at December 31, 2022 is subject to offsetting gains or losses in the future due to both changes in actuarial assumptions and future experience and will be recognized in future periods through amortization or settlement losses.
The total actuarial loss at December 31, 2023 is subject to offsetting gains or losses in the future due to both changes in actuarial assumptions and future experience and will be recognized in future periods through amortization or settlement losses.
Geographically, revenue in our Americas region increased 4.6% for the year ended December 31, 2022, as compared to the prior year, including a 0.5-percentage point adverse impact from currency, primarily reflecting the benefits of recent acquisitions and growth in equipment sales and consumables, such as paper and supplies.
Revenues in our Americas region for the year ended December 31, 2022 increased 4.6%, as compared to the prior year, including a 0.5-percentage point adverse impact from currency, primarily reflecting the benefits of recent acquisitions and growth in equipment sales and consumables, such as paper and supplies.
Defined benefit pension plan contributions in 2023 is due to further contributions to our U.K. defined benefit pension plan not being required after October 2022 following agreement of the triennial valuation of the Plan with the Plan Trustees.
Defined benefit pension plan contributions in 2023 is due to no further contributions to our U.K. defined benefit pension plan being required after October 2022 following agreement of the triennial valuation of the Plan with the Plan Trustees.
For this financing aspect of our business, we maintain an assumed 7:1 leverage ratio of debt to equity as compared to our finance assets. Approximately 40% of our Total Finance assets, net balance at December 31, 2022 includes indirect lease financing primarily provided to end-user customers who purchased Xerox and non-Xerox equipment sold through distributors, resellers and dealers.
For this financing aspect of our business, we maintain an assumed 7:1 leverage ratio of debt to equity as compared to our finance assets. Approximately 45% of our Total Finance assets, net balance at December 31, 2023 includes indirect lease financing primarily provided to end-user customers who purchased Xerox and non-Xerox equipment sold through distributors, resellers and dealers.
Segment Margin Print and Other segment margin of 3.7% for the year ended December 31, 2022 decreased 0.9-percentage points as compared to 2021.
Print and Other segment margin of 3.8% for the year ended December 31, 2022 decreased 0.9-percentage points as compared to 2021.
In 2023, we expect to continue leveraging our finance assets on a total debt basis at an assumed 7:1 ratio of debt to equity.
In 2024, we expect to continue leveraging our finance assets on a total debt basis at an assumed 7:1 ratio of debt to equity.
Refer to Note 18 - Employee Benefit Plans in the Consolidated Financial Statements for additional information regarding contributions to our defined benefit pension and retiree health plans. FUJIFILM Business Innovation Corp. We purchased products, including parts and supplies, from FUJIFILM Business Innovation Corp. totaling $1,175 million, $966 million and $1,077 million in 2022, 2021 and 2020, respectively.
Refer to Note 18 - Employee Benefit Plans in the Consolidated Financial Statements for additional information regarding contributions to our defined benefit pension and retiree health plans. FUJIFILM Business Innovation Corp. We purchased products, including parts and supplies, from FUJIFILM Business Innovation Corp. totaling $933 million, $1,175 million and $966 million in 2023, 2022 and 2021, respectively.
The bad debt provision in 2022 is more in-line with historical trends but the reserve as a percentage of our trade and finance receivables balance remains elevated to cover expected losses that may result from future macroeconomic conditions including higher inflation and interest rates.
The bad debt provision in 2022 and 2023 has been more in-line with historical trends but the reserve as a percentage of our trade and finance receivables balance remains elevated to cover expected losses that may result from future macroeconomic conditions including higher inflation and interest rates.
Our ongoing assessments of the more-likely-than-not outcomes of the examinations and related tax positions require judgment and can materially increase or decrease our effective tax rate, as well as impact our operating results. Unrecognized tax benefits were $110 million, $107 million and $115 million at December 31, 2022, 2021 and 2020, respectively.
Our ongoing assessments of the more-likely-than-not outcomes of the examinations and related tax positions require judgment and can materially increase or decrease our effective tax rate, as well as impact our operating results. Unrecognized tax benefits were $140 million, $110 million and $107 million at December 31, 2023, 2022 and 2021, respectively.
Contributions to our defined benefit pension plans in subsequent years will depend on a number of factors, including the investment performance of plan assets and discount rates as well as potential legislative and plan changes.
Contributions to our defined benefit pension plans in subsequent years will depend on multiple factors, including the investment performance of plan assets and discount rates as well as potential legislative and plan changes.
The shared services arrangement with HCL includes a remaining aggregate spending commitment of approximately $649 million over the next 4 years. However, we can terminate the arrangement at any time at our discretion, subject to payment of termination fees that decline over the term, or for cause.
The shared services arrangement with HCL includes a remaining aggregate spending commitment of approximately $440 million over the next 3 years. However, we can terminate the arrangement at any time at our discretion, subject to payment of termination fees that decline over the term, or for cause.
We can terminate the arrangement subject to payment of termination fees that decline over the term. We incurred net charges of $220 million, $207 million and $185 million for the three years ended December 31, 2022, 2021, and 2020, respectively, related to these shared services arrangements.
We can terminate the arrangement subject to payment of termination fees that decline over the term. We incurred net charges of $227 million, $220 million and $207 million for the three years ended December 31, 2023, 2022, and 2021, respectively, related to these shared services arrangements.
During the five-year period ended December 31, 2022, our reserve for doubtful accounts ranged from 3.0% to 4.8% of gross receivables. Holding all assumptions constant, a 0.5-percentage point increase or decrease in the reserve from the December 31, 2022 rate of 4.1% would change the 2022 provision by approximately $21 million.
During the five-year period ended December 31, 2023, our reserve for doubtful accounts ranged from 3.0% to 4.8% of gross receivables. Holding all assumptions constant, a 0.5-percentage point increase or decrease in the reserve from the December 31, 2023 rate of 4.4% would change the 2023 provision by approximately $18 million.
Distributions to Xerox Holdings were $1,120 million and were primarily used to fund Xerox Holdings continuing dividends to shareholders and share repurchases. Xerox's distributions to the parent are expected to continue with those distributions primarily being used by Xerox Holdings to fund dividends and share repurchases.
Distributions to Xerox Holdings were $722 million and were primarily used to fund Xerox Holdings continuing dividends to shareholders and share repurchases. Xerox's distributions to the parent are expected to continue with those distributions primarily being used by Xerox Holdings to fund dividends and share repurchases.
Dividends Aggregate dividends of $159 million, $181 million and $209 million were declared on common stock in 2022, 2021 and 2020, respectively. The decrease in dividends since 2020 primarily reflects lower shares of common stock outstanding as a result of our share repurchase programs. Aggregate dividends of $14 million were declared on preferred stock in 2022, 2021 and 2020, respectively.
Dividends Aggregate dividends of $146 million, $159 million, and $181 million were declared on common stock in 2023, 2022 and 2021, respectively. The decrease in dividends since 2021 primarily reflects lower shares of common stock outstanding as a result of our share repurchase programs. Aggregate dividends of $14 million were declared on preferred stock in 2023, 2022 and 2021, respectively.
The higher stock compensation expense was primarily due to the accelerated vesting of all outstanding equity awards, according to the terms of the award agreement, in connection with the passing of Xerox Holding's former CEO. The increase was also due to acquisitions, investments in FITTLE, as well as benefits from temporary government assistance in the prior year.
The higher stock compensation expense was primarily due to the accelerated vesting of all outstanding equity awards, according to the terms of the award agreement, in connection with the passing of Xerox Holding's former CEO. The increase in SAG expenses was also due to acquisitions, investments in FITTLE, as well as benefits from temporary government assistance in 2021.
We recorded bad debt provisions of $43 million, $7 million and $116 million in Selling, administrative and general (SAG) expenses in our Consolidated Statements of (Loss) Income for the three years ended December 31, 2022, 2021 and 2020, respectively.
We recorded bad debt provisions of $28 million, $43 million and $7 million in Selling, administrative and general (SAG) expenses in our Consolidated Statements of Income (Loss) for the three years ended December 31, 2023, 2022 and 2021, respectively.
Product and Offerings Definitions Our Equipment sale product groupings are as follows: • “Entry” , which include A4 devices and desktop printers and multifunction devices that primarily serve small and medium workgroups/work teams. • “Mid-Range” , which include A3 devices that generally serve large workgroup/work teams environments as well as products in the Light Production product groups serving centralized print centers, print for pay and lower volume production print establishments. • “High-End” , which include production printing and publishing systems that generally serve the graphic communications marketplace and print centers in large enterprises.
Product and Offerings Definitions Our product groups range from: • “Entry” , which include A4 devices and desktop printers and multifunction devices that primarily serve small and medium workgroups/work teams. • “Mid-Range” , which include A3 devices that generally serve large workgroup/work teams environments as well as products in the Light Production product groups serving centralized print centers, print for pay and lower volume production print establishments. • “High-End” , which include production printing and publishing systems that generally serve the graphic communications marketplace and print centers in large enterprises.
Key indicators of future post sale revenue include installs of printers and multifunction devices, the number and type of machines in the field (MIF), page volumes and the type and Xerox 2022 Annual Report 30 Table of Contents nature of related software and ancillary services provided to customers - e.g., digital services.
Key indicators of future post sale revenue include installs of printers and multifunction devices, the number and type of machines in the field (MIF), page volumes, revenue per page, and the type and Xerox 2023 Annual Report 28 Table of Contents nature of related software and ancillary services provided to customers - e.g., digital services.
CCS and CES encompass a range of Digital Services that leverage our software capabilities in Workflow Automation, Personalization and Communication Software, Content Management Solutions, and Digitization Services. • FITTLE is a global financing solutions business and currently offers financing for direct channel customer purchases of Xerox equipment through bundled lease agreements, lease financing to end-user customers who purchase Xerox and non-Xerox equipment through our indirect channels and leasing solutions for OEMs of print and non-print related office equipment and IT services equipment.
CCS and CES encompass a range of Digital Services that leverage our software capabilities in Workflow Automation, Personalization and Communication Software, Content Management Solutions, and Digitization Services. • FITTLE is a global financing solutions business and currently offers financing for direct channel customer purchases of Xerox equipment through bundled lease agreements, lease financing to end-user customers who purchase Xerox equipment and solutions through our indirect channels.
Currency losses, net Currency losses, net of $13 million in 2022 were $6 million higher than 2021 primarily due to increased volatility in the global exchange rates, particularly in our Eurasia and Middle East operations, which could not be fully hedged.
Currency losses, net of $13 million for the year ended December 31, 2022 were $6 million higher than 2021 primarily due to increased volatility in the global exchange rates, particularly in our Eurasia and Middle East operations, which could not be fully hedged.
Xerox 2022 Annual Report 50 Table of Contents Reportable Segments Our business is organized to ensure we focus on efficiently managing operations while serving our customers and the markets in which we operate. We have two operating and reportable segments – Print and Other and Financing (FITTLE) .
Xerox 2023 Annual Report 46 Table of Contents Reportable Segments Our business is organized to ensure we focus on efficiently managing operations while serving our customers and the markets in which we operate. We have two operating and reportable segments – Print and Other and FITTLE .
Additionally, we have identified embedded operating leases within certain supply chain contracts for warehouses, primarily within our domestic operations. Our leases have remaining terms of up to twelve years and a variety of renewal and/or termination options. As of December 31, 2022 and 2021, total operating lease liabilities were $229 million and $283 million, respectively.
Additionally, we have identified embedded operating leases within certain supply chain contracts for warehouses, primarily within our domestic operations. Our leases have remaining terms of up to eleven years and a variety of renewal and/or termination options. As of December 31, 2023 and 2022, total operating lease liabilities were $182 million and $229 million, respectively.
In December 2022, the Company sold approximately $60 million in principal balances of lease receivables under this agreement and will continue to service those receivables for which we will earn a servicing fee. Refer to Note 8 - Finance Receivables, Net in the Consolidated Financial Statements for further information regarding this arrangement.
During 2023 and 2022, the Company sold approximately $1,100 million and $60 million, respectively, in principal balances of lease receivables under this agreement and will continue to service those receivables for which we will earn a servicing fee. Refer to Note 8 - Finance Receivables, Net in the Consolidated Financial Statements for further information regarding this arrangement.
Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Refer to Note 6 - Acquisitions and Investments in the Consolidated Financial Statements for additional information regarding the allocation of the purchase price consideration for our acquisitions. Our Goodwill, net balance was $2.8 billion at December 31, 2022.
Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Refer to Note 6 - Acquisitions and Divestitures in the Consolidated Financial Statements for additional information regarding the allocation of the purchase price consideration for our acquisitions. Our Goodwill, net balance was $2.7 billion at December 31, 2023.
Sales made under bundled lease arrangements directly to end customers comprise 44% or $708 million of our equipment sales revenue. Revenues under these bundled lease arrangements are allocated considering the relative standalone selling prices of the lease and non-lease deliverables included in the bundled arrangement.
Sales made under bundled lease arrangements directly to end customers comprise approximately 56% or $920 million of our equipment sales revenue. Revenues under these bundled lease arrangements are allocated considering the relative standalone selling prices of the lease and non-lease deliverables included in the bundled arrangement.
Approximately 45% of our consolidated revenues are derived from operations outside of the U.S. where the U.S. Dollar is normally not the functional currency. As a result, foreign currency translation had a 3.8-percentage point adverse impact on revenue in 2022 and a 1.6-percentage point favorable impact on revenue in 2021.
Approximately 45% of our consolidated revenues are derived from operations outside of the U.S. where the U.S. Dollar is normally not the functional currency. As a result, foreign currency translation had a 0.2-percentage point favorable impact on revenue in 2023 and a 3.8-percentage point adverse impact on revenue in 2022.
Xerox 2022 Annual Report 48 Table of Contents Income Taxes The 2022 effective tax rate was 0.9% and was lower than the U.S. federal statutory tax rate of 21% primarily due to the non-deductibility of the Goodwill impairment charge and the tax expense associated with changes in elections made to certain tax positions for recently filed returns, which were only partially offset by benefits from additional tax incentives and the geographical mix of earnings.
The 2022 effective tax rate was 0.9% and was lower than the U.S. federal statutory tax rate of 21% primarily due to the non-deductibility of the Goodwill impairment charge and the tax expense associated with changes in elections made to certain tax positions for recently filed returns, which were only partially offset by benefits from additional tax incentives and the geographical mix of earnings.
On an adjusted 1 basis, Net income attributable to Xerox Holdings was $189 million, or $1.12 per diluted share. Net loss attributable to Xerox Holdings for the year ended December 31, 2021 was $(455) million, or $(2.56) per diluted share, which includes an after-tax Goodwill impairment charge of $750 million (pre-tax charge of $781 million) or ($4.08) per share.
On an adjusted 1 basis, Net income was $189 million, or $1.12 per diluted share. Net (loss) for the year ended December 31, 2021 was $(455) million, or $(2.56) per diluted share, which included an after-tax Goodwill impairment charge of $750 million (pre-tax charge of $781 million) or $(4.08) per share.
Xerox 2022 Annual Report 32 Table of Contents Application of Critical Accounting Policies In preparing our Consolidated Financial Statements and accounting for the underlying transactions and balances, we apply various accounting policies.
Xerox 2023 Annual Report 30 Table of Contents Application of Critical Accounting Policies In preparing our Consolidated Financial Statements and accounting for the underlying transactions and balances, we apply various accounting policies.
Our bad debt expense for the year ended December 31, 2022 of $43 million increased $36 million as compared to the prior year period, primarily due to prior year reserve releases of approximately $31 million as well as increased provisions as a result of current macroeconomic conditions.
Bad debt expense for the year ended December 31, 2022 of $43 million increased $36 million as compared to the prior year period, primarily due to reserve releases of approximately $31 million in 2021 as well as increased provisions as a result of macroeconomic conditions during the year.
(2) Refer to Effective Tax Rate reconciliation. (3) For those periods that include the preferred stock dividend, the average shares for the calculations of diluted EPS exclude the 7 million shares associated with Xerox Holdings Corporation's Series A Convertible preferred stock.
(2) Refer to Adjusted Effective Tax Rate reconciliation. (3) For those periods that include the preferred stock dividend, the average shares for the calculations of diluted EPS exclude 7 million shares associated with our Series A Convertible preferred stock.
The decreased level of amortization in 2022 was primarily related to the write-off of certain XBS tradenames in prior years as part of our continued efforts to realign and consolidate this sales unit as part of Project Own It, partially offset by intangible amortization related to our recent acquisitions of Powerland and Go Inspire.
The decreased level of amortization in 2022 was primarily related to the write-off of certain XBS trade names in prior years as part of our continued efforts to realign and consolidate this sales unit, partially offset by intangible amortization related to our recent acquisitions of Powerland and Go Inspire.
From a Company risk perspective, this plan operates just like a defined contribution plan as the Company is only responsible for a contribution for annual benefit accruals under 5-year agreements. Although the Company risk has been mitigated, under U.S.
From a Company risk perspective, this CDC plan operates just like a defined contribution plan as the Company was only responsible for a contribution for annual benefit accruals under 5-year agreements through 2022. Although the Company risk has been mitigated, under U.S.
Refer to Note 19 - Income and Other Taxes in the Consolidated Financial Statements for additional information regarding deferred income taxes and unrecognized tax benefits. Xerox 2022 Annual Report 36 Table of Contents Business Combinations and Goodwill We allocate the fair value of purchase consideration to tangible assets, liabilities assumed and intangible assets acquired based on their estimated fair values.
Refer to Note 19 - Income and Other Taxes in the Consolidated Financial Statements for additional information regarding deferred income taxes and unrecognized tax benefits. Business Combinations and Goodwill We allocate the fair value of purchase consideration to tangible assets, liabilities assumed, and intangible assets acquired based on their estimated fair values.
The decrease in the Goodwill impairment charge impact was partially offset by the impact of lower Adjusted 1 Operating margin (see Adjusted 1 Operating Margin discussion below), of 1.4-percentage points, increased Restructuring and related costs, net, and Selling, administrative and general expenses (SAG) due to higher stock compensation and bad debt expense.
The Xerox 2023 Annual Report 44 Table of Contents decrease in the Goodwill impairment charge impact was partially offset by the impact of lower adjusted 1 operating margin (see Adjusted 1 Operating Margin discussion below), of 1.4-percentage points, increased Restructuring and related costs, net, and Selling, administrative and general expenses (SAG) due to higher stock compensation and bad debt expense.
On an adjusted 1 basis, the 2021 effective tax rate was 6.5%.
On an adjusted 1 basis, the 2021 effective tax rate was 6.4%.
Xerox 2022 Annual Report 60 Table of Contents Liquidity and Financial Flexibility We manage our worldwide liquidity using internal cash management practices, which are subject to (i) the statutes, regulations and practices of each of the local jurisdictions in which we operate, (ii) the legal requirements of the agreements to which we are a party and (iii) the policies and cooperation of the financial institutions we utilize to maintain and provide cash management services.
Liquidity and Financial Flexibility We manage our worldwide liquidity using internal cash management practices, which are subject to (i) the statutes, regulations and practices of each of the local jurisdictions in which we operate, (ii) the legal requirements of the agreements to which we are a party and (iii) the policies and cooperation of the financial institutions we utilize to maintain and provide cash management services.
Financing Revenue • For the year ended December 31, 2022, Financing revenue decreased 6.3%, as compared to 2021, due to a lower average finance receivables balance, as collections continue to outpace originations, and lower Print and Other equipment sales in prior periods.
Finance receivables were approximately $600 million lower as of December 2023 as compared to December 2022. • For the year ended December 31, 2022, Financing revenue decreased 6.3%, as compared to 2021, due to a lower average finance receivables balance, as collections continue to outpace originations, and lower Print and Other equipment sales in prior periods.
(1) Refer to the Products and Offerings Definitions section. (2) Includes equipment sales related to the Financing (FITTLE) segment of $22 million, $27 million and $23 million for the three years ended December 31, 2022, 2021 and 2020 respectively.
(1) Refer to the Products and Offerings Definitions section. (2) Includes equipment sales related to the FITTLE segment of $21 million, $22 million and $27 million for the three years ended December 31, 2023, 2022 and 2021, respectively.
As noted above, cumulative unamortized net actuarial losses were $1.9 billion at December 31, 2022, of which the U.S. primary domestic plans, with a lump-sum feature, represented approximately $600 million. The pro-rata factor is computed as the percentage reduction in the projected benefit obligation due to the settlement of a participant ' s vested benefit.
As noted above, cumulative unamortized net actuarial losses were $2.3 billion at December 31, 2023, of which the U.S. primary domestic plans, with a lump-sum feature, represented approximately $630 million. The pro-rata factor is computed as the percentage reduction in the projected benefit obligation due to the settlement of a participant ' s vested benefit.
The following represents our total finance assets, net associated with our lease and finance operations: December 31, (in millions) 2022 2021 Total finance receivables, net (1) $ 3,102 $ 3,070 Equipment on operating leases, net 235 253 Total Finance assets, net (2) $ 3,337 $ 3,323 ____________ (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 Consolidated Balance Sheets.
The following represents our total finance assets, net associated with our lease and finance operations: December 31, (in millions) 2023 2022 Total finance receivables, net (1) $ 2,510 $ 3,102 Equipment on operating leases, net 265 235 Total Finance assets, net (2) $ 2,775 $ 3,337 ____________ (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 Consolidated Balance Sheets.
In the U.S. and the U.K., which comprise approximately 75% of our PBO, we consider yield curves derived from Moody's Aa or better rated Corporate Bonds Xerox 2022 Annual Report 34 Table of Contents and U.K. Corporate bonds rated AA by at least one of the main ratings agencies, respectively, in the determination of the appropriate discount rate assumptions.
In the U.S. and the U.K., which comprise approximately 75% of our PBO, we consider yield curves derived from Moody's Aa or better rated Corporate Bonds and U.K. Corporate bonds rated AA by at least one of the main ratings agencies, respectively, in the determination of the appropriate discount rate assumptions.
Shared Services Arrangements In March 2019, as part of Project Own It, Xerox entered into a shared services arrangement with HCL Technologies (HCL) pursuant to which we transitioned certain global administrative and support functions, including, among others, selected information technology and finance functions, from Xerox to HCL.
Shared Services Arrangements In March 2019, Xerox entered into a shared services arrangement with HCL Technologies (HCL) pursuant to which we transitioned certain global administrative and support functions, including, among others, selected information technology and finance functions, from Xerox to HCL.
Refer to Note 19 - Income and Other Taxes in the Consolidated Financial Statements for additional information regarding the valuation allowance against our deferred tax assets. Our valuation allowance increased (decreased) through income tax expense by approximately $7 million, $(9) million and $25 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Refer to Note 19 - Income and Other Taxes in the Consolidated Financial Statements for additional information regarding the valuation allowance against our deferred tax assets. Our valuation allowance changed through income tax expense by approximately $(4) million, $7 million and $(9) million for the years ended December 31, 2023, 2022 and 2021, respectively.
Xerox 2022 Annual Report 47 Table of Contents Non-service retirement-related costs Non-service retirement-related costs increased $77 million for the year ended December 31, 2022 as compared to 2021 primarily driven by an increase in interest costs due to higher discount rates as well as negative asset returns on certain plan assets.
Non-service retirement-related costs increased $77 million for the year ended December 31, 2022 as compared to 2021 primarily driven by an increase in interest costs due to higher discount rates as well as negative asset returns on certain plan assets.
In July 2021, Xerox entered into an arrangement with Tata Consulting Services (TCS), whereby TCS will provide business processing outsourcing services in support of our global finance and accounting organization. The shared services arrangement with TCS includes a remaining aggregate spending commitment of approximately $188 million over the next 5 years.
In July 2021, Xerox entered into an arrangement with Tata Consulting Services (TCS), whereby TCS provides business processing outsourcing services in support of our global finance and accounting organization. The shared services arrangement with TCS includes a remaining aggregate spending commitment of approximately $144 million over the next 4 years.
Defined benefit pension plans 25 81 111 104 Defined contribution plans (1) 35 17 18 19 Retiree health benefit plans 25 19 25 25 Total Benefit Plan Funding $ 135 $ 141 $ 178 $ 183 _____________ (1) The difference between the 2022 funded amount and the 2022 expense of $20 million is due to contributions for our U.S. based 401(k) savings plans for salaried employees being expensed in 2022 as earned and contributed in January of 2023.
Defined benefit pension plans 30 28 81 111 Defined contribution plans (1) 35 40 17 18 Retiree health benefit plans 20 21 19 25 Total Benefit Plan Funding $ 185 $ 142 $ 141 $ 178 _____________ (1) The difference of $20 million between the 2022 funded amount of $17 million and the 2022 expense of $37 million is due to contributions for our U.S. based 401(k) savings plans for salaried employees being expensed in 2022 as earned and contributed in January of 2023.
There were other increases (decreases) to our valuation allowance, including the effects of currency, of $2 million, $(30) million and $(28) million for the years ended December 31, 2022, 2021 and 2020, respectively. These did not affect income tax expense in total as there was a corresponding adjustment to Deferred tax assets or Other comprehensive income.
There were other changes to our valuation allowance, including the effects of currency, of $13 million, $2 million and $(30) million for the years ended December 31, 2023, 2022 and 2021, respectively. These did not affect income tax expense in total as there was a corresponding adjustment to Deferred tax assets or Other comprehensive (loss) income.
Holding all other assumptions constant, the following table summarizes the estimated impacts of a 0.25% change in the discount rate and a 0.25% change in the expected return on plan assets: Discount Rate Expected Return (in millions) 0.25% Increase 0.25% Decrease 0.25% Increase 0.25% Decrease Increase/(Decrease) 2023 Projected net periodic pension cost $ (2) $ 1 $ (15) $ (15) Projected benefit obligation as of December 31, 2022 (265) 255 N/A N/A One of the most significant elements of our net periodic defined benefit pension plan expense is settlement losses.
Holding all other assumptions constant, the following table summarizes the estimated impacts of a 0.25% change in the discount rate and a 0.25% change in the expected return on plan assets: Discount Rate Expected Return (in millions) 0.25% Increase 0.25% Decrease 0.25% Increase 0.25% Decrease (Decrease)/Increase 2024 Projected net periodic pension cost $ (4) $ 6 $ (15) $ (15) Projected benefit obligation as of December 31, 2023 (195) 210 N/A N/A One of the most significant elements of our net periodic defined benefit pension plan expense is settlement losses.
Our broad portfolio of presses and solutions provides full-color, on-demand printing of a wide range of applications. Xerox 2022 Annual Report 29 Table of Contents • Xerox Services includes a continuum of solutions and services that helps our customers optimize their print and communications infrastructure, apply automation and simplification to maximize productivity, and ensure the highest levels of security.
Our broad portfolio of presses and solutions provides black-and-white and full-color, on-demand printing of a wide range of applications. • Xerox Services includes a continuum of solutions and services that helps our customers optimize their print and communications infrastructure, apply automation and simplification to maximize productivity, and ensure the highest levels of security.
Total sales of equipment, supplies and parts to distributors and resellers were $1,222 million for the year ended December 31, 2022 and provisions, and allowances recorded on these sales were approximately 28% of the associated gross revenues.
Total sales of equipment, supplies and parts to distributors and resellers were $1,044 million for the year ended December 31, 2023 and provisions, and allowances recorded on these sales were approximately 26% of the associated gross revenues.
(3.2) pts. Post sale Gross Margin 34.9 % 37.0 % 40.3 % (2.1) pts. (3.3) pts. Total Gross Margin 32.6 % 34.1 % 37.4 % (1.5) pts. (3.3) pts. RD&E as a % of Revenue 4.3 % 4.4 % 4.4 % 0.1 pts. — pts.
Post sale Gross Margin 33.6 % 34.9 % 37.0 % (1.3) pts. (2.1) pts. Total Gross Margin 33.6 % 32.6 % 34.1 % 1.0 pts. (1.5) pts. RD&E as a % of Revenue 3.3 % 4.3 % 4.4 % 1.0 pts. 0.1 pts. SAG as a % of Revenue 24.6 % 24.8 % 24.4 % 0.2 pts. (0.4) pts.
Our guideline public company method incorporates revenues and earnings multiples from publicly traded companies with operations and other characteristics similar to our entity. The selected multiples consider our entity's growth, profitability, size and risk relative to those of the selected publicly traded companies.
Our guideline public company method incorporates revenues and earnings multiples from publicly traded companies Xerox 2023 Annual Report 35 Table of Contents with operations and other characteristics similar to our entity. The selected multiples consider our entity's growth, profitability, size and risk relative to those of the selected publicly traded companies.
After completing this qualitative impairment review, we concluded that it is more likely-than-not that the fair value of the Print and Other reporting unit is higher than its carrying amount and that it is not necessary to perform a quantitative Goodwill impairment test.
After completing this qualitative impairment review, we concluded that it is more likely-than-not that the fair value of the Print and Other reporting unit, the only reporting unit with goodwill, is higher than its carrying amount and a quantitative Goodwill impairment test was not required.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of December 31, 2022, of $1,042 million of secured borrowings, $623 million are hedged to a fixed rate through the use of Interest rate caps and swaps. A 10% change in the yield curve, representing 20 - 30 basis points, will increase the derivative mark-to-market from $7 million to $9 million.
Biggest changeA 10% change in the yield curve, representing 20 - 30 basis points, will increase the derivative mark-to-market by approximately $1 million.
A 10% appreciation or depreciation of the U.S. Dollar against all currencies from the quoted foreign currency exchange rates at December 31, 2022 would have an impact on our cumulative translation adjustment portion of equity of approximately $320 million. The net amount invested in foreign subsidiaries and affiliates, primarily Xerox Limited and Xerox Canada Inc. and translated into U.S.
A 10% appreciation or depreciation of the U.S. Dollar against all currencies from the quoted foreign currency exchange rates at December 31, 2023 would have an impact on our cumulative translation adjustment portion of equity of approximately $320 million. The net amount invested in foreign subsidiaries and affiliates, primarily Xerox Limited and Xerox Canada Inc. and translated into U.S.
Foreign Exchange Risk Management Assuming a 10% appreciation or depreciation in foreign currency exchange rates from the quoted foreign currency exchange rates at December 31, 2022, it would not significantly change the value of foreign currency-denominated assets and liabilities as all material currency asset and liability exposures were economically hedged as of December 31, 2022.
Foreign Exchange Risk Management Assuming a 10% appreciation or depreciation in foreign currency exchange rates from the quoted foreign currency exchange rates at December 31, 2023, it would not significantly change the value of foreign currency-denominated assets and liabilities as all material currency asset and liability exposures were economically hedged as of December 31, 2023.
Dollars using the year-end exchange rates, was approximately $3.2 billion at December 31, 2022. Interest Rate Risk Management The consolidated average interest rate associated with our total debt for 2022, 2021 and 2020 approximated 5.3%, 4.8%, and 4.8%, respectively. Interest expense includes the impact of our interest rate derivatives. Nearly all of our customer-financing assets earn fixed rates of interest.
Dollars using the year-end exchange rates, was approximately $3.2 billion at December 31, 2023. Interest Rate Risk Management The consolidated average interest rate associated with our total debt for 2023, 2022 and 2021 approximated 6.0%, 5.3%, and 4.8%, respectively. Interest expense includes the impact of our interest rate derivatives. Nearly all of our customer-financing assets earn fixed rates of interest.
The fair market values of our fixed-rate financial instruments are sensitive to changes in interest rates. At December 31, 2022, a 10% increase in market interest rates would reduce the fair values of such financial instruments by approximately $85 million.
The fair market values of our fixed-rate financial instruments are sensitive to changes in interest rates. At December 31, 2023, a 10% increase in market interest rates would reduce the fair values of such financial instruments by approximately $63 million.
Refer to Note 15 - Debt in the Consolidated Financial Statements for additional information regarding our interest expense and our secured borrowings.
Refer to Note 15 - Debt in the Consolidated Financial Statements for additional information regarding our interest expense and our secured borrowings and Note 16 - Financial Instruments in the Consolidated Financial Statements for additional information regarding our interest rate caps and swaps.
As of December 31, 2022, of our total principal debt of $3,742 million, a total of $1,042 million of secured borrowings carried variable interest rates, of which $847 million has a variable interest rate based on SOFR/CDOR plus a spread and the remaining $195 million has a variable interest rate based on the financial institution's cost of funds plus a spread.
As of December 31, 2023, of our total principal debt of $3,311 million, a total of $911 million of secured borrowings carried variable interest rates, of which $729 million has a variable interest rate based on SOFR/CDOR plus a spread and the remaining $182 million has a variable interest rate based on the financial institution's cost of funds plus a spread.
Added
As of December 31, 2023, we had $911 million of secured borrowings with a variable rate and $463 million of variable to fixed rate interest rate caps and swaps. As of December 31, 2023, $290 million of the $463 million of derivatives were designated as cash flow hedges.

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