Xerox Holdings Corporation and Xerox Corporation — Form 8-K Summary
Business Context and Reporting Period
Filed under Item 5.02 on November 25, 2020, regarding actions approved by the Compensation Committee on November 19, 2020. The actions address employee retention and incentive compensation amid COVID-19-related disruption during 2020.
Key Financial and Operating Information
- The filing does not provide revenue, profit, cash flow, margin, debt, liquidity, or other detailed financial metrics.
- Management stated that financial results reported through the filing date indicated the threshold payment metrics under the 2020 Management Incentive Plan would not be achieved, primarily because customers shut down on-site office environments in response to COVID-19.
- The filing references the Company’s efforts to deliver positive free cash flow during the pandemic but does not provide a quantified amount.
Material Changes and Compensation Actions
- The Compensation Committee approved cash retention incentive awards for approximately 1,350 management-level employees.
- The awards complement a company-wide year-end cash bonus program for approximately 24,500 employees below management level.
- Aggregate and individual officer awards will not exceed 50% of the applicable 2020 target awards under the regular annual Management Incentive Plan.
- Awards for named executive officers include $900,000 for the Vice Chairman and Chief Executive Officer and between $205,320 and $287,500 for the other named executive officers.
- The awards are separate from, and do not replace, the 2020 Management Incentive Plan or the 2021 regular incentive programs.
- The Committee also approved special restricted stock unit grants for employees, including named executive officers, whose 2019 and/or 2020 performance stock unit metrics were permanently adversely affected by COVID-19. The grants were expected in December 2020, with grant-date values approximating 50% of the recipients’ applicable 2019 and/or 2020 PSU grant-date values.
Outlook, Risks, and Unusual Items
- Cash retention awards are subject to forfeiture and repayment if a recipient voluntarily terminates employment before December 31, 2021.
- Special RSUs are expected to vest ratably over two years and are subject to forfeiture upon voluntary termination before the vesting period ends.
- Management characterized the actions as intended to retain key personnel and support restoration of Company performance.
- Material risks include the duration and impact of COVID-19, continued revenue declines, cost reduction and productivity challenges, employee retention, economic and political conditions, tariffs and trade restrictions, foreign exchange, technology and competitive pressures, cybersecurity, access to credit, pension and retiree health funding, litigation, regulatory compliance, the restructuring of the Fujifilm relationship, and shared-services arrangements under Project Own It.
Investor Verification Checklist
- Verify the final 2020 Management Incentive Plan results and whether threshold metrics were ultimately certified as unmet.
- Confirm the aggregate cost and accounting treatment of the cash retention awards and special RSU grants.
- Review the December 2020 RSU grants, vesting terms, and named executive officer disclosures.
- Assess subsequent filings for the effect of COVID-19 on revenue, free cash flow, liquidity, restructuring, and employee compensation expense.
- Review the referenced 2020 Forms 10-Q and 2019 Form 10-K for detailed financial results and risk disclosures.