Thread regarding Xerox Corp. layoffs

Xerox saw their Technical Service department as an unnecessary expense and cut it to the bone. Yes, I was a highly decorated and successful employee that became “expendable”. Now I’m waiting to pi-s on Xerox grave. It’s coming and no spin cycle will change that. It’s a shame when a company sells its soul for short term gain. I’m doing fine and have a second career. I know Xerox will fail. It just can’t help itself!

Look at the ~$525M entry for DTA (deferred tax assets) in 2025. I think they are significant. (here is an explanation of what they are, how they are used, and why Xerox probably had to record them).

Deferred Tax Assets (DTAs) primarily arise from net operating losses (NOLs), tax credits, and temporary differences where book expenses exceed tax-deductible amounts in the current period. These are recorded as non-current assets on the balance sheet and can be used to offset future taxable income, reducing future tax liabilities.

Under U.S. GAAP (ASC 740), a company initially recognizes a DTA only to the extent it is more likely than not (a likelihood >50%) that sufficient future taxable income will be generated to realize the benefit. The assessment must be updated each reporting period, weighing all available positive and negative evidence (e.g., recent losses are strong negative evidence).

If, based on the weight of that evidence, it is more likely than not (>50% probability) that some portion or all of the DTA will not be realized, the company must record (or increase) a valuation allowance — a contra-asset that reduces the net carrying value of the DTA on the balance sheet.

This allowance is a non-cash charge that increases tax expense in the current period, worsening reported earnings.

In other words: If future projected taxable income is insufficient to utilize the full DTA (often due to cumulative or expected ongoing losses), the recorded value on the balance sheet must be reduced to reflect only the portion expected to provide a real tax benefit. This is a conservative requirement to avoid overstating assets when recovery is doubtful.

@dy in the real world, revenue declined 9%. Prior year does not include LEX. We cannot be serious with that message.

Has anyone had a chance to review the numbers released? Thoughts? Any breakdown would help as the memo from SLT this morning appeared to hide the issues and Marnie seem
XRX is on the right path due to increase in revenue.

@OP All of this gambling with warrants is fine to try to survive , but what if in the meantime the stock goes so low it gets delisted?

If they recover. ……🤣🤣🤣

Sausages

In simpler terms, they are protecting their money. They aren't protecting employees, the customers we serve, or the company itself. Even the company image at this point is being cast aside.
The CEO and any top tier people currently exist to protect their own money and returns to investors. That is it. Nothing else can be done at this company.

They are trying to swap bonds for warrants

The company has designated several of its debt securities as eligible for warrant exercise, including its 5.500% Senior Unsecured Notes due 2028, 8.875% Senior Unsecured Notes due 2029, and several other debt instruments.

The right to exercise warrants using designated debt securities will terminate if the volume-weighted average price of common stock equals or exceeds 50% of the applicable warrant exercise price for 20 trading days within any 30 consecutive trading day period.

https://in.investing.com/news/company-news/xerox-to-distribute-warrants-to-stockholders-as-part-of-balance-sheet-optimization-93CH-5207872

@af I guess that’s what they deserve after being d-mb enough to loan the money in the first place.

Sl--eballs being sl--eballs. Got it.

Hi, Goodwill Guy @ac+1kg2nndye

Good take, and I agree with a lot of the diagnosis, especially that the $8 strike isn’t a base case outcome and that today’s debt holders are sophisticated, not sentimental. No disagreement there.

Where I diverge is on the conclusion that this inevitably collapses into Chapter 7 or that creditors are automatically better off burning the house down.

The warrants aren’t a bet on $8. Management isn’t saying “this will work”, they’re enabling a voluntary, out-of-court way to reduce leverage if the business stabilizes enough to preserve enterprise value.

They are basically trying to keep creditors from becoming the ones who destroy the value this management team is trying to recover. Goodwill write-downs, EV math, and ugly optics don’t force insolvency, liquidity and timing do. This move is about buying time and keeping options open while there’s still something left to protect.

No happy endings here, agreed. But there’s a meaningful difference between high risk and inevitable outcome. This is management trying to avoid losing control.

@af+1kg2nndye that’s not quite right. Xerox is not swapping bonds for warrants and hoping the stock magically hits $8. The warrants are distributed for FREE, and they only eliminate debt IF and WHEN a holder chooses to exercise them by handing over existing Xerox debt instead of cash. When that happens, Xerox cancels the debt and issues shares.

If the stock never recovers and warrants expire, no debt is eliminated, but nothing new is lost either. So this isn’t “money gone”; it’s a conditional, voluntary debt-for-equity path designed to reduce leverage without forcing bankruptcy.

Whether it works depends entirely on stabilization by flawless, surgical execution - something this management team knows very little about.

@ah interesting thanks for your insight. Madness will ensue tomorrow.

@ag Hype from the warrants, and the stock always goes up the day before earnings.

The 52 week high, weirdly enough, was exactly 1 year ago today on 1/28/25, at $9.47. That was the earnings call date last year; it hit that in the morning and has spent the last 265 days below it.

We hit a new 52 week low tomorrow or Friday, or both.

@ac well said. Why is the stock price up like 30 cents - is this non related to the issue on this post? People assume the price going up means the company is in god good numbers tomorrow but that isn’t the case I don’t believe. I’m interested to know your take on this if this free warrant talk is considered positive which is why the stock is up? I know the stock going up 30 cents doesn’t solve the problems but it’s an interesting and odd connection if there is one??

"How do the warrants eliminate debt?"

These MFrs are going to bondholders and offering to convert their bonds to warrants with an $8 strike price in two years. The warrants only are usable if the share price is 8 or higher 24 months form now, if not, that money is gone.

It's kind of a blackmail scheme they are pulling with the warrants.

"If $250 million worth of debt gets converted into nonsense warrants, we can keep the doors open and continue to service the other 3+ Billion"

They are asking for a free $250 million from the bondholders so their junkbonds continue to pay out like clockwork. Hence the timing of all this.

This is all unreal.

How do the warrants eliminate debt?

Goodwill guy here.

100% yes on this post. Here's why it won't work.

$8 in two years is nonsense, and everyone knows it. $4 in two years is just as far fetched at this point.

Also, most of the original bag holders of the debt sold a long time ago and cut their losses. The only holders of this toxic debt are degenerate gamblers, and the poorly educated.

CH 11. Two things to remember: It fails 85% of the time and ends up going to CH 7 eventually, also, creditors can object, and drag it out and even get the filing tossed out sometimes.

Remember, we are talking about BILLIONS of dollars. The debt holders will fight this, and for what? For continued interest and principal. They could fight this for months, maybe even a year. In that time, the stock, and more importantly, the actual business of XRX will crater. Vendors will flee, clients will see how far they can go without paying (actally common stuff for companies in bankruptcy)

Is this good for bondholders? Yes! Dragging this out lowers the ability of XRX to defend itself and the bondholders get their best option out of all the terrible options available to them: CH7.

CH 7 is slow and painful, but the debt is in control and will do what it can to preserve capital and strip XRX of all the copper wire and sellable assets.

Does the have anything to do with the Goodwill Value of the company? YES!

There is a 99.9% chance that the Goodwill Value will be written down tomorrow, to the tune of several hundred million or even one billion dollars. Goodwill Value is a part of the Enterprise Value. What happens if the EV drops below total debt, it's curtains:

When a company’s Enterprise Value (EV) is less than its total debt,
it is considered insolvent and enters Chapter 11 with little to no equity for existing shareholders. In this scenario, creditors (specifically senior lenders) take control of the reorganization, often swapping debt for equity, resulting in shareholders being wiped out.

Will they file CH 11 tomorrow? No, probably not, but they could....

Tomorrow is the 29th and we see where they are at. On Friday, the 30th, They have a $130mm loan payment due. Regardless of what happens, there is no happy ending to all of this.