Xerox 2003 Annual Report Download - page 34

December 31, 2003 December 31, 2002
Finance Finance
Receivables, Secured Receivables, Secured
($ in millions) Net Debt Net Debt
GE secured loans:
United States $2,939 $2,598 $2,430 $2,323
Canada 528 440 347 319
United Kingdom 719 570 691 529
Germany 114 84 95 95
Total GE encumbered finance receivables, net 4,300 3,692 3,563 3,266
Merrill Lynch Loan – France 138 92 413 377
Asset-backed notes – France 429 364 – –
DLL – Netherlands, Spain, and Belgium 335 277 113 111
U.S. asset-backed notes – – 247 139
Other U.S. securitizations – – 101 7
Total encumbered finance receivables, net (1) 5,202 $4,425 4,437 $3,900
Unencumbered finance receivables, net 3,611 4,568
Total finance receivables, net $8,813 $9,005
(1) Encumbered finance receivables represent the book value of finance receivables that secure each of the indicated loans.
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flows related to debt of $4.0 billion as detailed below:
$ In Millions
Payments
2002 Credit Facility $(3,490)
Convertible Subordinated Debentures (560)
Term debt and other (1,596)
(5,646)
Borrowings, net of issuance costs
2010/2013 Senior Notes 1,218
2003 Credit Facility 271
All other 113
1,602
Net cash payments on debt $(4,044)
Further details on our June 2003 Recapitalization
are included within the Liquidity, Financial Flexibility
and Funding Plans section of this MD&A.
Financing activities for the year ended December
31, 2002 consisted of $2.8 billion of debt repayments
on the terminated revolving credit facility, $710 million
on the 2002 Credit Facility, $1.9 billion of other sched-
uled debt payments and preferred stock dividends of
$67 million. These cash outflows were partially offset
by proceeds of $746 million from our 9.75 percent
Senior Notes offering and $1.4 billion of net proceeds
from secured borrowing activity with GE and other
vendor financing partners.
Financing activities for the comparable 2001 peri-
od consisted of scheduled debt repayments of $2.4 bil-
lion and dividends on our common and preferred
stock of $93 million. These outflows were offset by net
proceeds from secured borrowing activity of $1,350
million and proceeds from a loan from trust sub-
sidiaries issuing preferred securities of $1.0 billion.
Capital Structure and Liquidity: We provide equipment
financing to a significant majority of our customers.
Because the finance leases allow our customers to pay
for equipment over time rather than at the date of
installation, we need to maintain significant levels of
debt to support our investment in customer finance
leases. Since 2001, we have funded a significant por-
tion of our finance receivables through third-party ven-
dor financing arrangements. Securing the financing
debt with the receivables it supports, eliminates certain
significant refinancing, pricing and duration risks asso-
ciated with our debt. We are currently raising funds to
support our finance leasing through third-party vendor
financing arrangements, cash generated from opera-
tions and capital markets offerings. Over time, we
intend to increase the proportion of our total debt that
is associated with vendor financing programs.
During the years ended December 31, 2003 and
2002, we borrowed $2,450 million and $3,055 million,
respectively, under secured third-party vendor financ-
ing arrangements. Approximately 60 percent of our
total finance receivable portfolio has been pledged to
secure vendor financing loan arrangements at
December 31, 2003, compared with approximately
50 percent a year earlier. We expect the pledged por-
tion of our finance receivable portfolio to range from
55-60 percent during 2004. The following table com-
pares finance receivables to financing-related debt as
of December 31, 2003 and 2002: