Xerox 2004 Annual Report Download - page 53

Download and view the complete annual report

Please find page 53 of the 2004 Xerox annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 100

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100

51
rates calculated at each monthly loan occurrence at
yield rates consistent with average rates for similar
market based transactions. Refer to Note 9 for further
information on interest rates. New lease originations,
including the bundled service and supply elements,
are transferred to a wholly-owned consolidated
subsidiary which receives funding from GE. The
funds received under this agreement are recorded as
secured borrowings and together with the associated
lease receivables are included in our Consolidated
Balance Sheet. We and GE intend the transfers of the
lease contracts to be “true sales at law” and that the
wholly-owned consolidated subsidiary be bankruptcy
remote and have received opinions to that effect from
outside legal counsel. As a result, the transferred
receivables are not available to satisfy any of our
other obligations. GE’s funding commitment is not
subject to our credit ratings. There are no credit rating
defaults that could impair future funding under this
agreement. This agreement contains cross default pro-
visions related to certain financial covenants contained
in the 2003 Credit Facility and other significant debt
facilities. Any default would impair our ability to
receivesubsequent funding until the default was
cured or waived but does not accelerate previous
borrowings. However, in the event of a default, we
could be replaced as the maintenance service
provider for the associated equipment under lease.
During 2003, weentered into similar long-term
lease funding arrangements with GE in both the U.K.
and Canada. These agreements contain similar terms
and conditions as those contained in the U.S. Loan
Agreement with respect to funding conditions and
covenants. The final funding date for all facilities is
currently December 2010. The following is a summary
of the facility amounts for the arrangements with GE
in these countries.
Facility Amount Maximum Facility Amount (1)
U.S. $5 billion $8 billion
U.K. £400 million £600 million
(U.S. $770) (U.S. $1.2 billion)
Canada Cdn. $850 million Cdn. $2 billion
(U.S. $706) (U.S. $1.7 billion)
(1) Subject to mutual agreement by the parties.
France Secured Borrowings: In July 2003, we secu-
ritized receivables of $443, previously funded under a
364-day warehouse financing facility established in
December 2002 with subsidiaries of Merrill Lynch,
with a three-year public secured financing arrange-
ment. In addition, we established a new warehouse
financing facility to fund future lease originations in
France. This facility can provide funding for new lease
originations up to ?350 million (U.S. $477), outstand-
ing at any time, and balances may be securitized
through a similar public offering within two years.
The DLL Secured Borrowings: Beginning in the
second half of 2002, we received a series of fundings
through our consolidated joint venture with DLL
from DLL’s parent, De Lage Landen Ireland Company.
The fundings are secured by our lease receivables in
The Netherlands which were transferred to the DLL
joint venture. In addition, the DLL joint venture also
became our primary equipment financing provider in
The Netherlands for all new lease originations and
continues to receivefunding for those lease originations
from DLL’s parent. In the fourth quarter of 2003, the
DLL joint venture expanded its operations to include
Spain and Belgium. Our DLL joint venture has been
consolidated as weare deemed to be the primary
beneficiary of the joint venture’s financial results.
Germany Secured Borrowings: In May 2002, we
entered into an agreement to transfer part of our
financing operations in Germanyto a GEentity in
order to finance certain prospective leasing business.
In conjunction with this transaction, wealso received
loans from GE secured by existing lease receivables
that were transferred to this entity. At December 31,
2003, we consolidated this entity because we retained
substantive rights related to the transferred finance
receivables and were therefore deemed to be the
primary beneficiary. During the first quarter 2004,
the entity was deconsolidated because we were no
longer deemed to be the primary beneficiary, as the
transferred finance receivables had been reduced to a
level whereby we no longer retained significant risks
relativeto the total assets of the entity. Further, we are
not providing loss protection on the new leasing busi-
ness entered into by the entity. The entity’s total assets
and debt at December 31, 2003 were $114 and $84,
respectively.