Xerox 2006 Annual Report Download - page 45

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For the year ended December 31, 2005, net cash
from investing activities decreased $498 million from
2004 primarily as a result of the following:
• $247 million from the net purchases of short-term
investments which were intended to increase our
return on available cash.
• Decrease of $143 million due to a lower net
reduction of escrow and other restricted
investments due to the 2004 renegotiation of certain
secured borrowing arrangements and scheduled
releases from an escrow account of supporting
interest payments on our prior liability to a trust
issuing preferred securities.
• Decrease of $86 million due to lower proceeds
from divestitures and investments, net reflecting:
• 2005 proceeds of $105 million primarily
consisting of $96 million from the sale of our
equity interest in Integic Corporation.
• 2004 proceeds of $191 million primarily
consisting of $66 million from the
ContentGuard sale, $79 million from the
ScanSoft sale and $36 million from a preferred
stock investment.
• Decrease of $48 million due to lower proceeds
from the sale of excess land and buildings.
• Partially offsetting these items was a $15 million
decrease in capital and internal use software
expenditures.
We expect 2007 capital expenditures including
internal use software to approximate $300 million.
For the year ended December 31, 2006, net cash
used in financing activities decreased $1.5 billion from
2005 primarily as a result of the following:
• $2,463 million lower usage primarily resulting
from the 2005 net repayments on term and other
unsecured debt, of $1,187 million, as contrast to the
2006 net borrowings of term and other unsecured
debt of $1,276 million. The 2006 net borrowings
primarily reflect the 2016 Senior Notes borrowing
of $700 million in March 2006, 2017 Senior Notes
borrowing of $500 million in August 2006 and the
2009 Senior Notes borrowing of $150 million in
August 2006.
• $42 million due to higher proceeds from the
issuance of common stock, resulting from increases
in exercised stock options.
• Partially offsetting these items were the following:
• $636 million higher cash usage for the
acquisition of common stock under the
authorized share repurchase programs.
• $269 million higher net repayments on secured
borrowings.
• $100 million payment of liability to Xerox
Capital LLC in connection with their
redemption of Canadian deferred preferred
shares in February 2006.
For the year ended December 31, 2005, net cash
used in financing activities increased $1.7 billion from
2004 primarily as a result of the following:
• A $1.5 billion reduction in proceeds from new
secured financings, reflecting a rebalancing of our
secured and unsecured debt portfolio.
• $433 million cash usage for the acquisition of
common stock under the authorized October 2005
share repurchase program.
• A partially offsetting $235 million decrease in net
payments on term and other debt reflecting lower
debt maturity obligations.
Financing Activity
Customer Financing Activities and Secured Debt:
We provide equipment financing to the 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 maintain a certain level of debt
to support our investment in these customer finance
leases. We currently fund our customer financing activity
through cash generated from operations, cash on hand,
capital markets offerings and third-party secured funding
arrangements.
In the United States, Canada, the U.K., the
Netherlands, and France, we are currently funding a
portion of our customer financing activity through
secured borrowing arrangements with GE, De Lage
Landen Bank (“DLL”) and Merrill Lynch. While terms
and conditions vary somewhat between countries, in
general these arrangements call for the financial
counterparty to provide loans secured by lease
originations in the country for which it has been
contracted to be the funding source. Most arrangements
are transacted through bankruptcy remote special purpose
entities and the transfers of receivables and equipment to
these entities are generally intended to be true sales at
law. Under these arrangements, secured debt matches the
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