Xerox 2006 Annual Report Download - page 47

The following table summarizes our secured and
unsecured debt as of December 31, 2006 and 2005:
(in millions) 2006 2005
Term Loan ...................... $ — $ 300
Debt secured by finance
receivables .................... 2,059 2,982
Capital leases .................... 28 38
Debt secured by other assets ........ — 213
Total Secured Debt ........... 2,087 3,533
Senior Notes ..................... 4,224 2,862
Subordinated debt ................ 19 19
Other Debt ...................... 815 864
Total Unsecured Debt ......... 5,058 3,745
Total Debt $7,145 $7,278
At December 31, 2006, approximately 29% of total
debt was secured by finance receivables and other assets
compared to 49% at December 31, 2005. Consistent with
our objective to rebalance the ratio of secured and unsecured
debt, we expect payments on secured loans will continue to
exceed proceeds from new secured loans in 2007.
Credit Facility: In April 2006, we entered into a
$1.25 billion unsecured revolving credit facility including
a $200 million letter of credit subfacility (the “2006
Credit Facility” or “facility”). The facility allows us to
increase from time to time, with willing lenders, the
overall size of the 2006 Credit Facility to an aggregate
amount not to exceed $2 billion. The facility is available,
without sublimit, to certain of our qualifying subsidiaries.
The facility replaces our 2003 Credit Facility that was
terminated upon effectiveness of the 2006 Credit Facility.
As of December 31, 2006, we had outstanding letters of
credit of $15 million and no borrowings under the 2006
Credit Facility. In conjunction with the 2006 Credit
Facility, debt issuance costs of $5 million were deferred.
In connection with the effectiveness of the 2006
Credit Facility, we terminated the 2003 Credit Facility in
April 2006 and repaid all advances outstanding
thereunder, including a $300 million secured term loan,
with a combination of cash on hand and proceeds from
the capital markets offerings. The termination of the 2003
Credit Facility resulted in the second quarter 2006
write-off of the remaining unamortized deferred debt
issuance costs of $13 million ($9 million after-tax).
Refer to Note 11 – Debt to the Consolidated
Financial Statements for further information regarding
our 2006 Credit Facility.
Liquidity, Financial Flexibility and
Other Financing Activity:
Liquidity: We manage our worldwide liquidity
using internal cash management practices, which are
subject to (1) the statutes, regulations and practices of
each of the local jurisdictions in which we operate,
(2) the legal requirements of the agreements to which we
are a party and (3) the policies and cooperation of the
financial institutions we utilize to maintain and provide
cash management services.
As of December 31, 2006, we had $1.5 billion of
cash, cash equivalents and short-term investments, and
borrowing capacity under our 2006 Credit Facility of
approximately $1.235 billion. Our ability to maintain
positive liquidity going forward depends on our ability to
continue to generate cash from operations and access the
financial markets, both of which are subject to general
economic, financial, competitive, legislative, regulatory
and other market factors that are beyond our control.
Share Repurchase Programs: The board of
directors has authorized programs for the repurchase of
the Company’s common stock totaling $2.0 billion as of
December 31, 2006. Since launching our stock buyback
program in October 2005, we have repurchased
100.6 million shares, totaling approximately $1.5 billion
of the $2.0 billion authorized.
Refer to Note 18 – Common Stock and Note 22 –
Subsequent Event in the Consolidated Financial
Statements for further information regarding our share
repurchase programs.
Loan Covenants and Compliance: At December 31,
2006, we were in full compliance with the covenants and
other provisions of the 2006 Credit Facility, the senior
notes and the Loan Agreement. Any failure to be in
compliance with any material provision or covenant of the
2006 Credit Facility or the senior notes could have a
material adverse effect on our liquidity and operations.
Failure to be in compliance with the covenants in the Loan
Agreement, including the financial maintenance covenants
incorporated from the 2006 Credit Facility, would result in
an event of termination under the Loan Agreement and in
such case General Electric Capital Corporation (“GECC”)
would not be required to make further loans to us. If
GECC were to make no further loans to us and assuming a
similar facility was not established and that we were
unable to obtain replacement financing in the public debt
markets, it could materially adversely affect our liquidity
and our ability to fund our customers’ purchases of our
equipment and this could materially adversely affect our
results of operations. We have the right at any time to
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