Xerox 2007 Annual Report Download - page 73

For the year ended December 31, 2007, net cash
used in financing activities, decreased $809 million from
2006 primarily due to the following:
• $538 million decrease due to higher net cash proceeds
from unsecured debt. This reflects the May 2007
issuance of the $1.1 billion Senior Notes, the issuances
of two zero coupon bonds in 2007 resulting in net
proceeds of approximately $400 million, and the net
drawdown of $600 million under the 2007 Credit
Facility. These higher net proceeds were partially
offset by the March 2006 issuance of the $700 million
Senior Notes and the August 2006 issuance of an
additional $650 million of Senior Notes, as well as,
higher repayments on other unsecured debt in 2007 as
compared to 2006.
• $437 million decrease due to lower purchases under
our share repurchase program as cash was invested in
acquisitions.
• $100 million decrease relating to the 2006 payment
of our liability to Xerox Capital LLC in connection with
their redemption of Canadian deferred preferred
shares.
• $278 million increase due to higher net repayments of
secured financing. (refer to Note 4-Receivables, net in
the consolidated financial statements for further
information).
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.
Financing Activities
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, borrowings
under bank credit facilities, and proceeds from capital
markets offerings.
We have arrangements in certain international
countries and domestically through the acquisition of GIS,
in which third party financial institutions originate lease
contracts directly with our customers. In these
arrangements, we sell and transfer title of the equipment
to these financial institutions. Generally, we have no
continuing ownership rights in the equipment subsequent
to its sale; therefore, the related receivable and debt are
not included in our Consolidated Financial Statements.
The following represents total finance assets
associated with our lease or finance operations as of
December 31, 2007 and 2006, respectively (in millions):
2007 2006
Total Finance receivables, net(1) ....... $8,048 $7,844
Equipment on operating leases, net . . . 587 481
Total Finance Assets, net ............ $8,635 $8,325
(1) Includes (i) billed portion of finance receivables, net,
(ii) finance receivables, net and (iii) finance receivables
due after one year, net as included in the Consolidated
Balance Sheets as of December 31, 2007 and 2006.
Refer to Note 4 – Receivables, Net in the
Consolidated Financial Statements for further information
regarding our third party secured funding arrangements
and a comparison of finance receivables to our financing-
related debt as of December 31, 2007 and 2006. As of
December 31, 2007, approximately 5% of total finance
receivables were encumbered as compared to 31% at
December 31, 2006.
Xerox Annual Report 2007 71